Barnes & Noble joins a growing list of chain retailers lookin' to enhance their customers shopping experience and retain foot traffic thru alcohol sales on-premise (i.e Starbucks, Whole Foods, etc.). During an investor call yesterday, Barnes & Noble announced plans to open four new stores in fiscal 2017 that "will feature cafes offering wine and beer in spaces that will be double the size of its typical cafes," reported Wall Street Journal (among many others). The cafes will also "offer a full breakfast, lunch and dinner menu, together with waiter service." First store will open this Oct in Eastchester, NY, followed by Edina, MN and Folsom, CA stores "before Christmas" and one more in Loudoun County, VA. Food is "going to be affordable, not $50 dinner entrees," said chief executive Ron Boire. Currently cafes make up about 10% of total Barnes & Noble sales, which were down 0.8% in latest quarter ending Apr 30. 

Some developments move with the currents, matching overarching trends, while others stand in direct contrast, forcing questions of whether the outlier is just that, an oddity, or an emerging new trend. On the one hand, Rhode Island followed many other states by easing restrictions on direct sales at breweries. On the other, South Carolina bucked general trend of fewer state alc bev enforcement agents by beefing up staff and cracking down on violations. Go fig.

Some small brewers in RI pushed for privilege to sell up to a case of 12-oz bottles/cans to visitors for off-site consumption and up to 36 oz for consumption on site. The group succeeded in convincing legislators to pass a new law to allow just that, as well as open up similar sales for distillers on smaller scale. The bill now awaits the governor's signature.

In South Carolina, the alcohol unit of the state's Law Enforcement Division ballooned from just 2 agents in 2011 to 30 currently, The Post and Courier reports. That's led to stepped up enforcement of alcohol violations, including a not-so-welcome crackdown of the way beer festivals had been organized and operated in the state. About a month ago, state agents told organizers of 1st ever South Carolina Brewers Guild Fest that since brewers must distribute all product thru wholesalers, they may not serve their own beer at the fest, as planned. The group complied. It seems to be a change in the law's interpretation, not the law itself, according to atty and exec director of SC Brewers Assn Brook Bristow. He can't recall the state previously treating "a special event permit holder as a retailer," the paper summarized. It also suggests that alc bev manufacturers of any kind won't be able to directly donate their products to non-profit orgs for special events. "It's always been the policy," Brook told the paper, "but it hasn't been the protocol; that's why the apple cart is upset."

The development is notable for at least a couple reasons. First, it's highly unusual these days to hear about states ramping up agents devoted to alcohol enforcement as many agencies tasked with these issues have lost both funding and employment, just as the number of licensees, particularly in the manufacturing tier, have increased. Second, many industry members, including and sometimes particularly smaller ones, welcome fully-funded, well-staffed enforcement agencies. Nationally, keeping the TTB funded and staffed has been a stated goal for most US trade groups, including the Brewers Assn, for years. And just look to recent developments in California, where the state's alc bev agency has lost leadership, which many believe is affecting its ability to continue investigations into alleged violations.

SoCal Community Seeks to Ban Single Bottle Sales We've heard this before on the city or community level, small governments wanting to reduce crime or public drunkenness by restricting sales of single-serve bottles like 40-oz bottles of malt liquor or small "airplane"-size liquor bottles. But advent of 22-oz bombers of craft brands means those measures now butt up against a different kind of consumption. That's what happened in Lancaster, CA, according to LA Times. New city ordinance bans alc bevs "purchased in smaller single servings" from smaller retailers like c-stores, gas stations and small liquor stores in attempt to keep cheaper drinks "out of the hands of Lancaster's growing homeless population." But wording would also restrict these outlets from selling single bottles of more expensive brands too. Biz owners showed up at council meeting to push back against the ordinance, so the mayor delayed its effective date by 6 months. In that time, amendment can be drafted to reconcile interests of city council and these bizzes.  

New year-round Lagunitas entry, available nationally next month in 12oz cans, pays homage to founder Tony Magee's comment that the co would hold out to be "the last" brewer to package in aluminum. But times change: 12th of Never Ale clocks in at 5.5% ABV, presenting "everything we've learned about making hop-forward beer expressed in a moderate voice," per beer's description. Seeing gains put up by craft cans these days (as IRI's Dan Wandel showed this week, see last issue), hard for major craft brewers to ignore.

