In Fla, sprawling bill that gives small brewers broader retail sales rights, but also covers tastings, growlers, guest taps and more, has passed out of House subcommittee and on to full committee and another hearing in 3 weeks or so we're told. In familiar theme, small brewers trying to expand retail options while distribs trying to keep 3-tier walls intact. Much jockeying still to be done and bill's final form not yet clarified. Small brewers support separate bills that address growlers and tastings (one each in Senate and House committees) without rest of broader bill's provisions, while others remain opposed, according to the Florida Current.

In Mass, small brewer-supported bill to allow termination without cause if distrib that loses brand gets fair mkt value prompted another op-ed from distrib assn's prexy Bill Kelley in Boston Globe. As he has in past, Bill attributed "much" of craft's success in state to distribs support as they play "vital part" in sales/mktg of craft. Proposed bill would change already "flexible laws" that regulate brewer-distrib relationship and already allow brands to move. Then too, proposal would create "instability that would directly impact the ability and willingness" of distribs to make needed investments, could harm new small brewers, consumer choice, etc. Bill writes too that it's "unfortunate that giants like Sam Adams and Harpoon would push such unfair legislation."

More and more we're seeing media stories about: 1) micro-distillers seeking same privileges as small brewers and vintners; 2) retailers howling when competitor(s) gets perceived advantages; 3) state tax breaks for use of local ingredients. Some of these efforts are true attempts to "level the playing field"; some actually tilt that field to advantage one set of players or another.



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That's gist of questions raised by Nick Anderson, beer buyer for Arrowine bottle shop in Arlington, Va on Twitter this week, chronicled with added color by DCBeer blog. Nick's frustrations boiled over after seeing pic another Twitter user shared of stacked cases of Bell's HopSlam at nearby grocery store, but his complaints stretch to handling of numerous other brands. After acknowledging business sense, from distributors' point of view, that chains with larger total brand sales get allocated larger amount of specialty brands (like HopSlam), Nick laid out worries about such practices and direction of craft growth generally. Tho Nick claims to have been big dealer in a number of specialty brands in previous years, his shop was given much smaller allocation this time around and forced to compete against big price cuts from larger chain players. Giving voice to dissenters, he tweeted "'Hey, that's capitalism--deal with it'. It is, and I am," after commiserating "that my 10 years of building fanbases and spreading the gospel, of stoking fires & helping set trends…" seem to no longer be valued as much as they once were now that bigger buyers have caught on to craft's success.

When clarifying his point to DCBeer, Nick noted that "distributors care" (about bottle shops like his) "but they only have to care so much, because at the end of the day they're getting my money no matter what." That is, if they've got a brand he wants in his territory, he can't buy it from anyone else. He encouraged followers to "Support your local shop. Support the stores/buyers whose work you like and appreciate" on Twitter. Then followed up that "voting with your wallet is fine and good (and encouraged), but when a massive chain decides to open their checkbook, it can drown out a lot of voices with a quickness," to DCBeer. "I fear that big boxes cornering the market on special releases and shutting out small, independent stores is the first step to shutting them out completely," he concluded with the bloggers. Back on Twitter, mid-rant, he posited that "if WalMart wants to get into the HopSlam business NEXT year, they're gonna be the only game in town."  

Aggressive plans of Atwater Brewing to build 100K-bbl/yr brewery in Austin plus "a similar brewery in North Carolina," both slated to open in 2015 revealed this week by Crains Detroit Business. New 80K sq-ft Austin facility expected to cost $15 mil, targeting 100K bbls of capacity and "in the final planning stages for construction," sez Crains. No details on NC site. Co expecting to enter 8 mkts "as soon as product is available," prexy/CEO Mark Rieth told paper. Atwater spent $2 mil to expand capacity at current Detroit facility to 30K bbls and has been contracting with big new Brew Detroit facility too. Atwater anticipates producing 40K bbls at Brew Detroit this yr, 70K total. Plan is to have Austin up and running by first quarter 2015 to ship 100K bbls next yr, 250K bbls by 2018. Plenty to do between now and then.  

