Dedicated to its San Diego home, Ballast Point Brewing signed lease last week on a 106K sq-ft building in Miramar area, about 4 miles from its Scripps Ranch production facility and a mile from its primary local distributor, Crest Beverage, sales veep Earl Kight told CBN.  Ballast Point has already started moving equipment it’s acquired over last yr and half, as it searched for space, into facility, which it expects to have up and running around next June.  The new spot’s 150-bbl brewhouse, plus high-speed bottling, canning and kegging lines will open with 50K bbls of capacity, upping 100K-bbl capacity at current facility.  And that’s just the beginning.  The brewery will also include about 25K sq-ft of cold space and will be home to another 18K sq-ft tasting room/restaurant, as currently planned.  That means the brewer will operate 150-bbl, 50-bbl, 20-bbl and 5-bbl systems, all in San Diego.  Ballast Point’s top execs and “team of engineers...work incredibly fast,” Earl reminded, as they “got a restaurant and brewery up and running in 3 months,” including getting “it through all the red tape.”  This facility is “way down that path already” and interior layout “already planned out.”  So Earl expects distributor demand for Ballast Point brews will finally be satisfied by next summer, as many have been asking him “where’s my beer?” recently.  The rest of the 80-90K bbls or so its current facility will pump out by yr-end “is spoken for” as BP grew close to 60% or more in San Diego every month in 2013, and its biz in LA/Orange County is currently more than doubling.

We’ve collected almost 2.9 mil bbls-worth of 2013 projections from 40 craft breweries over the last few months.  Whether shared specifically with CBN or told to local or industry news sources since the summer, these projections indicate that many breweries are looking to end the yr posting some significant volume gains.  Remember, these are projections, so they may change by yr-end.  Collectively, these 40 brewing cos expect to be up around 28%, adding over 630K bbls to the 2.2 mil bbls the same cos shipped in 2012, according to Brewers Assn data.  As a group, these 40 cos accounted for 16.8 share of BA-defined craft brewery shipments in 2012 (recall, we include Craft Brew Alliance and Magic Hat/Pyramid in our craft totals, which the BA does not.  This article uses the BA’s 2012 stats, including its 13.2 mil bbls of total craft brewery shipments, for apples-to-apples comparison).  

These 40 companies range in size from Brooklyn Brewery’s projected 215K bbls (+22% over last yr’s 176K bbls) all the way down to Indeed Brewing’s expected 5500 bbls (5X the co’s 1100 total for 2012).  Half of these companies made the BA’s Top 50 Domestic Craft Brewing Companies list last yr; 9 produced over 100K bbls but none more than 200K.  Three expect to top 200K bbls this yr (Brooklyn, Stone, Dogfish Head) and another 2 expect to break 100K bbls for the first time (Oskar Blues, Founders).  Of the 20 that ranked below the top 50, 15 produced less than 15K bbls in 2012.  Just 7 expect to remain below that mark by the end of this year.  Projected trends range from Alaskan and Boulevard’s expected slow-and-steady 7% and 8% rates, respectively, to possible 100-200% growth rates for 5 cos, Crazy Mountain’s more-than tripling, 10 Barrel’s more-than quadrupling, and Indeed’s expected quintupling.  

Twenty Top-50 Brewers Anticipate Collective 24% Growth in 2013  The half of these 40 companies that made the BA’s Top 50 in 2012 expect to add over 470K bbls to craft’s total this yr.  Though many anticipate growing at or around overall category growth, likely in the mid-teens, some may make bigger jumps in the rankings.  Of these cos, Founders could add the largest number of bbls to the craft total, as it projected jumping 76%, 54K bbls to 125K bbls.  Five other companies project shipping 30-40K bbls more in 2013 than they did in 2012.  A near 40K-bbl jump from Brooklyn would be the second largest in this group, followed by Oskar Blues (which projected vol +42.5% for the yr to 125K bbls), SweetWater (+30% to 143K bbls), Ballast Point (+68% to 80K bbls) and Firestone Walker (+26.5% to 150K bbls).  Both Ninkasi and Southern Tier expect to finish 2013 around 90K bbls, +31% and 45% respectively.

Faster Growing Smaller Cos +62%, Gaining Share  The 20 companies that didn’t make the BA’s Top 50 list for 2012 comprised less than 2% of the assn’s craft total last yr.  But collectively they expect to be up around 62% this yr, adding 166K bbls.  Two Brothers Brewing leads this pack, projecting 50K bbls by yr-end, more than double its 2012 total.  Only 2 of these cos expect to end the yr having grown less than 20%; 12 of them expect to grow faster than 50% in 2013 and 8 think they’ll more than double.  In this group, 3 brewers expect to hit around 25K bbls - Santa Fe, Foothills and 10 Barrel - none of which produced over 15K bbls last yr.  These 20 smaller cos could represent as much as a quarter of the growth of just these 40 brewers.

