Lots of talk about struggling on-premise biz of late. Just this week, MillerCoors ceo Tom Long noted on-premise trends were “particularly weak.” Addressing beer headwinds more broadly, Tom said that “as the economy improves, we would expect improvement,” he noted, but so far it’s “still awfully weak with key beer drinkers” with “no indication of job growth” for key consumers. Meanwhile, Brinker Int’l (owner of big casual chains like Chili’s and Maggiano’s) told investors that casual dining remains “a fairly lethargic category.” While co is “optimistic” that trends can turn positive in 2d half of yr, “the restaurant industry isn’t recovering as fast as we had hoped,” said ceo/prexy Wyman Roberts. Brinker noted tho that co had some “positive results” in alc bev sales over last 18 mos, “especially” from craft beer selections. Elsewhere, a Natl Restaurant Assoc report reminds that reaching key demographic group on-premise doesn’t get easier as US Census projects senior citizens will have “biggest population growth spurt” by 2020 and there will be fewer under 25 yr olds. “Catering to older diners will become increasingly important in years to come,” said svp Hudson Riehle. Consumers will be more diverse as well, with Hispanics expected to reach 19% of population by 2020.

Distribution Key Driver Analyzing performance of over 10,000 brands for 1st half of yr, GuestMetrics found “changes in distribution are a critical factor” in driving share gains and losses on-premise. “While overall beer sales in on-premise during the first half of 2013 are flat,” and volume is down 3.5%, “it would be incorrect to think they dynamics in the space are even remotely static,” said prexy Brian Barrett. Just 2 brands, Angry Orchard from Boston Beer and Budweiser Black Crown had double-digit gains in distribution on-premise, Jan-Jun, found GM, (+15 points, +11 points respectively). Next best gainers were Goose Island, Redd’s Apple Ale, Coors Batch 19, Coors Third Shift, Leinie’s Summer Shandy and Lagunitas IPA. All brands aimed at consumers drinking craft and looking for fuller and different flavor. All of those brands, “with the exception” of Lagunitas, “100%” of their share gain was from increased distribution. Lagunitas growth was “slightly more balanced,” with 30% of its gain driven by increased sales per point of dist, noted report. Brands with largest declines: Amstel Light, Miller Genuine Draft, Bass and Newcastle.

Looks like Craft Brew Alliance’s portfolio strategy – as it tries to drive sales across Kona, Widmer and Redhook divisions – getting some traction, at least in Q2. Shipments up 13.5% in Q2, +5.6% yr-to-date. Meanwhile, Kona has taken top spot among those divisions. With 25% jump in Q2, Kona up 19K bbls, 17% for 6 mos and shipped 126K bbls yr-to-date. Widmer still off 6% YTD despite 2.1% Q2 gain (new Omission included with Widmer). Widmer’s 120K bbls for 6 mos still ahead of Redhook’s 102K bbls, tho Redhook up 15% in Q2, 8.3% YTD. Shipments/depletions much more inline in Q2, as CBA worked to “optimize our supply chain process.” But for 6 mos, depletions still ahead, +9% vs +5.6%.

CBA booked $2 mil in operating income following loss in Q1. For 6 mos, CBA still $800K in red. And while margins improved in Q2, still quite thin vs that other large publicly-owned craft brewer, Boston Beer. CBA boosted gross margin slightly to 30.5 in Q2, operating margin to 4.1. Boston’s gross margin in Q2 was 53.6, operating margin 17.7. At CBA, lower capacity utilization – contract biz dwindling as CBA ended brewing beer for Goose Island – modest price increase (CBA expects 1-2% for the yr), cost hikes tracking rev increases and thinner pub margins continue to pressure earnings. CBA still expects depletions to be up 7-11% for 2013; a bunch of new brands/collaborations should add to current momentum. More details on CBA’s Q2 in our sister publication Craft Brew News.

Pittsburgh area AB-Coors-Others distrib Fuhrer sued MC for not getting Batch 19, Redd’s and/or Third Shift, as we reported earlier today. Court papers show that Fuhrer principals met with Pete Coors, Tom Long and Ed McBrien from MC on May 10. They said MC “would not assign any new craft/specialty brands to Fuhrer because Fuhrer sold AB products.” At same mtg, MC execs suggested exclusive sales director would be enuf for Fuhrer to get new brands and MC “admitted that Fuhrer should have received the distribution rights for Batch 19” which Fuhrer points out is made from old Coors recipe. Execs also “indicated that they would not object” to Fuhrer trying to buy rights from Miller distrib Wilson-McGinley, which got ‘em. But a few weeks later MC atty wrote Fuhrer, “withdrew the proposal” about a sales director and added those “draconian conditions” set out by MC: new corporate entity dedicated to MC with separate cfo, and restrictions on ownership, board membership (see last issue).

