Brooklyn Brewery founder/prexy Steve Hindy cranked up the rhetoric against franchise laws ("the so-called three-tier system") in an op-ed for NY Times Sunday. Steve's main point has become somewhat of a craft brewer refrain: franchise laws protect distrib interests to point of not only stifling craft brewers' ability to move brands from poor performers, but cause some small brewers not to enter certain mkts - because of distribs' "reputations" - and thus harm consumer choice and the economy. While many states support craft biz and some provide flexibility to move brands and/or self-distribute, Steve would like to see more take on "tougher job of pushing against distributors and their lobbyists." Success of a beer should depend on consumers liking it, "not on whether archaic distribution laws prevent them from finding it in the first place," Steve concludes.

Like many advocates of policy change, Steve leaves out some key facts and bends others. For example, Steve notes in his first sentence that craft brewers face "tougher challenges" than most other small bizzes. But he doesn't mention explosion of craft brands made available to consumers in recent yrs, the 18% volume increase craft brewers enjoyed last yr alone and 20% $$ gain, (estimated by BA) or that the failure rate of small brewers is very low. Then too, Steve suggests "almost every state franchise law demands that breweries sign a strict contract with a single distributor in a state," tho no franchise law we know of mandates that. Back when franchise laws passed, Steve explains, there were few brewers (less than 50) and lotsa distributors (5K). But now, 2700 brewers have "fewer than 1000 viable distributors" to work with, he sez, "so that relatively few distributors control huge sections of the national territory." Again, Steve leaves out that 1,200+ of those brewers are brewpubs, lotsa micros don't distribute outside their local mkts, established distribs add new brands every day, more mkts now support indie craft distribs, liquor distribs are taking on craft etc.

Steve spoke to CNBC on same theme, noting again Brooklyn Brewery spent over $300K in legal fees to move brand from NY distrib, money lotsa small brewers don't have. "We've been talking to" NBWA "for years, literally 15 years," about this issue, said Steve, and "we've sort of given up. They're not budging on this. And so we've decided to go to the media and try to tell our story and hopefully have some impact on public opinion." CNBC unwittingly helped Steve by using graphic misstating the number of brewers as "27,000." But this "story" more about positioning for media, public and policymakers in influential outlet than inconvenient facts. Indeed, BA director Paul Gatza posted note on BA Forum about Steve's "excellent Op-Ed" and noted "franchise reform is a priority issue for state brewers guilds and the BA."

Distribs' Lobbyist Responds; Craft Benefits from Indy Distribs, NBWA Sez NBWA prexy Craig Purser responded to Steve's op-ed. Repeated key distrib talking point of late: craft brewers are "expanding because of - not in spite of - an independent national distribution network." Indy distribs invest in new brands, said Craig, "and get them to market." What's more, "explosive growth" for craft wouldn't happen without 'em. "Robust discussion is part of a vibrant industry," Craig added, but reminds that as craft brewers "seek to change the very state laws that have facilitated their meteoric rise," they gotta be careful: "the changes they seek today may prevent the next Brooklyn Brewery from getting established tomorrow." Steve apparently got pushback from others too. In followup conversation, Steve told CBN: "We just wanted to get distributors' attention. We support franchise laws. We're looking for carve outs."  

How many fast-growing brewers can one city hold? Now #4 San Diego brewer, Green Flash had another big growth year in 2013, up over 30% to about 56K bbls, co-founder Mike Hinkley shared with CBN (another brewer that just barely missed BA top 50 list). It will complete a national distribution footprint this year, filling in Hawaii and Utah. But the co isn't looking to many new territories for big growth. "Less than 3,000 barrels were sent to newly opened territories" in 2013, Mike told us, as existing mkts grew 26% last yr. Nearly half of Green Flash volume sold east of the Mississippi too, part of reasoning for Virginia Beach facility, scheduled to begin construction this yr. It should come online late next yr or early 2016, just before the San Diego facility reaches 100K-bbl capacity. Mike hopes Green Flash will hit about 70K bbls this yr (+25%) and about 87K bbls in 2015 (+24%).

At home in San Diego, Green Flash is currently installing a new bottling line that will make big improvements to shelf-life, already showing reductions in dissolved oxygen (DO) levels by around 75% "from an already fairly low number," per Mike. But it's also "very close to sealing the deal on a second Green Flash location in San Diego," where it'll move barrel-aging operations. Mike expects Silva Stout and some other brands to be released from that facility by the end of the year. It's also rolling out new packaging to all its products early in 2014, de-emphasizing scenic logo and devoting more space to brand names, styles and stories. Along with this overhaul, Green Flash reformulated a pair of its key brand recipes, West Coast IPA and Hop Head Red, upping dry hop additions as well as alcohol content.  

