"No change" doesn't make for the most exciting headlines, but in near constant state of flux in craft world these days, particularly in large California market, stability certainly stands out. The state brewers' assn there stuck to its guns and decided to keep current bylaws in place during special board meeting last week, exec director Tom McCormick explained in letter to membership today. That still means a couple previous voting members, Golden Road and Saint Archer, will no longer be eligible after being acquired last year. It also reminds that just as the national Brewers Assn's board works to decide whether its current bylaws best serve its membership, a growing number of state associations will need to enter into similar, sometimes difficult discussions.

Current Calif Craft Brewers Assn bylaws follow the TTB's lead, allowing in-state brewers that receive the federal small brewer tax credit (under 2 mil bbls) to be voting members, as they have since 1989. After significant outreach to membership and long discussion among 9 board members, CCBA board "voted unanimously" to keep that structure in the interest of maintaining a consistent voice at the state legislature, Tom wrote. So small Calif brewers now wholly-owned by larger brewers that produce more than 2 mil bbls annually in the US will no longer enjoy voting rights in the organization. Reading of fed tax laws does imply that the joint venture Lagunitas struck with Heineken last year does not affect the former's status in CCBA (including CMO Ron Lindenbusch's board seat). Same goes for Firestone Walker's decision to link up with Duvel Moortgat USA (and co-founder David Walker's role as CCBA board veep). Case of Constellation's acquisition of Ballast Point a bit more complex, though, an "it is uncertain at this time if Ballast Point qualifies for the federal small brewer tax."

Decision by board came after concerns from other members that CCBA "would not be able to represent the interest of smaller members," if some members owned by bigger cos. But board "feels strongly that this will not be the case," Tom wrote. He reminds that of the 9 board members, 5 "own breweries producing 16,000 bbls or less." That includes board prexy Natalie Cilurzo of Russian River.

Maintaining this stability is crucial, in Tom's view. "The CCBA has been active at the state capital for over 25 years," he reminded CBN, providing "a single coherent voice for the craft brewing industry that whole time." And amid major shifts in industry, "that voice at the Capitol is more important than it ever has been," he said, because it shows "we know who we are as an industry and as an organization." Years of building its reputation and relationships now means "the members of the legislature come to us," Tom said, when dealing with legislation that affects the alc bev industry.

While it's still very early in Calif's 2016 legislative session, Tom's already keeping an eye on a handful of different proposals, none that look terribly significant but some that could poke a couple holes in current tied house restrictions. As always, he'll work to "protect the privileges of our membership," like self-distribution and taprooms, and "preserve the tax structure" in place, while weighing other potential disruptions. But the org's bringing a "new focus" to "ensuring equal access to the marketplace for all beer." While watching pay-to-play cases develop across country in Mass, Tom reminds that CCBA "strongly support[s] the tied house laws" and will working with state regulators and legislators to ensure no large player is "leveraging their size to unfairly" restrict access of smaller ones.  

Explaining Craft Brew Alliance's "advantaged strategy in an advantaged category," CMO Ken Kunze introduced the co's "Kona+" strategy for mid-to-long term growth. Yup, once lead brands within the portfolio and segment, Redhook and Widmer Bros now relegated to "plus" behind Kona. Kona now fully 45% of CBA volume. CBA exec team very upfront about this "deliberate" plan to pull Redhook and Widmer back and focus on their home markets. Kona now "the clear number-one focus for CBA," its "marquee brand" that speaks to "largest audience across the largest geography." Kona shipped over 352K bbls in 2016, up 17%. That would put Kona brand alone at #7 craft brewer on our list, just behind Bell's and pushing ahead of Deschutes. The brand's added almost 100K bbls in just 2 yrs, +37%. Indeed, big piece of CBA's "future value will be driven by Kona's global volume opportunity," Ken said on today's conference call. It won't just be CBA's lead horse nationally. This yr will see some more explorations of oppys for Kona overseas too, expanding work that's just starting in Brazil. The co's total shipments dipped 0.4% in 2015, a bit below the +1% trend we estimated earlier this year (in Jan 22 issue). That means that Lagunitas slipped by CBA to be #4 national craft supplier, by just about a thousand bbls.

