What's up in San Diego? Following departure of top execs at Ballast Point earlier this week, long-time head brewer Yuseff Cherney announced (on Facebook, like Earl Kight) he too will be leaving the company. Yuseff started with the co 24 years ago, he wrote, "as a Clerk at Home Brew Mart." Recall, that's homebrew supply shop that grew into Ballast Point and still operating at original location. He offered high praise to the "world class team that furthered the vision that is Ballast Point," but no commentary about why he's headed out and moving on now. "As I sail away I have due course and hope to embark on my new adventure with a short journey," he wrote, recalling Ballast's boating and fishing themed imagery throughout. Read his entire statement over at West Coaster SD. Departures announced earlier this week had industry members, particularly distribs, wondering what was going on over at Ballast since its acquisition by Constellation last year. But Yuseff's departure likely of more interest to consumers, often considerably more concerned with brewers and the beer they make than even the top-most level execs. Constellation clearly working hard to ballast this fast-moving ship without slowing it down. But that's no easy task.

(Note: Calif Craft Brewers Assn has gotten clarity that Ballast Point no longer qualifies for small brewer tax credit at federal level, meaning it will no longer be a member. Exec director Tom McCormick wrote in to explain after we suggested the opposite in our July 13 article about the Maryland Brewer's Guilds decision. Recall, back in March, Ballast's membership was still up in the air when we reported on the CCBA's decision to stick with its current bylaws.)

At same time, separate SD-based pub printed interview with already-departed Stone brewmaster Mitch Steele, who provided some hints at new project he's working on as well as some fond memories of his time at Stone. New project won't be in California, he told San Diego Magazine, and it came up after being "approached by a couple of industry vets who have been out of the business for a while." He jumped on board after connecting with a mutual friend who assured Mitch the two "were legit," feeling persistence of the duo who "really want to make an impact" and seeing the "pretty solid financial backing behind the project, from people who are not brewery people." It also fit his longer-term, "retirement plan," to start something from the ground up, ironically. "There's going to be restaurants involved," Mitch said, and group taking cues from Stone's restaurants and what Sierra Nevada has built in Asheville. "There's also an opportunity to really impact the industry as a whole."

Finally, another top San Diego brewer, Coronado announced promotion of Brandon Richards and Kasey Chapman to joint COO roles. Brandon joined Coronado in 2012 and will focus on the co's brewery ops. Kasey's been at the brewery for 15 yrs and will focus on retail ops. Co-founders Ron and Rick Chapman remain as CEO and prexy, respectively.  

In M&A heavy atmosphere, all of a sudden MillerCoors no longer sittin' on the sidelines. One week after MC announced it'll acquire majority stake in Terrapin, it will also acquire majority interest in red hot Oreg brewer, Hop Valley, co announced. Deal is also expected to close in Aug. Similarly, Hop Valley "will operate as a separate business unit of Tenth and Blake," according to release. Top management team "will continue to lead the business and will retain an ownership interest."

In just the last two years, Hop Valley shot up over 30K bbls to 39,522 bbls total in 2015, still doin' 75% of biz in home-state OR. And this yr Hop Valley up 37% in OR thru May, according to state report. Altogether, co's two big IPAs, Alphadelic and Citrus Mistress, are providing bulk of growth this yr, along with incremental gains from newer Alpha Centauri Double IPA and Light Me Up Lager.

Indeed, Hop Valley is over 2 share in homestate, makin' it already one of the largest brand families there. Yet that provides an interesting challenge goin' forward, since Hop Valley's largest distrib is Portland-based AB house, Maletis Bev. And similarly, Hop Valley's with Columbia in Spokane, WA area where Odom is MC distrib. And rest of Hop Valley's footprint is aligned since co entered Idaho, NorCal and VT in the last couple yrs. Either way, MC instantly amassed a meaningful position in craft mecca state.  

Coupla Colorado clips floatin' around, including one that highlights Fort Collins' 20th craft brewery opened, Maxline Brewing, already the 9th since 2014, reported Coloradoan. Now there's "one craft brewery per every 7,600 residents" and "at least three other breweries plan to open in the city by the end of the year." An interesting contrast to "signs of a slowdown" in Denver's new brewery openings, as Westword reported late last yr (see Nov 11, 2015 issue). Recall, a record 18 new breweries opened in Denver last yr, as total count jumped to "more than sixty" thru 2015, but only one "brand new" brewery expected to open this yr. And while new brewery slowdown apparent within city, "suburban communities such as Lakewood, Evergreen, Castle Rock and Aurora" still have "several" breweries in "planning stages."

Then too, MC's Blue Moon officially opened its RiNo district brewpub on Sunday, reported Eater Denver. Recall, it's a 30K sq-ft space that can brew 10K bbls/yr. It'll keep 24 rotating brews on tap that're "mostly 'brand new'" and can seat up to 400 customers including outdoor patio.  