This entire group includes some of the fastest growing breweries in the US that will surely be gaining share of the category this yr.  If all are collectively up 28%, it could mean fairly significant share gain, depending on how healthy overall category growth ends up.  Recall, the BA reported a 13% volume gain at mid-yr and current IRI data pegs yr-to-date category volume gains around 16%.

Join us for the 20^th annual Beer Insights Seminar on Monday November 11^th at the Waldorf=Astoria in NYC.  It’s a jampacked day with up-to-the minute content plus plenty of time for networking with industry leaders.  Our program includes plenty of craft focus: Harpoon ceo Rich Doyle has a featured slot.  Craft will figure prominently during two panel discussions, one including Boston Beer’s sales veep John Geist, the other with the industry’s top scanner data experts who will update current craft trends on-premise and off-premise.  Ten Golden Rules ceo Jay Berkowitz will provide actionable insights into the world of social media and internet marketing, so critical to craft brewers.  Also on tap: presentations by AB sales veep David Almeida, Pabst prexy Kevin McAdams and a “fireside chat” with HUSA prexy Dolf van den Brink.   BMI publisher Benj Steinman will give an overview of industry trends.  Seating is limited.  Click here for more info.  Click here to register.

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

World of Beers will be opening its first NYC location as craft-friendly chain, known for its roster of 50 taps and around 500 bottles, “has leased 4,500 square feet in the new Chelsea Park” building on corner of 8^th Ave and 26^th St, reported NY Post.  Doing biz in NYC won’t be cheap, as paper noted commercial rents in Chelsea area go for between $100-130 per sq ft for a corner spot in that area.  No word yet on when WOB will be up and running at that location. It just opened its 42^nd location last month in Jacksonville, FL.    

Wisc’s brewing scene changed dramatically over the weekend with debut of Wisconsin Brewing Co’s new Verona facility, built for a cool $11 mil, according to the Wisconsin State Journal.  Prexy/ceo Carl Nolen and brother Mark raised $8 mil, originally with the hopes of purchasing Capital’s facility in Middleton after Carl’s departure from that co in 2011.  When the bid was turned down the two and veep/brewmaster Kirby Nelson, also a longtime Capital employee, looked for land to build a new brewery.  Wisc Brewing hopes to produce 20K bbls in 2014, its first full yr, with the expectation to scale up capacity to between 250K-300K bbls and spending another $12 mil to add its own packaging line by 2015.  In the meantime, it’ll ship beers 120+ miles to Stevens Point for packaging.  Tho it raised all that money, Wisc Brewing doesn’t own the new building, it’s leasing it from a developer.  Wisc Brewing spent about $400K on construction and the city of Verona offered $600K in tax incremental financing for the project.  The co plans to start construction on its own packaging “once we get over 20,000” barrels, Carl told the paper.  

Another mainstream beer vet has turned up in craft land.  Former HUSA and Sabra Dipping Co CMO Ken Kunze will join Craft Brew Alliance next wk as chief marketing officer, the co announced early this week.  “CBA’s portfolio is made up of world class brews, all with interesting flavors, and the brands have great stories that are about to be amplified,” said Kunze.

In 1997 Kunze was hired on HUSA’s team as the Director of Marketing for the Heineken brand, and by 2005 was appointed CMO. During his tenure at Heineken USA Kunze most notably “developed and launched the Dos Equis ‘Most Interesting Man in the World’ campaign,” as well as a handful of Heineken campaigns and packaging developments.

Kunze left HUSA in 2008, stating “my next opportunity with Heineken would have been outside the U.S and I prefer to stay stateside for the time being.”  After that Kunze signed on with Pepsi Co joint venture, Sabra Dipping Co., as CMO.  And now he’s at CBA, back with old HUSA bud Andy Thomas.  

Tho larger craft players are seeing healthier trends, many faster-moving smaller players means continued share-shift in craft segment.  Ten companies collectively lost 4.24 share of volume, and 4.93 share of $$ in IRI multichannel + convenience yr-to-date thru Oct 6.  Magic Hat/Pyramid, New Belgium, Sam Adams, Sierra Nevada and Gambrinus each lost at least half a share of both volume and $$ YTD.  Three of those cos lost almost 2.5 share of $$ thru Oct 6: New Belgium (-0.81), Magic Hat/Pyramid (-0.79), Sam Adams (-0.74).  Long Trail, Craft Brew Alliance, Lost Coast, Full Sail and FX Matt collectively shed another 1.45 share of $$ same period.  Five of these cos have negative $$ trends in scans so far this yr – Magic Hat/Pyramid (-4%), Long Trail (-7.5%), Lost Coast (-15%), Full Sail (-3.5%) and FX Matt (-5%) – but the rest are seeing double-digit growth.  Widmer brand lost over half a share of craft on its own and is down 5% yr-to-date, but CBA total co is up 12%.  Other notable $$-share losses include Deschutes’ -0.15 even tho sales up 13% YTD, Mendocino’s -0.13 (sales -13%) and Gordon Biersch’s -0.10 (down 23%). 

