Beer Marketer's Insights - BMI Archives Entry

BMI Archives Entry

12/08/2016

Bell's to Blast Thru 400K Bbls in 2016 As It Builds Out Capacity, Adds Several More States

Today, Bell's announced officially that it will be going to 3 more new states this yr: KS, NE and SD. That followed AR earlier this week. Bell's also expects to add LA, MS and maybe even 1 more in 2016, plus start to export more, Larry Bell told CBN this week over a Two Hearted Ale in St Thomas, while we were both attending the MI/IL/WI beer distribs' convention there ("workcation"). No surprise then that Larry and his vp and daughter Laura expect to easily pass 400,000 bbls in 2016. That would be less than a 10% gain (Bell's up 16% to 371,000 bbls in 2015). The quickened expansion pace is partly because Bell's simply has the capacity but also a little bit because of "strike while the iron is hot," Larry said. These 3 new states will bring Bell's to 27 + Puerto Rico and DC. Bell's is expanding its brewery another 210,000 square feet. Its expansions in recent yrs will cost it a total of $70 mil. Ultimately, its goal is to have 1 centrally located brewery that can someday brew as much as 1 mil bbls. Bell's currently has 475 employees.

Of the top 10 craft brewers, Laura pointed out that Bell's has both the "smallest footprint" and the "highest average price" which is a pretty nifty combo. And it is one of the few leading craft brewers (Sierra being the other that comes to mind) that has embarked on a process of generational succession and proudly proclaims that it's family-owned. Bell's "began in 1985 with a quest for better beer and a 15 gallon soup kettle," notes press release. "100% family-owned and independent, we strive to bring an authentic and pleasant experience to all of our customers through our unique ales and beers."

Newsletter Craft Brew News

Tagged under

12/08/2016

"Restated" Craft Up 14% in Jan IRI; Top Cos a Mixed Bag, Losing Craft Share; Top Brands Shuffle

IRI's newly defined craft segment saw $$ sales grow 14% and gain 0.8 share to 10.9 of total beer in IRI multi-outlet + convenience data YTD thru Jan 24. New definition includes Blue Moon, Shock Top and Leinenkugel brand families while switching out Not Your Father's Root Beer to flavored malt beverages (tho it kept Coney Island Hard Root Beer as craft). Blue Moon, Shock Top and Leinie collectively add 1.7 share of $$ to the category, primarily from Blue Moon's full share. And since both Shock Top (-11%) and Leinie (-4%) each continued to decline in Jan, they certainly dragged overall craft trend down a bit. Without all 3 of 'em, craft $$ would have gained 0.9 share to 9.2 of total biz and would be up 17%. But either way you look at it, category growth has slowed down a bit in IRI scans to start the yr.

Meanwhile, still a mixed bag for top craft cos in Jan. Blue Moon, largest craft co in this data set, saw solid 6% $$ gain thru Jan 24, slightly slower than last yr's trend. Sierra jumped up 11% headin' into tuff Q1 comps. Sam Adams top brands and New Belgium co continued to decline: Sam top 4 brands (Seasonal, Boston Lager, Variety Pk, Rebel IPA) collectively down 7% to start the yr (slightly better compared to last handful of mos thanks to much improved Variety Pk trend, +3%); and New Belgium down 3% goin' against 17% gain in Jan 2015. Lagunitas "slowed" to 32% growth, tho still had highest $$ gain of any craft co aside from Boston subsidiary, Alchemy & Science. Lagunitas jumped ahead of both Craft Brew Alliance (-2%) and Gambrinus (+4%) in scans. Editor's note: to get a picture of Boston Beer's total beer trend, if you combine Alchemy & Science and Sam Adams top brands, sales are up 8%; also, Sam Adams Rebel Grapefruit IPA and Nitro Series should provide an extra lift this yr.

