The disastrous flooding last week and over the weekend in Colorado thankfully spared many of the region's brewing facilities from significant damage. But unfortunately, many beer industry professionals, their families and friends have been evacuated, have lost their homes, their vehicles and their belongings and face a long period of uncertainty as they attempt to recover. Flood waters in Boulder shut down Brewers Assn offices starting Thursday of last week and its offices may open again only today, while at least some employees remain unable to get to there. Large craft breweries in the area sustained minimal damage, tho New Belgium, Oskar Blues, Odell, Left Hand and many others shut down operations for one or more days. Left Hand, in Longmont, evacuated as much of the city was inundated with water, but the brewery only sustained minimal flood damage and the tap room opened again yesterday afternoon. Neighbors in town Oskar Blues also sustained little to no damage at its brewery. Nearby Lyons, where Oskar Blues was founded, where it operates a brewpub and where many employees (of Oskar Blues and other beer companies) lived was completely evacuated. Both companies have focused attention on assisting those employees, family members, friends and neighbors who are affected. Oskar Blues has launched a Family and Friends Relief Fund page; Left Hand's Oktoberfest celebration this weekend will be used to collect money for the local Meals on Wheels, Longmont HOPE and the Left Hand Brewing Foundation, an organization already in place focused on disaster relief - more information is available at Left Hand's blog. Many communities have only just begun to assess damage to homes, roads and infrastructure like power, gas and water supply. 

Another battle over self-distribution brewing, this time in NC, reports WCNC in Charlotte. NC cap is 25K bbls; some brewers and at least one state legislator want to boost that to at least 60K. Points: Old Mecklenburg's John Marrino wonders why he has to drive his beer to a distrib who will take it around the corner. He also wonders why legislators involved at all, noting a baker "can distribute his own bread." Complains too that distribs are "carrying competing products." He doesn't want to give up control of distribution: "You're supposed to be able to build something and not have someone take it away from you. Counterpoints: Marrino is "tilting at windmills," sez Tim Kent of NC Beer and Wine Wholesalers Assn. Old Mecklenburg shipped 7400 bbls in 2012 and has long way to hit cap, Tim pointed out. Besides, "for someone to imply this is holding back the craft beer market is an absolute fallacy." Craft biz in NC is "vibrant," insisted Tim, and "a big reason for that is distributors provide an avenue to market." News report highlighted that NCBWWA is "one of best funded lobbying groups in the state" and spent $181,000 on campaign contributions in 2012. Distrib lobby "impossible to overcome," said legislator who wants to increase cap, and "very effectively killed the bill both times in committee." Tim's response: "The legislature does not dictate. The legislature makes decisions based on good information.

Brooklyn Brewery will likely enter BA's top 10 in 2013, with 25% growth so far thru Aug 13, said sales veep Robin Ottoway at Brooklyn's 2013 Distrib meeting. It should end the year up 22-23%. That will put Brooklyn around 210-215,000 bbls. It took Brooklyn 22 yrs to get to 100,000 bbls, just 3 yrs to get to 200,000 bbls, and if it averages 18% growth in next 2 yrs as it anticipates, it will get to 300,000 bbls, noted Robin. Such are the miracles of compounding. "Once we get to 300,000 bbls, we'll have new goals in mind," Robin added.

Up 15% in NYC Metro, Hitting 1 Mil Cases Brooklyn accomplished its strong overall growth rate without opening any new mkts this year and with solid double digit growth in its core. It is up nearly 15% in its home mkt of NY metro, and will do about 1 million cases in the area. Editor's note: That is only about a 1 share in the area. "We've only scratched the surface here in this city," said cofounder Steve Hindy, a theme echoed by several speakers throughout the day. Robin talked about the % of New Yorkers that still don't even know about the Brooklyn brand.

Exports Flying; Will Pass 1 Mil Cases Next Yr Meanwhile, Brooklyn's exports are flying once again; should pass 800,000 cases and 27% of Brooklyn's biz, said chief operating officer Eric Ottoway. The brewery expects to easily pass 1 mil cases of export volume in 2014, including over 400,000 in Sweden where it is opening a new brewery in partnership with Carlsberg in January. Also will sell about 180,000 cases in UK this yr, and targeting 250,000 next yr.

