There are currently about 8200 SKUs in US foodstores, according to IRI data, cited by consultant Bump Williams. And 4426 or 52% of ‘em are craft. Of the 698 added so far this yr, 426 are craft or 61%. Since beer is adding over 1000 SKUs per year each of the last 3 yrs, Bump suggests there will be 10,000 SKUs nationally before the end of 2014.

In Calif alone there are over 2500 SKUs.  But 205 or 8% of SKUs do 80% of the biz. And craft is about half the SKUs, over 1100 in Calif alone.  Even craft is highly concentrated among top SKUs; 110 or about 10% do 80% of the craft biz too. Pointing to Pumpkin beers, Bump said a distrib may carry 8-10 of ‘em. “When is enough enough? When is too much too much?”

Calif distrib Jeff Jordano of Pacific Beverage said “it almost feels like we’re at that tipping point for us.” His co carries 800 SKUs, 160 draft SKUs. While, “we’re not quite San Diego yet,” quipped Jeff, “in our neck of the woods, 4-5 craft brewers are opening up in the next couple of months.” Craft is “everywhere.... It’s an eye opener,” added Jeff, even being picked up by “first generation Hispanics in farm communities.” And yet Bump noted that of 8 top retailers in Calif, only 2 are up. And both are the only 2 where premium and subpremiums are up as well as craft. 

Consultant Bump Williams painted tuff picture of retail landscape in his introductory remarks to panel he led at Calif Beer and Bev Distribs Assn last week. “The word that I hear from big retailers is ‘chaos,’” said Bump. Their “concern over category softness continues” including statements such as “I don’t need to give as much space to beer since beer is declining,” added Bump. Spirits are “taking a lot of space, displays and attention.” And Bump continues to foresee “huge explosion of craft spirits,” calling what’s happened so far “the tip of the iceberg.”

“We’re overcrowded,” stated Bump, including “a lot of packages that just aren’t pulling their weight, a ton of ‘dead space.’” Beer cos “continue to put packages on the shelf that just aren’t selling.” And there’s 350 new packages in Calif just this yr. “Where are you going to put them?” Skumageddon, anyone?  Meanwhile the “musical chairs approach” on-premise is “not healthy” either, said Bump, speaking of the rotator bars. All this while the industry’s “brand building skills are diminishing,” in Bump’s view. 

AB will test Busch Signature Copper Lager in midwest (Region 4) starting in Feb 2014. Busch Signature will be 5.7% ABV, available in 3 SKUs, sez AB. While the copper color and Signature name have craft cues and therefore perhaps upscale connotations, interesting to note that Busch Signature will be parity priced with Busch and Busch Light.

Complexity of US beer biz will “continue to grow,” said ABI prexy North America Luiz Edmond in speech last week to Calif Beer and Bev Distribs Assn. But “with the flood of variety, what products stand out?”  This is “where the power of brands can be seen,” Luiz added.  He compared beer biz to game apps, noting there are over 100,0000 apps, most $1.00 or less, yet vast majority of people are playing just 3 games: Angry Birds, Candy Crush or Words With Friends. “The commoditization of beer is a significant risk and can damage the profitability not only for the brewers, but for the wholesalers. We have to be wise enough to continue to invest in our brands” said Luiz, and distribs have to “make the decision” about “what’s the best portfolio to carry.”  Meanwhile, AB has 5 branches and 27 independent distribs in Calif (who own 32 operations).

Calif “Sets Trends” Luiz stressed the importance of Calif as a trendsetting mkt.  (His comments took on added significance since AB lost over 1 mil bbls there the last 4 yrs and slipped under 40 share.) “As goes California, so goes the rest of the country,” said Luiz.  California “was one of the initial states to witness the rise of the high-end segment, the growth of small brewers and the rise of the Latino consumer.” Indeed, he continued, California “was one of the first states to see the explosion in the Hispanic population, which has had a remarkable impact on the beer industry.... If we don’t understand or learn that market, we stand to lose a lot of ground to competitors outside the beer industry.” 

Handful of AB’s higher-alc brands including Bud, Black Crown, the Ritas, Shock Top and others will debut in Okla in Nov, mixing up a decades-old strategy in the state, according to News OK.  Importantly, all beer over 3.2 alc by weight in Okla must be made available to any wholesaler in the state, which then sells it on to liquor stores and bars licensed to sell “strong beer.”  The law change in 1977 that established “brewer-controlled distribution” of lower-alc beer and less-controlled distribution of stronger beer led to a “lengthy court fight,” the paper wrote.  Folks voted to keep the change, so AB and others pulled stronger brands from the state.  Recall, AB has two branches in Okla City and Tulsa.  But those branches will not have exclusive control of these new-to-state brands.  Half of the 24 new packages available in Okla will be draft, only way folks will get Bud, Black Crown, Land Shark and Ziegenbock.  Packaged Ritas, Rolling Rock and Shock Top could appear in some 650 Okla liquor stores, an oppy that “had to be attractive to them,” state alc bev commission gen counsel told the paper.  