Deschutes kept up strong 20% plus growth pace that it closed last yr with, while Stone (+19%) and SweetWater (+9%) each slowed. Impressively, Firestone Walker (+78%) and Founders (+64%) each saw strong enuf growth to jump ahead of Bell's (+19%) in early 2016. Duvel Moortgat USA (w/o Firestone) accelerated to 23% growth to start yr with extra boost from several new Boulevard mkts. And Dogfish Head saw both volume and $$ up 6%. Gotta note, collectively all these cos listed above lost 2.7 share of craft $$ as more local and regional cos continue to snag share of segment. In fact, 8 of the top-10 craft cos collectively lost a whopping 6 share of craft $$, while A&S (+1.3), Lagunitas (+0.6), Firestone (+0.5), Founders and Goose (each +0.4), Deschutes (+0.2) and other top cos made up a little under 60% of that.

Different Top-30 Craft Brands Picture With New Def'n; Hot Brands Still Hot, Tho Fewer Up Strong to Start Year Top-30 craft brands in scans sure look different with the craft definition change. Blue Moon has 3 brands in top-30 including largest of the bunch, Belgian Wheat, still 2X larger than next closest brand (Sierra Pale), as well as Blue Moon Seasonal (#21) and Blue Moon Variety Pk (#26). Belgian White started off Jan strong, $$ up 13%, however both other top brands took tuff hits: Blue Moon Seasonal down steep 44% and Blue Moon Variety Pk down 19%. Shock Top Belgian White ranks 7th in terms of $$ sales, just ahead of Lagunitas IPA and just behind New Belgium Fat Tire. Yet it continued to decline in Jan; $$ down 5% thru Jan 24 while Lagunitas IPA up 27% and NBB Fat Tire down 2%. It'll be interesting to see if Shock Top's Super Bowl ad helps improve trend in next 4 wk period. Lastly, Leinie Shandy and Leinie Seasonal make the top 30 list at #14 and #27 respectively. Leinie Shandy notably improved trend after a tuff Q4 2015, tho volume still down 3%, $$ up 2%. And Leinie Seasonal $$ down 12%. All in, these 6 brands replaced Sierra Variety Pk, Shiner Seasonal, Kona Longboard Lager, Bell's Seasonal, New Belgium Seasonal and Not Your Father's Root Beer from last yr's top-30 list. But top brands have changed over even more compared to last Jan: SweetWater IPA, Harpoon IPA, Deschutes Mirror Pond Ale, Goose Island 312 Wheat and Magic Hat #9 were also top-30 brands in scans back then, tho each lost their spots thruout last yr.

Then too, the hottest brands remained the hottest brands in Jan. Especially Goose IPA. It accelerated in Jan to +320%, shooting past several brands in its path to become #16 top craft brand and #5 IPA in scans by $$ (#14 craft brand and #4 IPA by volume). That's only just behind another hot IPA with Chicago ties - Lagunitas Lil Sumpin' Sumpin' (+66%). Firestone Walker 805 Blonde also accelerated in latest period; up 161% thru Jan 24 and now the 19th best-selling craft brand in scans. And Founders All Day more than doubled its sales, +120%, just behind Stone IPA (+19%). Tho that's a fair amount slower than its 2015 growth rate. Interestingly, each of these fast growin' brands' avg prices per case were down more than any other top-30 brand, other than Rebel IPA (-$2.58 to $31.12 per case): Firestone 805 down $1.97 to $32.51 per case; Goose IPA down $1.29 to $33.72 per case; Founders All Day down $0.97 to $30.24. Other honorable mentions: Lagunitas IPA continued to slow, tho still up 27%; Sierra Seasonal jumped 27% with new spring offering, Tropical IPA; and Bell's Two Hearted Ale maintained solid 35% growth. All in, fewer top brands growin' strong to start the yr. Only 12 of top-30 brands up double-digits plus (including Coney Island Root Beer, still all incremental) while rest are either up mid-to-low single digits or down. And 11 top brands are declining: including everything from Sam Adams Rebel IPA and New Belgium Fat Tire (-2%) to Widmer Hefe, Redhook Longhammer IPA (-5%), to steeper NBB Ranger IPA and Leinie Seasonal (-12%) and steepest, Blue Moon Seasonal and Variety Pk (see above).

