How about some uplifting news to close out the week? A couple in Fresno, CA wants you to pay a "Craft Beer Forward" with new social media campaign. The aim: get people to sit down with someone new and talk over a beer. Far from a new idea, but "with so many controversial issues in the world today, the time has come to take action, take time to get to know a complete stranger over a craft beer," according to "quasi manifesto," the Fresno Bee wrote. Early stages of an app to help people share experiences and meet new folks is in development, but for now participants sharing pictures and videos via Facebook. Initially posed as a "challenge" hoping to connect folks that already share a passion for craft, not hard to see potential to push out beyond that and find some new fans as well as some common ground.
Bills that legalize on-site sales at small breweries in Georgia and Mississippi already passed thru one full chamber of respective state legislatures this week. Georgia Senate passed SB85, which would allow brewers to sell limited amounts of beer directly to visitors for on- and off-premise consumption. Miss House passed HB1322, which similarly allows limited on-site sales at small in-state brewers. While still in committee, that bill amended to allow small brewers (less than 60K bbls) to keep retail privileges even if acquired by a person or entity that is not a small brewer (i.e. AB). Meanwhile, in nearby Texas, bill intro'd to fix issue with retailers filling and selling Crowlers. Bill explicitly allows retailers to sell draft beer in "a single-use container that may not be resealed once opened." No action on bill yet, tho. Finally, not all rosy for small brewers up in Nebraska. A bill recently introduced there attempts to roll back some of retail privileges recently given to small brewers in the state. Law passed last yr allows brewers to open 5 satellite retail locations. They can sell other beer, wine and liquor too, so long as they get appropriate retail licenses. But new bill re-writes that part of code and bars brewers from opening any new off-site retail locations, while grandfathering in any that were open before Jan 1 of this yr. Small brewers in the state hope to fight off this bill, which makes a number of other adjustments to state alc bev laws too. But this bill clearly a sign of pushback against retail privileges afforded brewers (even as recently as last yr!), forcing them into defense mode.
Song you've heard before playing even louder these days: on-premise environment particularly difficult for largest craft suppliers. To that point, 4 of 12 largest brewers in Nielsen CGA on-premise data are "exclusively Craft producers," Nielsen wrote, and those 4 "actually underperforming versus the rest of the top 12" (their emphasis). Not clear which 4 those are and recall database of on-premise accounts still being built and surely doesn't include many core craft bars (nor taprooms, natch). But those 4 large craft brewers -6% for 52 wks thru Dec 3, 2016 on premise, while rest of top brewers collectively -4.8%. As a whole, craft up 1.2% in this dataset, so "it's clear that the growth in this subsegment is being driven by smaller brewers." Familiar tune, right?
Song you've heard before playing even louder these days: on-premise environment particularly difficult for largest craft suppliers. To that point, 4 of 12 largest brewers in Nielsen CGA on-premise data are "exclusively Craft producers," Nielsen wrote, and those 4 "actually underperforming versus the rest of the top 12" (their emphasis). Not clear which 4 those are and recall database of on-premise accounts still being built and surely doesn't include many core craft bars (nor taprooms, natch). But those 4 large craft brewers -6% for 52 wks thru Dec 3, 2016 on premise, while rest of top brewers collectively -4.8%. As a whole, craft up 1.2% in this dataset, so "it's clear that the growth in this subsegment is being driven by smaller brewers." Familiar tune, right?
Boston Beer’s longterm ceo Martin Roper will step down next yr; exec recruiting firm Korn Ferry searching for his replacement. “The Board has been discussing Martin’s retirement plans for over a year,” chairman Jim Koch said in statement. Martin will stay thru search “to assure a smooth transition. I remain fully engaged and committed.” This is unusually long lead time. What’s more, search already underway for a while, INSIGHTS hears. Martin’s retirement another sign of changing times in craft; 9 of top 20 craft brewers have changed ceos in last couple of yrs amidst far more challenging environment. (This article adapted from beer marketer’s INSIGHTS.)
