The last 5-6 years have been particularly eventful for both the craft segment and the city of Asheville, North Carolina. Attention on the two has grown together, with "craft beer" headlines hitting papers nationwide and Asheville appearing on countless "best places to visit" lists, often noting its fast-growing beer scene. Now an influx of tourists crowd the small city's hilly downtown sidewalks, making both restaurant reservations and commercial real estate hot commodities. The city's so far maintained its indie vibe, home to just one Jimmy John's, an Urban Outfitters and an Anthropologie. Walking around, you'll pass very few recognizable chains, but rows of shops with products made by local artists and craftsmen, a bunch of hotels under construction and of course, plenty of breweries.

Standing downtown, you're a quick walk from at least 10 different breweries, according to the Asheville Ale Trail, which shows another half dozen or so within a short drive. A couple dozen breweries call the Asheville area home. It makes it easy to find great beer and beer-loving locals. But these outfits increasingly cater to over 9 mil tourists who visit the Asheville area each year, many of which are drawn by tours and high tea at the Biltmore Estate or the valleys and vistas of the Blue Ridge Parkway nearby. That number and the area's brewery count has ballooned in just the last 5-6 years, at the same time larger, out-of-state brewers moved in.

"Big Guys" Bring More Change, "Price Compression," Self-Improvement "The industry's changed incredibly quickly," co-founder of 3-yr old Hi-Wire Brewing, Adam Charnack said during a Brew Talks panel hosted by Brewbound at New Belgium's new site late last month. Entrance of "big guys" like Sierra Nevada, NBB and Oskar Blues, "really helps raise...the profile" of beer in the area, and "all-in-all it's been a really good thing." But it was also a "holy $#!t" moment, prexy of oldest area brewery, Highland, Leah Wong Ashburn said. For many years, "there was not a ton of thought, and that was a luxury," she said. "And we don't have that luxury anymore." She pointed to "some price compression" over last couple years, and difficulty "finding qualified staff," perhaps expected difficulties of ramped up competition but difficulties all the same. So Highland's "been forced to up our game," Leah said, noting that that's a "really good thing." Of course, NBB's learned a lot too, including navigating relationships and traffic patterns in a tight-knit community and being "sensitive with what local sponsorships we pursue," gen'l mgr of the co's NC brewery, Jay Richardson said.

Beer Money, City Funds Connect Industry with Community, Environment The city of Asheville has obviously been in on the town's beer growth. It hasn't only attracted of out-of-state breweries with tax incentives: its focus on bolstering itself as a beer town also attracted San Diego-based White Labs, a yeast supplier, to build there as well. Unlike opening of competing breweries, that will "save us five-figures" in cold-shipped yeast every so often, Adam said. And the "city is putting its money where its mouth is," helping out home-grown brewing bizzes, fixing infrastructure like sidewalks to make breweries like his easier to walk to, he noted. Community members also gathered behind Brewing for Greenways, a series of "rotating collaborations" between area breweries to raise funds to expand walking and biking routes throughout Buncombe County, Leah explained. Nine different beers have come out already and more expected.

That program represents just one more new tie between the area's brewing bizzes, their community and its environment. The city's mountainous setting and waterways draw attention now, but challenged growth in the past. A hundred years ago, a historic flood devastated what's now called the River Arts District along the French Broad River, where New Belgium's new brewery sits near a couple hundred active artists' studios. Industrialization isn't always kind to the ground on which it builds. But more attention on balance in this respect, particularly from this growing manufacturing sector, offers hope as well as specific efforts continue to improve water quality and reduce environmental impacts in the area. The weight of bigger companies with long histories of focus here can't hurt.

Winds of Change Blowing? Predicting the future of the craft segment may be as difficult as predicting future weather, but the rising tide that's been floating many brewery boats is "not receding," Leah insisted. At least in and around her home market: "you don't have to go so far outside of the city of Asheville to find that craft share is very small," she said. And that offers clear opportunities for more growth. Not that it won't be competitive: "everybody's pushing for grocery now," she said, leading to post-offs previously not seen in the segment, which followed an earlier push to get taphandles on premise. And pressures within the distribution and retail tiers "are going to force some corrections at some point," Jay said. But "it's still a rosy outlook for better beer in Asheville," he said. "Something is happening here," Leah agreed. As long as breweries there "all keep our heads in the game and do this well," many will find success and weather the storm. 

