A strong start to 2017 and cadre of new beers and brands offset New Belgium’s difficulties with its flagship and in crowded core markets. But not enough to generate strong overall volume growth. NBB shipments “essentially flat” last yr, new CEO Steve Fechheimer shared with Craft Brew News, with depletions “up just over 1%.” So co will end up around 960K bbls (958K in 2016). That’s thru a number of moving pieces, including trio of important launches: 1) new take on its hop-forward brands under Voodoo Ranger line, which debuted in late 2016; 2) new sessionable Dayblazer targeting more mainstream beer occasions; and 3) NBB’s first try at extending established flagship brand Fat Tire with new Belgian White. At same time, co continued filling out national footprint in first full yr shipping from new Asheville, NC brewery (opened mid-2016) as well as Fort Collins, which co also expanded when NC opening delayed.

Salesforce “Realignment” Not Cost Savings  Looking at these moving pieces, Steve asked “what do we need” from 225-strong salesforce across US to provide the “capabilities to really be successful,” he explained. NBB working towards goal of “focus” in 2018, as Steve told us in Sep (vol 8, #83). Existing sales organization was “not exactly what we need from a structural standpoint,” Steve said, wasn’t aligned with where growth already coming from. So NBB “moving from a 4-division structure to a 3-division structure” in sales dept, Steve shared.

In “re-shifting of our regions,” co laid off about 6 sales folks, found new roles for 15, including 8 new chain execution mgrs, helping coordinate work between internal natl accts and regional folks with distrib teams. Indeed, co bringing “more focus on national accounts,” Steve said, including pair of on-premise natl accts roles. Co still has 15 open roles as part of new alignment. NBB “didn’t make any structural changes” outside sales, he said. Plus, 2018 sales personnel budget “the exact same” as 2017. “None of this was designed as a cost savings mechanism,” he pointed out. Instead: a “realignment” after assessing its needs.

Portfolio Shift: Voodoo “On Fire,” Making Up for Fat Tire Declines and Nearing 1/3 of Biz in Scans  Reimagining of New Belgium’s hop-forward portfolio under Voodoo Ranger name, along with recipe reformulations, paid off last yr. Those beers “continue to be on fire,” Steve told us. And new yr-round entry in that line, Juicy Haze IPA, will be “huge focus for us going forward.” Of course, “flagships continue to struggle,” generally, Steve acknowledged. And its original Fat Tire Belgian Ale no exception. However, NBB still promoting new Fat Tire Belgian White, “bringing a little bit of energy and excitement” to the base brand. It’ll also work on sampling more drinkers on Dayblazer, still a “huge opportunity for us,” tho perhaps not as strong a focus as building Voodoo brands and re-energizing Fat Tire.

Scan data reminds just how important new Voodoo Ranger brands have become for New Belgium. Core IPA up over 30% by $$ for 52 wks thru Dec 3, 2017 in IRI multi-outlet + convenience data. Imperial IPA up over 80%. Both up even faster for 12 wks, +48% and +119%, respectively. NBB $$ +4% during same period and those 2 lead Voodoo Ranger brands alone were 29% of co’s total biz in scans. That’s up from 17.6% during the same period in 2016. Add in 3rd yr-round brand, 8-Hop Pale Ale, and Voodoo portfolio even closer to a third of the biz. Meanwhile, Fat Tire $$ off 10% for 52 wks thru Dec 3, -14% for 12 wks. It slipped below 36% of the co’s biz during last qtr of the yr, down from over 43% in 2016. Rest of the co’s portfolio in scans, including Dayblazer, 2016 big-bet Citradelic, seasonal line and wide range of Belgian classics and specialty offerings, also about a third of the co’s biz, up slightly for the yr, but collectively down about 6% for 12 wks. These shifts, led by fairly major portfolio reinvention, clearly raises the stakes on cycling big launch numbers for NBB.

Past 200K CEs in Fort Collins But Colo Soft; NC +17%  Geographically, New Belgium “slightly down” in home state Colorado in 2017, Steve told us. So it’s focusing efforts to “win Colorado” this yr, as that’s “extremely important” these days. Its upping advertising and putting more resources against competing in Denver and Colorado Springs, population centers of the state, as well as key tourist markets. That’ll include “adding a few bodies,” Steve told us, and co has a couple more “key relationships” to announce beyond project with Colorado State University in hometown and in-process location at The Source in Denver. Meanwhile, work with CSU and launch of new Old Aggie brand helped NBB push past 200K-case milestone just in Fort Collins, where co still self distributes. Up double-digits there. Across the country, NBB doing “amazing in North Carolina,” +17% in 2017, as its distribs in the state being “great partners for us.” It’s already crossing 175K visitors to Asheville brewery per yr, which co expects will “continue to accelerate.”

