In an ever changing beer world, "the most successful distributors will be the ones who continue adapting to the changing environment and optimize their portfolio of national, regional and local independent American craft brewers," the Brewers Assn wrote in an article posted to its site's "News" section this week. The article cites comments from distributors and input from brewery owners to provide guidance to wholesalers for managing craft portfolios. Part of that effective management includes dropping underperforming brands or those with expectations that "no longer align." And part of that will be franchise reform, as the BA lays out in the article's final section: "Let Our People Go." Holding onto a brand looking to move "benefits no one and threatens the long term viability" of entire craft segment, the article argues. That's after reminding that "small brewer carve-outs" are passing in state houses with greater frequency, so "the best distributors in each market stand to benefit by offering a new distribution option to dissatisfied craft brewers." The country's small brewers ain't gonna stop innovating anytime soon (and the largest brewers ain't either, we'd note), creating a constantly evolving environment that "requires continuous evolution of retailer and distributor strategy." Distribs that stick to the same-old same-old won't cut it, the article implies, while winning wholesalers will evolve with industry.

Leading up to this final section, the article has plenty of other sound suggestions for managing a craft portfolio. Among the "countless topics to consider when analyzing brewery partners," the BA suggests close looks at a brand's recognizability and story, the brewery's priorities ("flagship or wide portfolio approach") and investments in selling its brands in local mkts and national chains, plus its "strength in home market" and "social media plan." Don't forget to consider long-term "commitment to quality" including, "where legal," helping pay for "getting old beer out of market." Potential brewery partners should also have clear plans for how to expand its capacity and brewing operations and its long-term ownership structure.

We've heard lots about the increasing frequency (and size) of mkting agreements distribs are making when acquiring new craft brands. Interestingly, this article flips that around, insisting that "distributors should hold brewers accountable for effectively investing in and managing their business." Indeed, one distributor told the authors that craft brands "all have a chance to succeed, but the level of success depends on resources and spending behind the brand." Success "depends on the market. Not all brands work in all markets," one distrib owner said and "there is not enough space in the world for all brewers to achieve their distribution goals," the article says. Further "it sometimes feels as if there are more brands today than there are consumers to drink them," a distrib told the BA. When taking on a new brand, wholesalers must understand "what niche or void" it will fill. The article also encourages distribs to pick the right person to lead a craft portfolio depending on that distrib's overall craft strategy: "passionate craft beer enthusiasts" do well when focusing on craft-heavy accounts; managers with "extensive sales knowledge" work well elsewhere. Before invoking a 2013 memo from Bump Williams citing "lots of dead packages" and encouraging better management of real estate, the article argues that "it is more important than ever to maintain focus on the flagship and leading brands of top craft brewers." The "new, exciting entries," should then complement that focus.  

AB's focus for now with Blue Point will "remain on building a stronghold in the northeast," veep Andy Goeler, who runs the Goose Island biz, told CBN yesterday. There's "no specific plan to roll out to new territories" or go national, he added. Tho Andy expects calls from AB distribs seeking to add brand, any expansion not likely to happen as quickly as it did with Goose. Part of reason for fast Goose rollout, Andy reminded, was "need" in AB distrib system to have craft brands to compete better. In any case, "as we get to know Blue Point better, that's when opportunities will arise." Andy confirmed that majority of Blue Point volume already with AB distribs and where it's not, "we are encouraging our distributors to purchase the rights." Why Blue Point, why now? Northeast is "great area to have a deeper presence," Andy said, to compliment AB's natl footprint. Then too, Blue Point's "passionate beer culture reminded us of Goose Island." Third factor was Blue Point's need to expand. "They are capacity constrained beyond belief. You can't fit another chair" at Long Island plant, said Andy. And AB sees lotsa oppy to build out tasting room in Patchogue.

AB resources provided "great option" for Blue Point founders Mark Burford and Pete Cotter to expand capacity. Some brewers more comfortable with varying levels of debt, Andy pointed out. Mark and Pete also "had time to look at what we've done with Goose Island. They liked our approach, which is to let them do more of what they are doing." Since AB shifted production of Goose flagships to its own breweries, it freed up Goose brewers to innovate and they are now making "more small-batch, experimental brands than ever." Will Blue Point be made in AB breweries, especially since some of its volume now contract-brewed? Again, "no specific plans" to shift production right now, said Andy, tho "if the day comes when we need to brew it [at AB breweries], we'll absolutely help them. We'll see how they grow."

As when AB bought Goose Island, backlash from beer geeks popped immediately after announcement. Blue Point website shut down briefly from overload. Andy's response to such backlash: "I love and appreciate that people are so passionate about the beer that they take time to write in their opinions." Tho he gets "concerned" when any beer gets bashed, "we expect it" and respect the passion behind the comments. "We learned at Goose that the only way to counter" such criticism "is to over time, show them that we respect the beer so much that we're not going in to cut costs, cheapen the beer or the packaging, but to provide a vehicle to do more." AB's challenge is to ensure that "a year from now people will be saying 'Wow, Blue Point is doing this and this and this and look at what AB helped Blue Point do.'"

Are there more craft deals in AB's future? "We've got our hands full with two great brewers. I want to focus on that the best we can," Andy responded.  

