Beer Marketer's Insights

Beer Marketer's Insights

In case you lost track of all the new markets craft brewers launched in the last month, we've put 'em all together for you in one handy pdf. Organized by state, this list includes craft brewer distribution expansions with sales expected to begin by the end of March 31, 2014, along with a synopsis of the month, and a touch of things to come. While it may not be comprehensive, this list includes announcements made by the largest craft brewers and many expansions by smaller players.  
Legal symposium held by CLE Intl recently in Cincinnati hosted discussion with Christian Moerlein's ceo Greg Hardman and Mad Tree's "secretary of beer defense" Brady Duncan. Mad Tree is early-2013 start up, sells solely in Cinci and northern KY. It's first Oh craft to can, Brady said, and plans to sell 9-10K bbls this yr. Christian Moerlein can lay claim to being one of very first craft brands in US. Original brewery opened in 1853, went out of biz during Prohibition. Moerlein re-launched in 1981 as "a Better Beer Brand" and was first US beer to pass German Purity Law, said Greg. Moerlein sells about 10K bbls/yr, but Greg also purchased heritage brands from Hudepohl-Schoenling, everything from value brands like Burger/Hudepohl to Little Kings Cream Ale (still in small green bottles) and many more in 30+ states. Those brands sell an undisclosed "multiple" of Moerlein's volume, Greg told CBN, and his co will get craft designation in revised BA definition, he's been told. Greg bought biz in 2004 to "bring back local ownership and revitalize the Christian Moerlein Brewing Company."

CM started as contract brewer, but all Moerlein/Hudy made in Cinci now and brewery can be expanded to 500K-bbls capacity. Greg plans to "aggressively" build out. He also has 5K-bbl Christian Moerlein Lager House brewpub near Riverfront Park that's become tourist destination. If that ain't enuf, Greg very involved in developing extensive plan to "re-populate" historic brewery district in Cinci's Over-the-Rhine neighborhood. He heads up non-profit group seeking to attract new breweries, improve space, save historic sites, etc. Plan includes building "Brewing Heritage Trail," along lines of Boston's Freedom Trail, through neighborhood that once hosted numerous breweries. Indeed, Brewers Triangle, near Moerlein brewery, once had 6 breweries within 500 feet, said Greg. Judging from presentation, Greg has spent as much time, energy and passion on revitalizing Cinci's brewing district as he has on building his beer biz over last decade.

Distribs "Bring A Lot of Value" When Greg bought biz he had 175 distribs, but "didn't want to be tied up with them." But he also found state laws didn't give him option to self-distribute and ultimately in core markets, if distribs worked the brands he kept them. Asked how much he "loses" by giving up distrib margin, Greg said "too much." But he also said "for us to put sales teams on the street…we weren't willing to spend the money even if we had the opportunity." At same time, "distributors bring a lot of value to the equation," from rotation to inventory." Still, "you always want the right" to self-distribute. Mad Tree signed on with craft-oriented distribs Cavalier and Beer House "off the bat," said Brady. He and his partners were not interested in buying trucks or hiring drivers/sale force. Plus: "We needed a lot of help." Cavalier "had a good portfolio and presence and has been a huge help." It was especially important to Brady to "get off to a strong start up and down the street" and in "good craft beer bars" where his distribs do good job. They're "weaker" in the chains, but "we'll catch up."

