Seven yrs after Lost Coast co-founder Barbara Groom started looking for a home for a new brewery and 3 yrs waiting for a series of 4 different local planning directors to rezone the spot she found, the co finally announced plans for its new facility. The NorCal brewery will build a 3rd time in Eureka, Calif, Barbara told CBN this week, filling out the new spot with all new equipment including a 120-bbl brewhouse. That should allow Lost Coast to brew about 300K bbls/yr, Barbara said (not the 600K-bbl figure printed in the Times-Standard, she said). But initial capacity will be close to the 70K bbls Barbara expects the current brewery to pump out by the end of 2013. She hasn't made any decisions yet about whether to keep current facility open after the new one comes online, tho she'd like to "keep the little one to do specialty beers." The company hasn't added any new distributors in 3 yrs and, because of constraints at the brewery and hold-ups to build the new one, "really didn't give" its current distribs "the love that we would've given them otherwise," including having to say no to a "fairly large chain" in the midwest. Lost Coast hopes the building process, not without hiccups already (including calls from a local plumbers union to boycott the brewery for hiring outside contractors, just this week, according to the North Coast Journal), will be done by mid-2014.  

Of top craft brands in San Fran/Oakland food stores, Sierra Pale Ale is still top dog at about 155K cases, however volume up just under 1%, $$ sales about flat yr-to-date thru Sep 29 in IRI data. Sierra Torpedo also about flat for the yr, and Sierra Seasonals down about 9% YTD. So Sierra top brands not growing much in core San Fran area. Perhaps that's one reason why Sierra just opened tasting room in Berkeley. Recall, Sierra's nation-wide scan trends are much better - Sierra Pale up 7%, Torpedo up 21%, Seasonals down 2% YTD thru Nov 3 in total IRI food stores. Sierra up 4-5% in all channels in 2013, CBN understands.

At same time, a handful of Northern CA brewers continue to grow rapidly in their home mkt. Lagunitas leading the charge - IPA volume up 42%, $$ up 36%. That put it just under 3 share of total high end (craft, import, above premium) food stores $$ YTD thru Sep 29 in San Fran/Oakland mkt. Little Sumpin' volume up 148%, $$ up 143%, and Lagunitas Seasonals volume up 42%, $$ up 37%. Anchor Steam growing solidly too, volume up 22%, $$ up 20% YTD. Bear Republic Racer 5 IPA whizzing by, volume up 54%, $$ up 47%. Trumer Pils volume up 32%, $$ up 29%. Lost Coast Great White volume up 23%, $$ up 18%. And Speakeasy Variety pk sold 10,600+ cases in San Fran/Oakland food stores thru Sep 29.

On other hand, Gordon Biersch and Mendocino are two Calif brewers seriously strugglin' in both San Fran and nation-wide. In San Fran food stores, Gordon Biersch Marzen $$ down 22%, it's Variety Pk down 20% thru end of Sep. Nationally, Marzen down 32%, variety pack down 16% in food stores YTD in latest available data (thru Oct 6). Mendocino Red Tail down 24% in San Fran food stores, and -17% nation-wide food stores YTD.

Some of the top out-of-state craft brands not growing much in competitive San Fran craft mkt either thru Sep 29. Particularly Sam Adams: Sam Boston Lager (-3%), Sam Seasonal (+1.3%), and Sam Variety Pk (+4%), each significantly slower in San Fran mkt vs nation-wide. New Belgium Fat Tire $$ down 0.6% however that brand has been much improved over last 13 weeks nation-wide (+16% in total IRI food stores thru Nov 3). And NBB variety pks actually growing ahead of national trends in San Fran food stores, up 31% thru Sep 29.

Widmer Hefe (-9%), Redhook ESB (-23%), Pyramid Hefeweizen (-17%), and Pyramid Audacious Apricot Ale (-35%) down most of out-of-state brands in SF food stores thru end of Sep. Kona brands, Deschutes Mirror Pond (+11%), and NBB Variety pk are only out-of-state craft brands with double digit growth. Kona Long Board Lager $$ up 12%, and Kona variety pk up 30% there.  

In recent yrs, numerous craft brewers have employed ex-execs from the big brewers in important roles. But the ascent of Andy Thomas to ceo of Craft Brew Alliance, as well as the team he has built, exemplifies this trend towards execs with skill sets honed at big brewers probably more so than at any other co.

