The craft segment is "roughly the same size as the US ultra-premium ($14+/bottle) wine market," about $12 billion, estimates a report from Frank, Rimerman + Co LLP (FRCo) and Ian Malone, released late last year. A wine-centric accounting/consulting firm based in Calif, FRCo researches the wine industry, while Malone asserts some role in Duvel's purchase of Boulevard (First Bev advised Boulevard). The report, "Craft Beer and Wine at a Crossroads," paints a picture of parallel industries with key points of divergence for its wine biz readers.

The report suggests broad interest in craft beer by wine professionals. "Everyone's saying the Millennials are in the bag for the wine business, but they're not," David Gill of Wine Metrics said on stage at the Unified Wine & Grape Symposium last Jan, according to the report. He went on: beer and spirits execs are "aggressive marketers and they're not going to let us eat their lunch. In fact I think craft beer is eating some of ours."

The authors estimate ultra-premium wine "accounts for approximately one-third of all wine industry revenue," but only about 13% of volume, vs craft beer at 6.5 volume share and 10.2 $$ share in 2012 (the report cites BA stats). Since "wine began experiencing a dramatic and sustained period of 'premiumization' 25 years before beer," a doubling of annual craft beer revs to $25 bil, about the size of the premium ($7+/bottle) wine segment, could be a "conservative" estimate. In fact, craft could "grow larger than the overall wine industry," about $35 bil, because "we believe it is still early days in beer's 'premiumization' cycle." The report cites Bain & Company's 8 "Trillion Dollar Growth Trends to 2020," one of which was "everything the same, but nicer."

If wine serves as a model, the authors expect lots more breweries and SKUs. Indeed, "compared to the number of wineries, the number of craft breweries is still relatively modest," and there are 6-times as many wine SKUs as beer, according to the report. A chart comparing the growth in the number of US wineries and craft breweries, using 1970 as "year 0" for wineries and 1985 as "year 0" for breweries, shows that the two pathways track very closely. Both saw a steeper increase begin around "year 25," 2010 for beer. If this "parallel track" continues, it could mean "continued significant growth for the next decade or longer."

These wine biz authors acknowledge that SKU proliferation "creates a strain on the distribution network," but importantly, "many small wineries addressed this problem by focusing on direct to consumer sales." So "will there be opportunities for craft brewers to sell direct to consumers beyond the brewpub?" Anticipating more attempts to create avenues for direct to consumer beer sales, the report reminds of wine's "two decade head start on reworking the antiquated alcohol beverage direct shipping laws."

The report dips into "craft vs. crafty," noting that, if the craft beer segment follows wine's lead, "the large brewers will make much more 'crafty' (but good) beer in the future." The report also advises craft brewers to be wary of allowing "'premiumization' and complexity" to lead to an industry "infused with formality, snobbery and psycho-social barriers," as is present in wine.  

Total beer $$ sales finished up 2%, volume up 1% in Seattle/Tacoma IRI foodstores 52 weeks thru Jan 5. Craft Brew Alliance is largest craft co at 6.5 share of $$. It was relatively stagnant for the yr, up under 1% for 52 weeks thru Jan 5, but remains 4th largest co in all of Seattle IRI, behind Crown (6.93 share), ABI (20.8) and MC (21.03). CBA's 4 top brands collectively make up half of co's Seattle sales, down slightly: Redhook ESB (+1%), Longhammer IPA (+6%), Widmer Hefeweizen (-2%) and Redhook Variety Pk (-10%). Deschutes, the next largest craft co, up steady 6%, gained 0.15 share of $$ to nearly 4 share. Seasonals led the charge, up 9.3%. That put sales just behind Redhook IPA and Miller High Life (-12%), and ahead of Bud Light Platinum (-22%), Modelo Especial (+17%), Coors Banquet (+9%).

Boston Beer biggest share-gainer, finished 2013 up 108%, adding 1.7 share of $$ to 3.5 (4.5 last 4 weeks). But similar to Portland mkt (see CBN vol 5 no 3) that's all Angry Orchard, which grabbed 1.3 share of $$ with just 2 brands: Crisp Apple (+0.9), Variety Pk (+0.4). No Sam Adams in Seattle top 50 scan brands. Elysian was pure craft player that gained most share, up 66%, +0.7 share, to 1.8 share of $$ in its home mkt. That put Elysian ahead of Sierra (flat), Alaskan (+6%), and DGUSA (-20%), and just behind New Belgium (-3%). Fremont Brewing was the other hot local brand that gained most share, finishing up 148%, +0.5 share to 0.8. Ninkasi (+0.4) and Lagunitas (+0.2) were next largest share gainers, tho Ninkasi is double Lagunitas size in Seattle mkt at 1.5 share.

In mkt like Seattle, always a next wave coming on. Wash brewers, Lake Chelan Winery (+309%) and No-Li Brewhouse (+45330%) each gained 0.1 share of $$. Some other fast growing local brewers in order of highest sales include: Iron Horse Brewing (+41%), Silver City Brewing (+76%), Two Beers Brewing (+198%), Odin Brewing (244%), and Hilliards Beer (+420%). Also worth noting, revived Rainer brand saw sales up 16% +0.3 share to 2.4. But Pabst Brewing Co only up 4%, and eked out share gain of just under 0.1.  

