Likely a temporary glitch, but local officials in San Luis Obispo, CA issued "stop-work order" to SLO Brewing on its new brewhouse and tasting room there, reports The Tribune News. They say SLO installed equipment outside scope of original plans. Officials also cited SLO for allowing public into building for tasting event before occupancy allowed. "Everything put into that building was put in per the specs," countered co-owner Hamish Marshall. And outside event forced inside by rain. Fines seem modest, SLO and officials have met and Marshall confident construction will start up again soon, hopes to open doors by end of Nov, paper reports. 

Optimism about global prospects of craft beer voiced by Brooklyn Brewery prexy Robin Ottaway in talk with Bloomberg. Reviewing recent Kirin deal, Robin said folks there "got craft," took "leadership role" in developing segment and investing in lead Japanese craft brewer and so became "natural partner" for Brooklyn. Then too, craft "would never happen" in Japan without big brewers embracing it, since big brewers "really control access to market there." Brooklyn maintains status in US as indie brewer (via BA defn) since Kirin's ownership under 25%, and Robin and bro Eric maintain control. But "independence" as such and big brewer ventures not key concern for Robin. Asked if he had concerns big brewers would "monopolize" craft via acquisitions, Robin actually echoed remarks you might hear from AB's High End prexy Felipe Szpigel: "I don't really look at it that way. Craft beer is on the rise. The fact that the big brewers are paying attention to craft beer is good for craft beer. What's really happening with all these moves is they are helping to elevate beer.... Craft brings variety, consumers want variety. The future is increasingly in craft beer." Whether a given brewery owned by a big brewer, or is independent "whatever the definition of independent is, to me that matters less than the fact that beer is getting elevated thru this process, which creates opportunity for everybody." Key oppy Kirin creates for Brooklyn: bringing all production in-house. About 80% of Brooklyn still bein' brewed outside Brooklyn, Robin said. Then too, "we have a lot of plans globally for retail," Robin noted, citing JVs in Scandinavia. "We'd like to do more of those."  

Texas-based Real Ale Brewing being cautious and calling back about 11K cases of 12-oz bottles of Devil's Backbone (recall, that's longtime Real Ale Belgian-style tripel, not associated with VA brewery) and Hans' Pils brands "due to a potential glass defect," it announced this week. That's even though much less than 1% chance that a defective bottle actually in the market and actually less than 500 cases ever hit retail. So most of bad bottles ID'd at brewery or wholesaler warehouses. No reports of injury from consumers yet, Real Ale says. Problem affected two production dates of 6-pks of Devil's Backbone (best before 3/13/17, partial run, and 3/20/17) and one date of 12-pks of Hans' Pils (best before 1/20/17). As with other glass-related recalls, defect could cause small pieces of glass to break and fall into bottle. Real Ale will refund any purchases of affected bottles consumers may have made. More details available at Real Ale's website. 

Huge ramp up of Coney Island Hard Root Beer during 3d quarter last yr proved insurmountable for Boston Beer this yr. Quarterly shipments declined 12%, the co reported yesterday; depletions slightly better, -8%. Drop-offs continued for Sam Adams, Angry Orchard and Traveler brands too, while solid Twisted Tea growth and intro of Truly Spiked & Sparkling hard seltzers didn't push Boston trend positive. For 9 mos, Boston shipments down 8%, about 250K bbls. Depletions down 6% for 3 qtrs. Comps get a bit easier in Q4 (-2.5% last yr). And Boston benefits from 53rd week in 2016 (a 2+ pt impact for full yr). But Q3 worse than execs hoped. So they lowered volume guidance for full-yr, when shipments and depletions expected to decline by 2-6%.

When Will Comps Ease? Coney Hard Sodas Boosted Trends 5+ Pts in 4Q15; Total Boston -7% for 12 Wks About those comps. Build of Coney Island hard soda volume at wholesalers occurred largely during 3d qtr last yr, but increase in competition in the category didn't really hit til January, as CEO Martin Roper explained on conference call yesterday afternoon. In all, "there's a lot of timing issues" when trying to project where Boston volume will net out in 4th qtr and "the comparisons are really hard to lay out." Recall that Boston expanded volume of 3 core brands (Sam Adams, Angry Orchard, Twisted Tea) by 2% in IRI multi-outlet + convenience data for 13 wks thru Oct 4, 2015. During that period, 6-pks of Coney Island Hard Root Beer alone lifted Boston trend by over 2 pts, to +4.1%. Soon after, Boston's core biz down 1.9% for 13 wks thru Nov 1. That's when Alchemy & Science in total became a Top 25 beer supplier off-premise on its own, adding over half a mil cases to Boston's retail biz. So adding in A&S swung Boston trend 7.5 pts to +5.5%. Boston cycling that right now.