Brooklyn Chooses Southern Wine & Spirits in Vegas For the first time in a couple of yrs, Brooklyn is entering a new mkt, Las Vegas. Brooklyn chose the largest wine and spirits distrib in the land, Southern Wine and Spirits, for Vegas. SWS has its only truly sizable beer operation in Vegas (including 2+ mil cases of Crown). SWS is getting much more serious about craft beer in that mkt (see our Aug profile in Vol 4, # 43). So this is big score for SWS, continuing trend of largest wine and spirits distribs getting far more interested in craft.

SWS and others had courted Brooklyn to come to Vegas for yrs. But what convinced Brooklyn to come to Vegas is the entrance of Brooklyn Bowl into the Vegas mkt. Brooklyn Bowl is a combo bowling alley and concert venue around the corner from the brewery (and where the distrib conference is held). It is also Brooklyn's largest on-premise account, selling 250 kegs per month. And the Brooklyn Bowl in Vegas is 3x bigger than the one in Brooklyn. "That Brooklyn name is very powerful," said Robin.

Portfolio Strength, Chain Development, Featured by Sales Execs Brooklyn Lager is up 25%, East India Pale Ale up 23% and Brooklyn Brown up 7%, said sales exec Chris Rom, noting those are still the big 3 yr-round brands. But Summer Ale, tho only available for 5 mos, has become the "2d largest liquid in our portfolio." And that's also up 22%. Oktoberfest and Brooklyn's Pumpkin beer each up double digits. And its big bottles up near 40% this yr too.

Chain is an increasing area of focus. "For the future, we have to get much deeper into those chain accounts," said sales exec John Boegel. For the last 52 weeks, Brooklyn is up 38% in NY metro IRI, compared to 19% for total craft. Only a small part of NY metro off-premise biz is tracked by IRI, so Brooklyn underrepresented. It was only the 33d largest craft brewer in IRI, tho it is #11 on the BA list. Nationally, Brooklyn up 27% in IRI.

Brooklyn Beefs Up Brooklyn has a 7-person strong marketing dept, up from just 1 four yrs ago, noted Eric Ottoway. Next yr, it is going to 10. Similarly, 4 yrs ago it had 1 person in chain sales, now it has 4. Next yr, it will add another. Brooklyn is up to a dozen brewers on staff and its sales force reportedly about 30 people.

Its marketing department has many interesting initiatives, notably its roving MASH (a food, culture and beer festival), and its extensive social media efforts. MASH is "nightlife with a twist," said mktg director Ben Hudson, "demonstrating our Brooklyn-ness." The MASH will be in 11 cities next yr and in 2012, Brooklyn hired its own executive chef, who often collaborates with leading local chefs at the MASH events.

Another Hindy Book Coming on the Craft Revolution Brooklyn cofounder Steve Hindy has written another book called "The Craft Beer Revolution: How a Band of Microbrewers Are Transforming the World's Favorite Drink," due for publication next spring. His last book "Beer School" remains one of the more instructive tomes about the origins and development of a craft brewer.  

In our article on Nevada Beverage's craft division last week, we implied that local brewer Joseph James Brewing was currently about 1200 cases, but that was its Nevada distribution when NevBev took on the brand in 2010. The brewery plans to ship about 10K bbls to its 15-state territory, according to co-founder Matt Lisowski, Sr. That's up from just over 3000 bbls in 2012 and headed toward about 12,500 bbls in 2014. Nevada has changed from the co's "worst performing market" to "a key part of our success," Matt shared with us.

Another newsbreak via Twitter! "Daniel Lanigan, a well-known publican and the founder of Alewife Baltimore, Alewife Queens, and Lord Hobo - one of the Boston area's most celebrated craft beer bars-announced via twitter that he plans to open a 150,000 sq ft brewery in the North Shore region of Mass," reported Brewbound. "For the past 8 mos Lanigan has been quietly securing enuf private investment money to launch Paragraph 11 Brewing, an $18 mil operation that will focus exclusively on contract brewing." The twitter post revealed that Lanigan plans to have "100 15 bbl brewhouses, H20, lab treatment, cans, bottles, kegs up to 250K bbls." https://twitter.com/lordhobo/status/377447957240356865 "I have many friends in the industry who are frustrated with their current contract brewing situations and I think I can make contract beer as good, if not better, than it is currently being made," Lanigan told Brewbound. Brewbound points out "Lanigan has no commercial brewing experience," but "plans to hire an experienced brewing engineer who has worked with large-scale brewing facilities." Lanigan hopes to be up and running by 2015.