Lagunitas made another landmark leap in 2017, passing New Belgium to become 3rd largest craft brewer, CBN’s early estimates suggest. Even as its trend slowed in latter half vs depletions +11% thru 1st half (see vol 8, #80), Lagunitas shipments grew mid-to-high-single-digits to around 980K bbls in 2017, we estimate. Comparatively, New Belgium shipments ended up flattish at around 960K bbls, depletions up 1% (see below). Lagunitas has come a long, long way in a short, short time to reach this mark. It shipped just 43K bbls in 2007 and proceeded to grow over 900K bbls in 10 yrs (nearly 750K bbls in last 5 yrs). But growth no longer a given at this size these days, and will be interesting to see if Lagunitas can keep it up off of nearly 1-mil-bbl base goin’ forward. Indeed, both Lagunitas and New Belgium noticeably slowed in 2d half of 2017.

Meanwhile, for the 2nd year in a row, 3 of top-5 craft brewers’ shipments declined. Boston Beer’s beer shipments (Sam Adams and A&S beer) likely dropped low-double-digits, now hovering right around 2 mil bbls, we estimate. Sierra Nevada declined about 7% again in 2017, slipping under 1.1 mil bbls. And Craft Brew Alliance gave guidance of shipments decline between 2-4% from 749K bbls in 2016. So CBA shipments likely to end up anywhere between 720K and 735K bbls for full yr. This is indeed a new age for craft beer. In 2012, top-5 craft brewers (slightly different group) held nearly 36 share of total craft shipments. Last yr’s top-5 under a quarter of segment volume. (Editor’s note: we don’t include Blue Moon, Shock Top, Leinenkugel’s or Yuengling in our craft numbers.)

Now that he’s officially moved on from MillerCoors, original brewmaster and creator of Blue Moon, Keith Villa “plans to open at least two new breweries,” reported Forbes.  Indeed, Keith joins lengthy list of brewmasters who’ve moved on from their original cos to open breweries of their own.  Keith’s breweries will focus on “ultra-high end” beers “brewed with exploratory, cutting edge ingredients,” he told Forbes.

Former First Bev director JB Shireman just joined principal competitor in craft M&A space Arlington Capital Advisors.  Recall, JB left First Bev in Dec after 6.5 yrs and many deals there.  JB is “a great addition to the Arlington Team,” said managing partner Vann Russell. “He is extremely well-known and respected within the craft community.”  Arlington Capital release sez it’s “one of the top investment banks in the craft beer industry,” and that it has “advised on $3.5 billion in aggregate transaction volume in the sector, more than any other advisory firm.”  Deals in 2017 included BrewDog, Short’s. According to Arlington “with a valuation of $1.25 billion, BrewDog is the largest valued craft transaction ever.”  (TSG bought 22% for $240 mil.)  Arlington also “worked with” Stone, Dogfish Head, Cigar City, SweetWater, Victory and Abita, it sez.  At First Bev, JB “led transactions for many high-profile brands including Devils Backbone, 10 Barrel, Four Peaks, Breckenridge, Saint Archer, Hop Valley, Revolver, Terrapin, Boulevard, Firestone Walker, 21A/Funkwerks and Brooklyn Brewery.” 

Craft deal landscape has changed dramatically after so many deals in last few yrs.  Right now, “supply exceeds demand,” acknowledged Arlington veep Wade Honeycutt to Craft Brew News.  In new landscape, Arlington “careful” to “work with” craft brewers who will “continue to command premium” valuations like those seen in sector in recent yrs.  Many of those will be “next up and coming” players that are currently 20-50,000 bbls, said Wade.  JB brings “immediate credibility with a lot of operators,” said Wade, and has great “relationships.”  There are a “lot of opportunities” here in US but Arlington must be “patient” about which are “right ones.” While not taking focus off US, Arlington also doing more intl deals, including one that’s close to fruition in Asia and another one coming in Europe.  Meanwhile, Arlington also sees “increasing overlap in consumer sectors such as food, restaurants, beer, spirits, consumer packaged goods and other emerging categories.”  Could one of those emerging categories even eventually be cannabis, which hasn’t yet seen a ton of deal activity?  Stay tuned.  