Ten largest Craft share gainers got an additional 2.81 share of volume, 3.23 share of $$ thus far in 2013.  Lagunitas snatched almost full volume-share pt (+0.96), more than full share pt of $$ (+1.07).  ABI Craft (Goose Island) had next-largest share gains, 0.54 share of volume, 0.56 share of $$.  SweetWater, Stone and Dogfish together grabbed over 0.75 share of $$, and each up over 40% YTD.  A handful of familiar brands and those noted above for 100%+ trends grabbed additional 0.10-0.15 share so far in 2013, including, in order of share gains: 10 Barrel, Oskar Blues, Bells, Great Lakes, Elysian, Founders, Uinta, Ballast Point, and Foothills.  Many more chipping away behind.  Recall, total Craft volume is up 16%, about 5.8 mil cases; $$ sales up 18.7%, over $220 mil YTD thru Oct 6.  

While many craft brewers and brands are declining, as we reported last week, what about the ones that are really starting to take off, perhaps the newest next wave?  Which of top 100 craft brewers in IRI are rising 100% or more?  There are 11, many the brewers that are often buzzed about.  They may not be the largest, but this list shows up-and-comers with a big head of steam in 2013, written about in descending order of size.

Out of the Pac Northwest, Elysian is up 107% and grew 56,000 cases in IRI multichannel + convenience yr-to-date thru Oct 6.  It is the 44^th largest craft brewer in IRI (recall Elysian recently told CBN it’s up 60-70% in all). 10 Barrel out of Oregon is up 61,000 cases, 372% and rose out of nowhere (just entering chains) to be the 50^th largest craft brewer in IRI. 

The next 3 are all out of the Southeast, where craft exploding in last couple of years.  Devil’s Backbone is Va’s hottest brewer, up 40,000 cases and 128%, at #57 in IRI’s top 100.   Foothills is fast-rising NC brewer that grew 41,000 cases, 147%, 58^th largest in IRI.  And much-acclaimed Cigar City in Tampa also up 32,000 cases and 141%.  It’s #69. 

Vermont’s Switchback didn’t sell in chains before this yr and it’s gained 50,000 cases in IRI to become 74^th largest.  SF’s Speakeasy up 37,000 cases, 325%, Karbach in Tex up 31,000 cases 233%, San Tan in Indiana up 22,000 cases, 217%.  And Revolution, also barely sold off-premise last year, up 28,000 cases, nearly 5000%.

Others are nearly doubling, like Two Brothers and Atwater.  And others still have phenomenal growth rates in scan, but are not quite doubling, such as Ballast Point up 83%, Left Hand up 82%, Green Flash up 78%, Short’s up 77%.  Taken together, last week’s article on declining brands and brewers and this week’s on those that are flying, shows there’s an increasing bifurcation among craft brewers; those that are still growing explosively and those that are beginning to struggle.  This could be the beginning of a next evolutionary phase.     

Boston Beer blew through another strong quarter of big growth, shipments up 217K bbls, 29% to 995K bbls.  That brings 9-month shipments trend to +23%, same as depletions.  Boston reported depletions +26% for the quarter, and should finish out the yr +21-24%.  That’s well up from previously-projected 17-22% depletions gain.  Boston expects that to slow next yr to “mid-teens,” still a robust gain for a co its size.  Indeed could mean Boston gets close to 4 mil bbls by end of next yr.  It’ll be well over 3 mil bbls in 2013; a 15% gain on 3.4 mil bbls brings Boston’s total vol to over 3.9 mil bbls.   Despite Boston’s stellar sales trends, its stock is taking a bath today, down $16, 6% at presstime, with mkt cap dipping just below $3 bil.

Spending and Income Up, Guidance Down  Boston prepped investors for increased spending to maintain growth it’s seeing across Sam Adams, Twisted Tea and Angry Orchard families.  Ads, promo and selling expenses already increased 25%, $11.8 mil in the 3d qtr.  But Boston raised its full-yr expectations for such expenses from $20-26 mil up to $26-32 mil.  And it’ll spend even more in 2014: between $34 mil and $42 mil.  And tho it narrowed expectation for capital expenditure (capex) for full-yr 2013 – now $100-120 mil, not up to $140 mil – the co plans to invest $140-180 mil in capex in 2014.  Spending for Alchemy & Science likely in $4-6 mil range plus capex of $7-10 mil by yr-end; next year the co plans to spend $3-5 mil more, but that “could vary significantly.”