While Kona keeps on cooking, other CBA brands really cooled off last year. Dance between Redhook and Widmer Bros as second-largest in CBA portfolio continued. Widmer slightly outperformed Redhook in 2015, but both down: Widmer shipments -9% to 198K bbks; Redhook -17% to 186K bbls. But again, this is part of plan to rein these brands in to be more "regional brands in targeted geographies," Ken said. The co believes it's now "foundational to have brand strength in home markets." As such, depletions up 6% across all CBA brands in their home markets, "ten points better than the portfolio performed outside of home markets," he added. This pull-back will affect Redhook most, Ken said, but its Washington depletions positive, +2% in 2015. Similarly, lead Widmer brand Hefe STRs grew 3% in Oreg, including flat on-premise biz and off-premise +6%.

These results show that CBA brands "can go home, grow there and be vibrant once again," CEO Andy Thomas said. Throwing a little shade on some other large craft brewers, Andy commented that CBA "not hiding behind" distribution expansion to boost trends. Later, he came back around to "seduction of going an inch deep and then going a mile wide," acknowledging that's something CBA is still "dealing with consequences of," particularly with Redhook. Andy had a few choice descriptions of current craft landscape, including "hyperbole-driven" and full of "short-term noise." Pressed on pricing (CBA expects to get another 1-2% average price increase in 2016), Andy commented that "some of the efforts" from big brewers "to try to stunt craft growth" were, in his view, "met with a big yawn." Playing with price "hasn't proven an effective strategy for them," he said. Ken also explained that part of pricing strength of craft comes from 3-tier system, since both distribs and retailers "play a pretty strong role in terms of pricing." Indeed, "I don't think anybody within that framework wants to kill the golden goose, so to speak," he said, as it's "really driving incremental profitability for them." He also thinks that, should a brewer cut price, others "more likely to pocket that than to pass it along to the consumer."

Partners Out East Help Brewing Efficiency, Financials; 2016 Outlook Big changes also afoot out east, where CBA doesn't have any home markets for current core brands. That's where partnerships with Appalachian Mtn Brewery and Cisco Brewers come in. AMB shipments out of CBA's Portsmouth, NH brewery started with draft back in Q4, joined by 16-oz cans just last month, COO Scott Mennen shared on call this morning. Cisco shipments should start later this year. So CBA expects AMB to become its #1 brand in home North Carolina market, and Cisco to take over as #2 behind Kona in Northeast.

Between adding in these partner brewers, continued work at City Brewing in Memphis and deal with Pabst to start brewing Rainier brands at Woodinville, WA plant, Scott's got a lot of ops to manage. (Recall, Pabst has purchase option to buy that Wash brewery.) But these changes and construction in Portland and in Hawaii a big part of CBA's pathway to healthier financial picture. In 2015, CBA net revs ticked up 2% to $204 mil, while cost of goods sold even and selling, gen & admin expenses up 9%. That squeezed earnings and took a big cut into CBA's operating income, shrinking operating margin to 2.1%. But co continually focused on improving gross margin, which it expanded by over 100 basis points to 30.5% last yr. The co still aims to grow that to 35% by 2017, hitting between 31-32.5% this yr.

Look out for continued "lumpy" quarterly numbers this year, though, Andy said. The co had to shut down production in Portland for construction earlier this year. So Q1 shipments out of Oreg will be down 15-20K bbls, a hefty hit. But more contract/partner volume comes online as the year goes on. So CBA expects total shipments to be up 1-2% in 2016.  

How far can you go with sharing in craft beer? Recently opened combo gastropub and homebrew shop called Black Sands Brewery in San Francisco's Lower Haight area seems to be pushing limit in interest of community, getting going via crowdfunding initiative, hiring spirited amateurs as asst brewers, publicly posting all its recipes and occasionally picking up homebrew customer's recipe for its own lineup.

Black Sands is located at intersection of Haight and Pierce, at prominent cycling node called "the wiggle," ensuring a continual stream of cyclists, and between 2 Haight St beer meccas: Toronado Ale House, just a block away, and original Magnolia brewpub on Upper Haight. Large-windowed corner space that once housed a launderette holds gastropub with open kitchen and open brewing area, while garage in back has been converted to compact homebrew supply store opening onto Pierce and carrying range of items from beginner kits to refractometers. Another garage door can be hoisted open to expose brewing apparatus to passersby on Pierce when beer is brewed or class is taught.