“Our performance under Martin’s stewardship has been incredible,” said Jim, citing 8-fold gain over last 22 yrs, since Martin joined (he was prexy for 17 yrs). Most impressive part of run: 5 yrs between 2010-2015 when Boston Beer more than doubled revs, and almost doubled volume and profits. Rode hot hand with Angry Orchard, Rebel, Twisted Tea and more. Revs jumped about $500 mil, from $464 mil to $960 mil, oper income grew from $81 mil to $156 mil. Volume nearly doubled from 2.3 mil bbls to 4.3 mil bbls. But game has changed. Boston Beer volume, revs and profits all down for 9 mos 2016 (Boston has only reported results thru Sep). Shipments down 7.7%, revs down 7%, oper inc down 20%. Q4 not great either.
Boston has continued to struggle in scan data in recent mos. Volume down 7.6% for 4 weeks thru Jan 22 in IRI multi-outlet + convenience, and 4.7% for 12 weeks (IRI does not include subsidiary Alchemy and Science in Boston total; that’s way down in recent mos). Boston still getting good growth with Twisted Tea brands, but suffering severe short term drops (4-wk) in some craft brands, Seasonals (down 50%) and Rebel (-31%).
Boston Beer’s stock also went on magnificent run, multiplying over 15x between 2009-2015 from $20 in early 2009 to $314 at beginning of 2015. Stock mkt capitalization peaked over $4 bil. But since then value of stock cut in half to $156 and mkt cap under $2 bil. Meanwhile, Martin realized $60+ mil in value of options in last 2-3 yrs (selling and buying); still has plenty of stock.
Then too, Boston overhauled sr mgt team in last 18 mos. Six of its top 10 exec officers are new since Aug 2015. That includes new CMO, CFO, Legal, HR and Supply Chain veeps and chief accounting officer. New ceo will make 7, leaving just Jim, chief sales officer John Geist and brewing veep Dave Grinnell as vets. All in period of its worst trends ever. So now chairman/founder Jim Koch looking to reinvigorate Boston with mostly new top mgt amidst radically shifting and far more difficult craft landscape. “Recent management changes and continued challenges the business is facing, could raise some questions about whether bigger changes may be afoot at SAM,” Goldman Sachs’ Judy Hong suggested in report today.
The pace of change within craft continues to accelerate, even as the segment's overall growth slowed in 2016. In more challenging times, comprehensive and accurate info can deepen understanding and provide a competitive edge. Order the 2017 Craft Brew Guide to keep track of this ever-changing industry. This year's edition, available in April, provides perspective with key shipments and retail data, analysis of select markets, profiles of top players and insight into important issues like M&A and legal/legislative changes. The 2017 Craft Brew Guide will also include expanded coverage of hot topics like top style IPA, growing taproom sales, shifts in US hop acreage and production and more. Order this year's digital (PDF) edition for $225 or both the easy-reference soft-cover book and PDF for $275.
How about some uplifting news to close out the week? A couple in Fresno, CA wants you to pay a "Craft Beer Forward" with new social media campaign. The aim: get people to sit down with someone new and talk over a beer. Far from a new idea, but "with so many controversial issues in the world today, the time has come to take action, take time to get to know a complete stranger over a craft beer," according to "quasi manifesto," the Fresno Bee wrote. Early stages of an app to help people share experiences and meet new folks is in development, but for now participants sharing pictures and videos via Facebook. Initially posed as a "challenge" hoping to connect folks that already share a passion for craft, not hard to see potential to push out beyond that and find some new fans as well as some common ground.