MC’s actions violate Pennsy law which bars conditions MC suggested simply because Fuhrer sells competing products, distrib argues. MC conditions are also “unreasonable restraint of trade” and are “tortious interference” with Fuhrer’s existing contract with AB. In effect, MC “demanding that Fuhrer either cease selling AB products or carve up the company into pieces it would no longer control.” So it asked for injunction stopping MC from using Fuhrer-AB relationship to withhold craft/specialty MC brands, plus damages. At same time, Fuhrer filed separate action with American Arbitration Assn, given requirements of distrib agreement, even tho Fuhrer believes arbitration clause does not apply to this issue.

Despite better Jul retail numbers, Jun was tuff mo for import shipments, driven by odd 33% drop in Dutch bbls coming into US. Total imports off 190,000 bbls, 7.4% for mo, as Mexican shipments down 5%. Again oddly, shipments from Canada, Belgium, Ireland, UK and Germany each up for the month. For 6 mos, imports off 340,000 bbls, 2.3%. Mexican imports managed just 100,000-bbl, 1.2% increase for 6 mos. Dutch shipments down 165,000 bbls, 6%. Among remaining major source countries, only German shipments up yr-to-date, driven by Stella being packaged there. With June import loss, total US shipments for 6 mos came in down 2.5 mil bbls, 2.3%.

Beer volume up 1.8% in Nielsen’s All Outlet + convenience store data for 4 wks thru Jul 27. That’s improvement from -0.8% for 4 wks thru May 4, -1.1% thru June 1, +0.6% thru Jun 22. Then too, $$ sales up healthy 4.6% in most recent 4-wk data, doubling gain thru May 4. Driving Jul increase: high end, natch. Craft volume +20.2%, imports +7.1%, FMBs +35.8% and super premiums +0.9%. Each of those trends is acceleration from Apr-May period, except for FMBs. More important perhaps, premium light volume off just 1.7% for 4 wks thru Jul 27, after having been running down 3-4% in each of the previous reported 4-wk periods. Premium regular dropoff less steep as well. Trends for below premium improved too, tho still down 2.4% in most recent period. Cider continued to more than double. Above premium segments grabbed 28.3 share of volume in most recent 4-wk period, up 2.8. Dollarwise, above premium up 3.5 share to 38.7 for 4 wks. That’s 2.2 points higher than high end had of $$ as recently as 4 wks thru May 4.

Join us for the 20th annual Beer Insights Seminar, Monday November 11 at the Waldorf=Astoria in NYC. This year's event features a top-flight program, with plenty of craft notes, and lots of oppys to network with industry peers. Speakers include outspoken Harpoon ceo Rich Doyle. Boston Beer's sales veep John Geist will participate in a panel with MillerCoors chief customer officer Kevin Doyle and Crown exec veep sales Bruce Jacobson, moderated by consultant Bump Williams. Another panel will provide unique insights into industry data, including current craft trends on- and off-premise, from 3 leading info providers: GuestMetrics ceo Bill Pecoriello, IRI principal bev alc insights, Dan Wandel and Nielsen senior veep Andrea Riberi. Also on tap to speak: AB sales vp David Almeida, Heineken USA president Dolf van den Brink. As always, BMI's Benj Steinman will present an overview of industry trends. More speakers will be announced in coming weeks. The seminar is $1150 per person. Sign up for what's sure to be a jampacked and insightful day. Seating is limited. Click here for more info. Click here to register.

And the beat goes on, and on and on, as media continues to provide forum for small brewers to speak about their big brethren. Or lash out, depending on the brewer. Comments this week run gamut from respectful to ragging. Brooklyn Beer's Steve Hindy played the diplomat on Jim Cramer's Mad Money CNBC show. Asked whether craft brewers can "bring down the edifice of the big brewers," Steve said that "in the hearts of all craft brewers we were fighting against the giants. But now we're maturing and the game is kind of changing. The giants are getting into our territory and they see that we're taking a lot of market share from them." Problem for big brewers, in Steve's view, is that a 200,000-bbl brand - a top-10 craft brewer - "is a drop in the bucket. It doesn't move the needle." Then too, big brewers face "dilemma" in making craft-like beers because "the more they promote flavor in beer, the more they undercut their big horses, which are the light lager beers." Steve did say "big breweries make great beer. They do. It's light lager beer." Consumers seeking more flavor across range of products, Steve pointed out, from coffee to ice cream, and US can "take 4,000 breweries." Pre-Prohibition, there were 2K breweries for 80 mil people. Population is now over 300 mil.

