More and more new NJ breweries continue to open their doors ever since NJ law change in 2012 that allowed (among other things) brewers to sell product after tours for both on and off-site consumption, wrote NJ Biz reporter Meg Fry in two separate, but related articles back in Apr, Perfecting Their Craft and Joining the beer industry can be quite a brouhaha. Since law passed in 2012, number of breweries basically quadrupled. Now NJ has over 50 breweries with 20 in planning that're members of the state Guild and "we are aware of another 20, too," said exec director of Garden State Craft Brewers Guild, Don Russell. So "that's 40 breweries in planning right now that are expected to open in the next 18 months."

Handful of potential legislative reforms are top o' mind for the Guild these days. One proposition looks to clarify language that would allow brewers to at least allow customers to BYOF ("bring your own food") on-site. Another seeks growler sales at farmers markets - "more of a marketing opportunity for brewers than actually making…money." For brewpubs, Guild is "advocating for the right to self-distribute off-premises." And one simply looks to ensure that brewers can air sporting events on TV in their tasting rooms. "It's not written into law that we can't," explains founder of Demented Brewing Co, Tom Zuber, "but the guidelines set by the Garden State Craft Brewers Guild discourage us from doing things like that," i.e. sports on TV, trivia, live music. "The idea behind the guidelines is that if we play by these rules it's more likely that we'll get new, favorable legislation passed for us in the future." Then too, Guild govt affairs rep Eric Orlando believes "New Jersey's red tape, plus the state not making itself more attractive to the craft beer industry will make us miss the boat" on west coast breweries lookin' to come east to build second facilities. Thus far, they've "been building in Virginia, North Carolina, and even states up further in New England because these states have done a lot to try to attract such business." Yet all of the Guild's initiatives are getting pushback from various alc-related interest groups in-state, whether it's the state Wholesaler Association, NJ Restaurant and Hospitality, Licensed Beverage Association and NJ Liquor Store Alliance "to name just a few."

NJ Brewers with Room to Grow Thruout article, several local breweries weigh in on their own aspirations and plans for their biz. Several, such as Forgotten Boardwalk, Demented Brewing, New Jersey Beer Co and Flounder started within the last 5-6 yrs and are still only 1-3K bbls per year. Brewers like Kane (10K bbls) and Cape May (7500 bbls) are a little bigger. And longest-standing and largest of the bunch, Flying Fish did 24K bbls last yr and over $8 mil in revs with 34 employees. Recall, Flying Fish recently sold "majority interest" to The Lynett and Haggerty families, "owners of Times-Shamrock Communications which publishes The Times-Tribune and The Citizens' Voice" (see Apr 12 issue). While some of these brewers are content with staying relatively small and in-state, several are expecting strong growth too. Forgotten Boardwalk will nearly double biz to 3K bbls and reach $1 mil in revs this yr. Demented quickly expanded biz into 200 plus accounts since switching from self-distribution to signing on with Sheehan Family Cos Hunterdon operation. It will start canning in next 6 mos, move into Philly and NYC mkts and expects to "outgrow" current facility within 5 yrs. Kane also will start canning next mo and lookin' to expand barrel-aging space among other things - it now has over 400 accounts in-state all thru self-distribution. Cape May "increasing our footprint with bottled beer" after moving into new production facility. Flying Fish is relatively "content" where it's at but wants to "invest in more partnerships" like its collaboration with Jose Cuervo for tequila infused beer: "it's fun to blur those definitions" founder Gene Muller told paper. All in, tho NJ craft scene is still relatively underdeveloped, several local brewers seem poised to push forward to next phase of growth while new players add to the mix.  