Thru rest of 2015, core Boston biz got worse: ended yr down 4.4% for 13 wks thru Dec 27. Mostly incremental A&S volume boosted that by almost 6 pts to +1.3%. Fast-forward to 12 wks thru Oct 2 of this yr and core Boston volume -3.2%. But A&S down 50+%, lowering total Boston off-premise trend to -6.6%. In that time, biggest Sam Adams and Angry Orchard brands declined more, while Twisted Tea remained healthy. In fact, Twisted Tea Original became largest Boston brand by volume in IRI MULC for 12 wks thru Oct 2, up 16%.

Wide Range for 2017: Execs Expect Underlying Growth "If You Believe" in Stabilization Moving into next yr, Boston guided to volume trends anywhere from "minus low single digits to plus low single digits." But just like 53rd week helps trends this yr, makes it tougher next yr. That suggests Boston can grow (or get close) next yr: "we can grow the company," Martin said, "slightly." To do that, "you have to believe" a number of things, he continued: 1) "that Twisted Tea maintains its health"; 2) that "Truly continues on its trajectory" and "can duplicate" intro summer; and perhaps most importantly, 3) "you can return Angry Orchard and Samuel Adams to sort of very low declines or flat," Martin explained. "We think that's reasonable," and "doable." Obviously, "innovations" like switching up Sam Adams Spring seasonal by fitting in two new brands to slot previously filled by just one, plus launch of Rebel Juiced (see Oct 7 issue), as well as moves in cider, "will help that." But still, "it's a highly fluid time," without full competitive picture of early next yr.

New Sam Packaging and Media: Boston Lager "Already Shipped," Full Portfolio By Mid-Q2 Another possible help: brand new Sam Adams packaging just started to roll out. New packs for Boston Lager "already shipped," Jim said, with Seasonal coming next, then Rebel, both by yr-end. "New look and feel" coming for entire Rebel lineup, said Martin. New art responds to "very consistent feedback" from drinkers connecting "patriot" Sam Adams with Jim and the co's "role in craft beer history," he noted. That'll be focus of media support, targeted for early Nov, but could be delayed. New packs "brighter, cleaner, simpler," he said. It's "bolder on the shelf," he thinks, ideally fixing previous pkging that was "lacking on some retail disruption visibility." The "whole line will be completely redesigned by the time we get to middle of Q2," Martin said.

Financials: Net Revs Hit in Q3 Too, -14%; Ad, Promo, Selling Expenses Slashed Volume decline took toll on Boston financials, natch. Net revs whacked 14% in Q3 alone, down 8% for 9 mos. Boston cut ad, promo and selling expenses by 18% in the qtr, over $14 mil. But gen'l and admin expenses up "due to increases in stock compensation" and salaries/benefits. So operating income took $10 mil hit in Q3, off $26.5 mil, 20% for 9 mos. As always, Boston execs reiterated strategy to spend more to get brands back to growth. That could involve increasing spend next yr, but they're "looking at everything," Martin said. That includes "sales force alignment," to ensure formidable sales force is "aligned against what drives the biggest value to our wholesalers and our retailers." That could lead to increased investment in sales next yr. Boston also trying to pick up production efficiencies it didn't get when chasing growth during "incredibly hectic" few years, Martin commented. It perhaps "built up capacity a little higher than we needed," including "staffing" or "shift patterns" that it's "going to walk out of," he said, "in a manner consistent with our values." He still sees plenty of oppy to find greater efficiency and plans to "go after that with a vengeance."  

Following 12 months of slowing trends in off-premise data, retailers "by and large not expanding craft space," and "put up the yellow light," founder/chairman Jim Koch said during Boston Beer 3d quarter earnings call yesterday. "They have enough variety, they have enough assortment," he relayed. So adding more "won't increase [retailers'] total sales," they believe, and would instead create more confusion. So some large off-premise chains look to "rationalize the category and make it more shoppable," Jim reported. For example, "Wal-Mart is cutting beer SKUs," and Boston sees "some of the same thing happening at Kroger." At same time, on-premise chains not adding taps and "even increasing the number of mandated brands," Jim said, "rather than allowing discretion at each unit to pick whatever the long tail of craft they want." In short, it's the "end to a long phase" of "constantly increasing shelf space" for craft, Jim thinks.

Indeed, craft "certainly in a transitional phase," Boston CEO Martin Roper said earlier in call. "That slowing down of the growth rate has been pretty quick," he noted, and now there's "a lot of uncertainty on the craft beer side." Folks across tiers report "drinker confusion," Martin said. They've spoken to "some retailers who are choosing to focus on core items" and "reduce the long tail." That's because "they've been churning the tail a little bit," he noted. "In general, what they're doing is giving more space to the strong brands to allow pack out and avoid out of stocks at the expense of the big hunk of shelf space that has been devoted to variety and assortment," Jim continued. So spring resets in particular could be even more brutal for craft, these execs believe, though not entirely clear yet how all retailers making these decisions. Jim, Martin and team believe, longer-term, Boston will "benefit from removing some of the confusion from the category," Jim said. When pressed on this, Jim noted that it "takes a little bit of time to play out," of course.  