Then too, Brew Hub, "a chain of production facilities that's launching in Lakeland in May (2014)," set to "announce 6 breweries that have signed on…by the end of the year," wrote Tampa Times. Recall, Lakeland "the first of six regional facilities planned across the country that will host between five and eight partner breweries each," all part of their $100 mil project to provide contract brewing for Craft. CEO Tim Schoen reiterates goal to change perception of contract brewing within Craft segment, that's "often demonized within the craft-beer scene," as Tampa times puts it. "We're turning that perception 180 degrees. We're going to promote it and embrace it. We view ourselves as real stakeholders with our partners," Tim told Tampa Times.  

Four more craft brewers are adding restaurant/food service concepts to their arsenal in driving attention, excitement and profits. Oskar Blues announced a brand new Longmont, Colo spot, CyclHOPS Bike CAN-tina, which will function as the home REEB Cycles, the brewery's bike brand as well as a "quick full-service tace and tequila eatery," with space for 300 guests and 20 taps. Across Colorado, Ska Brewing recently opened up The Container, an on-site restaurant built out of 2 shipping containers, according to the Durango Herald. The space opens to the brewery tasting room on one side, with the second container located one flight up for seating. Ska prexy Dave Thibodeau explained that he and Ska co-founders "don't understand the food industry" so they hired chef Jeremy Storm to create the menu and run the restaurant biz. Ska plans to finish out 2013 at around 31K bbls, up from almost 26K in 2012, the paper wrote. Half Acre Brewing (just under 12K bbls in 2012) just announced that it too will be opening up a restaurant adjacent to its Chicago brewery and taproom, wrote Chicago Grid. Not many details available yet, but it'll offer food for folks who just picked up some beer next door instead of selling alcohol itself. Finally, remember that "little brewpub" Epic ceo/co-found David Cole hinted at in CBN in July? This week the co announced The Annex, a "gastro-pub" in the Sugarhouse nabe of Salt Lake City. On-site brewing should begin sometime this winter, according to the release.

Still plenty of distance to travel, including up to 7 more bills in hopper, but Mich legislators heard testimony this week on 3 bills that will allow state craft brewers some breathing room to expand their bizzes, according to reports from mlive.com and Detroit News. Lawmakers plan to vote on 10-bill package, not individual items. Bills, which have support of most craft brewers and powerful Mich Beer and Wine Wholesalers Assn, would: 1) up definition of microbrewer from 30K bbls to 60K bbls; 2) allow those brewers to operate two tasting rooms instead of just one; 3) allow brewpubs to have up to 6 locations, (up from 3), if they stay under 18K bbls combined production (up from 5K).

Only two Mich brewers over 30K bbls now, Founders and Bells. Founders supports reform so it can expand to two facilities with tasting rooms. So do Short's and Arcadia which are coming up against the 30K limit. Bell's does not support bills as written. Larry Bell testified that allowing multiple brewpubs would cut into his biz as they'd likely limit sales to their own beers. "We see it as the possibility of taking away about 100 accounts in the state over the next 5 years that we might have the opportunity to sell beer to, unless we make some changes to the language," Larry said, reported michiganradio.org. Larry sees loophole that could allow big global brewers to come into state and set up tasting rooms or two. He also supports the 30K-bbl cap. Frankenmuth Brewery's Haithem Safara said "he wants to unshackle microbreweries from requirements to go through distributors to get their products on store shelves," wrote Detroit News. Limited self-distribution reportedly still in debate. So are other issues. Meanwhile, retailers still have trouble with limits on giveaways, which distribs support. So situation remains "in flux," as one participant told CBN.  