When a restaurant location became available in a corner of central Phoenix that SanTan Brewing founder Anthony Canecchia had his eye on for a while, he jumped on the oppy. The Chandler-based co was most of the way thru a pretty solid 2017. SanTan hasn’t finalized Dec numbers yet, but expects full-yr shipments to end up between 34-35K bbls, Anthony told Craft Brew News. That’s up from about 30K bbls in 2016, according to Brewers Assn stats. Canning since 2009, shift within craft to aluminum packages has certainly helped SanTan’s biz, he said. More recently, it launched 24oz cans of core Moon Juice IPA and now “can’t can it quick enough,” using original small canning system re-engineered to handle larger package.

Home state Arizona still represents upwards of 80% of the co’s biz. Boosting resources available to a relatively new sales rep in nearby Tucson was reciprocated by the co’s distrib, Finley and “something clicked,” Anthony said. So 2nd largest city in AZ “was the real big growth market for us in 2017.” SanTan’s wholesalers across its home state “have really stepped up their game,” he added. Sales in neighboring New Mexico were flat, but co’s working on plan to get back to growth there. Only other markets SanTan sells to are in SoCal, where it’s “still doing well,” according to Anthony. But “almost all of our focus” is on Arizona.

For years, Anthony and co have been thinking about opening a small brewpub, particularly in the sprawling state capital, home to about 1.6 mil people on its own but closer to 3 mil including close-in cities of Chandler, Mesa, Scottsdale and Glendale. But SanTan couldn’t find the right spot, preferring neighboring bizzes to also be owner-operated. Then multi-state Z’Tejas Mexican restaurant chain filed for a 2nd bankruptcy in late Oct, announcing closure of a handful of its locations, including one in central Phoenix. The “densely populated residential area” provides “great views” of the mountains east and north, Anthony described, and most of the surrounding bizzes were locally-owned, exactly what he was looking for. So he had a letter of intent out within a week, “signed on the line” by mid-Nov, nailed out final details of a lease with the local landlord in early Dec and expects to pick an architect for renovations shortly. The co will do some minor remodelling to align it with its family-, bike- and dog-friendly original location. Anthony plans to put in small pub brewing system to provide some exclusive beers for new spot, he told us. It’ll bring the SanTan experience about 30 miles closer to the Northeast corner of Phoenix, ideally deepening connections in key home market.

Sacred Stave Straight Whiskey Coming in 2018, Yrs After SanTan Started Distilling  Also coming soon for SanTan, long-awaited launch of its spirits biz, Sacred Stave. Anthony and co set up distilling a few yrs back, allowed under its AZ license. But looking to focus on the kinds of spirits that SanTan folks like to drink, it decided to focus on single malt whiskeys, still a rarity in the states. It’s got a 50-bbl brewhouse, so why not take advantage of it, Anthony figured. Now, after grabbing a little over 100 used wine barrels from all over the state, its first 2-yr straight whiskeys will debut this yr, joining a growing number of small brewers also making and marketing small-batch spirits.

AB craft portfolio (including Shock Top) collectively slowed to low-single-digit gain in latest scans, and that could signal need to “ramp up its craft strategy,” including acquisition of Craft Brew Alliance (BREW) “before the buy options expire,” speculated Susquehanna Intl Group’s Pablo Zuanic in recent report.

Goose Volume Down 10% for 8 Wks; Elysian, Karbach, Golden Road Driving Growth; 2+ Mil Bbls in 2017 AB craft volume grew just 2% in IRI multi-outlet + convenience data for latest 8 wks thru Dec 17, as performance “varied widely” among craft partners. Shock Top brand family still stiflin’ growth, but its trend slightly improved lately; down 13% for 8 wks, representing 34% of AB’s IRI craft volume. So what’s the main culprit for AB craft slowdown? Goose Island. Goose volume declined 10% for 8 wks, representing 23% of total AB craft biz. Recall, Goose Island lowered pricing drastically in recent scans, as $$ sales plummeted while volume shored up for 4 wks thru Dec 3 (see Vol 8, #105). So 8-wk Goose volume decline suggests December’s been an exceptionally tuff mo. Then too, 10 Barrel suddenly dipped 3% for 8 wks. And newest craft brand, Wicked Weed, saw volume dip 1% for 8 wks, albeit off of tiny base. Pablo gives disclaimer that IRI data not as comprehensive in “well controlled states” like VA, NC and OR, and IRI in general “is not the perfect tool to measure craft performance.” But Wicked Weed decline in scans is still noteworthy, since it had nearly all incremental growth in 2016 IRI data.  And 10 Barrel volume clearly slowin’ lately in scans compared to volume up nearly 15% YTD thru Dec 3.