Toppling Goliath entered yet another contract brewing relationship, this time with Wisconsin Brewing to brew its flagship Dorothy's New World Lager, reported Wisconsin State Journal. Recall, Toppling Goliath already has a contract brewing relationship with Brew Hub and reportedly did majority of its production, approx 10K bbls, at its Lakeland, FL facility last year, Brew Hub CEO Tim Schoen previously told CBN (see Jan 22 issue). Brew Hub is also in the process of building MO facility (and searching for other locations across the country), but that's not expected to be complete until early 2017. So perhaps Toppling Goliath lookin' for some extra capacity in the meantime, after it expanded distribution into a handful of new states last year, including WI. "We've had a relationship with Wisconsin Brewing for some time; we've shared a few beers together and really hit it off," Toppling Goliath founder and prexy Clark Lewey told paper. "We felt the best way to expand our distribution into Wisconsin was to brew in Wisconsin." Indeed "Clark and the team at Toppling Goliath will leverage opportunities for both breweries," Wisconsin CEO and prexy Carl Nolen added. "As we look to the future we're considering cross promoting new beers especially made for beer lovers in Wisconsin, Minnesota and Iowa." This is at least 3d contract brand brewed by Wisconsin. It's brewing Pabst's Old Tankard Ale and Not Your Father's Root Beer 10.7% abv version as well. Wisconsin Brewing "produced about 13,000 barrels" in 2015 and currently operates in a 21K sq-ft facility with an 80-bbl brewhouse.  

 Debuting with 60-bbl system in 13K sq-ft space in Santa Rosa, CA, Seismic Brewing hopes to quickly scale up in Calif, the Press Democrat reports. It's led by Christopher Jackson, 26-yr-old youngest son of Jackson Family Wines founders, currently the 9th biggest wine producer in US, paper notes. The new co, separate from the family's wine biz, looks to focus distribution in its home state and "will start with an annual production" of 8-10K bbls. Jackson hopes to sell most of the co's beer on draft, initially, but is also looking into canning.

 There's no better pairing" than beer with oysters, asserted Dogfish Head's Sam Calagione in quick talk with Stuart Varney on Fox Business show today. So Dogfish Head now "partnering with our friends at Hoopers Island," Sam said, on line of "raw oysters that taste smoked" due to packaging with water infused with smoked woods. Oysters now just debuting at Dogfish Head's new Chesapeake & Maine seafood restaurant. But due to deal with Hoopers Island Oyster Aquaculture Co, they'll "eventually" distribute 'em thru Mid-Atlantic region. While expensive, investment "totally worth it," Sam said, as "the exploration of goodness is what we're all about." Recall, Dogfish already sells sausages, pickles, chowder and more through other partnerships.

 Brewers that choose to self-distribute are essentially choosing to run a second business within their business. But with current landscape lots more brewers are choosing to self-distribute 'cause they have to. That was a common theme thruout Craft Brewers Conference panel on self-distribution, featuring folks from 4 craft brewers that have in past or currently run their own distribution operation: senior director of Stone Dist, Chad Heath; Harpoon president, Charles Storey; Left Hand founder Eric Wallace; and IA-based Confluence Brewing founder, Eric Selander. All agreed, running a distributorship alongside your brewing operation is "a standalone business," as Charles put it, and even culture "can be different" from culture of the brewery. It's "all about selling" for a distributor and it's "got to be efficient." And "it's very hard to figure out when you stop," said Chad. But "don't give up home market distribution if you can," advised Eric S. While some smaller brewers have "feeling" that "wholesalers are making all this margin," that's a "misconception," urged Eric W. "They work their a*$&% off to earn that margin."

Each brewer is currently at different stages with their distrib operations. Stone Dist is most developed, having grown from 450K cases to 3.7 million cases and 12 to 118 reps in 8 yrs since Chad joined. Now it carries "about 30-35 brands" and "that seems to be the sweet spot for us." Any more "becomes a bit unwieldy," to him. It also launched Maui Dist in December 2014, which now carries 20 different craft brands. Left Hand's Eric W agreed with 30-35 brand limit, since his operation built up to 29 brands before sellin' to CR Goodman in 2006. Left Hand had "similar philosophy" to Stone, bringing brands like Stone and Lagunitas into CO for the first time. Its distribution outfit was able to "turn it profitable after 4 or 5 years" but "it takes a great amount of energy and focus and resources," he said. Now Left Hand is "pretty much exclusively selling through wholesalers."

Harpoon distributes over half a mil cases to the greater Boston area "and is gradually transitioning to a multi-brand operation," said prexy Charles. It'll bring on its 3d brand "sometime in June" and is also looking into "possibility of bringing on craft spirits." And IA-based Confluence Brewing grew 300% since 2013 thru self-distribution and in Jan 2016 picked up its first outside supplier, West O Beer, founder Eric Selander shared. It's still tough "to get into the far corners" of the state, but it has "pretty nice distribution across the state" with a "fleet" of 5 vans. Indeed, "we're the young kids in the game," said Eric S.