Ballast Point only started construction on its huge new 100,000 sq ft facility in Jan, but a recent visit showed the project already well along and should be shipping beer in the 2d half of this yr. Ballast Point hopes to get 25,000 bbls or so from new facility in 2d half of this yr. New brewery will have initial capacity of 50,000 bbls, but that will quickly ramp up to around 300,000 bbls. A good thing new capacity coming on line too. Ballast is busting at seams, rapidly outgrowing its Scripps Ranch facility. It will produce over 100,000 bbls this yr, in only about 23K sq ft, said prexy Jim Buechler. New brewery is intended as "showpiece" said founder Jack White, with 15,000 sq feet devoted to huge retail establishment (with 15,000 sq ft of offices on floor above), including tasting room and full restaurant that can seat over 250 people. That will be Ballast Point's fourth place, following its original homebrew shop, Scripps Ranch facility and restaurant/experimental brewery that opened last yr in Little Italy.

Ballast continues to fly locally. It hit 400,000 cases in San Diego last yr (about 1/3 of its total volume). Local distrib Crest up 67% this yr, said sales and mktg veep Earl Kight, expecting to break 600,000 cases in 2014. Ballast Point gained 1.1 share of $$ in San Diego foodstores last yr in IRI to 2.1, while Stone at 2.9. And it just got into Ralph's, a major SoCal chain, last week. Some early scan data this yr suggests Ballast Point already passing Stone at 3 share. But Stone growing too. Elsewhere in SoCal, Ballast is more than doubling so far in 2014. This more rapid-than-expected growth means that distribs in Pac NW and Midwest can't get beer. If they could, Ballast Point would be growing even faster than its 70% pace this yr.

Jim Buechler is a bit of an anomaly for craft; a Harvard MBA who had long and successful career in wireless and commercial real estate industries, he makes no bones that running Ballast Point is best gig he's ever had. And why not? He's presided over extraordinarily rapid growth of Ballast in last 2.5 yrs, tripling from 29,000 bbls in 2011 to 86,000 bbls in 2013 (projected 125-130K in 2014) and from 35 employees to 185, culminating (for now) in this latest and largest brewery expansion. So far, Ballast Point only has 12-13 sales folks, mostly in SoCal. Actually, Jim sees analogies with wireless where you grew 80% in a good yr, 60% in a bad yr, he quips, noting that with such fast growth someone hired as a mgr can move up to a director within a few mos because there are simply so many needs to fill.  

Firestone Walker rose up out of California's Central Coast wine country immortalized in the movie "Sideways." And the Firestone family, which had earlier made its name in the tire business, owned a pioneering Firestone winery in the region for decades. Indeed, the original tiny brewery of 6000 square feet was "very much a hobby," built on the grounds of the family's winery in Los Olivos back in 1996. The wine connection remains strong (including a number of beer/wine collaborations). "The culture that exists in the wine community is a big part of who we are," said co-founder David Walker, which "speaks to the artisanal, experimental and quality" aspects of Firestone's identity. Firestone Walker makes some of the most acclaimed "big beers." Firestone Walker and its brewmaster Matt Brynildson were recently dubbed "the most decorated American brewery" by San Jose Mercury News beer columnist Jay Brooks. He pointed to its repeat wins at GABF as midsized brewery of the yr and also at the World Beer Cup as Brewery of the Year. These aren't major publicity ploys for Firestone (so far), but they are key to the company's culture, which focuses on the brewmaster and his team (Matt is a partner) and gives them a lot of latitude. "My function," said co-founder Adam Firestone, is "to enable beer-making." Adam also ran Firestone winery from 94 to 2006.

Firestone Walker Goes Deeper With 805 At the same time, Firestone Walker is also making its play for the mainstream. "We need to talk to the 85%" of people that haven't noticed craft, as David "optimistically" estimates. Leading the charge in that regard is of course its 805 brand, an easy drinking blonde ale that is so far a runaway success along Calif's central coast. Last yr, at Firestone's top distrib, Pacific Bev Co in Santa Barbara, Firestone Walker sales shot up 70% or so to half a mil cases, driven by surprise success of 805. And this yr, Pacific Bevs up another 30-40%. So one distrib alone could be at 650-700K cases of Firestone Walker, about half 805, and that's almost 25% of FW's total volume. The brand with the area code for a name (like Goose Island's 312) is "more of a lifestyle than an area code," said David, and it's become a source of local pride. This spring 805 has expanded further into Southern Calif and will also sell in cans starting in May. Firestone Walker also has other more mainstream plays like Pivo Pils and its just-released session IPA, Easy Jack IPA. Firestone Walker currently in 8 states and a number of larger cities, but ¾ of its biz, over 2 mil cases in 2014, will be sold in its home state Calif. Several larger distribs and other sources describe Firestone as a craft brewer with potential to break out to the next level, with its combo of brewing and business acumen.