After expanding distribution and increasing local presence (see Jun 30 issue), publicly traded Evans Brewing (ALES) increased packaged sales over 1000% vs last yr, co announced. Interestingly, all of its year round products are packaged in 22oz bottles, a format that has tapered off a bit in recent yrs, tho still growing a bit (+4%) in IRI supers YTD thru Jul 10, per Brewers Assn Power Hour. But Evans having success thus far, particularly after expanding reach in homestate CA earlier this yr and adding CO and WA in Apr and May. Recall, Evans recently sold $1 mil in common stocks to PE firm Kodiak Capital Group to help snag space for planned 24K bbl/yr brewery (see Jun 30 issue). And earlier this year Evans completed acquisition of Bayhawk Ales. Co will soon open its first restaurant in Fullerton, CA, The Public House, which is "expected to increase awareness" in SoCal. 

Many small brewers still thinking positively in craft haven Colorado, according to economic impact study released by Colorado Brewers Guild. The state had issued 350 brewery or brewpub licenses by May of this yr, that report showed, in 94 different Colo cities. The report found 7,776 craft brewing jobs in the state for 2015. All those numbers now almost certainly higher. So far in 2016, 44 brewers have opened, according to Westword. Based on average revenue per employee, ranging from about $66K to up to $225K depending on number of workers, researchers estimated Colo craft beer sales totaled about $882 mil last yr. Craft brewing in the state contributed about $1.7 bil in economic impact, per report.

Notably, most respondents (82 companies, representing almost 150 locations) are pretty optimistic about growth over next couple years. Almost half of respondents expect to grow by more than 20% this yr and 45% expect the same in 2017. That's about 10 points lower than last yr's responses, even if it's still quite strong. Another 30+% expect growth between 10-20% each of next 2 yrs. Just 5-6% of respondents expect to grow low single-digits in 2016 and 2017. Note that almost 80% of responding companies were less than 10 yrs old. And just 18% of them currently ship beer out of state. So these relatively young companies still highly dependent on local growth. Interestingly, heightened competition in craft was a concern for these respondents, but not the biggest one. Instead, "lack of space" was most-named "challenge" in survey of brewers, followed by "insufficient capital," then "labor and wages." In fact, 18% of respondents said "that either cost of labor or quality of labor were their top problems." Competition was #4 on list of challenges.  

Public money still playing an important role in private beer companies moving forward with expansion plans. A half-million dollars' worth of grants will help fund expansion of Port City Brewing in Alexandria, VA. Port City plans to invest $3 mil to triple capacity from about 17K bbls per yr to closer to 50K bbls, according to Washington Biz Journal. That involves adding fermentation space as well as building out a new warehouse for cold storage, putting in a new bottling line and more. The city of Alexandria will match a $250K grant secured from the state's Agriculture and Forestry Industries Development fund, based on the amount of state-grown wheat Port City buys to produce Optimal Wit (expected to be about 350K lbs this yr). Just today, up in Framingham, MA, Jack's Abby Craft Lagers announced it signed a lease for building right next door, tho details on what exactly will go on there still scant. Recall, Jack's Abby recently opened up much larger space in town to expand operations, including a much bigger "Beer Hall" space. New building "will house some of our ideas that we never had the space, time or tools to pursue in full. We will be bringing in equipment that will allow us to pursue some new ideas that we could not focus on with our current setup," founders Jack, Eric and Sam Hendler posted to co's Facebook page.

But not every small brewer lookin' to get bigger these days. Celebrating its 10-yr anniversary, Akron-based Hoppin' Frog Brewery still content with making a couple thousand bbls per yr. The brewery expects to make about 2,200 bbls this yr, owner/brewer Fred Karm told the Akron Beacon Journal. It has 35 employees and does distribute limited amounts of beer to 24 states and 17 countries. But "I don't want to be a CEO behind a desk," Karm said, adding "I'm looking for sanity in my life. Not necessarily a million bucks." He's still "wary" of super fast growth and "believes there will be an inevitable fallout," the paper wrote. "It was different ten years ago," he said, discouraging homebrewers from quickly going pro. Indeed, there were just 30 breweries in Ohio then. Now there are 180, according to the state Division of Liquor Control.  

Public money still playing an important role in private beer companies moving forward with expansion plans. A half-million dollars' worth of grants will help fund expansion of Port City Brewing in Alexandria, VA. Port City plans to invest $3 mil to triple capacity from about 17K bbls per yr to closer to 50K bbls, according to Washington Biz Journal. That involves adding fermentation space as well as building out a new warehouse for cold storage, putting in a new bottling line and more. The city of Alexandria will match a $250K grant secured from the state's Agriculture and Forestry Industries Development fund, based on the amount of state-grown wheat Port City buys to produce Optimal Wit (expected to be about 350K lbs this yr). Just today, up in Framingham, MA, Jack's Abby Craft Lagers announced it signed a lease for building right next door, tho details on what exactly will go on there still scant. Recall, Jack's Abby recently opened up much larger space in town to expand operations, including a much bigger "Beer Hall" space. New building "will house some of our ideas that we never had the space, time or tools to pursue in full. We will be bringing in equipment that will allow us to pursue some new ideas that we could not focus on with our current setup," founders Jack, Eric and Sam Hendler posted to co's Facebook page.