Cofounder/brewer Cole Emde is former fine art preparator and longtime homebrewer who worked in bottle shop in NYC's Grand Central Terminal, apprenticed a short time with KelSo's Kelly Taylor, then served as asst brewer at Willoughby, Ohio brewpub. His cofounder is a childhood friend and fellow homebrewer from design biz, Andy Gilliland, and key backers are operators of Ken Ken Ramen eatery in Mission District. Early on, partners used IndieGoGo to raise money and awareness, offering "Beer for Life" to those who made $100 contribution - 1 free pint per month for rest of your life. They hit their $15K goal in 1 day and doubled it, bringing in 330 lifers who access a custom mobile app to redeem their beers. Only 5 to 10 per week actually show up to claim their bounty, a bit low even considering that one-third of contributors don't actually live in SF. "I wish more people would redeem" their beers," Emde said. But on coupla recent trips by CBN, Black Sands didn't seem to be lacking for paying patrons.

Stance is to "be very transparent and not protective, as in the 1990s," Emde said. Recalling the lengths to which he used to go as homebrewer seeking tips on how to brew a coveted beer, he figured, "why not give literally everything away?" Similarly, given his own experience hounding KelSo's Taylor for 2 years with no more than homebrew experience, "my philosophy now is to hire off the street, people with the right attitude, and teach them."

Any beer deemed worth releasing is published on Black Sands website, with brewsheet keyed to homebrewers doing 5-gal, all-grain batches offered on downloadable PDF. Twenty recipes have been posted so far. Tho some craft brewers offer limited recipe info (and Scotland's BrewDog released recipes just last week, see above), Emde thinks he's among first with full-disclosure policy. Black Sands website prominently explains basis of the biz, that "Beer Is For Sharing" and "not just the final product, but the entire process of making it." Brewpub space "designed and planned so that everything is transparent, from beer to recipes to food," it continues. Those beers lean to hoppy side, often using new or experimental hops, all of them American styles except for a saison that's essentially an American IPA brewed with saison yeast.

Info flow doesn't only go in one direction. After Black Sands team was wowed by recipe for India pale lager devised by homebrew shop customer named Alex Magill, brewpub teamed with him to brew it for customers under moniker Bittersweet Motel. Recipe is duly posted for anyone else to replicate. Hard copies of that and the other recipes also are on hand at the homebrew shop, to serve as a shopping list for would-be clone brewers.  

Tight bonds between commercial craft brewing and home brewing communities by no means being severed even as each continue to expand. Indeed, many brewers working hard to appeal to growing group of hobby brewers often by participating in their brewing education. It's a tried and true craft brew rule of thumb: don't piss off the homebrewers. These days, bigger and bigger companies sticking close to it. Here are just some recent examples. Last week, Scottish brewer soon-to-debut stateside brewing ops BrewDog released recipes for all of their beers online (a bold move for such an established co, tho one that SF's Black Sands Brewery is building its biz on, see below). Around the same time, Ballast Point announced it's sponsoring a national homebrew competition, called Original Gravity, to celebrate its 20th anniversary. Recall, Ballast got its start as Home Brew Mart, a shop selling homebrew supplies in San Diego in 1996. It still operates the shop and has continued to support homebrewers with beers like its Homework Series (for which the co releases a beer as well as its recipe so hobby brewers can try to clone it and see how close they get). Speaking of releasing beers, lots more so-called "SMaSH" beers coming to market these days from commercial brewers. That stands for "Single Malt and Single Hop" and is a traditional homebrewer exercise to help understand flavor development and performance of individual ingredients. Long Trail has released a couple Smash Project beers out east, while Portland Brewing (in NAB portfolio) has seen some success with its seasonal Smash brands.  

Handful of notable developments from world of intellectual property and trademarks popped recently, including an unusual decision rejecting a filed consent agreement between holders of two beer marks. The Trademark Trial and Appeals Board upheld its refusal to register Bay State Brewing's TIME TRAVELER BLONDE due to existence of TIME TRAVELER mark held by Boston Beer's Alchemy & Science subsidiary. That's even though both parties signed an agreement OK'ing similarity of marks, attorney John L. Welch wrote for his TTABlog. Such agreements often "entitled to great weight," Board wrote in decision, but this specific one "does not comprise the type of agreement that is properly designed to avoid confusion and does not fully contemplate all reasonable circumstances in which the marks may be used by consumers calling for the goods."

Key to this decision, the consent agreement provides for a geographic limitation that doesn't quite cut it for the Board, plus a promise for differentiation that it doesn't see. Bay State agreed that it won't sell its blonde ale outside of New England and NY state, but A&S' Time Traveler shandy is also sold in those regions. So that limitation matches neither Bay State's application for a nationwide registration nor the lack of "corresponding geographical restriction" on A&S' registration. Furthermore, Board couldn't do anything with the agreement's promise that the packaging ("trade dress") of each product would help distinguish the brands because the Board got no info on trade dress. In short, the agreement seems to conflict with aspects of the application, the Board found, so "in this case is outweighed by the other relevant likelihood of confusion factors." Importantly, the decision is a rare "precedential" one from the Board, which can be used as basis for other decisions.