Sprawling Campus in Paso Robles Expands Again; Next Decisions in 2014 Firestone Walker's main brewing facility is on a sprawling and expanding campus in Paso Robles, about 1.5 hours north from where it all began (also wine country). Adam Firestone and his brother-in-law David Walker bought the SLO brewery here back in 2002, after SLO filed for bankruptcy. And they have steadily added to it since. The facility as currently configured can ultimately get Firestone Walker to about 300,000 bbls of capacity. At their present growth rate, that might not be enough capacity to get them through 2016. So even after all the major expansions and renovations they have done, including a just installed high speed canning line (350-400 cans per minute), building out for new bottling line coming next year, new kegging line and expanded storage, Firestone Walker already faces another round of critical decisions about how to accommodate its next round of anticipated growth. Firestone Walker has had the foresight to purchase around 78 acres of property adjacent to the brewing campus. "We're trying to be smart about it," said Adam as there are a "lot of options" for next moves. Firestone will be "forced to make a decision in 2014," said David, which is "much sooner than we anticipated."

A "Cathedral" of Barrels in Buellton; Feral One Firestone Walker has a second facility in Buellton, 45 minutes north of Santa Barbara, that includes a taproom/restaurant, a tasting room and Barrelworks, which opened in Jan 2013 and houses its wild and barrel aged beers, which the co calls a "Cathedral of Barrels." In Mar, Firestone debuted its first sour beer, Feral One in Buellton. About 400 people lined up there in advance of opening to get a taste. In another play to the high-end beer aficionado, Firestone Walker holds its Invitational once a yr, with 50 other brewers up in Paso Robles. Around 3500 tickets sold out in 22 minutes for $75-100 per pop. Nationally, about 80% of its biz in 3 brands, #1 Union Jack, #2 805 and #3 DBA (the original flagship British style pale ale), but Firestone Walker is also well-known for its barrel-aged beers like Parabola and Sucuba, which sell for $20 a 22-oz bottle and are routinely found high in rankings on geek-centric websites like Beer Advocate and Rate Beer.

Three Breweries in One It's almost as if Firestone Walker is several different breweries in one. Here's how David describes it: On the Central Coast, "we aspire to be like New Glarus" with big volume concentrated in home area and easy-drinkin' 805. But regionally Firestone aspires to be more like Bell's, with a "wide range of eclectic beers available to the whole region." And nationally the model "aspires to be like Dogfish Head," with a lineup of rare and specialty beers that are only available in very limited quantities. Firestone Walker is trying to improve its capabilities across all these dimensions. Recently, it hired well-regarded New Belgium region director Dave Macon as vp sales and mktg. Since Dave joined New Belgium when it was only about 150K bbls and was part of team pushing it to near 800K bbls, "his experience is what's in front of us," said David. This move will also help to "align" sales and mktg. "We're all about building out our team," said David.

Venice Coming Including its 2 brewpubs, Firestone Walker already employs over 300 people (a little more than 100 full-time) and reached near $50 mil in revs last yr. Next up: late 2014/early 2015 opening of its next major facility in uber-trendy Venice, Calif. Recall, that will include small experimental brewhouse, big retail restaurant and some office space as Firestone Walker takes another big step to build its brand in greater LA area. The Venice facility will replicate the look of Paso Robles, but a "little groovier," said Adam Firestone. Venice "will be a listening post. That's why we picked the site in the belly of the beast where a lot of creative ideas are happening." It will be a kind of "test kitchen for floating new ideas," added Adam. "Our hope is to bring a little bit of Paso Robles to Venice and a little bit of Venice to Paso Robles," concluded David.  

CBN recently visited 2 of Calif's more esteemed and fastest rising craft breweries, Firestone Walker and Ballast Point. They are each growing rapidly with an intense focus on their local mkts and expanding their breweries like crazy in a headlong onrush to meet demand. The Future Is Now! "These are the good old days," sez Ballast Point's sales and mktg veep Earl Kight. Firestone Walker is up another 30+% yr-to-date and expects to hit 200,000 bbls in 2014, up around 50,000 bbls. And Ballast Point up around 70% yr-to-date, but because of capacity constraints (new brewery coming on line in 2d half), "only" expects to grow more than 40,000 bbls 50% or so to between 125-130,000 bbls. So the two combined will grow 90-95,000 bbls in 2014. Part of this article also appeared in INSIGHTS Express. Read on for more in-depth coverage, exclusive to CBN.  