Coming off SweetWater's announcement that it grew 32% last yr and ended 2013 shipping 144K bbls (see last issue), we caught up with "Big Kahuna" Freddy Bensch. The folks at SweetWater have been "preparing for this day for the last 2 years," Freddy told Craft Brew News. It took that long to "redo the entire brewery," adding to packaging, fermentation and more, including a now-operational 250-bbl brewhouse. The work has jacked up capacity from around 110K bbls to 450-500K bbls, Freddy said. More recently, SweetWater hired a cfo and beefed up its sales staff to "take full advantage of it when [capacity] came online." That time is now. SW has a "pretty aggressive expansion schedule set up for 2014." Recall Va opens next week; Miss, Oh, and Tex follow.

Through all those moving parts, Freddy maintains it's "always about the beer for SweetWater," and "whatever decisions that we're making, the quality of the beer is always at the front end of that answer." So when cans debut in mid-March, they'll be can-conditioned and, even tho it's an operational "nightmare," Freddy hopes that all of SW's bottles will be bottle-conditioned by the summer too. A traditional process dating back to the beginning of bottled beer and later picked up by a number of US brewers, bottle-conditioning relies on re-fermentation after packaging to create carbonation. Less common in cans, it's a process that Freddy says, during internal tests, led to "phenomenally better" beer.

Flagship 420 Extra Pale Ale is still nearly 60% of SweetWater's biz, +22% last yr, but IPA is becoming more important to the brewer. Recall, they will be the two brands getting the can treatment off-the-bat; IPA was up 47% in 2013. Tho SW "typically" led with 420 draft in new markets, "followed closely by IPA," Steve Farace, SW's "Minister of Propaganda" told us, that's changing a bit after "the surge in popularity in IPA, and ours specifically." IPA will be "as readily available in new markets as we have done with 420." That's followed by "420, IPA, Blue and Tackle Box for off-premise grocery, convenience and package stores to give customers a wider variety," Steve said.

SweetWater will likely be working with many new distributors in 2014. "When we sign up with a new wholesaler, we're looking for a partner," Freddy told us, one that will "invest" and "grow our brand" hopefully for the next "25 or 30 years." (SW is getting big mktg commitments from some distribs, CBN hears tho not confirmed by Freddy, starting at $5 per case in 1st yr.) With planned expansion to 4 new states this yr, SW will need to repeatedly, in Freddy's words, "pick the right partner and create the right recipe" for long-term growth.

Freddy believes "the business side of the craft beer industry is really gonna heat up in the next 5 or 6 years," particularly in terms of M&A. While lotsa smaller guys are growing gangbusters now, "we'll see what happens when they're at capacity and they need to make that 20-million-dollar investment," he said. But right now, he finds "most of the pressure really comes from the local guys, the regional guys," a challenge when entering new markets and one SW hopes to provide to the "tons of out of state brewers coming in" to Georgia and the Southeast. Atlanta still accounts for 40% of SW's biz, but with expansion elsewhere, that's down from closer to 50% in early 2012. The co puts "no money in traditional marketing" in Atlanta, Freddy told us, instead relying on programs like its Riverkeeper work or events like 420 Fest. Freddy and co "shy away from the mass media," he said, and "focus on things that can really impact or influence a community in a positive way."  

Small brewers and their supporters are getting a jumpstart on the 2014 legislative session in a handful of states, seeking to protect their bizzes with new or amended laws. In Tenn, the industry successfully lobbied for a change from the state's price-based high excise taxes to a volume-based system last yr, but brewers there are seeking further protection. Any beverage with more than 5% alc by weight (abt 6.2% ABV) is taxed like liquor at 24.25%, according to Nooga.com. "We need to bring our beer laws out of the Stone Age and get them more in line with other states in order to not only foster growth in craft beer locally but also to welcome new breweries to start distributing in Tennessee," a Chatanooga restaurant owner told the paper. He claims that 2 of the $8 he charges for beers goes toward state taxes. Elsewhere, NH legislators got to work quickly, intro'ing a bill that creates "a tenant brewing system," allowing for a $240 license for brewing companies that will not own their own facilities but will brew in another co's licensed brewery, according to Exeter Patch. NH was the first state to create a nanobrewery license. An Indiana Senate committee has already unanimously passed a bill that would allow state microbreweries to sell beer for off-site consumption at farmer's markets, wrote the Evansville Courier & Press.

Look for more from Craft Brew News more often in 2014!

Keep up with us between issues at our blog, and on Twitter: @BeerInsights, @CraftInsights and @ BevInsights

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There will be 51 state-level brewers guilds, including DC, by the end of 2014 with addition of Wyo's assn, currently in the works, Acacia Coast, State Brewers Assns Coordinator for the Brewers Assn, told CBN this week. That's grown from just over 20 guilds when Acacia took the post in 2011. When she came on, the "single shining-star best practice" in place at all of the most successful guilds back then was having a paid executive director or coordinator of some kind. There were only about 11 then, but now that count is "up to 25 or more," Acacia said, as a "handful" of city or regional guilds have hired exec directors too. There are 5 states with 2 or more paid staff, with the Oreg and Ill groups planning on hiring more soon too.