Newsletter Craft Brew News

Tagged under

12/08/2016

Pair of Regulatory Bombs Send Shockwaves Across Beer Biz: Mass Pay-to-Play, TTB on CatMan

Massachusetts ABCC handed down tough decision in pay-to-play case against Craft Brewers Guild, a Sheehan Family Co, and TTB clarified its position on category management practices, effectively killing Kroger's plan with Southern Wine and Spirits, both in just the last 24 hours. Both rulings come down hard on much-discussed practices, often seen as being legally fuzzy or difficult to prove after years of questions, either formally posed or in private discussion. Many questions still remain about exact fallout from rulings: Craft Brewers Guild has option to appeal among others; TTB handed down general ruling about practices without mention of any specific violation. However, taken in tandem, these developments indicate that though much slower moving than industry, regulators still pay attention and will act when they deem it necessary.

Importantly, both rulings indicate that the regulatory agencies preparing them believe the respective laws are cut and dry, regardless of arguments to the contrary. The MABCC followed "an extensive paper trail" to show violations, not contested by CBG, which instead argued that regulations in question are no longer in effect, overly vague and being selectively enforced, for example. But MABCC repeatedly expressed confidence in rulings, regulations and violations. Similarly, TTB acknowledges that "the language [of regulation] is clear," even if it's been awhile since it was written. Exception that allows wholesalers or suppliers to offer shelf plans or schematics "as a stand-alone marketing tool" with "little or no intrinsic value" covers that practice and no more. Time since any regulation in question was written or last enforced totally irrelevant, it seems, to both MABCC and TTB. And considering violations found by MABCC investigation and TTB's "review of current practices," both see trade practices far beyond those they deem allowable. (Portions of the following appeared in INSIGHTS Express earlier today.)

Mass ABCC Ruling Could Suspend CBG License for 90 Days; "No Disruption" CBG Sez Decision to suspend Massachusetts distrib Craft Brewers Guild for 90 days based on violations of so-called "pay-to-play" came down today. It "sent shockwaves through the industry," said one sizeable distrib. The "unprecedented" and "unusually harsh" decision, as Boston Globe called it, finds that CBG "engaged in a pervasive illegal enterprise involving numerous retailers and corporations that spanned at least five years," according to ruling. It lays out damning set of evidence, including invoices, check requests and checks totaling about $120K to 12 retail licensees in Boston, under auspices of "brand allocation," "marketing support," and/or "menu programming." MABCC found CBG paid between $1000 to $2000 per committed draft line or a $10-20 rebate per keg of certain brands. Paper trail summarized by ruling highlights numerous suppliers, including some of largest payments in support of dedicated Yuengling draft lines and repeated rebates totalling many thousands of dollars specifically naming "Lagunitas," "Sierra," "Wachusett," "Cisco," "Magic Hat," "Brooklyn," "Smuttynose" and many more.

CBG has a few options. It can appeal to state court within 30 days. It may also petition the ABCC "to accept an offer in compromise," within 20 days. That compromise would include payment of a fine totalling 50% of gross profits for 90 days. "We are in the process of reviewing the decision with our legal counsel," said Craft Brewers Guild gm Michael Bernfeld. "Regardless of which option we exercise, there will be no disruption in our business and we will continue our high level of service to our valued customers," he added. Lotsa balls in play at this point, as ABCC still investigating 4 more allegations of pay-to-pay, according to Globe, and retailers in question will get hearing later this month. Meanwhile, Mass franchise law allows for termination of distrib for good cause, including for "engaging in improper or proscribed trade practices." Since Sheehan has indicated that it will either appeal or pay fine, and that there will be "no disruption" in biz, one could assume it won't face terminations. But again, multiple possible scenarios for how this plays out.