Andy was at Heineken for over a dozen years, including senior roles in different parts of the world, culminating in his tenure as prexy/ceo of Heineken USA in 2005-7 before he was even 40. While Andy headed up HUSA, the company had an extraordinary 2006 followed by a more challenging 2007. Andy departed, then resurfaced in beer a couple of years later as a consultant for Monitor, where he worked with CBA as a client. When he arrived at CBA officially in 2010 as prexy and chief commercial officer, the company was just getting on its feet. In recent yrs, led by departing ceo Terry Michaelson, Andy Thomas and others, the company has started to gain momentum, both in the marketplace and importantly as a stock.

Now comes news that Andy will take helm of Craft Brew Alliance, moving up to ceo starting Jan 1. Terry Michaelson, ceo since 2008, will step down after "fantastic ride," take on sr advisor role next yr, Andy told CBN. CBA also announced slew of other changes to executive team. Series of moves serves to "flatten" CBA management, and are a "logical progression" to "next chapter," Andy said, allowing for faster decisions. When Andy headed up HUSA 2005-2007, he worked alongside recent-hire Ken Kunze, cmo at HUSA then and now also at CBA. Other CBA execs have had long tenures in beer biz, over 125 yrs-worth collectively.

Ken will also head up Restaurant and Retail operations, a "logical" move, Andy said, as those are "marketing weapons." Twenty-year brewing, ops and logistics exec veep Sebastian Pastore will leave CBA, as Scott Mennen will take over brewing and John Glick will take supply chain and logistics roles; both spent a number of years at AB. Dan Partelow will continue in gen mgr position for core west mkt; Peter Schauf stays on in same role for growing east mkt. Sales vet Derek Hahm moves into new chief of staff role, guiding human resources, admin and corporate affairs.

Salaries and Ownership With big company executive talent comes salaries closer to what big companies pay. Andy will get base salary of $400K in 2014, plus possible $250K cash incentive bonus. That's up from $300K base salary in 2012, when then-ceo Terry had base salary of $339K. That was up from $270K in 2010. Recall, CBA shipped about 585K bbls in 2010 and 675K bbls in 2012. Moving into new mgt structure, Andy also signed non-compete which keeps him from taking another job at competing biz thru end of 2015. Terry still has about 60K shares of CBA stock including options, while chairman Kurt and Rob Widmer still own 14% of biz, based on gov't filings.

Month of Stock Price Movement, Return to Acceleration in Scans CBA stock (BREW) price has grown significantly from just over $6 a year ago to over $16 at presstime. But in last month it jumped to near $18 at the end of Oct before quickly dropping off to about $14.50 early in Nov. Current market cap over $310 mil. Tho CBA reported 14% depletions trend in Q3, +11% for 9 mos thru Sep 30, trends in IRI scanner data reflect more vacillation during that period. After strong spring, total CBA volume growth in IRI MULC channel slowed from +11.8% for 4 wks thru Aug 11 to +6.6% for 4 wks thru Oct 6. Change in $$ sales trends more moderate (+10.9% to +7.7%). That brought yr-to-date volume and sales trends to about +12% thru Oct 6, from around +14% thru early Aug. CBA's most recent 4-wk trends have accelerated, particularly $$, +12.1% thru Nov 3. Prices for all 4 CBA brands on Top 30 Craft list for MULC channel thru Nov 3 up for 4 wks, some substantially: average Redhook ESB prices +1.6%, Kona Longboard +2.3%, Widmer Hefe +3%, 6-packs of which had prices up over 5%.

Celiac Sprue Assn Recognizes Omission as Safe for Celiacs Regardless of FDA or TTB rulings on "gluten free" labeling, largest non-profit support group for celiacs, Celiac Sprue Assn, issued recognition seals to CBA's Omission Lager and Pale Ale last week (4% of CBA volume in latest qtr). CSA issues seals recognizing brands they deem safe for consumption by those affected with celiac disease after strict gluten testing.  

Boston Beer has "raised its volume guidance several times" the last few quarters with "new product platforms (Twisted Tea and Angry Orchard), and a resurgence in its core lager franchise aided by the rollout of cans and more media spend," noted RBC Capital Markets analyst Nik Modi this morn. However, currently Modi does not forecast any "further acceleration" in volume trajectory, which "makes it hard to justify the stock going much higher."