Along with the increased spending in Q3, Boston saw operating income bump up 26%, $9 mil to $42.2 mil.  It’s now up $15.4 mil, 22% for 9 mos.  Rev per bbl jumped about 1.7% for qtr and 9 mos, headed upward in 2014.  But the co lowered its earnings expectations by about $.05 per diluted share to $5.05-5.35 because of that increased spending (only “partially offset” by volume gains) and a land write-down in Freeport, Mass.  Boston expects gross margins of 52-54% for full-yr 2013 as well as for 2014.  But it’s expecting to take price more aggressively next yr.  Boston’s recently sought price increases around 1%, but it’ll be looking for a 2-3% increase nationally next yr, to help cover increased costs.

Pricing Up Due To “Cost Pressures” Across Portfolio, Retailers with “Variety Fatigue”  On Q3 conference call, Citi’s Vivien Azer pushed back on that price increase, as well as Boston’s “optimistic” shipments expectations for 2014, but interestingly no one touched the reduced earnings guidance and Boston’s increased spending only came up tangentially.  On 2014 pricing, considering the “general health of the Sam Adams brand,” Boston’s “growing” tea biz and cider’s “healthy growth” as it’s “lapping first year numbers,” ceo Martin Roper is “pretty optimistic” even with “some headwinds” and “competitive activity, some of it announced, some of it rumored.”  Pressured on why Boston’s looking to raise its rev/bbl next yr, especially as more tea and cider implies a “negative mix shift” to Vivien, Martin explained “cost pressures on the beer side” as well as for tea and cider.  “There is some move,” Martin said, to “beers with higher cost structures for us to cover on the tea side.”  So Boston will “take some price,” even though it’s “totally unclear how much” of the price increases taken by larger suppliers will be “sticking.”  

Chiming in to discuss Boston Lager’s health, chairman Jim Koch said there’s “starting to be the inklings of, in some retailers, variety fatigue.”  More are devoting consistent space to top craft brands because those retailers are “realizing that just churning their taphandles confuses their staff, makes the beer ordering process longer, generates more bad beer and kegs that don’t turn fast enough.”  Faced with an “avalanche of SKUs” and still tons of newbies still opening every day, it’s a “positive sign for the craft category that lead brands from the strong craft brewers, brands that are well supported in the marketplace are seeing growth.”  Martin tempered though that it’s “not universal” and “just the top 3 or 4” brands.  Further, “we’re still seeing some strength in the volume of the tail.”  But shelf space and available taphandles “aren’t growing as fast as they used to,” leading to some “churn in the middle” where “there’s some fight for space going on.”  

Freshest Beer Slows with Operational Challenges; Hiring Ramps Up  Boston’s “Freshest Beer Program,” seeking to reduce wholesaler inventories and cut the time its beer spends in warehouses, isn’t being implemented as quickly by quite as many distribs as Boston originally planned.  By yr-end, it could reach about 70% of Boston’s volume, up from 65% currently.  It’s “not as many as we would like,” Martin explained, “given that” Boston faced some significant “operational service issues” during the quarter.  Indeed, Martin and co “were obviously caught a little bit by surprise” during last 2 qtrs.  As such, Boston expects to ramp up hiring over next 6 mos “to get out ahead” before peak selling season in 2014.  Both Martin and Jim repeatedly mentioned the toll that achieving its 2d and 3d qtr growth took on their employees, at the breweries and on the street.  Boston will be upping its salesforce, since “with this kind of growth rate there starts to be more markets that can support and justify” a devoted salesperson, Martin said.  The co will particularly look to support “major retailers,” who want “more representation from us, more visibility to us.”  So Boston will put “more people into teams against” those retailers, just as the “national accounts team continues to grow.”

Join us for the 20^th annual Beer Insights Seminar on Monday November 11^th at the Waldorf=Astoria in NYC.  It’s a jampacked day with up-to-the minute content plus plenty of time for networking with industry leaders.  Our program includes plenty of craft focus: Harpoon ceo Rich Doyle has a featured slot.  Craft will figure prominently during two panel discussions, one including Boston Beer’s sales veep John Geist, the other with the industry’s top scanner data experts who will update current craft trends on-premise and off-premise.  Ten Golden Rules ceo Jay Berkowitz will provide actionable insights into the world of social media and internet marketing, so critical to craft brewers.  Also on tap: presentations by AB sales veep David Almeida, Pabst prexy Kevin McAdams and a “fireside chat” with HUSA prexy Dolf van den Brink.   BMI publisher Benj Steinman will give an overview of industry trends.  Seating is limited.  Click here for more info.  Click here to register.

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