The most recent addition to those ranks of state guild exec directors is Charlie Sullivan, who will head up the Washington Brewers Guild, one of two Wash brewer assns (the Washington Beer Commission is purely promotional while the WBG is more legislatively focused). Charlie is one of only a few exec directors to come out of the beer industry. For example, recent-hire for the Ohio Craft Brewers Assn, Mary Martineau, came from being the executive director of an independent farmers/artisans market, Acacia told us. And the new exec director in North Carolina, Margo Knight Metzger, came from a public relations post for NC Tourism. When Acacia surveyed existing guilds last year, she found that 7 of 23 respondents had guild leaders with a lawyer or lobbyist background and another 7 were headed up by folks with backgrounds in promotion and events organization. Four came from the beer industry; the remaining came from an assortment of other backgrounds.

This is indicative of the three major goals of state guilds: to protect, promote and educate. In that same survey, Acacia found that 30 of 37 responding guilds had "initiated legislation" in their state legislature and 22 guilds had "actively defended" small brewer rights of some kind. "Taxes are of utmost concern," for state brewers guilds, Acacia said, and they also have a "keen interest that they have access to market." All of the guilds have fundraising arms and most "fundraise through their events" as "dues are often secondary," she said. Fourteen of 38 guilds earned over 75% of their income from events, according to her survey, and "for more than half, 50% comes from events." About a dozen guilds currently offer some form of educational seminar or technical conference, but that's increasing steadily.

Besides these guilds becoming more active internally, they're also becoming more connected. Guild leaders often communicate digitally in their own guild-only messaging system. Acacia's also brought them together for National Guild Gatherings during CBC. She's also started holding "a few regional guild gatherings," notably a few times already for Midwest guilds, "at the board level." Connecting guilds and sharing best practices is a crucial part of future success. As we've seen already, small brewers have been quick to point to legislative inequalities between neighboring states when working with legislators, who "love formulas that work," according to Acacia. "Precedence is crucial for drafting lots of legislation," she said, "which is why we keep such a close eye on canary-in-the-coal-mine states like California."

It's more than just brewers' guild becoming more involved in state houses too. Recall, Boston Beer recently hired its first in-house gov't affairs rep, Kathi-Anne Reinstein, who comes directly out of her job as a Mass State Representative. The North American Craft Maltsters Guild has also recently been formed to protect the interests of small-scale maltsters.  

Craft beer's space at sporting and entertainment venues continues to grow and it's key to strike the right balance with the big suppliers to get best benefit, concession execs told Sports Business Journal this week. AB and MillerCoors "still obviously dominate beer sales in sports, and concessionaires are respectful of their partnerships with teams," wrote SBJ. "No matter how into the craft trend you think you are, everybody's going to want a Bud Light or Miller Lite at the same time," said Ben Forsythe, gen mgr at Centerplate, which handles operations for MLS team Portland Timbers, where 50% of taps sell craft beers. But big brewers understand craft is benefitting them as well. "They understand if you get the pricing and distribution right, it benefits the entire category because you're keeping people in the beer category," said Andrew Shipe, Aramark's mktg veep. He noted while AB and MC still acct for 69% of consumption at all of his co's 11 baseball stadiums, in just 3 yrs, "there has been a shift of 5 share points and now the craft beer category is worth about 20%." Pretty impressive given that craft options at stadiums "hardly existed" just 10-15 yrs ago, added Andrew.

A poll of 2,000 "senior-level sports industry execs," this past Dec found 47% would be more likely to buy a 16oz domestic at a sports venue compared to 34% who would want to buy a 12oz craft. They may still prefer a domestic beer but that gap is likely narrowing and SBJ report gave many examples of stadium and concession execs being drawn to high margins craft can yield and how sporting venues are turning underutilized spaces at stadiums into profitable craft beer selling points. At Comerica Park in Detroit, concession co Sportservice used craft to generate big sales at an underutilized outfield space that once housed McDonald's. Sportservice started selling craft beers there in 2012, then last yr spent $110,000 to upgrade vending spot "with a woody, Pacific Northwest feel," and expanded selections to 10 craft taps with 16 bottled options. "The move paid off. Sportservice sold about 169,000 cups of beer this past season, more than triple" sales in 2012. With 16-oz going for $8.75, the same price as 24oz domestics, gross sales at that spot reached $1.48 mil, noted SBJ.

Getting into the Brewing Game Tampa, Fl-based Ovations Food Service is so impressed with craft performance at its venues that it has decided to start brewing beer. Co is developing "its first brewery" at Jungle Island theme park in Miami. "We hope to start construction in the next six months and complete it by the end of the year," said Doug Drewes, exec vp. Looking ahead, Ovations wants to partner "with teams to develop microbreweries at arenas and stadiums."