On much, much smaller scale, Colorado's Wynkoop Brewing announced it's pulling out of distribution altogether and cutting current can production. It's choosing instead to focus all its energy on the brewpub. Recall, Wynkoop brewpub in Denver and handful of other spots had been connected to Breckenridge biz before it sold to AB. So now that those restaurant-breweries separate, owners focusing on that part of biz instead of distribution. Elsewhere in Colorado, note that Fort Collins Brewing not only revamped its lineup of beers and labels/artwork recently, it's also shifting all packaged production to cans instead of bottles.  

Another small brewer on small brewer deal, this time in WA: Odin Brewing has "reached an agreement that will see Odin take over all of Hilliard's Intellectual Property and select assets," according to press release. Oddly, Odin biz still smaller than Hilliard's and only just got back to 2012 volume peak of 3K bbls last yr after a series of declines, while Hilliard's grew 55% to 4,731 bbls last yr, according to Brewers Assn stats. And gotta note, both Odin and Hilliard's were down in Seattle/Tacoma IRI foodstores last year. Odin just opened a new brewery and taproom in Tukwila, WA this Mar with newfound capacity. It's up about 20% plus in natl IRI multi-outlet + convenience data thru May 1 this year, while Hilliard's brands nearly disappeared from scans in same time, down 63%.

Hilliard's opened in 2010 and just six years later founder Ryan Hilliard decided to sell his biz "and pursue other opportunities." Deal terms not disclosed, tho "it's not often that deals like this come along, and when they do you have to be ready to move on them," sez Ryan. "This deal will allow us to grow our capacity, improve our packaging capabilities and grow share in an ever expanding market," added Odin owner Dan Lee. While some of Hilliard's brewing equipment will be transferred to Odin's facility, the current Hilliard's facility by and large will be put up for sale "as-is," Odin's Wes Peterson explained. "For the time being we will not be entertaining a piecemeal sale of the assets," and "I suspect given the proliferation of breweries in the market that there will be a lot of interest in Ryan's facility."  

Just how dynamic is movement within craft these days? Look to almost dizzying amount of change in IRI's list of top 30 craft brands in its MULC universe, ranked by yr-to-date $$ sales. After just 4 more weeks, over half these 30 brands in multi-outlet + convenience data changed ranks as some way way up and others way down. Start of summer beer sales led to big gain in ranking of Leinenkugel's Seasonal Shandy, from #7 thru May 15 to #3 craft brand thru Jun 12 (tho $$ sales still down 4% YTD). Sam Adams Seasonal now back ahead of Boston Lager YTD (-21% and -11% YTD, respectively), but both actually now behind Fat Tire $$ sales for the year. Note that both those Sam brands doing slightly better for 4 wks and Fat Tire doing much better: -2% YTD and +6% for 4 wks.

Just as Lagunitas IPA (+20.5% YTD) moved ahead of Torpedo (-3%) last year, Little Sumpin' Sumpin' (+47%) now bigger than Sierra Seasonal (+6.6%) by $$ in IRI MULC data. Goose Island IPA still up 143% YTD, biggest growth of the bunch. Blue Moon Seasonal now down 37% YTD, biggest decline of the bunch. They're still smack dab in middle at #15 and #16. Firestone Walker 805 right behind and still about twice its size a yr ago. "All New Glarus Products" (+14%) and Founders All Day IPA (+97%) both up 2 ranks, ahead of Coney Island Hard Root Beer and NBB Ranger IPA (-16%). And since this data now captures beginning of Oberon season for Bell's, that co's Seasonal lineup now ahead of 3 more brands: CIHRB, same co's flagship Two Hearted Ale and NBB's Variety Pk too. So Bell's Seasonal went from #24 thru mid-May to #21 thru mid-June. CIHRB, Ranger, Two Hearted (+24% YTD) and NBB Variety (-3%) all moved back 2 ranks after 4 more wks. Finally, Sierra Variety Pk fell off list of top 30, replaced by Leinenkugel's Grapefruit Shandy, +79% YTD.

These rankings don't mean much alone, but the amount of movement here shows just how tight it's getting, even among craft's largest brands. These 30 brands represented 43.8 share of craft $$ YTD, ranging from Blue Moon Belgian White's 7.1 share to Leinie Grapefruit's 0.55. At the end of January, the (somewhat different) top 30 brands had over 45 share, ranging from 7.75 to 0.57 share each. So as smaller brands gain ground just as overall craft growth diminishes, the segment's biggest players will need to work that much harder to hold on to what they've got.  

Bell's is currently up 15.3% YTD, vp Laura Bell shared during Beverage Industry webinar. That's a bit slower than projected 20% growth for the year at its distrib conference (see Mar 30 issue), but Laura and co understand that in "today's day and age things are getting a little more challenging." So one of Bell's goals is to maintain at least natl avg growth rate for craft, and it's certainly doing that and more thus far. Still plenty left in the yr too as Bell's set to launch several new products (including just launched Quinannan Falls Special Lager), revamped packaging and last of the new mkts for the yr.