Bills that legalize on-site sales at small breweries in Georgia and Mississippi already passed thru one full chamber of respective state legislatures this week. Georgia Senate passed SB85, which would allow brewers to sell limited amounts of beer directly to visitors for on- and off-premise consumption. Miss House passed HB1322, which similarly allows limited on-site sales at small in-state brewers. While still in committee, that bill amended to allow small brewers (less than 60K bbls) to keep retail privileges even if acquired by a person or entity that is not a small brewer (i.e. AB). Meanwhile, in nearby Texas, bill intro'd to fix issue with retailers filling and selling Crowlers. Bill explicitly allows retailers to sell draft beer in "a single-use container that may not be resealed once opened." No action on bill yet, tho. Finally, not all rosy for small brewers up in Nebraska. A bill recently introduced there attempts to roll back some of retail privileges recently given to small brewers in the state. Law passed last yr allows brewers to open 5 satellite retail locations. They can sell other beer, wine and liquor too, so long as they get appropriate retail licenses. But new bill re-writes that part of code and bars brewers from opening any new off-site retail locations, while grandfathering in any that were open before Jan 1 of this yr. Small brewers in the state hope to fight off this bill, which makes a number of other adjustments to state alc bev laws too. But this bill clearly a sign of pushback against retail privileges afforded brewers (even as recently as last yr!), forcing them into defense mode.
Song you've heard before playing even louder these days: on-premise environment particularly difficult for largest craft suppliers. To that point, 4 of 12 largest brewers in Nielsen CGA on-premise data are "exclusively Craft producers," Nielsen wrote, and those 4 "actually underperforming versus the rest of the top 12" (their emphasis). Not clear which 4 those are and recall database of on-premise accounts still being built and surely doesn't include many core craft bars (nor taprooms, natch). But those 4 large craft brewers -6% for 52 wks thru Dec 3, 2016 on premise, while rest of top brewers collectively -4.8%. As a whole, craft up 1.2% in this dataset, so "it's clear that the growth in this subsegment is being driven by smaller brewers." Familiar tune, right?
The "rising tide lifts all boats period," for craft segment from 2010-2014 is gone and craft's "now entered a period" where "no longer" can everyone "succeed at the same time," said Brewers Assn chief economist Bart Watson during yesterday's Sovos/ShipCompliant webinar. "There's still growth," he insisted, but it's "in pockets." In this next phase, craft brewers "are going to need to do very different things" to be able to compete and will have to "balance their current model with innovation and differentiation," whether it's by biz model, beer style, geography, or whatever else.
"Some of this is going to be geographic," he said. Indeed, craft volume sales declined 2% in 2016 IRI (using "broadest available channel" data) in top-10 share states as a group, he showed. Yet craft grew 7% in "middle 19" states and +5% in "bottom 10" states. "It's hard to grow in Colorado" when craft is around 30% of the mkt. And this further suggests "growth is going to come from new places" and "brewers are going to have to shift their strategies accordingly." Also keep in mind, those top-10 states with highest craft share only make up 13% of total beer volume tracked in IRI vs about 30% of total craft volume. Middle 19 states make up about 50% of both beer and craft beer volume, but bottom-10 states just 20% of craft volume vs 37% of total beer volume. Many states that're "less concentrated don't have the variety yet."
Meanwhile, "innovation and experimentation" continue to drive the needle and studies consistently show that ROI of innovation is "higher in tougher industries," said Bart. "That's where you break out" and "find those pockets of growth." But "when innovation is your norm, what kind of growth is still there?" one audience member asked during Q&A. That's "proving" to be "challenging" Bart acknowledged, and its "hard to build those long term sustainable brands" amidst constant "variety seekers." But "we are seeing brewers who are thinking of innovative ways to appeal" to consumers including "built-in" rotation within a brand, i.e. brands that offer different versions of essentially the same beer with different ingredients, or IPA variety series. And perhaps brand building within craft segment ends up sourcing consumers that're "different" than "core craft consumers" that're constantly seeking variety.
All in, there are "still big untapped opportunities," in Bart's eyes. Continued growth of "non-traditional drinking occasions" such as own-premise and festivals that allow "much more experiential" way to consume (see last issue), provides a "huge volume opportunity for breweries" to bring in and retain new customers, said Bart. It "isn't just your core craft drinkers." They can help bring in "more general community" of beer drinkers. Some of ways to stay competitive, in Bart's view: continued IPA growth and variation within IPA; focusing on other growth styles (some of which happen to over-index with women) such as sessions, farmhouse, blond/golden ale, sours, Fruit/Veggie, Herb/Spice and shandy/radler; and figuring out where brands can find growth geographically.
