BMI Archives Entry
Not a Very Merry Christmas in Scans: Craft Volume Growth Dips Below +3% YTD; Misalignment
Here's how trends played out through back half of year under that overall slump. Recall that the 6 largest craft brand families, according to Nielsen (Blue Moon, Sam Adams, Sierra Nevada, New Belgium, Shock Top, Leinenkugel's Shandy), collectively declined by an average of 300-400K CEs every 4 wks thru Aug and Sep. During that time, growth of all other craft brands didn't quite make up for those declines. That pushed the segment's YTD trend down to +3% thru Oct 1. By Nov, those large craft brand families moderated declines a touch, while growth of all other craft accelerated: craft volume grew 3.3% thru 11/19. But as the yr wound down, trends went back the other direction. The top-6 collectively declined by nearly 400K CEs again for 4 wks thru 12/24; all others gained less than 200K CEs for 4 wks. Remaining Domestic Brewers (all segments; smaller than Boston, Mike's, NAB) now up near 7% by volume YTD, -2% for 4 wks.
Importantly, as for just about every other major holiday in 2016, Christmas didn't line up perfectly with these 4-wk reports from Nielsen. That is, report compares this 4-wk period thru Christmas Eve with a period including the holiday last yr. So short-term trends across the industry are particularly soft - total beer biz volume -3.5% for 4 wks, for example - and that softness perhaps overstated. Still, craft volume likely to finish 2016 up not more than 3% in Nielsen scans.
Craft "Squeeze" Already Happening in UK?
Several mid-sized brewers are altering their bizzes and portfolios to stay competitive in ways that should read quite familiar. Thwaites Brewing, founded in 1807, licensed out a couple of its "popular" brands to a top pub co, Marston's, back in 2015. Now it "only brews niche ales for its pub, hotel and spa estate." Shepherd Neame also "branched out into hotels and food, while retaining brewing volume by supplying unbranded bottles to discount supermarkets." Camerons (part-owned by Heineken) sells "majority of its near-one million hectoliters a year output" to Heineken, Carlsberg and Diageo, and has 75 pubs that are "core to the business." Moorhouse's, founded in 1865, invested millions of $$ into new facility and added new beers such as White Witch, a low ABV Blonde Ale with citrus notes. And now it added another blonde ale, Stray Dog, partnering up with the band, New Order, "following the success that another brewer, Robinson, had with Trooper beer and Iron Maiden." Camerons also launched Motorhead Road Crew beer "in collaboration with members of the band." Indeed, "there are advantages to being our size," Moorhouse's Ian acknowledged. "A microbrewer could not do that" and "I think there are some big opportunities, especially in exports." Ringin' any bells?
Texas Crowler Conflict Ain't Over But Underscores Fine Line Between Formal, Informal Rulemakings
Briefly, appeals ct judge in Tex ruled that when TABC added to existing FAQ on its website a Q&A explaining that only manufacturing licensees may fill crowlers, the agency did not simply re-state law but interpreted it in a way that's "generally applicable." That means that the posting constitutes a "rule," not simply some informal guidance by the agency. That distinction is important in this case because TABC argued that Cuvee had no right to file suit over informal guidance and should go through internal administrative process instead. But appeals ct disagreed. So Cuvee "can have its day in court," as Marc summarized.
The distinction is also important outside this case, Marc argued. The use of "similar informal policy documents" by many state agencies, as well as TTB nationally, "has been rising for decades," he observed. Recall similarly informal "bulletin" issued by Georgia Dept of Revenue last fall, which had small brewers calling foul over new restrictions and led directly to further delays in brewers being able to sell facility tours (and give away beer). These FAQs and the like may simplify agencies' work (as many have also dealt with dwindling resources), Marc noted. But if they replace more formal "notice-and-comment rulemaking," which require time to weigh comments by stakeholders, these docs could leave agencies open to legal challenges, as in this Tex case. Or as Marc concluded, this "opinion stands as a useful reminder to regulators that this approach has limits."