Growlers, Cans, Trademarks Asked about quality issue with growlers some brewers have broached on BA Forum and elsewhere, Greg acknowledged there's a "big debate," but pointed out "we have a policy of making sure the growlers are sterile." His staffs clean and seal all growlers they sell. Then too, Greg has asked some retailers who "don't clean their lines" not to sell his brands. Brady said his beers are "better out of the package." He sez he can tell if a beer's been on tap for as little as a day and growler fills generally just "not as fresh." Canning lines are big investment out of the gate, but "less expensive in the long run," he pointed out. Atty for Indiana Craft Brewers Guild said his state limits growler sales to breweries. Tho liquor stores want to get into growler biz, "we have successfully resisted." Asked about trademark issues that keep popping up in craft land, Greg said he's been "very active" in that issue. Worst thing is if brewers "don't protect" the marks. "You have to spend the money, you can't do it yourself." Greg's got 60-70 marks that he keeps alive, including one for Hudepohl brand that's gotta be envy of his craft brethren: "America's Great Small Brewery."  
Small brewers ain't slowing down pace of new brand intros in 2014, including reformulations or updated release schedules to emphasize more hops, tone down alcohol content or take on approachable old-world styles. Just as predicted. Are session IPAs old news? Not by a long shot. Firestone Walker showed off its 4.5% ABV "spring-summer" entry, Easy Jack IPA, this week, not long after Flying Dog announced coming Easy IPA at 4.7% or Stone released its 4.5% Go To IPA, both new year-round brands. Doesn't have to be called an IPA to fit the hoppy-yet-low-alc trend: Odell moves its Loose Leaf, a "hop-forward" "American Session Ale," from a limited intro last year to new yr-round 6-pack status this month. Shipyard's new yr-round American Pale Ale also fits the bill. New spring seasonal from Breckenridge, Ophelia, a 5% "Hoppy Wheat," too. And that's just a sampling of many more.

Elsewhere, a bunch of brewers are stepping up their games to compete and differentiate in ever-more competitive IPA category. They're tying IPA brands tighter to overall brewery image or building on already successful brands to keep fans in the family. Sierra Nevada is asserting its hop authority with much-discussed all-IPA variety pack (the one that includes new Nooner low-abv entry alongside #2 brand Torpedo and others). Alaskan reformulated and re-named its IPA into Icy Bay IPA, attaching it to a more specific Alaskan story and artwork while amping up the hops (particularly in the aroma department). At the same time it unleashed specialty Jalapeno Imperial IPA on its distrib territory. Similarly, Ballast Point started packaging Sculpin IPA variant with Habanero peppers, previously a draft-only limited-release. Bring on the heat. Victory just announced new Moving Parts rotating IPA series in 22-oz bombers as well as new brands for its summer variety pack. The 12-packs will include Summer Love (German/American hybrid ale made for hot weather), re-appearance of Belgian-style Whirlwind Wit and 2 brands from draft-only Hop Ticket series: a dry-hopped (think: aroma again) Pils plus, you guessed it, a Session IPA.

Saisons, Berliners and Shandies, Oh My Hops ain't the only ingredients adding a little oomph to thirst-quenching Spring and Summer sippers from small brewers. Let's talk yeast. More brewers brought Belgian yeast strains into the fore in recent months along with the sometimes spicy and/or fruity and/or funky and/or tart flavors that come with them. In this group: Stone's first official "seasonal," Stone Saison, on shelves "Spring-to-Summer." Other new saisons: Allagash's first new yr-round release in 7 years is its Saison; Brewery Ommegang's new Spring seasonal Glimmerglass also fits the bill. A coupla southern breweries took on classic quenching German Berliner Weiss style, typically tart-to-sour and wheat-heavy. Saint Arnold announced Boiler Room, a new 3.5% ABV yr-round release. Lazy Magnolia offers limited release Song of the South. Elsewhere, Harpoon took next step into low-abv, summer-quencher world with addition of seasonal Big Squeeze Shandy in its UFO line. Boston Beer/Alchemy & Science's Just Beer Project just announced first seasonal, Just Summer, another wheat-centric offering. Other examples abound.

More Craft Cans in Time for Summer Plenty more craft in cans comin' atcha too. Rogue takes on aluminum for the first time, releasing 16-oz 4 packs of its Amber Ale in cans designed to mimic hand grenades. Already-canning Baxter Brewing in Maine announced 12-packs of its warm-weather seasonal Summer Swelter. DESTIHL, Saint Archer and Deep River all announced addition of canned-offerings this week. Recall, 16-oz cans of Bell's Two Hearted and popular seasonal Oberon appear at the end of the month.  
Interesting distribution doings in SoCal. Crest in San Diego (a unit of Reyes Beverage Group) just bought rights to Hess brands from fledgling Craft Beer Guild of Calif (a unit of L Knife and Sons). So this deal involves 2 of larger and more influential craft distribs nationally. Recall, Craft Beer Guild of Calif just got Bell's in a couple of counties, and has Ninkasi, but Hess one of its top brands since it launched small distrib in SoCal a couple of yrs back.

