They were the 2 hottest brewers in US beer biz in 2013.  And whaddya know, Constellation (which owns Crown) and Boston Beer stocks had by far the best % gains among cos with over $1 bil mkt cap.  Constellation nearly doubled in 2013, up 99%. And that followed a 71% gain in 2012.  Guess the Street likes its moves to get bigger in beer (buying the rest of Crown and Piedras Negras brewery to boot).  Meanwhile, Boston Beer stock jumped another 80% in 2013 (tho it’s down 6-7% today).  Look at the run Boston Beer stock has been on: up 24% in 2012, 14% in 2011 and it had doubled in 2010.  Up more than 10x since early 09.  Craft Brew Alliance is still a much smaller co, but CBA stock really took off in 2013.  Up 153%.  

As for big boys, they each posted solid gains, but well below pace in 2012, or spectacular 30% gain of S&P 500 in 2013.   BUD stock increased 21% in 2013, following 43% gain in 2012.  SABMiller stock price up 10% in 2013, following 25% gain in 2012.  Heineken up 18.4% in 2013 vs 31% gain for 2012. Among the top global brewers, believe it or not, Molson Coors stock performed best.  Up 31%, following 1.7% decline in 2012. 

Diageo stock posted its 5^th straight yr of double-digit growth, up 12% following 27% gain in 2012.   In a year that Monster Beverage faced more gov’t scrutiny and legal challenges over safety of caffeine content and its youth marketing, its stock price still increased 28.3% in 2013.    

We wrote last issue about how small European brewers are looking to be treated like small US brewers here, at least in terms of the federal excise tax break. Politico also ran a lengthy story about this, noting it as a topic of discussion during ongoing trade talks. Guest columnist Diogenes offers these sobering thoughts.

By Diogenes

Europe's small brewers are raising questions about the fairness of the small brewers tax break enjoyed by American brewers. The questions could imperil the tax advantage, which many see as a key driver of the craft beer revolution.

In an article in the Financial Times, Brigid Simmonds, head of the British Beer and Pub Association, said: "We think all brewers should be treated the same. This is as near to a tariff issue as you can get."

This should send shivers down the spines of American craft brewers. Since the 1970s, American brewers producing fewer than 2 million barrels annually have enjoyed a tax break on their first 60,000 barrels of production. Today, that amounts to a $660,000 tax savings for qualifying brewers producing 60,000 barrels.

The FT indicated that Simmonds and others are lobbying the European Union delegation to the US-EU trade talks to get the break extended to Europe's small brewers who export to the United States.

Assuming the US government would not be enthusiastic about extending the tax advantage to European brewers, it is possible that the Europeans would call for revocation of the US tax advantage to even the playing field, or as Simmonds put it, to insure all brewers are treated the same.

As readers of Craft Brew News know, the Brewers Association is pushing bills in Congress that would fatten this tax advantage by reducing the tax on the first 60,000 barrels even further, take off another $2/bbl for production up to 2 mil bbls and extend the tax advantage to brewers making up to 6 million barrels.

The Beer Institute, representing large brewers and importers, has supported greater tax breaks for brewers producing under 60,000 barrels, but has opposed the extension of the breaks to brewers making up to 6 million barrels. The BI has taken no position on Simmond's complaint.

One of the perils of the BA's legislative initiative is that it has drawn attention to the longstanding tax advantage.

The possibility that the tax break could be challenged in the trade talks has always haunted small brewers, a kind of a Sword of Damocles hanging over their heads.

This is a real threat.

Earlier last year, a small importer of European beers challenged the state and New York City tax advantage enjoyed by New York-based brewers as a violation of the Commerce Clause of the US Constitution. New York State and City revoked the tax advantage. Governor Cuomo and the state legislative restored the state's tax break in a way that some believe is still vulnerable to challenge. New York City did not. There are many such tax advantages for in-state brewers in the United States.

The Brewers Association made no comment on the European campaign to equalize taxes. At the very least, the European move is bound to complicate the BA's efforts to get a bigger small brewer tax break from Congress through the BREW Act. If all the world's small brewers got the same break as US brewers, the cost of the bill would increase significantly. For a Congress focused on reducing the national debt, the cost of the bill is the main problem.