Then too, Bell's Two Hearted Ale is now 51% of product mix, Laura noted. That's already up a bit since its distrib conference in late March. And Oberon is 28% of total biz, tho it's only sold half the yr. Indeed, it can be "terrifying" to have half of your biz with one brand that has just one hop, so Bell's is figuring out how to "help keep Two Hearted strong" while "support[ing] our other brands." As Bell's "position[s] ourselves for the next round of the industry" Laura pointed to 3 main factors that will help navigate thru increased competition: "inspiration, intention and integrity." "Beers are made . . . still from inspiration" rather than "looking at a focus group." But at the same time it needs to make "mindful," "data-supported decisions" about their beer lineups. So there's a "balance of what feels right and sort of what makes sense for us." And lastly, integrity is about "relationships," "quality" and "independence" for Laura. As craft definition gets muddied, Bell's is "passionate about being an independent brewery," she stressed.  

On premise still looks pretty grim for US beer in new Nielsen data, launched earlier this yr. Total beer down 3.4% and craft up 3.5% for rolling 52 wks, president of Nielsen CGA joint venture, Jon Collins and Nielsen vp of beverage alcohol practice Danelle Kosmal shared during Beverage Industry webinar. But top 10 craft brands collectively down 4.9% by volume for 52 wks thru Apr 23.

Meanwhile, Jon showed that craft typically has 65% of the taps in Nielsen tracked accounts, compared to just 44% of the draught volume. So tap space is "going to come under challenge" and there "will be some questions there" regarding "need to tweak the number of taps." Yet several bars use variety of taps as a way to "differentiate," Jon acknowledged. And while domestic premiums are under-spaced compared to volume output, they're declining at a whopping 7.8% rate in Nielsen on-premise data. Then too, trends still do start in the on-premise, said Jon, and as several folks continue to say, "the next IPA is still IPA." But another aspect that's emerged is the growth of "less challenging style[s]" such as Pilsners and Kolschs, as well as trendy "fruit & vegetable" flavored brews (tho we've already seen that happening in the off-premise as well).

Separately, typical craft consumers consistently over-index in also choosing other bev alc categories, Danelle shared. Indeed, craft consumers average nearly 24 bev alc brands in their repertoire compared to just 15 brands for the avg US consumer. About half of craft drinkers also drink American lagers, 61% also drink imports and craft drinkers were above avg in nearly all wine & spirits consumption (particularly wine and whiskey). So again, more evidence that it's a "far more fluid, far more competitive market place," said Danelle.  

Craft gains these days aren't what they used to be. On a rolling 52-wk basis, IRI's off-premise data shows diminishing craft gains as 2016 continues. Craft $$ sales still up not-quite double-digits, +9.6% yr-to-date thru Jun 12 in multi-outlet + convenience universe. Cases up 6.2%. Both of those trends just over a point faster than 4-wk growth rate. Zoom out and craft sales still up 12.6% by $$, 8.9% by volume for 52 wks in these channels. But that's 2-3 pts lower than the segment's 15.5% gain by $$, +11.5% in cases for 52 wks thru Jan 24.

Absolute $$ and volume gains for 52 wks continue to shrink for the segment, shown in the chart below. Craft $$ sales grew by over $415 mil for 52 wks thru Jun 12 in IRI MULC data. That's 13.6% lower than the $481 mil the segment gained for 52 wks thru Jan 24. Craft's 52-wk volume gain shrank from over 10.5 mil CEs thru Jan 24 to under 10 mil CEs thru Mar 20 to under 8.5 mil CEs thru Jun 12. That's a drop of almost 20%.