TTB CatMan Ruling Likely Puts Kibosh on Kroger/SWS Plan; Other CatMan Activity? Lines clearly drawn between "simple" sales "tool" in form of shelf plan recommendations, allowed by current exception in tied house rules, and "additional services that far exceed that exception," according to TTB ruling handed down yesterday. "Additional services constitute 'things of value,'" it goes on, and therefore "a means to induce." Those services could include taking on "a retailer's purchasing or pricing decisions" or shelving decisions for "a competitor's products," "receiving and analyzing" private info on competing products for retailers, giving market data to a retailer and more.

Recall, TTB looked at CatMan practices after letters from many industry members about Kroger's planned "Planogram Center of Excellence," where Southern Wine and Spirits was going to collect and provide all kinds of data and support to Kroger, ostensibly paid for by "voluntary" contributions from suppliers and distribs. This ruling then is a "resounding thumbs down to Kroger," veteran alc bev atty Richard Blau told CBN. Yet, TTB does not specifically mention Kroger or its proposed plan in ruling. And many questions remain about whether any other industry members provide those "additional services" under current CatMan programs and whether TTB will pursue them as potential violations.

Newsletter Craft Brew News

Tagged under

12/06/2016

ABI-Owned Retail in UK: Goose Island Pubs and Beer Hawk Online

While AB says it does "not have a strategy at retail" in the US, as High End prexy Felipe Szpigel said at our Spring Conference in May, it's certainly taking steps to work that end of the market elsewhere, just as builds more brewpubs here too. First "pilot" location for Goose Island branded pub will "open in London before Christmas," UK's Daily Telegraph reported late last week. It'll open a second location in London next year, plus a third in Belgium. First Goose Island Vintage Ale House will seat just 35 guests and focus on food "inspired by American smoke houses." Of course, no three-tier rules in UK or Europe and ABI already retailing some beer there. That includes another UK outfit the co also acquired earlier this year: London-based online beer retailer Beer Hawk. It's not doing on-demand sales, but offers beer clubs and mixed-case sales for delivery in about a week, focused exclusively on what it calls "the world's best beers." The 4-yr old co announced acquisition early this yr. This week, it ruffled feathers of competing online beer retailer over packaging of certain type of orders, according to City AM. Paper claims deal led to expanding Beer Hawk's warehouse by 5X, doubling employees, adding 300 beers to offerings and reducing shipping costs by 30%. Again, AB maintains it has no official strategy to expand retail stateside, though it is opening more Goose (and other High End brand) brewpubs here too. It already owns more than 20 retail outlets of varying types, not including branded/licensed locations, plus more in the works.

Newsletter Craft Brew News

Tagged under

12/06/2016

Expanding into Spirits, Cider Ain't Easy: "Absence of Franchise" Tuff; Regulatory, Consumer Hurdles

Going "beyond beer" into other alc bev categories may seem exciting, but likely to be a lot harder than it looks, panel of brewers that have done it and legal expert familiar with process explained during Brewbound Session last week. "We want there to be more similarities," Rogue prexy Brett Joyce said, but "it's very, very, very different." Yup, three "very"s. "The list of differences is a lot longer than the list of things that are in common" between making and selling beer and spirits, including "the nuance of how it's sold." Just starting to market a spirits brand won't work "if you go in half-baked," Brett argued, and launching its spirits brands taught the co to "be more buttoned up and be more expert." He also acknowledged that, while small brewers don't often sing the praises of franchise law, "in the absence of franchise law," as in spirits, "you really see what happens when the mega suppliers have so much power that they can exert over" the wholesale tier. Meanwhile, styles and categories of spirits are much more specifically defined than in beer, and "the big guys do a really good job of playing in those categories" there. So difficulty of innovating and strength of big competitors is almost certainly "part of the reason" that craft spirits "haven't taken off like craft beer."