Meanwhile, Elysian (+70%), Karbach (+24%) and Golden Road (+86%) are driving growth for AB craft portfolio in latest 8 wks. Elysian (12%) and Karbach (8%) represent 20% of total AB craft volume in scans during period.  Devils Backbone (+11%), Four Peaks (+10%), Blue Point (+9%), and Breckenridge (+27%) all growin’ solidly as well. But gotta note, all but Devils Backbone noticeably slowed vs YTD trends. All in, AB craft (including Shock Top) sold 2.1-2.2 mil bbls in 2017, Pablo estimates. Goose Island and Shock Top collectively make up ~60% of that volume (with about 1/3 on premise). Recall, CBN estimated AB craft acquisitions collectively grew to ~1.2 mil bbls in 2016, while Shock Top declined to 600K bbls. Shock Top declined double-digits again in 2017, so craft acquisitions collectively would have had to grow near 400K bbls at least (including addition of Wicked Weed) to reach Pablo’s estimate.

Cannibalization “Conflict” Between CBA and AB Craft Portfolio? Production Oppys and More Tho Pablo and co “assume” some of AB craft’s slowdown is “related to cannibalization,” they “do not see a conflict with the BREW portfolio,” in scenario where AB acquires CBA. But with Kona struggling in CA last yr while Golden Road grows, Elysian growin’ in WA while Redhook ain’t, and recent 10 Barrel declines in natl scans, gotta wonder if AB and CBA brands may already be experiencing some degree of cannibalization, let alone how brand interactions may change if CBA is entirely owned by AB.

Then too, there would be “production coordination opportunities” as well if AB were to buy CBA, natch. Recall, AB produced ~300K bbls of CBA brands in 2017 out of its Ft Collins brewery. Gotta note, AB also plans to invest $11 mil in its Merrimack, NH facility for an additional 400K bbls of craft/specialty brew production (see CBN vol 8, #82). If CBA had access to that capacity, it might no longer need its 100K bbls/yr brewery in Portsmouth, NH. Merrimack brewery offers Blue Point on tap, but currently doesn’t produce any AB craft brands, according to Pablo. Lastly, Pablo presumes that CBA would “first take controlling equity stakes” in each of its partner brands (Appalachian Mtn, Cisco, Wynwood) before AB would make an offer.

Continued Ballast Point declines are having little to no effect on total Constellation Beer Brands Division results. Indeed, Constellation Beer posted another strong gain this qtr thru Nov 2017 and shipments grew 8.4% to 211.6 mil cases, depletions up 9.5% for 9 mos thru Nov. No mention of Ballast Point or any craft-related action during Constellation’s fiscal Q3 report and conference call held earlier today. Yet Ballast Point declines persist in scans and continue to steepen following launch of Fathom IPA and “Discovery Series” offerings at $9.99-10.99 per 6pk in Oct (see Aug 29 issue). Ballast $$ sales dipped 15% for 4 wks thru Dec 16, down 13% for 12 wks and -5% for 52 wks, according to Nielsen data shared by Morgan Stanley’s Dara Mohsenian. Avg prices down 3% for 4 wks and 2% for 12 wks. Recall, total Ballast brand family began to see short-term declines in spring 2017 and hasn’t been able to return to growth since. In the meantime, Constellation management now “hopeful just to get in a position to turn it around” back to growth thru “nuts and bolts kind of brand building,” CEO Rob Sands shared at Beer Insights Seminar in Nov (see Nov 7, 2017 issue).

After adding 7 new mkts in 2017, Dogfish Head is pickin’ up right where it left off in 2018, expanding into Louisiana in early 2018 with Crescent Crown, Eagle Dist, Choice Brands and Venture Dist, co announced. Starting early Jan, Dogfish will be available in southern LA, including New Orleans, Baton Rouge and Lafayette metro areas. And in Feb, brands will be available in northern half of the state, per release.  Recall, new mkts accounted for 30% of Dogfish Head’s growth in 2017, co shared during distribs meeting in Sep. Yet each of its core mkts still grew double-digits as well, as its top-10 distribs collectively grew 19% (see Vol 8, #82). Louisiana marks Dogfish’s 38th state plus DC and co plans to “expand into additional states in 2018” as well.