Some areas for "volume upside" in US include further play in IPA category with Rebel IPA (and on smaller scale Just Beer Project's Anytime IPA), further "c-store penetration, and other regional craft innovations." "IPAs represent about 20% of craft beer market and have grown 41% YTD," yet "Boston Beer indexes very poorly to this hot segment." So "recent innovations" with Rebel IPA, and Anytime IPA (Just Beer) are big oppys for Boston Beer: "if Boston Beer were to capture 8% share of IPAs, it would mean an incremental 8 pp to total volumes," Modi estimates. Rebel IPA set to launch in Feb 2014 in 12 and 16oz cans, and in 12oz bottles.

Then too, Modi sees "next leg of growth" coming from c-stores, where Boston Beer heavily under-indexes; c-stores are 22% of its off-premise sales, compared to category indexing at 54% of off-premise sales, noted Modi. After recent increases in capex for 2013 and 2014, most recently on Cincy brewery, "Boston beer will have the capacity to meet its growing demands and Free Cash Flow generation should be material," sez Modi.  

The statewide distribution option for top craft brewers is alive and well. That's lesson from several significant recent appointments from some of the largest craft brewers (and/or strong regionals) in some of the largest states: Bell's in NY, Deschutes in Oh and Ky, and Odell in Tex. Just yesterday, Bell's announced it would "round out" NY state with Union in NY starting in Feb. Many may have viewed that move as "fait accompli" after Bell's appointed L Knife entities throughout upstate NY this fall. Bell's liked what it saw upstate. "We are excited to round out the state after an overwhelming response for our beer in western and upstate New York," said Bell's veep Laura Bell. She cited the "excellent job" that the Sheehan Group (L. Knife) did with Bell's upstate.

CBN estimates that Bell's could potentially sell a couple of hundred thousand cases in the state of NY alone in 2014. That would be a 0.14 share in a 144 mil case NY mkt. This followed other statewide appointments by Deschutes in Oh and Ky with Heidelberg's craft-centric division Rampant Brands. Deschutes also likely expects to sell at least a couple of hundred thousand cases in Oh, CBN estimates. And Odell is going statewide with Ben E. Keith in Tex starting Mar 2014. All these appointments are also examples of AB distribs that sell well outside their AB territorial footprint. They already have very big craft books and yet are still providing a viable distribution solution for leading craft brewers.  

Time for another round of recent expansion announcements, which just keep coming. New Belgium will double its capacity of foeders (large oak barrels traditionally used in fermentation of sour Belgian-style ales) to 64, the co announced this week. Twelve foeders arrive in Fort Collins this week, followed by another 20 next month. The addition will allow a pair of Lips of Faith beers, Tart Lychee and Eric's Ale, to go year-round by 2015. Shipyard will add a production facility to new Clearwater, Fla (in Tampa area) Sea Dog pub. It'll move from 1.5 bbl system up to a 20-bbl brewhouse, which it hopes to have online early next yr, according to Creative Loafing, Tampa Bay. Green Flash in San Diego is "scouting" a 2d facility out there, exclusively for its barrel aged beer program. "We will open a packaging hall and are planning to also use the space for a food and beer pairing concept destination," ceo Mike Hinkley said. Green Flash still plans to break ground on its Va brewery next yr. Out in Ill, Two Brothers plans to boost fermentation capacity and increase brewery efficiency that will allow the brewer to climb toward 40-50K bbls in 2014, according to reports on BeerPulse.

Bell's to Cans Bell's will can Two Hearted Ale and popular summer seasonal Oberon in 16 oz cans next yr and expects to add other seasonals to canned lineup next. Texas-based Rahr & Sons also will add cans next yr, focusing on its Rahr's Blonde in 12-pks of 12 oz cans in its local Dallas-Fort Worth market, plus a new can-only American Pale Ale.

Even in South Dakota Craft is happening everywhere these days, it seems. South Dakota's largest city is rapidly adding both craft-focused accounts and a system of beer-supportive bizzes locally, according to a deep-dive into Sioux Falls, SD market by local Biz Journal. The fledgling craft market is already home to Anderson Hop Farm, which recently invested in processing equipment to dry and pelletize its harvest, and Union Labs & Testing, a young yeast supplier. Nearby Dakota Beverage will add a 100K sq-ft facility to centralize operations, according to GM Bill Christensen, who added that "it's just a matter of when" Sioux Falls will become a craft "hot spot." More craft-focused Global Distributing reported consistent 25-30% growth by putting energy behind its small suppliers.  