Figuring out how to be nimble inside those defined categories "is a real challenge," agreed Alva Mather, alc bev-focused atty at Pepper Hamilton. But so is navigating sometimes drastically different regulatory structure. With spirits specifically, control states represent a big hurdle for small companies, she noted, since states often require distribution to every store. Even if adding another alc bev type is "very attractive," it's often best to "set up a different company," in terms of insurance, for example. That's what Two Beers Brewing founder Joel Vandenbrink had to do when establishing Seattle Cider Co due to state law, he explained. He also "had to learn a whole new customer base," and found that, to market the brand, the co was "talking more about the health benefits of the cider." Meanwhile, the tax structure for cider is "much more complex and nuanced," with fruit additions or added carbonation putting you in a "different tax bracket." But getting funding was easier, since banks often "look at the person," so he could "use the history of the brewery to piggyback on" when launching Seattle Cider. By same token, when he finally took call from "French farmer-owned co-op" Agrial, seeking to acquire Seattle Cider, folks there balked at his insistence that they had to buy the brewery too. So combined co "was a challenge at the front end" of the deal, but eventually it "became kind of a benefit," Joel said. (Recall, that deal struck and announced at end of Sept, see Sept 28 issue.)

Newsletter Craft Brew News

Tagged under

12/06/2016

MS-Based Biloxi Brewing Has Ambitious Growth Plans with New Facility Coming Soon

Biloxi Brewing is getting ready to move into its own brewing facility in Biloxi, MS, and it's got an ambitious volume projection for yr-1 in the new space. "We're projected to do 24,000 barrels our first year, and we will eventually start ramping that up," co-founder/co-owner Mark Cowley told The Sun Herald. To put it into perspective, Biloxi shipped just 1,300 bbls in 2015, according to Brewers Assn stats. It's been contract brewing out of Lazy Magnolia's facility in the meantime, but clearly co feels there's some pent up demand that it's been unable to service. The brewery is 11K sq-ft, with small tasting room. After "trial" run this month, "a grand opening is set for early 2017."

Newsletter Craft Brew News

Tagged under

12/06/2016

Flying Dog Nears Closing on New Site in Frederick as Plans Expand: 800K Bbls, Farm Brewery Too

A public hearing, currently scheduled for next week, is only step left in process before Flying Dog can close on deal to buy 32 acres of land to build much larger brewery in Frederick, MD, Baltimore Biz Journal reported this week. Recall, it's been working through slow process of buying land from the city for most of this year. And when those plans became public, Flying Dog founder/CEO Jim Caruso explained to us plans to sell about 500K bbls in Mid-Atlantic region (see April 20 CBN). Recall, the co neared 100K bbls last yr. Well, current plans call for a facility able to produce about 800K bbls, within 150K sq-ft, Biz Journal wrote. Facility may not be finished for another few years though, perhaps not til 2020. And once it is, current brewery will remain open for a year while transitioning. FD also hopes to put in smaller, 8000 sq-ft "farm brewery" (note that co scrapped plans for a similar concept at a different site in mid-2015), plus larger event space at new location. Current brewery location has space to bring in over a thousand attendees for events, but FD hoping to "draw bigger names and bigger crowds," per paper.

Newsletter Craft Brew News

Tagged under

12/06/2016

Founders Adding Two More Seasonal 15-Pks in 2017

Founders Brewing will bulk up its 15pk roster with all three of its core seasonal brands in 2017 - Azacca IPA from Jan-Mar ("or even a bit sooner in some regions") and Mosaic Promise for fall season (Sep-Dec) will join year-round All Day IPA and (now) summer seasonal PC Pils in canned 15pks this yr, co announced. Recall, PC Pils launched for first time this fall thru yr-end, so co decided to shift brand to summer seasonal. Interestingly, while most (if not all) 15pks to this point have been used for "sessionable" brands, Azacca IPA is a stronger beer at 7% ABV, marking a bit of a departure there. Mosaic Promise, however, clocks in at 5.5%. Prior to PC Pils launch, Founders Seasonal volume was growing triple-digits and still $47.60/case in IRI data thru Aug 14. That was already a significant drop-off in price per case, but you can expect even further drop in 2017 with the addition of 15pks. That being said, it seems Founders Seasonals are set up for a year of strong volume growth.