GuestMetrics data shows drop offs across the board for alcohol on premise in Q3.  Beer volumes started out Q1 -4.3%, “improved to -2.0% in Q2,” but then “deteriorated to -4.6% in Q3, with volumes at -5.5% during most recent 4 wks.”  That’s “worst of any 4-wk period thus far,” for beer.  Spirits “weakened” too, -2.8% so far in Q3, volumes -3.4% most recent 4 wks.  Wine started 2013 +0.8% in Q1, now for first time “dipped into negative yr-over-yr territory,” -0.9%.  Wine volume -1.8% last 4 wks, “the softest of the year,” for wine too. 

These fall offs in volume driven by weak overall traffic on-premise in Q3.  “Overall traffic to full service restaurants and bars started at -1.4% in Q1, improved slightly to -0.8% in Q2, and…is at -1.4% in Q3 to-date, with traffic at -1.8% during most recent 4 wks.”  Traffic to bars and clubs dropped to -3.6% in Q3 to-date, “concerning -5.0% during most recent 4 wks.”  Fine dining trends slowed from +2.3% in Q1 to +0.4% in Q3 to -0.1% last 4 wks.  Casual dining is only segment that has slightly improved in 2013, tho numbers still “soft.”  Started at -2.2% in Q1, now at -1.7% in Q3 to-date, -1.9% in last 4 wks.

Not much relief yet in soft shipments picture for US beer biz.  Taxpaid shipments by domestic brewers down another 260,000 bbls, 1.6% in Aug, estimates Lester Jones at Beer Inst.  For 8 mos, taxpaids dropped 2.6 mil bbls, 2.1%.  Imports down 2.2% Jan-Jul.  So known US shipments off 2.9 mil bbls, 2.1% yr-to-date. 

Hotter last 4 wks boosted beer $$ and volume trends to +2.2%, -0.5% yr-to-date respectively in IRI multi-outlet + convenience data.  During latest 4-wk period ending Sept 8, total beer volume +2.2%.  And with avg price-per-case up almost 3%, mostly due to trade-up, $$ up over 5% same period.  Even premium regular segment posted 1% $$ gain.  Craft $$ grew over 20% last 4 wks and last 13 wks, boosting yr-to-date trend to +18.4%.  PABs still running hard, $$ +32.7%.

All of top 5 suppliers and 8 of top 10 grew volume and $$ in weeks leading up to and thru Labor Day.  AB volume +0.6%; MC +0.5%; and MC $$ grew faster than AB, both around 3%.  Biggest gainers again Crown and Boston, which together gained over 1 $$ share, while AB lost over 1 $$ share.  Crown volume rolling +13.6% for 4 wks and Boston Beer +29.7%.  Heineken volume up slightly while  Diageo and NAB posted only negative trends last 4 wks, both dropping between 3.5-4.5%.  Acceleration this latest period moved AB 13-wk volume trend closer to flat, -0.3%, while $$ now up 2%.  MC dollars up slightly more for 13 wks, but vol still -0.8%.  Both still losing share.  Yr-to-date, AB shed 0.5 volume share, MC -0.43, while Crown grabbed another 0.37 and Boston took 0.27 of beer vol.  

Editor’s note: Three data sets hit in last 24 hours, all showing different pictures of the industry.  Beer volume improved off-premise, +2.2% last 4 weeks, decelerated to -5.5% on-premise last 4 wks, and total taxpaid shipments still down slightly yr-to-date.

Another reminder in Wall Street Jnl today about how hard spirits co’s are working to catch attention of young drinkers (and women) with constant stream of innovation.  So far, wave of new products paying big dividends.  “Innovations” in North America accounted for $800 mil in sales for Diageo last yr.  “We have pretty much built a billion-dollar business over the last 4 ½ years on innovation in the US,” said NA prexy Larry Schwartz.  “Premium and above is where we innovate,” he added, as Diageo continually experiments with new vodka/whiskey brands.  Jim Beam also awash in innovation with goal “to get about 25% of medium-term sales growth from innovation,” noted WSJ.  Beam targeting RTD canned spirits for women, and is also gaining new access with new brands/pkgs.  “You can go to Yankee Stadium and get a low-calorie margarita in a bottle. That didn’t exist two years ago,” said cmo Kevin George. In US, there is a “candy and confectionary-flavored vodka boom” underway, as flavored styles “account for more than a fifth” of vodka consumption, and vodka accounts for 1/3 of all spirit sales, per Liberum Capital.  On top of red-hot craft beers, this adds another dynamic for big brewers to contend with that doesn’t seem to be going away anytime soon.