This Friday, Jan 5 will be longtime MillerCoors brewer Keith Villa’s last day with the co. He created the recipe for Blue Moon Belgian White in the co’s SandLot brewpub at Coors Field back in 1995 and spent “over 20 years as the head brewmaster and global brand ambassador” for the brand, MC CEO Gavin Hattersley and CMO David Kroll wrote in note to distribs this wk. Retirement from MC leaves Keith time for “family, traveling and exploring new creative ventures,” he said. Confident that “the future of Blue Moon shines brightly,” Keith’s “witnessed the growth of Blue Moon from a local beer that we developed at the SandLot to a brand that is sold around the world,” a level of “success” that “surpassed my wildest dreams.”

What started as a single beer in fairly traditional Belgian wheat beer style, evolved into a family of multiple brands under Blue Moon Brewing Co umbrella, including seasonals, variety packs and limited releases. Blue Moon topped a couple hundred thousand bbls back in 2005, already about 10 yrs after its creation. By 2008, it passed 1 mil bbls, by our estimates, and topped 2 mil in 2013 across all brands. Total brand family finished 2016 at about 2.125 mil bbls, we estimate, -4.5%, 100K bbls from the yr prior.  Very few brands reach the kind of scale achieved by Blue Moon: it ranked #19 on our list of top beer brands in the US by volume for 2016. Last yr, Blue Moon franchise volume basically flat in off-premise retail, Nielsen all outlet data yr-to-date thru Dec 23 shows. That’s at least in part due to paring down of the portfolio as MC refocused efforts on flagship Belgian White. That paid off as the original Blue Moon finished the year +6% off premise, Nielsen shows. After a particularly strong summer, the brand did slow at the end of the year, down low-singles for the last couple months of 2017. After playing key roles in quite a bit of Blue Moon marketing over the years, Keith leaves MC not long after this refocus on the beer he created, alongside a branding/packaging refresh and the opening of a standalone Blue Moon brewpub in Denver’s RiNo neighborhood.

Boundaries of big, growing and morphing IPA style about as difficult to see these days as your hand on the other side of a pint of its hottest sub-style. Hazy IPAs, once mostly limited to taproom sales or small distribution circles around the relatively small Northeast breweries that made them, are going bigtime. Three of largest craft brand families launch their own versions all in early 2018. New Belgium announced newest yr-round IPA in its hop-forward Voodoo Ranger series, called Juicy Haze IPA, this wk. It’s rollin’ nationally in 12oz bottles and draft, with 16oz 4-pk cans comin’ in March. It’s 4th yr-round brand under Voodoo umbrella that also see handful of limited releases, including 3 more planned in 2018, NBB sez. Juicy Haze clocks in at 7.5% ABV, 42 IBUs. That’s a bit stronger than new 6.8% Sam Adams New England IPA, which comes on 16oz cans labeled as “Hazy & Juicy,” as well as Sierra Nevada’s 6.7% Hazy Little Thing IPA. Recall, NBB’s rebrand and reformulation under Voodoo Ranger provided strong growth for the co last yr. We’ll see if it can keep that up and if these new launches can juice all these cos’ trends in 2018 (sorry, couldn’t help ourselves).

But what are all these hazy launches doing to craft’s biggest style? A shift away from bitterness and toward hop flavor has been happening for a few yrs now. These new-fangled hazy takes are in some ways the ultimate expressions of that within what’s commonly seen as the most hop-focused style, and discussion over them reached fever pitch as 2017 ended. Love ’em, hate ’em or somewhere between, they’re here and makin’ waves. But beyond some brewers’ dismissal, we’ve noticed something interesting about them. Some drinkers who spent years turned off by the bitterness they associated with those 3 letters seem to have no problem getting into the juicy, tropical fruit flavors brought to the table by these beers. That could turn into another new wave of growth for craft’s lead style, already a third or more of craft volume and still growing. On the flipside, it muddies the meaning of those 3 letters (something Chicago Tribune columnist Josh Noel reflected on at tail end of last yr). IPA has included lots of substyles for a while now, but by further broadening the sensory identifiers associated with the now ubiquitous acronym, it could become more difficult for longtime fans of the style to find the kinds of beers they prefer. That’s even before considering the prickly issues of drawing lines around various substyles for judging competitions or sourcing the very in-demand, often proprietary varieties of hops most commonly used to brew these beers.