"Opportunity is enormous" in moving to Crest, founder Mike Hess told CBN as it "helps us get brand out to where we needed," casting "wider" with a "larger platform. Hess began as acclaimed nano, opened facility with 30-bbl brewhouse last summer. It sold 3000 bbls in 1st 9 mos, said Mike, also recently entering Phoenix. Expects to do about 7000 bbls in 1st 12 mos. His facility maxes out at just 15,000 bbls, so may need to look at another facility in relatively near future.

Reyes Bev Group will also be getting Hess brands in other areas of SoCal as well, including Orange, Riverside, LA and San Bernardino, probably starting around May 1, Mike added. Meanwhile, another smaller growing San Diego craft brewer, Belching Beaver, will reportedly be distributed by Reyes Beverage Group from San Diego to Santa Barbara in near future.  
Craft category continues to keep 20%+ gain pace in scans in 2014; $$ up 23%, volume up 20% for 4 wks thru Mar 23 in IRI multi-channel + convenience. IPAs also kept up fast-trackin' 50%+ pace for latest 4 weeks. Now up to 22.2 share of craft $$, 20.8 share of craft volume YTD. That's in large part due to rapid success of Sam Adams Rebel IPA. It is now the 5th largest selling IPA, 13th largest total craft brand yr-to-date in scans. And it's just behind Widmer Hefeweizen and Redhook Longhammer IPA for next spots. Just last mo Rebel IPA was #27 craft brand in scans.

Amazingly, for latest 4 wks Rebel IPA a top-10 craft brand, outselling New Belgium Ranger IPA (+49%) and only just behind Lagunitas IPA (+88%). But it's not like either of those brands growing slowly; both in fact trending well above last yr #s, especially NBB. Sierra Torpedo Extra IPA still the top selling IPA, up 20% YTD, and passed Boston Variety Pk (-8%) to become 6th largest craft brand. But Lagunitas IPA inching closer and closer each mo.

Then too, 2nd largest craft style, Seasonals, $$ up 27% yr-to-date, trending 17 percentage points higher than it did all of 2013. That's in large part due to another Sam Adams brand: Sam Seasonal sales kept up +50% YTD pace, still riding Cold Snap success (see CBN vol 5 no 20). NBB Seasonal also well above last yr trends, up 42% YTD (+64% in latest 4 wks) tho recall NBB had a slow start to 2013 and is riding big incremental gains from entering some of largest states like Fla and Oh. Lagunitas Seasonals another bright spot among top seasonal brands, up 70% YTD and a top-30 craft brand at #28. Sierra and Deschutes seasonals, however, have slowed; Deschutes up just 3% and Sierra Seasonal down 7% YTD (down low double-digits in latest 4 wks).

Meanwhile Boston Beer (cider & tea included) and NBB are flying for the yr, each up over 40% YTD. Lagunitas, +85%, stickin' to its consistent 80% plus growth it has enjoyed over the last coupla yrs. A handful of top craft cos only up mid-single digits in latest 4 wks (tho YTD trends are a bit better): Sierra, Gambrinus, Craft Brew Alliance, and Deschutes each up 5-6%. And a handful of top craft cos up 23-43% for the yr: Stone (+25%), Sweetwater (+38%), Dogfish Head (+35%), Bells (+43%), Harpoon (+23%). So varied trends across top craft cos, but total category keeps truckin'; $$ up 24% YTD to 6.9 share of total beer sales.  
Now it's official. Goose Island "312 beer(s) will replace Old Style as the non-Budwieser option carried by vendors through the stadium," at Chicago Cub's Wrigley Field reported Chicago Tribune. Recall, AB inked deal in September to be exclusive beer at Wrigley Field (reportedly worth $14 - $15 mil per yr over up to 10 yrs), thus ending long standing relationship between Pabst's Old Style and Wrigley. Old Style will still be available through this upcoming season after "campaign" to "keep old style in Wrigley" tho future is uncertain for the long-standing official beer of the Cubs. Wrigley's beer lineup "will lean heavy on AB products," including Bud family, Ritas, Redbridge, Goose Island and newest portfolio addition, Johnny Appleseed Cider, according to Chicago Tribune. Goose's Green Line, Matilda, and Sofie will also be available in the stadium this year. "Until now, craft beer has been rare at Wrigley Field, leading to a reputation as having one of baseball's least interesting beer selections," sez paper. On the other hand, White Sox stadium, U.S Cellular Field, "will again be dominated by MillerCoors products (Miller Lite, Coors Light, Blue Moon, and Redd's Apple Ale)," but will again feature a solid and varied lineup of craft beers that includes Bell's Oberon, Revolution Anti-Hero, Rogue Dead Guy Ale, Lagunitas DayTime and Sierra Nevada Pale." This is more evidence supporting trend that sports arenas are shifting towards more craft-centric offerings, as reported by Sports Business Journal earlier this yr: "When you look across baseball…over the past three years, there's been shift of 5 share points and now craft beer category is worth about 20 percent," Andrew Shipe, Aramark's vice president of marketing told Sports Business Journal (see CBN vol 5 no 5).