But not every small brewer lookin' to get bigger these days. Celebrating its 10-yr anniversary, Akron-based Hoppin' Frog Brewery still content with making a couple thousand bbls per yr. The brewery expects to make about 2,200 bbls this yr, owner/brewer Fred Karm told the Akron Beacon Journal. It has 35 employees and does distribute limited amounts of beer to 24 states and 17 countries. But "I don't want to be a CEO behind a desk," Karm said, adding "I'm looking for sanity in my life. Not necessarily a million bucks." He's still "wary" of super fast growth and "believes there will be an inevitable fallout," the paper wrote. "It was different ten years ago," he said, discouraging homebrewers from quickly going pro. Indeed, there were just 30 breweries in Ohio then. Now there are 180, according to the state Division of Liquor Control.  

Three particular craft beer styles were showcased in BA Power Hour presentation by IRI's Dan Wandel last week. While he updated breakdown of IPAs by substyle and brand count, he also put into context an overarching trend of "infused" beers, and gave us much further look into trending Golden Ales style.

1400+ IPAs Tracked in Supers; Fruit Veggie Spiced IPAs Grabs More Share of Style Just over halfway thru the year, IRI tracked 1,426 total IPA brands actively selling in supers; about 26% of the total craft brands in supers and over 28% of total $$ sales. Total brand count already ahead of 2015 total (1,353) and 1,500 mark "likely to be eclipsed before the end of this year," said Dan. While newer Fruit Veggie Spiced (+19) and Session (+17) IPA substyles are growin' in numbers, majority of those new IPA brands tracked are still American IPAs, now up to 767 total brands YTD. American IPA sales collectively up 16% and still make up nearly 2/3 of total IPA $$ sales. But that's down nearly 4 share vs last year. Other largest style, Imperial IPA, only saw 6 more entries tracked YTD to 336 total brands; collectively up 7%, also shedding nearly 3 share of IPA style $$ down to 18.2.

Again, majority of IPA share going to fast-growin' Fruit Veggie Spiced (or "Infused") IPAs; up 663% and gained 5.8 share of total IPA $$ to 6.9 in IRI supers. Infused IPAs already about as large as Session IPAs (which are still growin' solid 32%) with 45 fewer brands. Gotta note that Infused IPAs gettin' a big boost from two of this year's largest craft intros, New Belgium Citradelic and Sam Adams Grapefruit Rebel, plus a handful of Ballast Point intros. So it'll be interesting to see if substyle continues to grab share at this pace in coming years. Indeed, these smaller substyles of IPA that're growing have more "dependency on the top brands," Dan pointed out. Top-2 Fruit Veggie Spice IPA brands account for 48% of the substyle and top-5 account for 81%. Similarly, top-2 session IPAs account for nearly 54% of total substyle and just 1 English IPA brand accounts for 73% of total English IPA sales (English IPAs only other substyle gaining share of IPA, up 55%).

All in, IPAs still strong pretty much across the board with American IPA and Fruit Veggie Spiced IPAs providing the bulk (over 3/4) of the growth. Black IPAs are only substyle declining in sales, down 16% YTD.

"Infused" Craft Beer Sales Up to 11 Share of Craft in Supers YTD; Larger Than Cider "Infused" beer is the term Dan Wandel used to describe brews with additional, non-traditional flavors. And they're quickly making headway, up from 7.3 share in 2012 to 12.2 share of total beer sales in supers YTD. While FMBs and ciders are inherently 100% "infused," craft actually is 2d largest infused segment after passing cider category altogether with $130 mil in sales YTD. That's over 19% of total infused beer sales and already 11 share of total craft $$ YTD (+2.1 share). Keep in mind, craft infused brews got huge boost from Coney Island hard sodas (defined as craft by IRI) and several other "craft" alc soda launches. But the trend toward infused styles is an important one that's provided growth for industry across the board (with exception of cider this yr). Dan looked to infused spirits to show potential run room for beer category. Infused spirits represent 32.5% of total spirits sales in supers YTD, so if infused beer could even reach half of that, it's "still quite a bit of runway."