The 29K sq-ft Williamsburg warehouse home to both Brooklyn Brewery and its largest account, Brooklyn Bowl music venue, is reportedly "in contract" to sell to new ownership, Atlas Capital Group, for $37.5 Mil, according to The Real Deal. Recall, Brooklyn CEO and co-owner Eric Ottaway has raised concern multiple times that once lease is up in 2025, co likely unable to renew at least 2/3 of its lease due to commercial development oppys in the bustlin' neighborhood; a big reason why Brooklyn got well out in front of potential issue with Brooklyn Navy Yard HQ and brewery project, expected to be complete by early 2018 (see May 16 issue). Indeed, The Real Deal sources say Atlas Capital Group "likely to eventually reposition it," since there's nearly 70K "buildable square feet" and could be "as big as" 170K sq-ft "if the developer were to include a community facility component." Yet Brooklyn Brewery seems to be in the same position regardless of ownership. Its lease doesn't expire until 2025, while Brooklyn Bowl lease ends a bit sooner, in 2021. And Brooklyn Brewery still hopes to keep a retail component of its Williamsburg location intact to maintain presence in its original neighborhood, Eric Ottaway previously told CBN.  

 Started as AB distrib in upstate NY college town Oneonta (just south of Cooperstown), Northern Eagle plans to buy its second brewing biz this yr when it acquires small Glens Falls Brewing in nearby Queensbury, the Daily Star reports. Recall, Northern Eagle bought Cooperstown Brewing back in 2012. Since, prexy George Allen has expanded both brewing and distrib biz, including building new facility for its core distribution biz. It's also participated in bringing hop growing and production back to a region once known for the agricultural biz. Glens Falls Brewing is only a couple yrs old, according to paper, founded in 2014 by Richard and John Davidson, also founders of Davidson Brother Brewing further north. Northern Eagle had contracted with Glens Falls for Cooperstown Brewing beers when that co's facility was being renovated. As a distrib, it's also carried Davidson Bros beers since 2012, George told the paper. "When the opportunity to purchase Glens Falls Brewing Company came before us, we knew it would be a good fit," he said. And that co now also ready for expansion, including fermentation, packaging and possibility of biz in non-alc space as well.

A little over 1 and a half yrs after fast growin' Surly Brewing opened sizable $30-mil, 100K-bbl/yr brewery, co already planning to double capacity there, co announced. It'll "extend the fermentation hall" to have space for 14 more fermenters and will start with eight new 600-bbl tanks from ROLEC in South Germany, "slated for use in 2017." Recall, in its first full yr using new production facility, Surly surged 60% to 62,432 bbls in 2015 with more than 3/4 of total biz and more than 2/3 of total growth still in home state MN (see Jun 16 issue). Now after adding several new mkts, including ND, SD and NE this May, WI in Jun 2015 and IA in Mar 2015, co's forced to expand capacity to keep up growth pace. Indeed, "we are excited to dig in on this expansion a little sooner than we had projected but with our new out-of-state markets doing so well, and Minnesota being stronger than ever for Surly, the time is now," said founder and president Omar Ansari. Surly will break ground on this first phase of the expansion project in Aug.  

Big news out of Ballast Point. Two top Ballast Point execs have left the co as of yesterday, including chief commercial officer Earl Kight, who has been the face of the company with distribs for years, as well as prexy/ceo Jim Buechler, top exec of co. On Earl's Facebook page, he talks of "the final Longfin from my man Zach Borba...all good things must come to end...my last day at Ballast Point...on to the next project (s)." This move came as a surprise to many, including one distrib who commented: "Dude…???? WTF???" Both Jim and Earl left to "pursue other interests within the alcohol beverage space," Constellation communications veep Mike McGrew confirmed with CBN this morn, so stay tuned on that.

Meanwhile, Marty Birkel, a 20 yr Constellation vet, most recently chief sales officer of Constellation Wines, takes over reins as Ballast Point prexy, starting today. Marty is already in Miramar, at Ballast Point's facility. Recall, Marty has plenty of beer experience, since he spent 8 yrs as head of sales at Crown Imports. Constellation bringing in a senior and well-regarded exec such as Marty shows "how important and how integral" Ballast Point is to Constellation's future plans, said Mike. And Constellation execs stress "business-as-usual" and continued independence of Ballast Point, even after these high-level departures, "consistent with what we articulated" when Constellation bought Ballast late last yr, Mike added. Earl Kight had reportedly clashed with Constellation over some of his distribution choices. Earl got to choose in most instances, to a number of Gold Network wholesalers' chagrin. But since Marty is Constellation, one could assume that alignment on such decisions will be a near certainty, right? "Marty will make that call," said Mike.