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

If there wasn't any other metric to measure craft beer's growth in 2013, the volume and fervor of year-end roundups and "best of" lists in local news outlets indicate that this thing ain't slowing down yet. Ohio's brewery-count is closing in on 100 while Colo's is up in the mid-200s - 240 according to one of the recent Denver Post "Beer in Review" interviews. Denver alone went from 23 to 29 by Café Society's count, but there are 18 planned breweries with leases (or close) within city limits, another dozen searching for locations and 2 big expansions (Great Divide and Denver Beer Co). Journalists in Fla, Minn, with 14+ new breweries this year, and 'Bama, with 20 total breweries now, pointed to law changes, particularly the allowance of on-site tap rooms, as the reason for all the new businesses opening. Smallish "beer cities" touted beer as the source of local pride and economic health just as larger metropolises witnessed some of their busiest beer years to date. Most observers expect more breweries, more lower-abv and sour/tart beers and more food connections in 2014, while some foresee more sales and business transactions and others worry about greater craft infighting.

In Oh, 46 breweries have opened since 2011 and just "five have closed or stopped brewing," according to Ohio.com's Beer Blog, bringing the state's total to 90. Among them are 14 in or around Columbus, 12 in around Cleveland, 10 in Cincinnati and even 2 owned by private clubs. Craft growth in the state "has been meteoric," the article claims, due in part to "the state making it easier financially for craft brewers to open" by dropping its yearly license fee from $3906 to $1000. In Fla, "beer gets political" headed no less than 3 entries in the Sarasota Herald Tribune's "Top 10 beer trends of 2013." Debates over beer laws, particularly growlers, aside, "explosive growth" topped the paper's list. Up in Minnesota, "it's been another banner year," wrote the Star Tribune. In addition to "at least 14 new beer-makers" in the state, "at least 10 breweries enacted or announced expansion plans," and "at least 12 more suds artists are in the planning stages." The Alabama Brewers Guild expects the state's 20 breweries to pump out 40K bbls by yr-end, based on an AP report, up from just 7000 last year according to BA stats.

Grand Rapids, Mich and Asheville, NC looked to their local brewing communities as the spurs for job growth in both cities. There are now 15 breweries around Asheville, according to the Citizen-Times. It also slipped in that Sierra Nevada "plans to produce 350,000 barrels" at its new NC facility in 2014, cranking up to 750K bbls later down the line, and has already hired 65 full-time employees in the area. New Belgium has started preparing its site for construction, with plans to open in 2015. Roundups of yearly reviews in DC, Chicago, and Boston pointed to successes by established and new brewers alike. "We're no longer surprised by the amount of craft" in DC, the DCist wrote, as "we expect and demand it."

Best of 2013 lists from all over, particularly those coming from the Denver Post's "Beer in Review" series, pointed to lots of brand new or young brewers making high quality beers early in their careers. Some industry folk that the Post spoke to tempered some of the excitement, including expectations of "many more announcements" regarding "succession planning" this year, says Troy Casey (once brewer at AC Golden that's started out on his own). The always-colorful Dave Thibodeau of Ska Brewing hopes that "the inclusion of the term 'proprietary information' into our industry's interactions" will not be the "trend to watch for in 2014," while Nick Nunns of TRVE Brewing worries "that this is the year we're gonna see things get hairy within the industry." (See page 1.) Time will tell. Happy New Year.  

Ruckus Brewing was granted another extension on the closing of its deal to purchase the site of the old Neuweiler Brewery in Allentown, Pennsy, according to Lehigh Valley Live. The co, which currently contracts a couple of brands and is the brainchild of a Manhattan marketing firm of the same name, was granted the contract to rebuild a $30 mil brewery on the site by the city last year, with some hefty tax incentives as Allentown works to turn around its riverfront district. Ruckus originally planned to line up financing and close the deal by last Oct, was granted an extension to Dec and then recently granted another extension til March. "We're still in negotiations" to complete the projects financing, Ruckus ceo Josh Wood told the paper. Construction on the planned 100K-bbl/yr brewery, which would have started by the end of the year, will likely not begin til May or June.  