Maybe these new Goose placements will give its top brands a lift in hometown market where flagship 312 was down 1-2% and Seasonal brand down 24% in IRI Multi-channel + convenience for 52 weeks thru Jan 5, 2014, despite being up 60% and 20% respectively nation-wide.  
Food & Drug Administration (FDA) proposed rulemaking that would, among other things, regulate brewers' sales of spent grains as animal feed "could trigger significant costs or changes," for brewers. So said attys Art DeCelle and Chris Lahiff of McDermott Will & Emery LLP during Brewers Association Power Hour held last week. Lotsa buzz among brewers in the last handful of mos about the potential impact of these new proposed additions to the Food Safety Modernization Act (FSMA). Art and Chris didn't put an exact number to it, but separately Beer Institute and American Malting Barley Association estimate that new regulations "will cost the industry millions of dollars in annual compliance costs, millions in disposal costs, and many millions of dollars in lost revenue without improving public health and safety." Estimated annual costs for just one unnamed domestic brewer could reach $527 mil if law was put into place, according to BI and AMBA (primarily from "Brewhouse loss of efficiency based on capacity"). Another article points to higher costs for farmers as well; one Petaluma, CA farmer saves $250 per ton by using Lagunitas' spent grain as animal feed for $100 per ton, reported Petaluma360. Lagunitas "generates at least 450 tons a week," so Lagunitas would lose at least $2.3 mil a year in spent grain sales. Anderson Valley "generates nearly 1500 tons of spent grain every year," and Bear Republic sells as much as 60 tons a week to a local rancher, article also noted. That starts to add up to a lotta moolah lost. There were approximately 2.7 million tons of spent grain in 2012, BI and AMBA estimate.