Devils Backbone Hits 75K Bbls; Several New States & Expansion Projects Coming, Including Distillery
Another year-end recap for one of AB's acquisitions hit the wires recently. Devils Backbone "produced about 75,000 barrels" in 2016 and next year it expects "somewhere around 95,000 barrels," reported Lynchburg News & Advance after talking to founder Steve Crandall. So DBB grew about 21% in 2016 vs last yr. Revenue growth rate reportedly a bit behind, up 18-20%, according to paper. Keep in mind, before acquisition was announced in Apr, Steve and co told CBN it could reach 95K bbls in 2016 (see Mar 1 issue), so growth trajectory slowed quite a bit since. Deal didn't close until Sep, which perhaps stalled DBB's expansion plans. But now it's all systems go. AB's "funding our dream," as Steve put it, including cap expansions at outpost facility to 150K bbls ("deal basically included $25 million for us to build out the dream," he said), a $3 mil distillery, souring/barrel-aging capabilities, new mkts and new jobs (among other things). Gotta note, this will be AB's first fully-owned distillery that we know of.
As you'd prolly expect, Devils Backbone will enter several new mkts in 2017 including SC, GA, FL, KY, OH, NJ, NY and more of PA and TN, noted paper. In 2d half of 2015, DBB entered NC, WV and eastern TN, and co entered DE and part of PA this Jul. No question, Steve has natl aspirations for the brand, he told paper. Meanwhile, on top of expansions listed above, Devils Backbone hopes to break ground this upcoming spring on "a year-round camping and RV area with cottages," sez paper. And the Lexington facility construction project will add a 50K sq-ft packaging and shipping/receiving facility, upgraded equipment, additional barrel-aging system and tripling the size of current taproom (to ~150 person cap). Currently DBB has 180 employees, up from 130 a year ago, and "most of these hires were made before the acquisition," sez Steve.
More Tuff Beer Trends in Early Dec Include Steeper Sam Adams Decline, Slowing Ballast Point
Deep dive into IRI off-premise data revealed some interesting findings about craft brands in 2016 and possibilities for the future development of styles within craft to Brewers Assn economist Bart Watson, shared in recent pair of members-only posts. While absolute volume growth of existing craft brands tapered off slightly in 2016 scan data, new brands did not make nearly as much of an impact, as far as BA-defined craft goes, Bart found. At same time, he alerted members to rise of non-BA IPAs, suggesting that as larger brewers dig in on that style, smaller independent ones may "need to get better and grow in the big brewer spaces," including sessionable, easy-drinking, lighter styles like golden ales, pilsners and more.
In both 2014 and 2015, new BA-defined craft brands added more incremental cases to the segment than existing brands, Bart showed in first post. But that changed in 2016, when a smaller number of new brands (as well as few big single-brand bets from the largest BA craft brewers, we'd note) only added about 2 mil CEs to the segment, compared to 2.7 mil CEs from existing brands. That's just slightly smaller than near 3-mil-CE gain from existing brands in 2015. However, with the number of existing brands headed ever upwards, more of them are declining these days than in the past. In fact, the ratio of growing brands to declining ones flipped from 60-40 in 2014 to 45-55 this yr, "a bit worrisome," in Bart's view. Further analysis showed that "there are still more big successes than big failures," he noted, "but 2016 marked the year of more little failures than little successes." For example, about a thousand BA craft brands gained between 100 and 1000 CEs in IRI off-premise channels during each of the last 3 yrs, peaking at 1100 brands in 2015. But the number of brands declining by that much doubled from 650 BA craft brands in 2014 to about 1300 in 2016.
Recall, IPA represents all of craft volume growth and more this yr. That wasn't one of Bart's key points in second post, but it shows up in interesting way when breaking up craft by IPA and everything else and by BA craft and non-BA craft. First, IPA growth of near 5.2 mil CEs in IRI scans splits pretty evenly between BA and non-BA craft. Indie craft brewers represented about 55% of IPA growth. But while that same group of small brewers collectively added almost 1.1 mil CEs of other styles this yr, non-BA craft brands in non-IPA styles declined by about 1.6 mil CEs. Looking further at the BA-defined craft brands, styles like golden/blonde ales, pilsners and other pale lagers continued to show off stronger-than-average, widespread growth, even when correcting for big, fast-growing brands. That suggests there's still room to run in these (and similar) styles for small, independent brewers, in his view.