Golden Ales 3d Best Share Gain; Firestone 805 and Kona Big Wave Boost; CA and TX Concentration While IPAs get bulk of the style coverage, Dan pointed to fast growing craft Golden Ales movin' up in the ranks too. Golden Ales collectively up 43% YTD thru Jul 10 in supers and gained 0.6 share of craft $$ to 2.7. Interestingly, that's the 3d largest share gain among all IRI defined craft styles, only behind Fruit Veggie Spiced and IPAs.

Similar to up and coming IPA substyles, Golden Ales gettin' over half (53%) of its total sales, and even more of total growth, from just two brands: Firestone 805 and Kona Big Wave. Next largest Golden Ale brand, Real Ale Fireman's #4, is about 1/5 the size of Kona Big Wave.

Then too, there's a clear regional component to success of Golden Ales. Four of Golden Ales' top-5 metro mkts are in CA and the other is Houston, TX. And those 5 metro mkts make up 37% of total craft Golden Ales sales. Indeed, both Firestone and Kona have large CA presence, but Firestone 805 and Saint Archer Blonde are only CA-based brands in top-10 Golden Ales. Four of top-10 Golden Ales are from TX including Real Ale Fireman's, Saint Arnold Lawnmower Ale, Southern Star Bombshell Blonde, and Deep Ellum Dallas Blonde. Atwater Dirty Blonde is among the top Golden Ales and on its way to TX via co's new Austin brewery. And two of top-5 new Golden Ales this yr are from up and coming top new TX brewers in scans, 8th Wonder and Austin Beerworks.

Also gotta note, Deschutes River Ale (categorized by IRI as blonde) and Rhinegeist Cougar Blonde were other top-10 Blonde Ales. New Belgium's new Glutiny Golden Ale is largest new Blonde ale this yr. And with the help of Craft Brew Alliance distribution agreement, Appalachian Mountain Boone Creek Blonde was #4 on the list of top new Blonde brands.  

Nearly 5 mos after AB and Devils Backbone announced deal, DOJ has finally closed its investigation, allowing cos to move forward. This was by far the longest investigation of a craft deal yet; other AB deals typically took 1-3 mos to close. DOJ pointed to "distribution relief secured in the ABI/SABMiller settlement." But it may not have cleared up all of DOJ concerns. Instead, the "competitive implications" of this deal "are too uncertain at this time to warrant further investigation," said Deputy Assistant Attorney General Juan Ateaga of the Justice Department's Antitrust Division in released statement. So DOJ "will be carefully monitoring ABI's compliance with its distribution obligations" and "will also carefully scrutinize any further craft acquisitions by ABI." (Note this article appeared earlier this afternoon in INSIGHTS Express.)

DOJ promises to consider plenty of possible impacts as it reviews any future deals "singularly" and "collectively." Red flags for DOJ would include, among other things, transactions that result in "giving ABI the ability to prevent its craft rivals from effectively getting their products to the market or the ability to increase high-end beer prices which, in turn, would enhance ABI's ability to raise prices in the premium and sub-premium beer segments." The agency insists it'll "consider all enforcement options," even re-open investigation into Devils Backbone acquisition, if necessary. AB and Devils Backbone appeared to be confident that deal would get done all along, especially after DBB entered new distribution territory in PA and DE with AB network in midst of investigation. Recall, DBB expects to finish yr over 90K bbls, and up over 40% in IRI MULC thru Aug 14.  

We wish we had better trends to report as yr

winds down, but latest Nielsen all outlet thru 12/17 continued sluggishness of recent weeks. Volume down

1.3% for 4 weeks. “Beverage results were generally weak across the board,” said Morgan Stanley’s Dara

Mohsenian (reporting on slightly different Nielsen data set), including “small impact from holiday timing.” AB

down 2.6% and MillerCoors down 2.9% for 4 weeks thru 12/17 in Nielsen all outlet. AB down 0.9% yr-to- date,

MC down 1.5%. What’s more, top 2 brewers realized very small net pricing gains in last 4 weeks. Total AB

avg prices up 0.6% and MC up 0.3%. Michelob Ultra remains a bright spot in terms of growth, volume up

20% last 4 weeks.

Meanwhile, high end a mixed bag. Constellation continued up double digits, but even its growth slowed to

13%, compared to 16% last 12 weeks. Avg price per case up 2.1%. And Heineken USA had a soft 4 weeks,

when it had been rallying recently. Down 2%, compared to 1% gain for 12 weeks. Avg prices up 1.5%. Boston

also softened further in latest period. Down 5.7%.