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"Traditional review standards," once crucial guidelines for all beer marketing, don't seem to be followed closely by current craft marketers, industry vet Dan Fox argued in a recent opinion piece for Euro bev pub the drinks business. Pointing out "ten particularly irresponsible craft-beer labels," by these standards, plus another 10 "runners-up" on his blog, Dan asserts that if past restrictions and notions of responsible alcohol marketing applied to these labels, they'd never have hit shelves. For example, brands touting sessionability or being able to drink more than one would once have been deemed a promotion of binge drinking; labels utilizing cartoon characters or figures like Santa Claus could be seen as appealing to children; many brand names using words like "punch" or "smash" could be seen as "celebrating alcohol-effect." Such branding, according to Dan, represents quite the "unfair advantage." Larger beer companies still adhere to these "strict ethical-marketing rules" and label art could be considered a craft co's "most important marketing investment." An LA Times response to the piece asks if the TTB "is approving these craft beer labels, who can blame [small brewers] for trying?" And if that's true, "how can one claim unfair advantage?"

Dan points to what he sees as a double standard. Based on his experience working on Coors brands for much of his 30-yr career in marketing, "far tamer" ideas for brand messages than the craft brands he shows were deemed unacceptable by regulators. In the time since, the way TTB operates has changed, as has the number of individuals making beer branding decisions along with the number of breweries and therefore labels needing approval. Certainly some of the brewers responsible for creating these brands had an inkling that they might suggest a celebration of alcohol's effects or that they depict a character that a child may be attracted to. But how many current craft marketers would consider language like "crush" or "wallop" off limits? Should they? A common refrain when discussing marketing with craft brewers is the impulse to create branding they personally find attractive or speaks to them. An inherent danger in that is producing marketing that also speaks to young drinkers with similar interests, perhaps even those under 21. The conundrum of marketing to 22 year olds but not 20 year olds has long plagued alcohol brands. Is Dan suggesting that some craft marketers are not plagued by this at all?

Online Resources for Marketers from TTB, BA, BI Vary Considerably Surely craft brewers' often rebellious spirit contributes to some of these instances of questionable brand messages. But perhaps another part of the reason craft marketers have ventured into territory where larger companies would never tread stems from current resources provided to them from different sources. Beer marketers seeking guidance from the TTB about what will keep labels from being approved are currently faced with a list of 7 initial no-nos followed by 7 more categories of restricted practices. Among them: any kind of false or potentially misleading statement, disparaging competing brands, obscene or indecent marks or language, government stamps, flags and the like, variations on the word "bonded," any number of practices that could be construed as health claims and words or numerals "likely to be considered as statements of alcoholic content." As far as this last restriction is concerned, it seems the TTB has erred on the side of quite a narrow definition of strength claims in recent years.

The other resource a craft marketer is likely to turn to when seeking guidance is the Brewers Assn's marketing and advertising code. The document discourages depicting unsafe drinking behaviors like drunk driving or excessive drinking as well as notions of success arising as a result of drinking. It also spends much time guiding brewers in their marketing efforts on digital media and ensuring viewers of said material are over 21. The Beer Institute's comparable marketing code includes some similar statements but also offers many more restrictions. The BI invites marketers to consider and not use any imagery or text that may "appeal primarily to persons under the legal drinking age if they have special attractiveness to such persons beyond their general attractiveness for persons above the legal drinking age." It also specifically bars any depiction of Santa Claus, requires actors used in beer ads to be at least 25 and steers marketers away from licensing logos for "materials intended for use primarily by persons below the legal drinking age." A craft marketer and craft-loving expectant parents may think a branded baby onesie is cute, but such a product is likely to make the blood of public health groups, neo-prohibitionists and industry watchdogs boil. BI-members and the industry's largest players are now very familiar with these anti-industry groups and individuals. As craft brands grow in visibility, they too will likely be subject to the same level of scrutiny as their larger competitors have been.  

As Mich beer folks finished up months-long process of reforming alc bev laws there (see above), some folks in Fla are getting frustrated by further debates, mostly surrounding growlers. Small brewers want to sell the half-gallon package. But some distributors don't want that to happen without more restrictions being placed on small brewers' abilities to open and operate tap rooms and sell beer from other brewers. Recall controversial House bill that would have allowed for the 64-oz package size as well as put many of those restrictions on the books (the one no industry members claimed any association with, see our Mar 7 issue). Most of those restrictions were removed during a committee hearing this week. Just prior to that, AB clarified its support of half-gallon growlers if they "meet the same safety, packaging and labeling standards other beers have to follow." Small brewers heaved a sigh of relief and the changes were supported by many, including the Florida Beer Wholesalers Assn (Fla AB distribs), according to the Sarasota Herald Tribune. That bill faces 2 more committees.