Not all craft brewers are on a great roll. Mendocino Brewing sales are down $1.8 mil, -14% thru Q3 2013 to $11.1 mil in its North American territory. It had operating loss of -$321,000 thru Q3 2013 compared to nearly half mil in operating income thru 9 mos last yr. What's more, Mendocino volume and sales down 13% yr-to-date thru Oct 6 in IRI MULC. Sales for its top 2 brands, Red Tail Ale and Eye of the Hawk Ale down 16.1% and 9.6% respectively. Those 2 brands made up about 91% of co's sales in IRI.

Meanwhile, Mendocino Brewing's working capital deficit steepened by $4.1 mil since beginning of 2013. Now at $7 mil, reported Lloyd's Liquidity Alert. Mendocino said "unused capacity at our Ukiah, California and Saratoga, New York facilities has continued to place demands on our working capital," adding "historically, our operations have not generated sufficient cash flows to provide us with sufficient working capital." As a result, it violated covenants in loan agreement, which were then amended. Mendocino subsidiary Relata Brewing was "in violation of the fixed charge coverage ratio" with Cole Taylor Bank as of Mar 31 2013, tho bank has yet to exercise "any default rights or remedies."

Thru end of June, Mendocino "had cash and cash equivalents of $96,900, an accumulated deficit of $14,254,000, and a working capital deficit of $7,048,800." To get back on its feet, Mendocino plans to have "reductions in discretionary expenditures, optimization of pricing and discounts to increase margins, expansion of our business in new territories, and exporting our brands outside United States," to "meet our working capital needs through June 30, 2014," Mendocino said. Also will "seek additional brewing contracts in an effort to increase revenue and utilize a portion of our excess production capacity." Mendocino is one of many bizzes in troubled empire of Indian mogul VJ Mallya.  

Lawsuit testing NY franchise law reform that allows termination if brewer under 300,000 bbls production and less than 3% of distrib's volume continues. In attempt to avoid dismissal, distrib Garal again argued that the 3% cap should be for brands it had when terminations dropped (early Jan 2013), not previous 12 mos, when it still had big Pabst biz (sold off in Dec 2012). Garal insists that if judge agrees terminations unlawful, only "adequate remedy" is not cash but returning Abita, Southampton and Flying Dog brands to Garal from distribs they moved to.

Recall that brewers/current distribs argue that the Pabst biz has to be included in 3% calculation and therefore brewers come under 3% cap and terminations legit. They also argued that Garal does not deserve injunction to get brands back since there's no irreparable harm, as Garal still in biz. But Garal's prexy Gary Konigsberg entered affidavit stating that "replacing established brands like Abita, Flying Dog and Southampton is an impossibility." No established craft brands currently available in his mkt, no other distribs selling brand rights and "in the best case scenario it takes approximately five to seven years for a craft beer brand to become a major seller - if it ever does." Then too, only 1 in 15 craft brands "ever gains any significant public market share and becomes an established brand," Gary claims. So, instead of potential cash award, Garal needs the brands back to return biz to profitability. Indeed, "the profits from those 3 brands alone represent just over 31% of Garal's 2012 gross profits." Finally, Gary and partner had to loan the co $500K to keep biz running, it can't "continue indefinitely this way" and at current rate "Garal will not have enough funds to operate in a matter of months," he wrote on Nov 6.  

A pair of notable Colorado brewmasters parted ways with longtime employers recently, while some recently-laid-off MillerCoors employees seem to be seeking new jobs at craft brewers. And this just in: Yuengling's former marketing director will head sales at Oskar Blues. Yup, Yuengling's former director of mktg and wholesaler development for the past 5+ yrs, Lou Romano, recently landed as natl sales mgr at Oskar Blues. Meanwhile, after MC's layoffs last month, "we're getting a lot of those folks reaching out to us," Founders Brewing co-founder Mike Stevens told a group gathered for a panel discussion on the Mich alc industry at the Grand Rapids Economic Club this week. Those folks seek "upper level management positions," according to Mike, which the industry might have room for since "craft beer is no longer the little baby anymore." Founders alone plans to hire 40 employees in 2014, and has been seeking higher-level sales and marketing execs.