Several parallels and some key differences between craft spirits and craft beer/above premium movements came to light in Goldman Sachs' report on "the Rise of Craft Spirits," part 2 of Goldman's "series" on "the Rise of Craft" products (first was on beer). Right off the bat, Goldman Sachs lays out its projection for craft spirits growth, stating that it could double share to 11% of total spirits volume by 2020, reminiscent of Brewers Assn goal for 20 share by 2020. However, that's including "craft-style" brands owned by major suppliers. Independent craft spirits are just 1.5% of the biz, could reach 4% of volume and 7% of $$ sales by 2020. Which leads to key parallel between craft beer and spirits: definitional disputes based on ownership, production processes and/or size. Goldman defines craft spirits as under 100K gallons per yr with "less than 25% owned/controlled by a non-craft distiller" using "hands-on" production process. Size restrictions and others' ingredients restrictions exclude fast growin' Tito's vodka, which already accounts for nearly 1.5% of the mkt on its own. But American Craft Spirits Association (ACSA) "recently relaxed" its craft definition to 750K proof gallons (or 315,451 cases), so industry members already conflicted about craft size. And of course, several brands such as Bulleit (Diageo), Knob Creek (Suntory) and Buffalo Trace (Sazarac) are owned by some of the largest suppliers. Either way, independent craft spirits as Goldman defines it have +40% CAGR from 2011 to 2015 vs just 2.5% for total spirits. And number of craft distilleries that've opened since 2000 is up 38X, "mirroring the growth in number of craft breweries."

Then too, similar to IPAs in beer, craft spirits gettin' majority of its growth from one style: craft whiskeys. While IPAs have grown to more than 1/4 of total craft beer sales, whiskey accounts for a whopping 37% of total craft spirits. Pricing-wise within whiskeys, "the largest share losses were all large low-to mid-priced whiskeys," (think Bump's report on beer growth by price tiers). Yet largest share gains were from "new flavored introductions" like Fireball and Crown Royal Apple (sound a little like FMBs and hard sodas?). Gotta note, although whiskey is the largest craft style, there's yet to be a single craft whiskey brand that could "meaningfully disrupt the industry" in the same way Tito's has for vodka. Rather, a "number of distillers growing quickly suggests that…as a group they may demonstrate the same characteristics and disrupt the whiskey industry in a similar way." Geographically, there are a higher number of craft spirits suppliers in some of the same craft beer savvy mkts, such as WA, CO, CA and OR. However NY actually has 2d highest number of ADI certified craft distillers, and TX is not too far behind the others. And "a similar distribution gap exists in craft beer…comparable to that of new craft beer introductions 2.5 years ago," noted Goldman.

There are several key differences between craft spirits vs craft beer too, Goldman points out. Most apparent is that large suppliers already offer several "craft-style offerings" that're growing. So larger cos "already possess the characteristic of 'craft spirits.'" If included in the craft category, they currently make up the majority of the category. (Editor's note: craft beer style offerings and any form of acquisitions by larger strategics amount to a little over 1/3 of total craft volume in IRI multi-outlet + convenience data so far this yr). Yet despite fast-paced growth of these larger co innovations, "they have not been material enough to inflect the trends of any individual player," sez Goldman. Another key difference: while craft beer suppliers have been known to proliferate brand/sku count over the yrs, craft distillers are typically only able to have 4 brands at a time due to distilling process time-length and higher costs. In general, start-up costs are higher for craft distillers and "excise taxes are much higher." And there's "potential for stricter regulation on craft spirits designation," i.e "clear labelling of where the spirit originated, bringing the use of external distillate to the forefront." Recall, Blue Moon suit in CA just got tossed for 2d time, lookin' for clear labelling of ownership, so it seems beer ain't goin' that direction anytime soon. All in, lotsa similarities but could these handful of key differences put a different cap on craft spirits vs beer? One thing's for sure, it'll depend on how you define "craft."

Constellation Looking to Buy Craft Spirits Too? "Given STZ's healthy EBITDA growth outlook, we see improving financial flexibility and expect STZ to continue to look towards strengthening its total alcoholic beverage portfolio in part through tuck-in acquisitions in the high end including craft spirits," wrote Goldman. Recall, Constellation Beer Brands Division stated intent to diversify its portfolio thruout all high end segments at its distrib mtg earlier this year. So perhaps Constellation has similar plans for all alc bev high end growth categories. Spirits are just 13% of its W&S biz and just 5% of total co sales.  

Major sports league stadiums across US continue to work with hospitality vendors to figure out how to adapt to growth of craft and, as others before it, Minnesota Vikings' new US Bank Stadium will include a "craft beer portable cart," the team announced this week. Cart formed in partnership with and to be branded with Northeast Brewers and Distillers Association, a local, Minneapolis trade association with members including Fair State Brewing Cooperative, NorthGate Brewing, Insight Brewery and others. Offerings to rotate for each event and "will complement a wider selection of microbrewers that will be available throughout the stadium," according to announcement. That's in addition to Leinenkugel and Blue Moon options, as "MillerCoors is a Founding Partner" of stadium and "official beer partner" of Minn's NFL team. Aramark's M Hospitality will help run cart at stadium that finished construction last week, 6 weeks early, with room for 70K fans when football season starts in Sept.