Stone Never Paid Up Front $$ for Self-Dist Brands; Pay-to-Play "Nature of the Beast" During Q&A one brewer that currently self-distributes specifically asked about getting paid by distribs for brand rights, realizing that "if I'm going to give that profit away" to a distrib "they're going to have to quadruple my sales" for it to pay out. Interestingly, Stone has "not paid for any brands that started with self-distribution" since they've been able to "get them that next layer of scale." But "that's been our own personal experience with it," and "if they can't quadruple your business then don't do it, bottom line," he said. Chad said he likes partnering with brewers that self-distributed since "they get it" and "understand" the hardships of distributing.

Then too, pay-to-play came up during Q&A as well. It's "the nature of the beast" said Chad, so "stay true to what you're doing" and "win the war, not the battle," he advised. Confluence gave an example where "this year we got essentially pushed out of our big arena" in Des Moines, IA, said Eric S. After co "fought tooth and nail" to get in it was "put up on the highest concourse" in "a booth that was only open for 5% [or so] of the games." The stadium was planning on moving Confluence down to a cart on a lower level, but "one of the big distributors got upset" and "decided to put in" $$ to help "remodel the concourse. So now we don't get a stand anymore." Stone Dist has been "dealing with it for so long, we're basically numb to it," Chad quipped, to which Eric W retorted "that's a concussion, not numb."

Craft Brew Alliance stock up another 7% today, capping a striking run. Stock up about 35% in just last 2 weeks alone "since the company announced a severance pay policy for executives in case of an acquisition," wrote Reuters this afternoon. Policy disclosed in an SEC govt filing on May 24. Filing said that "in case of a change in control," CBA "would pay each executive officer 18 months of their base salary, plus their annual target bonus and health benefits," according to Reuters. So CBA codifying possibility of change in control.

Recall, AB owns 32% of CBA. Could AB either divest its stake or acquire more? It's questionable whether DoJ would allow AB to buy rest of CBA. But could selling AB stake in CBA somehow be part of a DoJ agreement with ABI? So one source speculated. Yet ABI-SABMiller has nothing to do with CBA, so perhaps that's a stretch. Nevertheless the stock is soaring in 2 weeks since CBA changed its policy. CBA didn't comment to Reuters on severance policy. Whatever is driving that price jump, it ain't sales growth. Craft Brew Alliance volume down 2.4% yr-to-date in IRI multi-outlet + convenience.  

  Continued craft slowdown in tracked scans now has segment volume up just 3%, $$ up 6% YTD thru May 28 in Nielsen all outlet data. Craft volume actually dipped 3.7% for latest 4 wks, as did total beer biz. So craft didn't gain any share of volume for period. And craft $$ didn't fare much better, down 0.3% for 4 wks, gained just 0.1 share. This doesn't include full Memorial Day weekend, so likely that calendar negatively affected trends a bit: comparison to prior year "misaligned," Nielsen wrote. But the way trends have gone thru part of the holiday doesn't promise much improvement to close out the month.

Again, several top "craft" cos/brand families (as defined by Nielsen) dragged total segment down further. Yuengling (-6.5%), Blue Moon (-13%), Sam Adams (-17%), Leinenkugel (-16%) and Shock Top (-7%) declines were anywhere from 5-9 pts steeper during 4 wk period vs YTD, all digging further into the red. Yet smaller breweries are also noticeably slowing down in this data set. "Remaining domestic brewers," which are all suppliers outside of top-9 total beer suppliers (mostly craft), saw volume grow just 3% and $$ up 7% for 4 wks, compared to volume up 10% and $$ up 15% YTD. So there are clearly some tuffer trends even within the tail. All in, as craft continues to struggle, total beer biz continues to sag too. Lotsa noise in the numbers these days, but it sure ain't music to most ears.

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Reyes Bev Group, largest US beer distrib, should sell over $3 bil worth of beer this yr and around 150 mil cases, before any additional deals. It sold over 68 mil cases in Southern Calif alone in 2015 (over 20% of Calif volume). RBG has distribs in 4 of top 10 metro areas (parts of LA, Chi, DC and Miami). Presently, fully 70% of RBG gross profits and 60% of its volume nationwide generated by above-premium brands, said RBG West prexy Tom Reyes. As consumer preferences shifted, RBG benefited mightily from a sea-change in US beer biz, i.e. trading up. RBG less than 15% of revs (tho much higher % of profits) for one of largest US private cos, Reyes Holdings, which had revs over $23 bil in 2015.