Just as larger suppliers are turning focuses toward sales growth over volume growth, some small brewers are identifying novel approaches toward even higher margins and driving profits, literally capitalizing on craft cred. An increasing number of craft brewers have started selling beers they haven't even made yet to their most rabid fans. It goes something like this: sell a limited number of annual "memberships" via online or on-site retail and in return, guarantee members an allotment of (mostly) specialty and rare brands, some made exclusively for members and throw in some extra bonuses like merch, discounts at brewery shops, and the like. Such programs cater to craft's most excitable and avid consumers: those who spend much higher-than average time investing time and money into not only finding and tasting but often rating and trading beers. Besides driving exclusivity and excitement behind a brand or set of brands, they can also be big money makers.

Joe Sixpack's recent column on the growing phenomenon for the Philly Inquirer noted membership into Cigar City's El Catador Club cost $126; 1500 memberships sold out in less than a week while about a third disappeared in less than a minute. That's over $60K in less than 60 seconds, and close to $200K when all was said and done. Members receive usual perks, but you can bet many cashed in for the promise of 5 barrel-aged 750s, including a single bottle of the brewery's Hunahpu Imperial Stout. Fans used to waiting in long-lines on a special trip to Tampa for that beer's release likely didn't balk at an average of $25/bottle. Some smaller brewers have used similar programs to help deflect startup costs, like Night Shift Brewing, which sold 200 memberships at $250 each for 14 bottles priced around $18 apiece, or about $50K for about 15.5 bbls worth of beer, $3226/bbl. Colorado's wild ale-kings at Crooked Stave charged about $300 for 20 bottles, while the much-drooled-over Calif-based The Bruery sells Reserve Society memberships for almost the same price but promise about half the liquid. The Bruery's price/bottle for their club is about the same as Hill Farmstead charges its 150 members, who pay $350 for 12 bottles, or about $4925/bbl. Of course, costs per bbl for the beers these brewers provide members are also surely unusually high, as many include lengthy periods of barrel-aging, huge amounts of choice raw materials and/or plenty of specialty brewing techniques and equipment. The arrangement is made more attractive though by the incredible margins allowable by state regulations that make these beers available for pickup right at the brewery (or in the case of The Bruery, Calif-only shipping at an extra cost).  

 Lots has changed at Golden Road Brewing in the last year, but it's still one of the fastest-growing young brewing companies in the US. On the way to shipping about 17K bbls by the end of 2013, co-founder Meg Gill told CBN recently, it's dug in deeper at home. Meg has met with folks about bringing the beer further afield, and felt good. But when she returns to more biz from Dodger Stadium or LAX, she's convinced there's "so much more business in LA before we're ready to take those deals." So, Golden Road is "not ready" for out-of-state biz or "even the Bay area." Just two distribs, Ace and Mission in LA, distribute "just under 60%" of the co's biz, and combined they were up 135% in Aug. Meg rattled off a number of GR's August trends from LA county wholesalers, each up big, one almost +300%. So as the co is "focusing on making sure we're strong in Southern Calif," and "not just filling in chain holes," the goal has become to "not have to open more markets" to add volume.

Two big ways Golden Road has been filling its big LA facility? LAX and Costco. The Los Angeles airport has become Golden Road's #1 account, Meg says, thanks to close work with big-time concessionaire HMSHost. This month, LAX is debuting a new terminal - part of a $4 bil project. That should increase Golden Road biz in airport by 40% or so. In October, LAX will open a couple dedicated Golden Road kiosks too. Add on some big bets from Costco, which "ordered over 7K cases of beer in the last 6 weeks," Meg told us. The big box store tested the brand in 5 stores before expanding it to 52 where it launched 24-pks of lead-brand Point the Way IPA. Costco sells 4 GR skus now and will be "adding 3 additional 4-pks." And since "pricing is the same" and lots of customers are being sampled on the beers, Meg said, the relationship "has been very healthy for us." Costco also attracts a "totally different demographic" than Golden Road had "been reaching through Whole Foods."