Lotsa media coverage of "Green Wednesday," as supporters dubbed first day of legal pot sales in Colo earlier this week. NY Times front-pager reports things went smoothly, with plenty of enforcement presence, long lines and happy customers, amid lingering skepticism of non-supporters. Those customers were reportedly paying $50-$60 per one-eighth ounce, which we're told is about what smokers pay on the illegal mkt in metro NY. Meanwhile, Brewers Assn economist Bart Watson took oppy to suggest states and regulators use example of pot legalization to re-think and re-examine beer regulation. Most beer laws/regs come from post-Prohibition/post-war business context - big brewers, small/local wholesalers - that's different than today's mkt structure, Bart reminds in blogpost on BA website.

"With breweries now outnumbering wholesalers - and the concentration of those two industries going in opposite directions - might some of these rules be due for a re-think?" Yes, Bart suggests, noting that current 3-tier system, tho it's been a "boon for market access for all brewers," needs to evolve. Like how? Like self-distribution and brewpub laws that provide access and promote consumer choice, Bart notes, as well as small brewer carve-outs to help brewers move brands more easily. These changes, like moves to legalize pot, "demonstrate the amazing ability of US states to act as policy laboratories, where successful experiments spread state-to-state." And so, Bart advises policymakers "take a page from marijuana" and "continuously re-think the way the marketplace provides beer choice and access to consumers."  

Two deals already, less than 48 hrs into 2014. Hawaii Nui Brewing and Mehana Brewery (merged in 2009) were acquired by DeMare Enterprises, it announced. Recall, CBN reported on the co filing for bankruptcy in early 2013, with a long list of debts to pay off (see vol 4, no 28). DeMare was the high bid, spending about $325,000 for the breweries' assets, reported Pacific Business News. The two breweries were closed as of January 1, 2014, until DeMare receives "new 'Brewers Permit' from the Federal Alcohol and Tobacco Bureau," noted press release. "This planned closing coincides with the brewery's primary initiatives to remodel the existing space, provide additional industry training for its employees, upgrade existing equipment and install new packaging equipment." Upgrades are expected to cost around $500K, noted PBN. They expect to be up and running by Mar 2014.

Then too, local Twin Cities breweries "Pour Decisions Brewing Company and newly launched Bent Brewstillery announced a merger Thursday morning," reported Twin Cities blog, Vitamin. Bent Brewstillery had been contract brewing at Pour Decision's facility for some time, and only just commercially released its first two brews in December, noted blog.  

Between its Colo facility and its year-old NC site, Oskar Blues "packaged" over 119K bbls last year, up over 35%, the co announced today. Last year the co entered Mich and Ind for the first time and filled out distribution elsewhere, helped by 46K bbls out of the Brevard, NC brewery in its first full calendar year. This year Oskar Blues will re-enter Idaho with Craig Stein Beverage (MC) and move into Minnesota with the Original Gravity group of wholesalers (AB network: Capitol Bev, Thorpe, College City, C&L), plus move into Kansas, Nev, Del and add more territory in Southern Alabama. The co hired Lou Romano as Natl Sales Director in Oct and promoted Chris Russell to Biz Dev Director.  

Just before the New Year, Lagunitas founder Tony Magee took to his Twitter account to blast Boston Beer after "learning" that Boston Beer/Samuel Adams' "marketing plans" for the Rebel IPA rollout include "specifically targeting our biz as well as other craft IPA." After calling those plans both "flattering & sad," Tony labeled any instruction to wholesalers on Boston's part to replace Lagunitas handles as "parasitism" rather than "competition." He compared Boston's modus operandi to "serial killer thinking," noted that "power so inevitably corrupts" and seemingly in Chicago tough guy "bring-it-on" mode said "F___ them. We're ready."