All this while Ballast still flyin' by all measures. Recall, Constellation recently reported that Ballast Point up 60% in latest qtr Mar-May. And Ballast Point virtually doubling yr-to-date in IRI multi-outlet + convenience data in what's become a very tough craft environment for many. Ballast Point has 700 employees and it's "very important we maintain the culture" that's been built, emphasized Mike. That just got more challenging with the sudden departure of Earl and Jim. With Marty, Constellation "very, very confident" that Ballast Point "very well equipped" to "build momentum" concluded Mike, both at Ballast and in Constellation Brands Beer Division overall.  

Tough 1st half put a bit of a damper on craft growth, but small US brewers still expanded production by estimated 8% for 1st 6 mos of 2016, the Brewers Assn reported today based on member surveys. It reflects "a period of maturation," BA economist Bart Watson said in video today, but "there's much to be excited about." That includes continued big jumps in the BA's count of operating US brewers: 917 more than at this time last yr to total 4,656. It also counts about 2,200 brewers in planning. "As long beer-lover demand for craft brewed beer continues to rise, there will be new market opportunities for small and independent craft breweries," Bart commented.

Tracking slowdown of craft growth, +8% is about half the pace that the BA reported at this time last year. Recall, it's also about 5 pts slower than BA's reported craft trend for full-yr 2015, +13%, itself about 5 pts slower than 18% growth reported in 2014. Given increasing variability and dynamism within craft, almost odd that the segment's growth slowed so steadily. But it's also exactly the way Boston Beer chairman/founder Jim Koch suggested it would go during our Spring Conference in May: after reviewing BA's reported trends for past couple years, "well, you can do the math: that takes you to eight in 2016," he said.

Note too that BA's trend is about a point faster than IRI's craft volume trend in multi-outlet + convenience data, just as it has been the past two full years. That's even tho the two datasets track the segment in considerably different ways (one self-reported production, one scanned off-premise retail sales) and that IRI does not capture sales of many of the fastest-growing small brewers or channels where those brewers often enjoy the biggest growth.

As we've reported since late last year, slow growth and declines among craft's largest brands has contributed considerably to the whole category's slow down. Indeed, "tail continues to smoke," Bart told CBN, as smallest US brewers continue to open and expand across the country, digging deeper to make bigger impacts within small geographic areas. Yet two largest BA-defined craft brewers, Yuengling and Boston Beer, both continued to lose volume in early 2016. Indeed, Boston's Sam Adams brand overall could be down double-digits, considering softness off-premise of its larger brands and acknowledgement by exec team that on-premise, generally, worse for Boston's total biz. With Sierra also down thru first half, that's well over a quarter of BA-defined craft currently declining, dragging down overall growth.

A look at top craft growers in IRI suggests another possible pressure point for BA's craft data: 5 of top 6 growing brand families in foodstores butt up against org's definition of craft brewer. Founders is top grower by cases added thru July 10, Ballast Point is #3, Lagunitas #5 and Goose Island #6. Those 4 brand families added over 720K CEs to craft volume thru July 10 in foodstores alone, over 1/3 of IRI craft segment's total growth in the channel. None currently fit the "independent" pillar of BA's craft brewer definition. Then too, #2 volume gainer in IRI foodstores is Coney Island, made of course by Boston Beer. But most of those cases are for Coney's hard sodas. Tho IRI keeps those cases in craft (to not split up Coney brand family, since it does sell other beers that fit more nearly into the segment, like a pilsner and India Pale Lager), others file those and hard sodas with FMBs. BA's "traditional" pillar of craft definition specifically notes that FMBs "are not considered beers." Smaller players would need to be really turning on the heat to make up for all this growth that's excluded.  

Ballast Point is typically rolled into Constellation's total in IRI reports, however recent cut of data CBN saw (put together by Ballast's chain dept) breaks out top brand families to show Ballast brand family still flyin' high; up 99% thru Jul 10 in IRI foodstores. That makes it #41 beer brand family overall and the #12 craft brand family in natl foodstores. It's ahead of Stone (+8%), Goose (+25%), Founders (+64%) and Firestone (+51%) among others; only just behind Bell's (+25%) and Kona (+19%) in terms of $$. So Ballast already represents 4.4% of Constellation's total $$ sales in foodstores and a sizable 22.6% of total $$ growth YTD. Ballast Point is also the fastest-growing craft brewer, it sez.