A coupla of Steve's colleagues took a (much) different tack. In public letter to "craft beer supporters" picked up across internet, Stone's Greg Koch pounded two themes. First was welcoming recent "significant" Consumer Reports focus on craft beers as latest example of mainstream publication working "craft" into "national lexicon." Predictably, he didn't leave it there, but took off again on "plain, cheaply manufactured, characterless and otherwise inferior goods" of all kinds made by guess who. There was plenty more, including references to "mammoth brewing conglomerates," "industrialized notion of beer," "faux craft," "watered-down, corn and rice-based 'beer,'" and more.

At the same time, Stone brewmaster Mitch Steele took to his blog, Hop Tripper, to examine what "beer quality" means to him. Acknowledging that "quality beer" is "different depending on who you ask," he contends it's often some mix of creativity, style-adherence, consistency and the absence of off-flavors. "A lot of people don't think American Lagers have any quality," he writes, "a big mistake." He, like Steve, praises the "consistent flavor of these beers" even if they show "so little malt and hops flavor." The post goes on to educate readers about the causes of 3 common off-flavors in beer: diacetyl (butter flavor), acetalaldehyde (green apple), and oxidation (cardboard). While consumers are often "not familiar enough yet with these flavors," many brewers at small breweries "lack the education, experience, or sensory acumen to ensure consistency" and keep off-flavors out. Mitch is "nervous" about the lack of basic lab equipment in many small brewers and finds it "sad, and potentially damaging" that some folks "are starting breweries because they have money and think it would be cool."

And across the pond, Brewdog's co-founder James Watt punked big beer again in lengthy feature that appeared today in Daily Mail. In addition to familiar attacks on "mass market beer," he said a "megabucks takeover" of Brewdog "would go against everything we believe in. I could think of nothing worse than sitting by and watching a big company destroy everything we've worked so hard for." In addition to ripping big brewers' brands, Watt also criticized industry's successful efforts to stall adoption of minimum pricing for alc bevs in UK. (Actually some industry members supported minimum pricing, including brewers.) "Alcohol imposes a cost on society," Watt said. "The biggest problem is big beer companies discounting to less than cost to drive promotions." Clearly, not everyone in the biz is adopting Jim Koch's suggestion that craft brewers differentiate themselves from big brewers without denigrating them.

Another hot regional brewer has most of its brands on allocation, has been shorting orders due to construction at the brewery and yet it is still expecting to grow 30-35% by the end of the year. Utah's largest brewer, 21-yr old Uinta Brewing company screamed into the top 50 BA craft brewers last yr, +67% to just below 45K bbls. This year the co expects to get close to 60K bbls, prexy Will Hamill told CBN, as its current brewhouse struggles to keep up. Sales veep Steve Kuftinec reported 3 record sales months May thru Jul. Uinta's Salt Lake City facility has been in construction mode for over 18 months, since purchase of adjacent property. Now in "phase 3" of the project, Uinta's adding outdoor fermentation that'll double capacity from about 70K to 140K bbls. But is simultaneously replacing its current 3-vessel manual 40-bbl brewhouse with a 4-vessel automated 130-bbl brewhouse that could pump out well over 300K bbls a year at full tilt. Will expects to hit around 85K bbls in 2014 and then take another 3-5 yrs to reach that 140K-bbl point. Looking further forward, its 6-acre complex has plenty of space to add more fermenters to support the new brewhouse, expected to be online by early 2014.

Just over half of Uinta's beer stays in Utah, and its home-state biz up 18% thru July. That includes Utah-only Cutthroat Pale Ale, still the largest craft brand in the state, according to Will. Recall, Utah only allows beers under 3.2 alc by weight to be sold in grocery and c-stores, so this low-alc pale fits right in. Cutthroat was Uinta's largest brand overall til last year, marketing dir Lindsay Berk added. But 2012 was a huge turning point for Uinta. That was the first full-yr of its rebrand. Trends popped from the low-teens to the upper-60s, Steve said.

But Uinta's figured out how to balance success in-state with emphasis on different beers elsewhere. Out-of-state, Steve focuses his sales team on 4 key "export brands": Hop Notch IPA and Dubhe Black IPA (part of Uinta's "Classic Line") and Wyld Extra Pale Ale and Baba Black Lager ("Organic Line"). These brands were just 28% of Uinta's 2012 volume, but are collectively up about 25% yr-to-date in 2013, up to 38% of its biz; Steve expects that to grow, as the co digs deeper in markets outside of Utah.