Newsletter Craft Brew News

Tagged under

12/06/2016

"A Lot of Transactions Under Way," But Smaller Stakes & Companies, Per Arlington Dealmaker

Just over a day before latest sizeable craft transaction announced (see above), Arlington Capital Partners founder/managing partner Vann Russell knows of "a lot of transactions under way" at Brewbound Session last week. Yes, "2017 certainly will be very frothy," just like 2015 and 2016. The difference will be that "the size of deals will be smaller and smaller companies, smaller breweries" will do them, he said. Arlington "really had not worked with anyone sub-100,000 [barrels]," he said, til the 2d half of this yr. But now those clients really driving next stage of craft M&A. Recall, this echoes comments by First Beverage Group's Bill Anderson at both our Spring Conference and Calif Beer and Bev Distribs mtg earlier in yr.

Vann spoke much about various attempts to "bring like-minded brewers together," whether backed by an existing larger brewer or by private equity/family offices. With many of those deals, Vann sees the "biggest value coming from a sales and marketing strategy" that's aligned, allowing smaller players to "leverage the resources of a bigger platform." Some here, like Artisanal Brewing Ventures (Southern Tier & Victory) and Oskar Blues (with Cigar City, Perrin), already have a head start establishing those platforms. But look for more. Of course, Storied Craft Breweries entered this world with Deep Ellum deal, Enjoy Beer hasn't announced deal since Abita and Stone's True Craft has yet to move. Vann highlighted importance of distribution in doing deals too. Overlap between Southern Tier and Victory footprints helped make that deal clear to those involved, he said, allowing both brands to "be more important to [their] wholesalers." At same time, he's working on a deal now where "a lot of the concern is around the mismatch of the distribution footprint."

While PE firms are "certainly in the returns business," Vann cited that a largely "negative" view of them may be a "misconception." The ones like VMG (Stone/True Craft), LNK (Dogfish Head) and TSG (SweetWater), are "typically looking for leaders in great categories in consumer [goods]." They're "able to bring expertise to the table," he insisted. Further, he pointed out that "most large consumer [goods] brands" have had "some institutional investor" involved "at some point." PE firms have long been rolling up portfolios of consumer goods products and expanding them together. But don't necessarily expect them to go public, at least not soon. "The public markets just aren't there right now" for craft beer. In fact, he suspects we'll see some "going the other way," or "public companies going private." Of course, not too many public beer companies in craft space, aside from Boston Beer, Craft Brew Alliance and just a couple very small breweries traded over the counter.

Newsletter Craft Brew News

Tagged under

12/06/2016

US Topped 5,000 Brewers by End of Nov, Growing BA Reports

Brewery count here in US just keeps on growing. It hit 5,005 at the end of November, Brewers Assn announced this week in year-in-review release timed with anniversary of Prohibition's official end. You've heard all the other good news, including mid-yr growth rate (+8%), rise of IPA and "sessionable styles," and BA's work defending members and consumer choice in light of ABI acquisition of SABMiller. But also note that in these increasingly complex times, BA doing even better job of bringing on new members. Org represents about 3600 members now, or about 72% of its operating brewery count, director Paul Gatza shared with Craft Brew News. That's up from 69% a year ago. Further, of the thousand or so new breweries that opened in the last yr, about 80% of 'em grabbed memberships to the org, again boosting its representation of US brewing bizzes.

Newsletter Craft Brew News

Tagged under

Page 546 of 1041