Again, more than 2/3 of Ballast's $$ sales growth and 63-64% of volume growth comin' from family of Sculpins: Sculpin IPA (+35%), Grapefruit Sculpin (+191%) and new Pineapple Sculpin (incremental $1.9 mil). Amazingly, Ballast Point Grapefruit grew 2x as many cases as original Sculpin and almost as big, while Pineapple Sculpin grew slightly more than Sculpin. Here's how it breaks out: Ballast Point sold 396,000 cases, up 196,000 cases, 98% yr-to-date thru Jul 10 in IRI foodstores. Sculpin at 107,000 cases, and grew 30,000 cases, while Grapefruit Sculpin at 93,000 cases and grew 61,000 cases. Pineapple Sculpin all incremental at 33,000 cases. The 3 Sculpin variants, plus a variety pack (8,000 cases) were almost 60% of Ballast Point volume. Throw in Watermelon Dorado Double IPA and Mango Even Keel Session IPA (about 15,000 cases each) and you get another 7-8% of Ballast Point biz. Big Eye IPA still up 10% and Variety Packs up 48%, accounting for another 14% of volume. Other smaller brands are mostly big pluses.  

All told, Boston Beer execs don't expect to grow volume this year. Its primary growth drivers continue to be outside its two largest brand families, both of which remain soft. For example, Sam Adams brand family is down 6% by volume in IRI foodstores yr-to-date thru July 10, with Angry Orchard family -20%, while Twisted Tea family +13%. That simultaneously increases pressure to correct Sam Adams and Angry Orchard declines just as the co needs to allow for the growth it's getting from Twisted Tea, Coney Island hard sodas (about to start lapping intro) and new Truly Spiked and Sparkling hard seltzers. Splitting that focus ain't easy, especially in a time of particularly low visibility in terms of where the company may end up, even for as short a time period as the rest of 2016. Recall, total depletions down 5% thru 1st half, as we reported yesterday. That improved to -4% YTD thru July 9. But remember that Boston's reported volume trends are "always rounded," CEO Martin Roper said early in earnings call yesterday afternoon. So that slight improvement from 2 more weeks (including July 4 holiday) probably even more slight. Further, execs "not sure we know really what caused that," Martin continued, and "uncertain whether that impact will continue." Indeed, "this is probably as uncertain as we've been at this time of year for quite a while," he acknowledged.

That softer depletions trend than scanned off-premise trends implies sharper declines in on-premise and indie/non-scanned accounts, as SIG analyst Pablo Zuanic asserted on call. "You're conclusions are right," chairman/founder Jim Koch agreed before reiterating difficulty of on-premise volume growth per tap handle as number of handles expands. But Boston's difficulty not causing "any flagging of interest at the wholesaler level in our brands," Jim said. That was response to Pablo's initial question about how tougher trends could be impacting relationships between tiers, especially considering that Boston's trends now not as strong as even largest US suppliers. How about retailers and space devoted to Boston brands there, Cowen & Co's Vivien Azer wondered. "Overall, we're not really losing shelf space," Jim said. "We are losing, slightly, our share of shelf space," he thinks, as retailers generally expanding space for craft. He's seeing a "similar phenomenon on premise."

Distrib Footprints and Valuations Keep Boston from Acquiring So Far; Sam Adams Challenge Boston's looked at possible acquisitions, but so far hasn't moved on many. Both Coney Island and Angel City had "clean wholesaler footprints," Martin said. In more "recent evaluations," he's seen options where the "wholesaler fit was good," but "the price multiples" didn't really "make sense." However, that's "likely to change over time" and the co is "open to it." On the other hand, Boston's "number-one priority is to grow Sam Adams," with #2 to stabilize cider category and Angry Orchard. As it works toward those goals, Boston "may not have much time for acquisitions," Martin acknowledged. In terms of that first priority, Jim highlighted Boston's difficult marketing juggling act. "The challenge is the brand work will have to do both those things: bring in 20-somethings, while maintaining the high-share that we have with Gen X and Baby Boomers, if you will." We'd think any larger, older craft brand currently faces similar challenge.

SAM Stock Up Big On Modest Earnings Beat Due to Decreased Spending: "50/50" Media, Freight Boston's stock +15% today at presstime, highest it's been since March at about $190. That's largely due to modestly beating analysts' earning expectations, impacted mostly by that big double-digit dip in ad, promo and selling expenses during 2d quarter. That $8 mil cut was about "fifty-fifty" from media/ad spend and lower freight costs due to lower volumes, CFO Frank Smalla explained.

"Very Wide Range" of Possibilities for Cider, Including "Related" Hard Soda Impact Cider presents a particular challenge for forecasting because of shift that happened in the back half of last yr, Martin explained. In 3d quarter last yr, "the root beer shipment and depletion wave" came on just as cider "trends started to weaken." Indeed, the latter potentially "related" to the former as "cider drinkers on the fringe of the category were attracted to" similarly sweet beverages like hard sodas. So cider comps get easier, soda comps tougher. And if soda was major challenge to cider, Boston execs see the potential for both AO and category to flatten out or even "track closer to 2014 numbers," at least "for part of the year." But importantly, "we don't know," Martin said, very candidly acknowledging that different analyses "lead to a very wide range in potential volume outcomes." So again, Boston expecting its total volume to come in flat to -4% for 2016.