Meanwhile, folks have turned attention to a Senate companion bill with "many of the same regulations" still included. "We're going to advocate for the Senate bill to take a good shape and strike a balance," FBWA's Mitch Rubin told the Herald Tribune, which the paper contrasted against his comments in support of changes to the House bill. The Senate version passed unanimously out of committee Weds after multiple amendments, tho none that received the acclaim from small brewers as the House amendments. And the Senate is the house to watch as it was Senate President Don Gaetz who told the AP he'd follow guidance of Northwest Fla AB distrib Lewis Bear. That comment sent some into a tizzy (press response includes a damning op-ed in the Pensacola News Journal) and re-upped small brewers' accusations that campaign contributions are deciding their fates. Small brewers in the state have taken to social and local media to garner support at the same time they've increased more traditional political lobbying activity, according to a report based on a recent visit from Brewers Assn state guild coordinator Acacia Coast. The Florida Brewers Guild now has a PAC and is holding more fundraisers as "money is the mother's milk of politics," FBG exec dir/lobbyist/genl counsel Josh Aubuchon told Acacia. Before labelling restrictions just removed from the House bill "tremendously harmful to Florida breweries," Acacia noted that "almost twenty new breweries opened up" in Fla in 2013 and the BA counts 88 current breweries-in-planning in the state.

Looks Like Looser Rules for Brewers in Minn and Tenn on Sunday Sales, Alc Content A complete repeal of Minn's ban on Sunday alc sales remains "unlikely," but small brewers could catch a break, CBS Minnesota reports. Sunday sales bills still on the table in both Minn houses would allow small brewer tap rooms to sell beer to go, including in growlers on Sundays. The reasoning? "Wineries are allowed Sunday bottle sales. Breweries should be, too," one Rep argued. Elsewhere, Tenn brewers might succeed in raising the allowable alcohol content for beer from 5 to 12% ABV after some new amendments to existing alc bev bills there. They also may be allowed to sell such beer in grocery stores, not just liquor stores, according to Nashville Biz Jnl.  

Brewers Assn-defined craft brewers exported almost 283K bbls in 2013, +49% over 2012 as part of the org's Export Development Program, it announced this week. Exports approached 2% of total craft shipments, based on BA stats, up from less than 1.5%. Competition in the North American craft space continues to heat up. Craft brewers shipped over 130K bbls to Canada alone last year, +93%. That's almost half of total craft exports, over ? of craft export growth. Recall, a handful of craft brewers, including New Belgium, initiated distribution to one or more Canadian provinces only in the last couple months. Of course, our neighbor to the North is home to its own growing group of small brewers that continue to seek distribution here as well. Shipments to Western Europe picked up 46% in toto, according to the BA. Sweden alone bought almost 44K bbls of BA craft in 2013, about 15.5% of craft export shipments and #2 individual mkt overall, according to the report. Recall, Sweden also Brooklyn Brewery's 2d largest mkt after NYC metro and it just opened new Nya Carnegiebryggeriet joint venture brewery with Carlsberg in Stockholm this week. Brooklyn shared goal last fall to export 400K+ CEs to the mkt in 2014, about 29K bbls. Indeed, Brooklyn exported about 60K bbls total in 2013, or over 20% of all BA-defined craft exports. UK neared 8% of craft exports last yr, followed by Australia (5%) and Japan (3%). "New distribution agreements" led to significant growth, BA coo Bob Pease said in statement, particularly in Asia-Pacific, showing fast gains in Singapore, Hong Kong and Thailand. Biggest hurdle and focus for BA and individual brewers as craft exports increase is "to ensure beer quality is preserved in all cases," Bob said.  

Kansas' largest brewer, Tallgrass Brewing will spend $5 mil on new 60K sq ft facility to get it to 100K bbls/yr capacity, co announced. It produced about 16K bbls in 2013 and looks to attract visitors with new facility on 9 acres, plenty of room to grow. This facility announced less than a week after Tallgrass shared plans to build new downtown Manhattan, KS brewpub with seating for 200. In Calif, Figueroa Mountain Brewery opened new location in Los Olivos, its third, and expanded current tap room space in Buellton. The brewer looks to opening of new restaurant capabilities in Buellton later this spring.