Brooklyn Beer founder Steve Hindy no stranger to competing with AB, which has branch in NYC. And now that AB acquired craft competitor Blue Point, he expects those brands (along with Goose Island) to get "special treatment" in chains given AB's broad "category captaincy," he told beer blog beerunion.com. Steve didn't mention potential on-premise competition, but he's gotta be thinking about Brooklyn taps being increasingly targeted across metro area. (Recall, Brooklyn sez it has 2d most taps in NYC.) AB's Blue Point purchase is "an intensification of a struggle that we've been engaged in for almost four decades." While "big guys thought we [craft brewers] were a fad that would eventually go away," they eventually "grudgingly realized" they had to play in craft. And success of Goose, plus Blue Point deal, suggests to Steve that AB "seems to be concluding that their best way to play in the craft category is to buy craft brewers."

More deals likely, in his view. If craft brewers, especially those who have been around for decades, don't have succession plan, they're "faced with a very difficult decision" of selling biz, selling part of biz and staying on or "just dying and allowing the company to kind of fade out of existence." Looks to Steve like Blue Point founders "could not come to any agreement on next generation and decided to take the money." Recall too, Goose Island's Andy Goeler pointed out to CBN that different folks have different comfort levels when it comes to debt, just as Russian River co-founder Natalie Cilurzo recently commented that she and her husband Vinnie "don't want to be $20 million in debt" when a "market correction" comes (see last issue). In any case, small brewers' options no different than any other small company; consolidation, buy-sells, etc surely not unique to beer.

Steve's likely correct that competition from big brewers getting "more intense," especially if AB and MC continue to shed mainstream volume. That's natural too. As we've noted in past, big brewers simply later to same game than big vintners and distillers, who saw premiumization oppy earlier. Shifting their drinkers from mainstream to their "crafty" brands could accelerate big brewers' mainstream volume decline, Steve suggests. But they'd surely rather keep that volume "in house." In any case, consumers will decide whether to "support independent, small brewers or whether independence and community involvement doesn't matter." Then again, AB spends mightily on community involvement too.  

There is no happenstance or coincidence, remember, just carefully planned expansions of growing bizzes into new territories, it seems. Stone Brewing will partner with Maui Brewing to establish new Maui - Stone Craft Beverages distribution company on Maui, second-largest Hawaiian island. First set of 9 brands, including Maui and Stone, natch, plus slew of other mostly Calif high-flyers (AleSmith, Bear Republic, The Bruery, Port/Last Abbey, Saint Archer, plus Colo's Avery and Oskar Blues) slated to hit market in April. New 16K sq-ft distribution center in works to handle brand.  

Tenth & Blake prexy Tom Cardella said "craft will double" in next 5 yrs in speech called the "Rising Tide" to Mich & Ill distrib meeting. Tom includes Blue Moon + Leinenkugel in his craft #'s, seemingly others . Key question is as craft grows "how do we manage the fragmentation?" His partial answer is "scale is good." Craft segment (with Blue Moon and Leinenkugel included) finished 2013 at 22.1 mil bbls, 10.7 share of volume, according to Tom. (We're not sure how Tom gets to 22.1 mil bbls, even if you include brewers not defined as craft by BA, plus AB and MC entries.) If you include em', Blue Moon and Leinenkugel are #2 and #4 craft brewers in the country, and combined make Tenth & Blake the largest craft supplier in the industry with the largest craft brand (Blue Moon). Blue Moon "has been one of the best things" for craft," because it "has been the gateway" brand," sez Tom. And Leinenkugel cranked out "over 400K bbls" of Summer Shandy (+20%) in 2013. "That gets back to the point that….the 2 big guys are going to reinvent themselves. We are reinventing ourselves. We're not going to go away and sail off into the sunset." And that's partly because T+B believes trend will continue. Tenth & Blake looks at lifecycle of gourmet "coffee as a great analogue" and "parallel" to what's happening in craft now. Gourmet coffee has grown 5-6% a yr, and is now 30% of volume, 50% of $$ in total industry.