With the way 21st Amendment Brewing has been growing in last few yrs - finishing 2013 at over 56K bbls, +30%, it's over 30x its 2008 volume - the co is running out of room to grow with current production partner. 21A has been one of most successful craft companies in recent years to brew the vast majority of its beer at another brewery's facility. It's worked with Cold Spring in Minn since early 2008, when it wasn't in the cards for the San Francisco brewpub to build its own Bay Area facility. The co "focused our time on building our relationship with Cold Spring" to form a "true partnership to make better beer," 21A co-founder Nico Freccia told CBN. "We think we can squeeze out 70K bbls" at Cold Spring, Nico said, so "if we hit 25%" growth this yr, "there's no more room after that." He, co-founder Shaun O'Sullivan and team have "always wanted to build a larger production brewery here at home in the Bay Area," Nico added, and recall Shaun shared at last yr's CBC that the co had started looking for space for such a facility. Stay tuned. On current contract landscape, Nico's seeing "still this mad dash to get in," with some players "totally oversubscribed." He's hearing "rumblings," some "backlash" against contract brewing still, along with more folks asking "what does 'local' mean?"

About a third of 21st Amendment's volume is in Brew Free or Die IPA, the co's #1 brand, up over 30% in 2013. "Literally on its heels," Nico said, and growing faster is 6-month-seasonal Hell or High Watermelon, about 28% of volume and up 48% last year. Two other yr-round beers, Back in Black (a black IPA) and Bitter American (an American take on classic low-abv British bitter style) make up another 16% and 10% of 21A's volume. The rest is in a pair of other shorter-release seasonals and the co's Insurrection Series: "really small volume, all allocated, meant to be in and out of the market in a very short time," Nico said. Often experimental and/or collaborative, like most-recent entry, pair of He Said pumpkin beers brewed with Elysian's Dick Cantwell, these high-margin brands are also "what keeps it fun." The brewer's canned offerings do quite well, just "20% of total shipments were draft" last yr, according to Nico. He recognizes that "we need to get that number up" to add "more sampling opportunities." But in "every market, it's getting harder to do that" with all the new draft-only breweries working to get handles.

Fifteen states and DC, mostly in the Northwest and Northeast, see 21st Amendment beers, but the "Bay Area is by far our biggest market," Nico said. NorCal buys about 36% of 21A's volume. The rest of the NW is only another 13% of sales, so 21A's east and west biz is "pretty evenly split," both at 49% (about 2% lands in the Twin Cities). While split over more mkts, the co's East Coast sales are posting the fastest gains, Pennsy at about 9% of 2013 volume and +37%. 21A has a particular focus in metropolitan areas tho so Philly alone up 70%. DC and NYC were 7% of volume each last yr, and growth in "Manhattan was huge," Nico said, +36%, "especially for draft beer." Nico finds the East Coast in general doesn't have "that fierce sense of territorial locality" that folks in the PacNW, particularly Oreg have. He thinks that's one of the reasons 21A sales have "slowed quite a bit" in those NW mkts. The co hasn't launched many new states recently, mostly just filling in gaps, like moving further into central Calif. That'll continue in 2014 when 21A "will do some more fleshing out of territory" and "fill some holes for chains," likely headed to the rest of NY state, out of the city and "maybe New England," Nico said, especially places the co passes on its way to Boston.

Nico and team works with the Global Brewers Guild (a group of salespeople that sell a portfolio of craft brands in many eastern mkts) to help "put bodies on the ground before we even enter a market." But the co also amped up its efforts nearer home last yr and now has a dedicated salesperson in Seattle and Portland, as well as a Calif sales director, and 3 folks in NorCal: one each focused on SF, East Bay and Sacramento. Recall, they also brought on Ted Whitney to guide the sales team late last yr. "Our biggest business in Northern California is in Safeway," Nico told us, where most stores carry "at least 3 of the SKUs." Nico's noticed that chain in particular adding more space for the category by "putting floor-stacks of beer everywhere," including "a lot of floor-stacks for Watermelon in the produce section in the summer." Some premium Safeways have started "labelling the beer aisle: import, domestic, local, craft," and "they don't seem to be afraid now to take the Natural Light 18-pack out" to make more room for craft. Up in local-heavy Seattle and Portland it's "a lot easier to get kicked out of sets," so breweries have to "work a lot harder to stay in front of buyers." Breweries "can't just throw beer out there and hope it's gonna stick," Nico said, "you've gotta back it; you've gotta support it."

21st Amendment Brewpub; SF Shifts Nico and Shaun founded 21st Amendment in 2000 as a brewpub in a once "rather desolate neighborhood" that since 2004 has "grown and grown and grown." With tech companies and venture capital moving in, an "infrastructure, neighborhood and a whole new economy has grown up around us," Nico said. That's changed the pub's business from largely seasonal (winter used to come with a 20-30% sales dip) to much more even. The "beer just turns and burns" in the summer still, but the pub's now a "well-oiled machine." It turned out about 815 bbls in 2013, exact same as in 2012; the 12-bbl system could probably produce 1000 bbls if necessary, Nico estimates. Almost all of that beer is sold over the bar, with only a couple of specialty kegs sneaking out to other Bay Area spots. Most of the time 3 or 4 of the co's primary beers from Cold Spring are on tap along with 8 or more from the pub. Nico's also noticed some big changes in the SF brewery landscape. Tho SF has been known as a great beer town for yrs, the number of breweries in town, "until recently, has always hovered around 8 or 9," mostly brewpubs that "all opened within 2 years of each other." But "recently we've had a lot more activity," with plenty more facilities opening in the area. Besides the new Magnolia brewery (see our Jan 14 issue), Pine Street and Triple Voodoo (currently contracting but about to open a facility, according to Nico) are new to town, plus addition of Cellarmaker and more MateVeza outlets, both outfits profiled below.  

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