Boston has denied any such specific targeting, but if Rebel IPA is a "West Coast IPA" and Lagunitas is arguably the most successful example of the style, is it even the least bit surprising that Rebel is somehow aimed at Lagunitas (whether directly "targeted" at its tap handles or not)? Hello? It's called competition. Why do some in craft community still pretend that's a dirty word, instead of simply the reality of business? Actually, Tony's tweets recognize this and can also be viewed as his somewhat smashmouth competitive response. Too bad if you don't like this style, craft brewers may have to get used to it, because there's likely to be more battles coming. Indeed, one large craft distrib who sells both Lagunitas and Boston Beer suggested that he expects 2014 will be a year of "unprecedented" infighting within craft.

In the Twitterverse, Tony's comments infuriated some yet seemed to have further endeared Tony and Lagunitas to others. In recent days, this spilled over into a highly detailed exchange on the BeerAdvocate with more than 100 responses, including lengthy posts from Tony as well as Boston Beer founder/chairman Jim Koch. Initially Tony described his rationale by saying that he "wanted to push BB off of their intended kill." To Tony, "the world is slightly hipper to [Boston's] plans now and that is good for us and for our little industry." He also wrote that the longer format of a BeerAdvocate forum "is a better place for complex things like this but twitter is a sharper blade."

"More than anything, at Boston Beer, we compete against ourselves and our own ideal," Jim Koch said on BeerAdvocate earlier today. That is "to brew the best beer we can. We don't target other craft brewers," he insisted. Boston has brewed IPAs since the 90s, according to Jim, "nearly a dozen different IPAs." Rebel IPA is the latest, created over a period of yrs. "It's hard not take some offense to Tony's other jabs and misrepresentations," sez Jim, seemingly referring to some Tony shots at Boston Beer's aid to other craft brewers as a form of marketing. "I think there's a shared responsibility for all larger craft brewers to help those who are following the path we have worked hard to pave," Jim concluded.

Tony wasn't the only one sending zingers via social media, amplified by aggregators like BeerPulse, recently. Danish gypsy (aka serial-contract/collaboration) brewer Jeppe Jarnit-Bjergsø of Evil Twin Brewing kicked up a couple kerfuffles, one at the end of Nov over the Goose Island Bourbon County Stout release ("an Anheuser Busch release") and another over a sign in NYC's SingleCut Beersmith's that "contract brewing will be the death of craft beer." That Facebook exchange got Brooklyn Brewery brewmaster Garrett Oliver to chime in, opining that "all too often these days, instead of brewing their beer and doing the fun thing they came to do, you see too many angry arrivistes talking smack about their fellow brewers."

Still the home of many a craft love-fest, it seems social media has also become a very visible battlefield for intra-craft disputes. Some have taken to these outlets to share harsh words against companies, business practices and individuals alike, soliciting calls of "sick burns," particularly painful insults. Digital forums, particularly Twitter, have allowed individuals the world over to air grievances against companies and governments and even mount insurrections. We've seen similar strategies taken in craft trademark disputes, mostly against much-larger or non-craft entities, even if the latter had trademark law on its side (Starbucks has successfully fought any spelling of Frappuccino tooth-and-nail since its inception). But one wonders how commonplace this social media battle cum marketing strategy will become and how it may mar craftdom's peaceful reputation.  

As we usually do with first issue of new year, Beverage Business Insights offers some hopefully helpful resolutions for entrepreneurs trying to navigate around shoals of increasingly perilous bev biz. Once contrarian, these rules now seem well on way to becoming accepted wisdom, judging by similar advice proffered by experts at industry pow-wows like BevNet Live lately. As always we credit the insights to you, our readers, who've been so good about communicating your hard-won knowledge to us at BBI.

Better to be slightly starved of capital than over-endowed. Having not-quite-enough capital forces you to focus on key priorities and let distractions go. By contrast, too much capital almost inevitably fosters waste. Besides, once retailers, distributors and prospective new hires know you have the dough, their hands come out. So try to keep the round modest. Don't let the institutional guys talk you up by too many millions.

Make your mistakes off-Broadway. There's much to be said for foregoing the national landgrab and its concomitant capital raise in favor of starting small, in a market or two, preferably your backyard. Until the big Bev Bust of 08, not many paid it any mind, tho. By staying contained to a single region or channel, you can figure out what makes your brand tick, while staying out of the spotlight and not getting tarred as a failure while you work out the inevitable kinks. You'll burn through less capital and less credibility if you make your mistakes locally, not nationally.