The biggest changes at Golden Road have come to its "culture." After a bunch of early hires, Meg found "several instances" in which her recruits (including now-departed initial brewmaster and a sales veep) were "not the right philosophical fit" for the growing co. Meg points to bringing in GM Paul Burgis last yr as a huge part of the "culture change," plus a sales analyst brought in from across the country and new brewmaster Jesse Houck too. Over the last 6 mos Meg's role has evolved into an "80% sales capacity role" while Paul has "put all these systems and structures in place" to help define the biz. They've also built their street-team to 5-strong, "more street force than distributor managers," Meg said, as she's doing lots of the work with Golden Road's 12 wholesalers.

Anyone who looked up that Press Telegram article we mentioned last issue, would have noticed quite the discrepancy with that 17K-bbl-figure above. The article pegs Golden Road at about 3K bbls, but Meg says they'll "go thru more than 3K bbls" with on-site sales at the brewery. When we asked about challenge of opening up a brewery in LA, she told us "there's just so much work to be done" and LA is "really busy." Golden Road received no incentives from the city (tho others offered huge tax incentives), but Meg instead noted "unbelievable" changes in "our neighborhood" including about 5 or 6 new restaurants since GR opened in 2011 and 6 new "craft beer bars," up from 0.

(This article also appeared in latest Beer Marketer's INSIGHTS.) With news that Boston Beer chairman Jim Koch placed on Bloomberg's Billionaire Index, largely through value of his stake in Boston Beer, it's time to consider enormous wealth creation now happening in fast-growing craft segment. This is a good thing. It's what happens with successful businesses. And yet, one can't help but wonder whether this extraordinary wealth accumulation among so many key craft players could create some image conflicts and perceptual challenges. That's especially so for a group that has defined itself as "small" underdogs and even prototypically as a revolt against the established order. To give just 1 relevant example, how will Jim Koch's freshly-minted billionaire status play into the ongoing tax battles? Tax breaks for billionaires?

Boston Beer's stock is on an extraordinary run, growing more than 10x in the last 4.5 years and reaching a stock market capitalization of $2.9 bil. But it ain't just Boston. Lotsa others creating big wealth. Recall, Sierra Nevada did 35% as much volume as Boston last yr, but without anywhere near same level of sales and mktg costs. Does that mean Sierra worth nearly $1 bil? It's not public, not for sale, so hard to know. Yet almost certainly Sierra's value well north of $500 mil. And don't forget that Sierra has been profitable and growing for many years, which enables it to fund projects such as coming state-of-the-art facility near Asheville for over $100 mil. Late last yr New Belgium co-founder Kim Jordan sold her stake to ESOP (Employee Stock Ownership Program), reportedly for between $175-200 million. She owned less than half of co, which implied enterprise value around $450 mil. That's just top 3.

Continue down the list: Craft Brew Alliance has current stock market capitalization of $246 mil and went up over 100% in last 10 mos. Widmer Brothers still have 14% stake currently valued at about $34 mil. And then there's Shiner, which likely has revs over $100 mil and its value would be some multiple of that, not to mention that deep-pocketed owner Carlos Alvarez used to import Corona in East. Such wealth creation in craft also driven by increased cash flow/increased earnings prospects, which should also mean more resources to reinvest and grow the biz.

And that value/earnings potential also bound to attract more potential buyers. There have been relatively few craft deals so far, but Goose Island's sale for $38.8 mil to AB in 2011 yet another example of significant craft wealth creation. Prices have heated up since then. There are again more rumblings of coming craft M&A, including 1 deal reportedly well over $100 mil. Then there's Two Brothers, a comparatively small craft brewer (24K bbls in 2012), but it sold its 900,000-case distribution arm Windy City for about $70 mil to Reyes Beverage Group. These are just a few examples of craft wealth creation.

The "amazing thing" in craft is "the amount of wealth that's being created by people that don't have traditional business backgrounds, or that have no business backgrounds," said one knowledgeable source. Still, vast majority of craft brewers are chasing growth and are often heavily in debt to fund brewery expansions. But an increasing number have reached some kind of tipping point, with revs $30-50 mil or even more. Many of these cos are now strong financially. These entities are well-past their early struggle days, growing rapidly, making money and building clout, especially in their local mkts. While many craft brewers are primarily motivated by passion not profit, considering some of the profits being made in craft these days, it's no wonder so many newbies still trying to get in on the action.