Firestone Walker to say "farewell" to Proprietor's Reserve lineup of brews including fan favorite Wookey Jack (black rye IPA), Double Jack (imperial IPA) and Opal (dry-hopped saison), co confirmed on its website late last week. "This was a hard decision made for the sake of innovation," said co-founder Adam Firestone. "Each of these beers [were] forward thinking and representative of some of our best brewing efforts, but they are now stepping aside to make room for the next generation," co-founder David Walker explained. So by end of the year these three brews will "dwindle from distribution." Yet this also "will create a void that the brewers here are extremely excited to fill," said brewmaster Matt Brynildson. And none of the brews are "dead yet," he added. "They may make curtain calls as special limited releases," brewed in small batches for on-premise consumption at coming Venice brewhouse, or "reimagined into something more fantastical."  

Local Minnesota outlets and homebrew-focused sites reported on deal struck by Northern Brewer Homebrew Supply with AB InBev "disruptive growth" arm, ZX Ventures, over weekend, adding a couple new details. Among them: tho ZX's Global VP of Homebrewing Cassiano Hissnauer referred to "partnering" with NB, that co's founder Chris Farley acknowledged it had been "acquired by ZX Ventures" in letter to customers. "I'll admit, we didn't share this with you the way we should and for that, I apologize," he wrote. It's still "a really important moment in our company's history," in his view. Yet "nothing will fundamentally change as the result of this deal," he maintains, including leadership, employees and culture. Deal "is about growing our company and providing our customers with unparalleled opportunities," so in short, "you, our company and our community," he thinks, "will be better because of it." He also maintains that "someday we want home-brewing to be as common a household craft in America as gardening or cooking," a sentiment echoed to local Star Tribune (tho that comment attributed to NB colleague as well as ZX's Cassiano in separate reports). Meanwhile, quick write-up posted to Homebrew Talk points to possible $50 mil in revs by combo of Northern Brewer and Midwest Supplies, citing bio of David Kidd of Adirondack Growth Capital. David "led the merger between" the cos, "creating a dominant industry leader with $50 million in revenue and more than 200 employees."  

Over 1,300 Craft Distillers in US: Hit 2.2 Share of Volume Last Yr, See Beer Stats as Upside, Seek "Excise Tax Parity" Craft continues to grow beyond beer market, slew of stats collected for Craft Spirits Data Project released yesterday reveal. As of August, there were 1,315 active craft distillers in US that fit parameters laid out by Project organizers American Craft Spirits Assn, Intl Wine and Spirits Research and Park Street (smaller than 750K proof gallons/400K 9-liter cases; "market themselves as craft"; no large distiller ownership; etc). Those distillers sold about 4.9 mil cases last yr, reaching about 2.2 share of spirits volume, up from 0.8 share in 2010. That's about $2.4 bil in retail sales, or 3 share. The group's grown an average of 27-28% each of last 5 years. But Project organizers see lots more upside by looking at growth of craft beer. "There is the potential for craft spirits to achieve market share parity with craft beer," they wrote in release, citing reports from many industry members who expect "craft spirits to perform in line or better than craft beer over time."

Like craft brewers, local and direct-to-consumers sales are crucial, especially for the smallest bizzes. Direct sales make up a quarter of sales by craft distillers that produce less than 100K proof gallons per yr. Home-state sales represented another 2/3 of volume sold by these small producers. Also like beer, craft distillers are concentrated in key states. The top 10 states by number of craft distillers are home to over half of the total in the US. Calif tops list, natch, followed by NY, Wash, Colo and Tex (a notable difference from beer). Next 5 include such craft beer-loving states as Oreg and NC, plus Ohio, Pennsy and Fla. Need another similarity? How about: "exports offer an additional runway for growth." Craft spirit exports topped half a million cases last yr. Last major finding of Project also points to beer, but perhaps not in most ideal way: craft distillers seek "excise tax parity" with similar beer and wine producers. The distillers "remain disadvantaged," since small brewers and wineries pay lower federal excise taxes (FET). "Today, a craft spirits producer pays 6 times more FET than a craft brewer and 17 times more FET than a small winery for equal quantities of beverage alcohol." Note that current Craft Beverage Modernization and Tax Reform Act includes tax relief for producers of all alc bev types. But raising disparate tax rates "for equal quantities" of alcohol not exactly something many brewers will be too excited about it, lest the disparity be "fixed" in the wrong direction.