Skumageddon by the Numbers But there are many challenges, notably "how to manage the fragmentation" of the industry? "We need this fragmentation" because "it's bringing the romance and the exploration, which is rejuvenating our business, but at the same time it's bringing a helluva lot of complexity." Here's Tom's revealing look at Skumageddon by the numbers: In last 3 yrs there have been 1830 new brands (+57.8%), 4K new skus (+62.8%), and 327 (+28.2%) more avg items per store introduced off-premise in scans alone. There've been 3116 new brands intro'd (+30%) on premise just in the last yr, yet total $$ sales are slightly down (-0.6%) and volume is off 4%, Tom presented. Top 10 craft lost nearly 2 share of craft collectively, and only Lagunitas and Leinenkugel gained share of craft in that group. Next 20 brewers only grew 0.2 share of craft, while rest grew 1.7 share. Yet top 10 craft cos gained 0.5 share of total beer biz, next 20 gained 0.2, and rest of craft gained 0.6. "Where are the ones (brands) you're really gonna play with and the ones you're gonna build long term," posed Tom. "Gotta think about the scale side of things," "we just gotta figure out better ways to manage it," and that falls more on the "distributor side at this time," noted Tom. Craft represent vast majority of the skus in all of beer, yet only accounts for a small amount of beer biz, he added.

"Solutions are needed," and "my challenge to everybody here and the industry is let's not just keep stuffing this stuff into the bag without coming up with ways to either stretch the bag or make the bag work a little bit better in our current environment…We've all got to get better with education," sez Tom. "Everybody wants to do beer dinners…well, hell with the beer dinners, how are we going to use that education better in the off-sale," asked Tom. "Connect with shoppers in non-traditional avenues," "involve shopper in the renaissance of beer," utilize "beer and food" pairings, do a better job "sampling" and "do glassware." "The other key thing here," two large MC distribs who also sell wine & spirits told Tom, is "you got to start with your people." "Your best beer guy is probably mediocre or at the bottom of the list in regards to my worst wine guy." Then too, there's got to be "smart draft strategies." There are draft accounts that have "dis-economic" models, with "140 taps" that's "nothing but rotating beer." How to approach that is to "start doing the math for the retailer on the velocities and the margins and the cost of all that churn."  

Lagunitas founder, Tony Magee addressed "a little bit of the elephant in the room" at Mich & Illinois annual distrib mtg in Aruba earlier this week: "there was a thing that happened…with the purchase of Windy City Distributing by Reyes," and "that has probably caused a little bit of contention," he noted. "Just wanted to let you know we were part of that decision" and "supported (it) whole-heartedly," and "the real reason (Lagunitas stayed with Windy City) was I had this parallel investment going," to build a brewery in Chicago "and I couldn't take any chances."

"When we first came to Chicago the mkt wasn't warm enuf yet…. We ended up with Windy City" because of "that basic one-stop shop thing." Even though their coverage was "paper thin" it represented the entire city of Chicago. "The original conception of that whole deal was that we'd (eventually) be partnered out and Windy City would be partnered out and we'd end up with the independent Miller Coors cluster," but "in the middle of that, we announced we were building the new brewery," and that "really raised the stakes for me," Tony remarked. "There was no way I could afford to allow a big disconnect," or "derailment" or any "misalignment" in Lagunitas' relationships with trade, retailers and distrib partners. "The cleanest possible outcome for us would've been status quo": "no deal at all, and instead Windy City simply invest." But Ebel Brothers "were not inclined to invest in their business," and "we were growing it for them in a way that wasn't really fair for us…We were spending a lot of money to build their business," and "we gave them trucks." So when Reyes Beverage Group purchased Windy City and "had the idea that they might keep it intact…I supported that entirely because it meant status quo moving forward." We "didn't need any more variables" with the brewery in the works. As time goes by the "investment in Windy City is going to have to be extraordinary for them to do what the cluster individually could have done," he acknowledged.