"FSMA is a much broader act," and "several provisions" could affect brewers, noted Art and Chris during BA power hour. The spent grain issue is "pretty remote" from rest of FSMA, tho "we're trying to work within the language of the law to get the FDA to exempt, or at least give a partial exemption to the use of spent grain as animal feed." Many of the same main points have been made by BA and BI regarding spent grains as a necessary byproduct of brewing beer, environmental issues of disposal via landfill, high costs of disposal, spent grains as a valuable asset for farmers to help reduce costs. Then too, current law exempts brewers from regulation under the FSMA, it has been common practice for brewers to source out their spent grain to farmers, and alcohol industry already is heavily regulated. The National Milk Producers Federation (NMFP), and other local farmers/ranchers have publically supported brewers push to keep spent grains exempt from regulation under FSMA. "The real issue is the huge amount of energy required to dry grains," sez one recent BA Forum post, arguing that most brewers dispose or sell their spent grains wet, and there is insufficient evidence to prove that spent grains are harmless. "Most recipient farmers using spent grains want the grains wet to provide a hydration source for the animals," BA director, Paul Gatza added in response, noting that BA's response does touch upon this issue as well. "The point should be made, however, that the FDA does not offer a scientific basis for the assumption that there is inherent danger in the use of spent grain." Comment period ended this Monday, Mar 31, tho there will likely be a second comment period this summer, and the rule likely won't be finalized until late 2015, noted Art and Chris. Once finalized most brewers will have 2-3 yrs to comply with any new laws.  
With its new brewery in Boulder still a yr away, Avery Brewing Co found its capacity maxed out. "The banks financing our project wanted to see growth and without it our entire plan for a new brewery was in jeopardy," said co-founder Adam Avery. Then he got call from New Belgium "with an idea" to form an "alternating proprietorship" that will allow Avery brewers to brew its White Rascal Belgian-Style White Ale at NB's brewery til next Jan. "This is an opportunity to help another great Colorado brewer get through a time of capacity constraints," said NB ceo Kim Jordan. Deal is limited to kegs only and will give Avery room to brew "more seasonal and specialty beers," at its current facility, noted Adam. It also provides Avery brewers "a chance to train and brew beer on a larger, more advanced brewhouse" that will be similar to its new digs in 2015.  
Any flight with beer available to air passengers could include at least one craft choice by the end of next year, predicted Boston Beer founder Jim Koch in an roundup of recent announcements from AP. Delta doled out some love to its Atlanta-hub's neighbor, SweetWater, adding its flagship 420 brand to its 34 daily flights between ATL and NY's LaGuardia. The airline served Sam Adams brands for a couple decades already, tho JetBlue picked up canned Sam last summer. Recall, Southwest added cans of New Belgium flagship Fat Tire earlier in year and the airline is currently "running out," said AP. A handful of regional carriers, like Alaska Airlines/Horizon Air and Sun Country, added local options to flights recently. Flyers "want to drink in the air what they're drinking on the ground," Jim said, so as craft steam continues to pick up, no surprise it's rising higher into the friendly skies.  
Ranking flip-flops call out from list of top 50 craft brewers according to the Brewers Assn, with just a handful of brewers holding ranks and at least 20 sliding up or down 3 or more spots. But even those passed by others mostly growin'. All in, we estimate BA's top 50 breweries shipped between 10.4-10.5 mil bbls in 2013. That's up well over a million bbls, about 13% ahead of near 9.3 mil bbls BA's top 50 shipped in 2012, an acceleration. So top 50 somewhere around 67 share of BA craft volume in 2013, down another 3 share or so, we estimate. Means that, with BA reporting about 2.4 mil bbls of growth overall in 2013, some 2600+ brewers below this top 50 got well over half that growth.

Plenty of healthy growth apparent on this list too, of course. Annual list from the BA fills in list of top brewers behind the 30 that shipped over 100K bbls we published earlier in the year (see Jan 24 issue). Biggest standout on BA list in that group is Duvel Moortgat USA, which includes volume from Boulevard (185K bbls) and Ommegang brands after late-year purchase of Boulevard by DMUSA. That puts combo in at #8 on BA list, between Bell's (248K bbls) and Brooklyn (216K bbls). Big gainers of those over 100K bbls include Firestone Walker (+4 to #16), SweetWater (+5 to #19), Oskar Blues (+3 to #24) and Founders (+4 to #26).

Just outside of 100K-bbl club, Ballast Point made huge strides, jumping 17 spots to #29 on BA list (recall, we list brewers the BA does not on our top 30). Ballast Point, Ninkasi and Southern Tier all shipped between 85-90K bbls in 2013, all moving ahead in rankings. A number of companies slipped back in rank on list, tho many of them still shared volume gains with CBN, just outpaced by competing craft brands. For example, Flying Dog +10% to over 80K bbls but slipped 4 spots to #33 on BA list. Similarly, Odell built shipments almost 17% last year to 78,500 but still moved back one rank to #34. Left Hand jumped 5 spots to #38 after growing shipments over 30% to about 66K bbls. But just 10K bbls separate it and all other breweries on top 50, and a couple more that didn't quite make the cut.

Brooklyn's Sixpoint Brewery screamed onto list at #43, pushing past at least 20 other breweries and likely more than doubling from 26K bbls in 2012 to big enough volume to have made this cut. Uinta Brewing up 3 spots to #46 after growing over 30% to 59K bbls. Saint Arnold up about 18% to 58K bbls, but down 3 spots. Gordon Biersch and 21st Amendment each joined top 50 for first time, each somewhere around 57K bbls in 2013. These rankings imply shipments from Gordon Biersch production facility jumped about 35% last yr. Recall that CraftWorks Restaurants (#39 on BA list, -7 spots) includes pub volume for Gordon Biersch and Rock Bottom. Saint Louis Brewery (Schlafly) pushed off list even after growing 15% to just under 57K bbls last year. Big Sky and Troegs also no longer made the cut; Troegs +23% to 54K bbls. See the full list here.