Learn to say no. "Getting to Yes" may be the name of an evergreen negotiation handbook, but "getting to no" is a better ambition for bev entrepreneurs to harbor. Learn to say no to big distributors you won't be able to adequately support, and to retail chains (especially Walmart) where you'll get lost on a bottom shelf and endlessly chiseled for pricing concessions. Tho audacious moves into the likes of Walmart seem to have worked out well for some intrepid bevcos, such as Vita Coco, the recent annals of troubled bevcos are filled with those who outran their coverage. If you stay contained within your chosen channel or geography and still manage to show accelerating off-the-shelf velocity, those other distributors and retailers (and capital providers and strategics) will only want you more, on your timetable.

Don't be overawed by the big systems. The Coke, Pepsi, Dr Pepper Snapple and beer systems are finely tuned machines for moving high-volume, high-velocity products at affordable price points through the chains. That doesn't mean they're right for you. Big systems seem to work best for big brands. For smaller, premium brands, their default reflex, at the least sign of resistance, is to hit the 10-for-$10 button (or worse). Even if you do partner with one, maintain flexibility over what distribution option you employ in a given market until you're further along. As a corollary: don't be so dazzled by the resumes of big-company vets. Their credentials may be only remotely relevant to your own needs - unless your overarching strategic aim is to cook up those 10-for-$10 deals with large-format retailers.

It's better to underplay than overplay your nutritional claims. We're in an era of heightened regulatory scrutiny and class-action litigation and, given the excesses of the recent past, can't really claim it's undeserved. So you're better off underplaying your nutritional and functional claims than overplaying them - that can only increase the likelihood of unwanted attention from regulators and sleazy lawyers, and won't do as much as you think to impress jaundiced consumers.

Think strategically about the strategics. If your main game plan is to launch your product, fake it for a year or two, and get taken out by Coke, Pepsi or DPS at a nice premium, then you shouldn't be in this biz. Figure you're going to be in the game for a while, and think of strategics as cos that offer real help in staying in the game. That might mean less easily defined partners, from overseas firms like Tata to family funds like Verlinvest and Emil Capital to well-connected incubators like LA Libations and MetaBrand, not just KO, PEP and DPS.

Stop pounding on the DSD guys already. True, some DSD distributors are grasping, whining, endlessly finagling operatives. (That's what makes them so much fun to have a beer with!) Maybe they really aren't right for your brand, at least at the earliest stage of development or in the channels you're targeting. Fine. It's worth keeping in mind, tho, that there haven't been any shelf-stable brands that have achieved megasuccess without going through the DSD network during their prime growth phase. So pick a limited # of DSD partners - maybe just one - make sure you're on the same page, and see if it can work for you. Like democracy or America's Got Talent, it's sloppy and occasionally unsightly, but nobody's found a better way.

Stand for something, from the start. We don't buy that old saw that certain categories - tea, coconut water, energy - are tapped out, with no room for new entrants. Nor does innovation have to mean employing some earth-shattering new ingredient that sounds like a by-product from an oil refinery. As existing brands move through their life cycle, there's room for reasonably straightforward brands to emerge, even without a lot of bells and whistles. But that only works if your brand stands for something, right from the outset. Trying to add on values or personality down the line is way harder, and less likely to be convincing to consumers.  

Teas' Tea is adding a contemporary technology twist to consumers' penchant for new year's health resolutions by tying into surging consumer interest in electronic fitness-monitoring systems. A winter sweepstakes dubbed Get Your Bits Fit each day this month will give away 31 Fitbit Flex Activity Trackers, the wireless wearable devices that sync to users' smartphones or computers to track their physical activity . . . Oregon atty gen Ellen Rosenblum is seeking to force 5-Hour Energy marketer Living Essentials to reveal precise recipe for drink, as part of 33-state investigation into shot brands marketing practices, BeverageDaily.com reported. Co has provided redacted documents, arguing that precise recipe beyond caffeine level is unnecessary and would jeopardize a key trade secret.