Lagunitas is set to begin making beer at its (now $26 mil) Chicago brewery by the end of February, "hopefully not more than a month of experimentation and we'll have beer coming out of there by summer," sez Tony. So it'll have taken 24 mos total from "conception of the idea" to build a 1.5 mil-bbl brewery in operation, he added. Since the announcement of the Chicago brewery near 2 yrs ago, Lagunitas' Chicago sales are up 255%. This past yr Lagunitas "shorted 40% of the orders that came into the brewery" and still managed to grow 70%. There will be 537 Lagunitas employees company-wide by the end of the yr.  

Vinnie and Natalie Cilurzo of Russian River Brewing don't have to work too hard to get attention from the brewniverse's twitteratti. They're in the thick of "Pliny madness" at their Santa Rosa, Calif brewpub at the moment, the only two weeks of the year when famed Pliny the Younger triple IPA is available on tap. To ensure the beer is available every day til at least 6pm for the full 2 weeks, Russian River rations half of the approximate 160 bbls it brews of Younger (the other half goes to select accts in Calif, Oreg, Colo and Pennsy). Without any waste, that's just over 1130 10-oz pours per day, of which patrons may order no more than 3. Visitors can wait 6 or more hours to get inside the pub while Younger's available, and this yr, Santa Rosa offered to set up live music or food trucks to assist with keeping the crowd happy, according the city's Press Democrat. But the brewery declined, for now. The city will spend about $700 to help take care of waste created by the extra visitors to town, but that's about it. Sonoma County worked to determine the economic impact of the beer's release last yr, estimating it at around $2.4 mil, largely thanks to many visitors to the area from out of state and country. That impact could be even greater if the Cilurzos decided to expand production, but they're still unwilling to take on the hefty debt that comes with major brewery expansions. "Everybody's opening a brewery, everybody's expanding," Natalie told the Press Democrat, before wondering "when is there going to be a market correction?" She concluded, "we don't want to be $20 million in debt when that day comes."  

The 2014 Beer INSIGHTS Spring Conference will be held at the Ritz Carlton in Chicago Jun 9-10. The Spring Conference will have greater focus on craft than ever before, once again with an overall theme of the dynamic and growing high-end of US beer biz. We'll have a panel led by consultant Bump Williams featuring top execs from fast-rising craft brewers including: Allagash Brewing founder Rob Tod, Ninkasi Brewing ceo Nikos Ridge, Odell Brewing ceo Wynne Odell, and Steve Crandall, founder of Devils Backbone. They join other key execs on our program including: Crown Prexy Bill Hackett; Boston Beer founder Jim Koch; MillerCoors innovations veep David Kroll; Lagunitas founder Tony Magee; consultant Mike Mazzoni, along with BMI's Benj Steinman. You won't want to miss the key insights and networking opportunity with execs leading growth in the high end so sign up today. Click here for more info, click here to register.  

Reactions to Tex laws passed in 2013 remain understandably mixed as some brewers begin to utilize new-found rights and others exercise their democratic rights to effect further change in state government. Uncle Billy's Brew & Cue became the first state brewpub to begin distributing beer late last week with Keg 1, according to the Texas Tribune. "If you can't sell your product to anyone other than your own customers, that makes it very difficult to survive," Uncle Billy's co-founder Rick Engel told the paper. Beer Alliance of Texas prexy Rick Donley took the example of "the real world impact of forward thinking legislation" to remind that "the legislation provides an opportunity for brewers and retailers across the state to create jobs, grow the economy, expand consumer choice and enable the development" of craft. Deep Ellum Brewing's founders were not-so-thrilled with how the final stages of passing the legislation went down last year tho. The co is actively working to remove state Sen. John Carona from his office, which he has held for 23 years, according to the Dallas Observer. The brewery will host a campaign party for "Carona's primary opponent" in the state's election, citing "time for a change." Brewery-founder John Reardon shared his distaste with Carona's ties to "big distributor buddies."