A couple of other interesting brand notes on Constellation and Heineken. Even in slower period, STZ still had at

least 5 brands growing 20%+: Modelo Especial up 21.4%, Modelo Especial Chelada up 45%, Negra Modelo up

35% (clearly benefiting from Casa Modelo platform), Pacifico up 28% and Ballast Point up 28%. That’s

significant slowdown for Ballast Point tho; it’s still up 77% for 52 weeks and 43% for 12 weeks. Meanwhile,

Heineken and Dos Equis brands each slowed last 4 weeks, up 1% and 2% respectively. Newcastle Brown still a

significant drag on Heineken trends, Morgan Stanley report showed. Down 24-25% for 4, 12 and 52 weeks.

Recent star Tecate Light slowed to 17% growth for last 4 weeks. Up 21% for 12 weeks and 26% for 52 weeks.

Almost half a century after Beer Marketer’s INSIGHTS began, we’re still having a ball

writing about beer. Who’da thunk? This year even more of a whirlwind than usual. It

wasn’t all pretty, but news kept us jumping, busier than ever. As we start to wind this

crazy yr down, we pause to reflect and express gratitude to be part of such a great

industry. We want to let you all know what a pleasure it is to meet and get to know so

many fantastic folks and write about the dynamic happenings in an ever-changin’ beer biz.

This year was all about change.  Even here at Beer Marketer’s INSIGHTS, we changed.  I’m

60, my friend and decades-long colleague Eric Shepard is 61. We’re still in it up to our

eyeballs. But we are bringing a younger generation along. Happily, each of our sons work

here. This past yr, David Steinman and Christopher Shepard grew and took on bigger roles

as we continue to develop.  My wife Robin also became more and more integral to our small

co’s operations. Longterm employees, Gerry Curley, Jim Sullivan and Gerry Khermouch, all

made invaluable contributions.  We welcome Nadia and Anjie to our team.  Thanks to them

all for all they do, bringing our newsletters, books and conferences to you.

And a big thanks to you, our wonderful readers, who sustain us. You bring us so much,

beyond your subscriptions. We appreciate all the info, insights, knowledge and just plain

ole’ camaraderie and good times. Finally, gotta thank my father Jerry Steinman for

starting such an improbable venture as BMI. Thanks, Dad. It worked. Jerry is alive and

well at almost 93. He sends his regards.  We hope that at this time of year you get some

time off to kick back and enjoy the holidays with your loved ones.  So from all of us to

all of you, here’s wishing you and yours seasons’ greetings, a very Merry Christmas and

Happy New Year.

This was yr of true landmark transaction in global beer history, MegaBrew, as ABI bought

SABMiller for over $100 bil, and Molson Coors then bought 58% of MillerCoors for $12 bil.

Many changes undoubtedly still to come, spinning off from that huge deal. What’s next is

extremely important consideration for all in the biz. Analysts already busy speculating,

natch. Many believe ABI’s next big move will be beyond beer. Most frequent speculation

surrounds Coke. “Global brewing and soft drinks are likely to converge in a post SAB-ABI

world,” reiterated HSBC’s Carlos Laboy, seeing Coke as “more likely” target for ABI than

Pepsi. “Looking out to 2020...industry and investors must consider a world where global

brewing is consolidated to the point where ABI can no longer expand in beer.” (At a

recent dinner of financial types, question asked what will be AB’s next target, and Coke

only answer that got any raised hands). Carlos argued tie-ups with Heineken or Diageo

likely not happening or not sufficient to save Coke from ABI’s clutches.

What about Molson Coors? Its next move will be to tie-up with Heineken, analyst reports

already speculate. Stifel’s Mark Swartzberg sez it would create conservatively $500 mil

in synergies. This move would make combo a 15 share of global beer, up from Heineken’s 10

share. Evercore ISI’s Robert Ottenstein also has stated for mos that there is 50/50

chance that Heineken and Molson Coors will do a deal by 2020 (same % chance as he used to

say for ABI/SABMiller deal).

Meanwhile, craft M&A continues apace. INSIGHTS has tracked 25 deals or so in 2016,

following very similar number last yr. And there will be similar number again next yr,

First Bev’s Bill Anderson told Calif Beer and Bev Distribs convention in mid-Nov. Most

deals are smaller, and valuations are coming down (tho still 15-20x EBITDA), but pool of

interested buyers is still plentiful, including many international brewers and private

equity cos. AB and MC may have just about had their fill, at least for now.

Correction: Constellation expects to be #1 GP provider in 40%+ of its distributors’

volume, not in 40% of its distribs, within 1 or 2 yrs. Our headline implied otherwise,

tho text was accurate… Next issue in early 2017, unless big news breaks.