Recall, Reyes family first purchased small 400,000 case Schlitz distrib in Spartanburg, SC in 1976. Pictures of that warehouse on walls in its showcase facility for Harbor Distrib Huntington Beach, CA. Recall, RBG paid over $50 mil for 500,000 sq ft building, according to local paper. That's before totally revamping it and likely spending tens of millions more to make this perhaps most efficiently designed and aesthetically pleasing beer distribution warehouse we've seen. Upon entering, one views inside of 50,000 square feet of cooler space, through floor-to-ceiling glass windows. This cooler space is bigger than entire original warehouse Reyes bought in SoCal in 1989, mktg veep Ned Hall told INSIGHTS. Harbor acts as natl hub for most RBG shared services throughout US, including functions like purchasing, payable, receivable, accounts, payroll, pricing. Those functions and more housed in 100,000 square feet of offices. Harbor's huge warehouse delivers 18 mil cases, with 1.3 mil cases on hand in inventory when we visited.

RBG measures everything, displaying on monitors an array of rotating KPIs (Key Performance Indicators). RBG almost 98% error free in delivering its orders. When it began "Perfect Order" program, it was around 70%, and that was considered good for a distrib. Another example of RBG's efficiency: when it bought Fla distrib Gold Coast late in 2014 (its last big beer deal), it had returns of about 5% of volume, over 1 mil cases. Now that's down below 1%. It has "high expectations," noted ops veep Mike Vaca and clearly demands a lot from employees. But Reyes also spending money, effort and time to make RBG a good work environment. Harbor has lotsa human touches, including Tiger Joe's pub with extensive outdoor area, bocce ball court, gym with running track, lotsa machines, classes, etc. And Harbor has very low driver turnover. Of Harbor's 80 drivers, it only expects to lose 1 in a given yr and would be "shocked" to lose 2, said Mike. RBG also measures itself on employee engagement, which is way up at Harbor. In general, RBG made "huge jumps" in its investments in people in last couple of yrs, said spokeswoman Molly Reilly as it looks to get on "front edge with the next generation of leaders."

Later, we drove by original warehouse in Long Beach. RBG co-founder Jude Reyes and Ned worked side-by-side there after Reyes purchased 4-mil-case Coors distrib Pingree in '89. In early yrs, they contended with floods, riots, fires and deep discounts. Then they got Corona. The rest is history. A joke but with more than a grain of truth. RBG will sell over 40 mil cases of Constellation Brands in 2016.  

While most measures suggest that beer biz off to pretty good start in 2016, there's a notable uptick of negativity on health issues for all alcohol and questionable govt actions that echo past attacks on even moderate drinking. This occurred amidst what we've called a "rise" in regulators' scrutiny of industry. Toss in repeated references to alcohol being "less safe" than pot and policy pressures on beer and alc bevs ratcheted up. And that's just as the industry's biggest public health critics will amass in DC next week at "Alcohol Policy 17," the irregular conclave of researchers, advocates and govt types who meet to swap research and advance policy measures to raise price, limit access and restrict alc bev mktg. Several recent developments will fuel their fire:

• Recall, US govt's revised dietary guidelines eliminated language that linked moderate drinking with heart health and reduced risk of all-cause mortality. They detailed "many" groups who should not drink. CDC then added another huge group who shouldn't drink: approx 3 mil women of child-bearing age not using contraceptives.
• UK govt went even further, raising skepticism about benefits of moderation in its revised drinking guidelines. In effect, UK's Chief Medical Officer tossed decades of research and revived notion that "all drinking is risky."
• Most recently, a group of researcher-advocates published a widely-covered re-analysis of earlier studies. It concluded: "A skeptical position is warranted in relation to evidence that low volume consumption is associated with net health benefits." The well-established "J-shaped curve" showing light and moderate drinkers live longer than abstainers and heavy drinkers, they claim, does not exist.

CDC's advisory, UK revisions and rejection of J-shaped curve came under swift and withering attack from outside observers, including indie researchers who defended J-shaped curve and links between moderate drinking and heart health. Still, much mainstream media coverage voiced new "skepticism" without question. So far, no policy action, but attempts will no doubt be made to leverage this skepticism to effect change and bash the business.