Some of the hottest markets for Uinta have been Ohio and North Carolina, Steve said. In fact, some months, Uinta sends more beer to NC than to all of Calif. Biz there is up 90% "in year four," said Will. Chicago, where Dubhe's been particularly hot, is up 40% even tho Uinta's not been able to get Windy City all the beer it wants. Will pointed to Colo and Calif too - key craft-centric markets. "You know the story," Will continued, with success of IPAs and seasonals "true for our brands as well." Uinta brands are available in 24 states at the moment, but is "very shallow in those states." Getting deeper is a 2014 goal. Steve's also been eyeing Texas and Florida, and hopes to have enough beer available to open those markets around Q1 of 2014. But Uinta moves into new territory and makes distrib assignments "super slow, super careful," Steve reminded, so don't expect a rush into either state. Trends have been supported by launch of 12oz cans of core brands this spring, sales of which have been largely incremental, Will reports, with little to no cannibalization.

Back in Utah, Uinta's got about 50 employees, including some staff at an onsite pub, still less than 2% of sales. That site has mostly been a "receiving ground" for the brand, rather than a profit-driver; Will and co are a lot more invested in brewing and selling beer. As such, he's been adding to production staff and sales team, including moving from sub-contracting reps who might work for multiple brands in multiple states to more geographically- or Uinta-focused employees. It also continues to reinvest in telling its brand story, including that recent packaging redesign to help fans "discover" Uinta. A proprietary bottle sporting a compass leads fans to its outdoor enthusiasm and environmental practices. Uinta's facility has been wind-powered since 2001, only the second brewery to go 100% wind-power, Will claims. It's recently added a rooftop solar array to produce about 20% of the co's electrical needs. A new wastewater treatment facility on site was included in the recent expansion and sustainability plans are constantly being revisited.

Not every hot craft brewer's expansion, even into the larger states, constitutes big news. But some expansions mean more than others. And Bell's coming to NY is significant. Bell's, the #7 BA craft brewer, will move into 4th biggest state NY Oct 1. Bell's is pumped for this because this is it's first new state in 5 years, founder Larry Bell told CBN. Bell's expects "really big bump in 4th quarter" from NY launch, said Larry. Bell's is presently up about 15%, but expects to end yr up 17-18%.

But Bell's expansion into NY also matters because of its distribution choice. Its distribution rights highly coveted. So Bell's just gave a big vote of confidence to the L. Knife group of cos. L. Knife is one of the largest craft distribs with 18 distribution entities in 13 states (it is also an AB distrib in NY, Mass, and Wisc). Bell's went with L. Knife all across upstate NY. That includes 3 separate L. Knife entities: TJ Sheehan, Tri-Valley Beverage and Craft Guild of NY. And while Bell's is not yet announcing its expansion to NY metro area, founder Larry Bell has expressed his desire to eventually go there. And ya gotta imagine that L. Knife's Union Beer would have a pretty good shot. Bell's is presently in 19 states, DC and Puerto Rico.

This NY move by Bell's is also notable because in NY, 2 separate distrib alliances have formed within the last 18 months to combat L. Knife's strength in craft. That includes an MC network of distribs called the Upstate NY Beverage Alliance formed last yr. And this yr, another alliance comprised almost entirely of AB distribs formed called the Empire Craft Alliance. Since Bell's is one of the largest and most-highly regarded craft brewers that's not yet selling in NY state, you can bet that each of these 3 groups and more tried hard to get the Bell's brand. Yet L. Knife prevailed, so this is big win for them.

Meanwhile, L. Knife has also continued to score other notable new craft entrants, including in its Calif Brewers Guild in Southern Calif, which began last year. That fledgling operation recently landed rights to sell Ninkasi there, giving the Guild a potential lead brand in still-small biz that includes Hangar 24, Golden Road, and numerous others. It will be interesting to see how Ninkasi fares in uber-hoppy craft mecca San Diego.

Big regional differences showing up in IRI. Total craft biz up 15%. But craft up just 9% in highly developed West. Up 25.4% in Great Lakes. And up 21% in Southeast.

Speaking of Southeast, craft up solid double digits in 1 of region's biggest mkts, Atlanta. And lead local player SweetWater is dominant. Its $$ sales up 26% YTD in IRI supers and it captured 25.9% of craft $$. The top 4 craft players are about 70 share of craft $$, with 3 largest craft brewers coming in #2-4 behind SweetWater. Boston Beer is 17.8 share of local mkt, New Belgium is 13 share and Sierra Nevada is 11.4 share. Might Sierra and NBB improve in Atlanta once they have breweries in Asheville? Another local brewer, Athens-based Terrapin, is #5, up 27%. And regional player Abita is #6, up 61%.