Slew of New Breweries: Jester King Invests in Seattle Startup; Altruistic Angles; Lots More
Jester King Partners with Farmhouse-Focused Seattle Project Folks behind in-planning Seattle brewery Fair Isle Brewing have been "longtime friends" with folks at famed Texas-based farmhouse brewery Jester King and now that relationship will be much more formal. Jester King has taken an equity stake in Fair Isle, the co wrote on its blog last week. Fair Isle, which still hasn't ID'd a final Seattle location and doesn't plan to open til early 2018, hopes to focus on mixed culture fermentations, a particular specialty of Jester King. So the established company will assist with "guidance, advice, and creative input," its founders wrote.
Will Doing Good Result in Doing Well? Sustainability-Focused in Sonoma; Jobs Program in Philly Son of top wine-making family and current manager of Jackson Family Wines plans to open "the best industrial brewery in terms of water conservation in the world," Christopher Jackson told San Francisco Chronicle about coming Seismic Brewing. With capital a non-issue, he found 13K+ sq-ft location in Santa Rosa, brought on brewers that spent time at Anderson Valley and Firestone Walker and planned a brewery initially able to produce about 8000 bbls per yr. Interestingly, a taproom isn't part of initial plans. Instead, focus is on paying for expensive equipment to keep environmental impact low. That includes relatively new technology from Cambrian Innovation that turns wastewater into potable water. A handful of other brewers, including Lagunitas, Russian River and more, employ similar equipment from the company. For Seismic, hope is to get water usage to beer output ratio down to 2:1, much lower than typical for small brewers and even below best numbers we've heard from large breweries, more like 4:1. Time will tell, but less concern over finances thanks to backing by family that runs a top-10 US winery, sure to help. The brewery will kick off with a kolsch, pilsner, IPA and oatmeal pale ale, distributed just within Sonoma County in kegs and cans when it opens next year.
In Philly, a Yale grad student, her husband and friend/brewer plan to open Triple Bottom Brewery, which will also keep environmental sustainability in mind while maintaining socially conscious in other ways. Group is still determining location as founders working closely with community stakeholders. That's cuz they're committed to a "jobs program for people who have criminal records or are experiencing homelessness," according to Generocity report. Co's already got 2 non-profit partners and looking to also bring attention to more common environmental/sustainability focuses for breweries, like water, as Triple Bottom Brewery name suggests. It's already past its $25K goal for IndieGoGo campaign with 10 days to go.
Real Estate Developers Eye Big Downtown Projects Near Stadiums, In Malls; New York, New York! Real estate developers clearly thinking about brewing bizzes these days: pair of large developments near stadiums are saving space for breweries. In Milwaukee, plans for big new "entertainment block" across the street from coming arena for NBA's Bucks includes showcase location for pretty sizeable brewery, city's Biz Journal wrote. No specific partner ID'd, but talks apparently happening. And renderings show off space for some pretty big tanks. On smaller scale, Inland Empire town of Lake Elsinore, CA approved plans for a mixed-used development near its baseball stadium that includes 21,500 sq-ft for a brewery, the Press-Enterprise reported last week. Another developer that owns a largely vacant Niagara Falls, NY mall hopes that opening a new brewpub there will lure more folks to it and help in mall's revitalization, according to Buffalo News. New developers, which bought the mall in 2014, are first constructing two 96K sq-ft "sports domes" with year-round fields for local sports groups. But they'll have a hearing to gain area economic development funding for the brewpub project next month. Other NY communities have already anted up in support of new brewery projects. Horns & Halos Craft Brewing plans to open in downtown Caledonia, NY next summer, after working with the county's Brew in Livingston grant program, as well as state-level New York Main Street grant program, per upstate's Daily News.
Filling in Whitespace in Georgia, Alabama A handful of soon-to-be breweries could fill in gaps in some underserved areas. For example, Georgia Beer Co hopes to revamp a century-old downtown waterworks building in Valdosta, GA to move out of the garage it's currently working in, Valdosta Daily Times wrote. That would cost half a million dollars, but the co's already talking to county Development Authority to set up a public-private partnership for the project. Meanwhile, one of biggest cities in Alabama will get 2 new breweries early next year, per local WKRG. One built out a 90-yr old "ice manufacturing facility," the other a revamped Goodyear Tire Center, both hoping to take advantage of new laws allowing on-site sales in the state.