Out in Colo, former brewer at MC's AC Golden plant, Troy Casey, who led much-praised barrel-aged and wild ale experiments there, recently announced departure in order to open Casey Brewing and Blending. The focus will be Belgian styles, all fermented in oak barrels, and lots of blending to generate unique flavors. Meanwhile, longtime Oskar Blues brewmaster Dave Chichura has decided to move on from that post to take over brewing operations for much-smaller Eddyline Brewing, in Buena Vista, Colo, according to Denver Post's First Drafts blog. The move allows Dave to be more hands-on, as his role at Oskar Blues had "become more of a management role." He had been overseeing both of Oskar Blues' breweries (in Colo and NC), a role that Oskar Blues will not fill, relying on lead brewers in each location. Dave witnessed growth at Oskar Blues from a brewery that produced 13K bbls in 2007 to a pair of facilities headed toward 120K bbls this yr, during his 7-yr tenure at the company. Now he moves to work at Eddyline, which produces about 3K bbls/yr and, with a new brewhouse under construction starting next month, could produce up to 10K bbls in 2014. Planned expansions would make room for as much as 50K bbls in the future.  

IPAs and Belgian Whites sell similar volume in scanner data nationwide, but the latter style sees much less competition than the former, Harpoon's ceo Rich Doyle noted at Beer Insights Seminar last week. Belgian whites dominated by Blue Moon and Shock Top natch, about 8.5 mil cases combined yr-to-date thru Nov 3 in IRI MULC channel. Recall that IRI does not include Blue Moon or Shock Top in "craft" stats, so all numbers here for "total Belgian Whites" are IRI's craft Belgian Whites plus Blue Moon and Shock Top, not including Blue Moon or Shock Top seasonals, variety packs, and other brands that sometimes move well outside of style. Besides them, only another 400K cases of craft Belgian Whites tracked by IRI, which brings total style volume close to 9 mil cases. So over 95% of that is just 2 brands. Total craft IPAs hit 7.8 mil cases in IRI yr-to-date, but 9 largest brands in style comprise just over 53% of that. Those 9 IPAs in descending order of $$ sales in IRI: Sierra's Torpedo, Lagunitas, NBB's Ranger, Redhook's Longhammer, Stone, Harpoon, Dogfish 60-Minute, Bell's Two Hearted and Deschutes Inversion.

IPA-share held by those 9 largest brands grew recently, while Belgian White-share held by Blue Moon and Shock Top has shrunk, each by a couple share pts. Two months ago, Blue Moon and Shock Top were over 97% of all IRI-tracked Belgian Whites. Craft Belgian Whites grew much faster over the summer (up over 70% for 4 weeks thru Sept 9) but slowed recently; up about 17% for 4 wks thru Nov 3. Part of that likely to do with seasonality. But smaller brands went from under 3 share of total Belgian White volume to almost 5 share in a couple months. Conversely, those 9 IPA brands gained about 4 share of the style in IRI since Sept. Prior to that, Bell's Two-Hearted didn't appear on list of Top 30 craft brands until August, followed by Deschutes Inversion in Sept. Watch out for how Shiner White Wing (see above) affects Belgian White data in 2014.

AB Wheat Whacking; Widmer Still Down IRI breaks out "total craft wheat beers," a broader style that includesother brands also affected by Blue Moon and Shock Top. Total craft wheat beer volume +8.6%, 136K cases yr-to-date thru Nov 3, but almost 95% of that gain has been Goose Island 312, up over 50% so far in 2013. That's as only other wheat-based top-30 craft brand, Widmer Hefeweizen, -5.9%. Interestingly, original Shock Top Belgian White volume is down almost 2% yr-to-date, but ST seasonals have more than doubled, and variety packs +44%, so all Shock Top brands combined growing solidly, all with healthy doses of wheat. All in, Shock Top brands +13.8% in IRI MULC thru Nov 3 to over 4.7 mil cases. Add in 312 and AB's non-import wheat beers +15.9%.

IPAs Remain Growth Engine; Pricing IPAs have added much more volume than whites so far in 2013, +2.28 mil cases, compared to growth of about 830K cases for all Belgian Whites and craft wheat. IPAs now over 17 share of craft volume, up almost 3 share of craft segment yr-to-date. Avg price/case for all IRI-tracked IPAs tops $37, +2%, while avg price for all craft brands more than $3 lower yr-to-date thru Nov 3. Dogfish Head 60 Minute is only top IPA brand with prices up more than 1%, now at $43.41/case. Prices for 4 of top 9 IPAs down yr-to-date. As for Whites, avg prices for craft brands slightly below total craft, avg Blue Moon prices just over $31/case; Shock Top at $29.34 thru Nov 3, up almost a dollar, 3.4%.