Separately and once again, the Board also upheld a refusal to register a mark for beer by denying arguments that the styles of the beers in question are very different and "consumers of craft beers are sophisticated and discriminating," as Welch summarized. Neither of those things mattered. Without specifying "limitations" on the types or styles of beer for which an applicant wishes to register its mark, the Board can not even consider that "there are distinct differences within the range of beers categorized as ales," as the applicant argued. If two marks are identified as "beer" or "ale" then any alleged differences in character or taste are irrelevant here. So too is any argument that craft beer buyers may be more careful than other types of beer consumers. If the application is for "beer," then the Board must assume it's sold like any other beer, which it regularly reminds is a common "impulse" purchase and therefore much more likely to be susceptible to confusion. 

Details of variety 12-pk New Belgium has planned to help celebrate its 25th anniversary arrived this week, explaining new takes on Fat Tire the co worked on with Allagash, Avery, Firestone Walker, Hopworks Urban Brewery (HUB) and Rhinegeist. Cincy press snuck out story last Dec (see CBN vol 6, #95), but NBB will debut the "Fat Tire and Friends" "Riff Pack" in mid-June. It'll come with 2 original Fat Tires, plus 2-each of 5 collaboration beers, riffs on the beer that pay homage while including some signatures of the partner brewer. For example, Allagash brought along its house Brettanomyces strain and Avery's using its own, different Brett yeast. Firestone Walker will hit it with more hops and lager yeast (Fat Tire meet Pivo Pils anyone?), while HUB will take a tart turn and Rhinegeist lightens it up and plays with balance.  

Coupla developments at largest US brewer AB InBev worth noting here, including continued "evolution" of its High End biz unit (note that each of these stories appeared in INSIGHTS Express in some form this week). AB's High End prexy Felipe Szpigel named Andy Goeler as mktg veep for entire division, moving over from role as craft CEO. So Andy adds imports and Shock Top to current craft focus. His role as craft ceo not being filled tho. Rather, prexies and gen mgrs of individual craft companies will report to Felipe. Andy's "had some relationships to these brands in the past," so he calls this a "natural evolution." Recall, AB also spending heavily to return Shock Top to growth after a down 2015 and make it the #1 craft brand. At same time as Andy gets broader role, change will "give Felipe more access directly" to the individual craft brewers now in AB fold.

AB Cuts Deal to Keep Okla Branches, At Least Temporarily, if Modernization Ballot Bid Passes Following up on legislative movement in Oklahoma that could force AB to divest distrib branches there (see Feb 19 issue), AB "has reached a deal" with bill sponsor. It "would allow the company to keep its distribution business in the state if the lawmaker's proposed state question on alcohol reforms passes," reports News OK. It would still allow legislature "to revisit the issue in two years in order to force AB to sell" the branches within 1-3 yrs. So Okla could just be putting off a legislative battle down the road. Current legislation still very much work-in-progress, but likely to include some accommodations for small brewers in state. Recall, biggest piece of bill allows cold, full-strength beer sales in grocery/convenience stores, which breweries, by and large, support.  

Starting today, Southern Tier heads over to the MillerCoors distrib network in Ohio, after 12 years at Premium Beverage Supply, the co announced. "We are looking forward to having our full lineup of brands available to more retailers and consumers across the state," CEO John Coleman wrote in statement, thanking them as well as Superior Beverage Group (MC distribs) prexy John Fleming "for taking a leadership role in making this transition possible." Southern Tier was #20 beer supplier by $$ overall in Ohio foodstores in 2015, IRI data shows, but volume dipped about 5%. (Note too that move not necessarily related to recent formation of Artisinal Brewing Ventures holding co with addition of Victory Brewing, which works with Heidelberg operations across OH.)

As promised late last year, Colo's Odell Brewing will start shipping to Iowa in April. It's working with Johnson Brothers throughout the state, its 12th and the first since the co launched Texas in 2014. Last week, fellow Colo brewer Left Hand announced it'll head to Louisiana starting next week, expanding partnership it currently has with Crescent Crown in Ariz. And this week another Colo craft leader, Avery, announced it's now back in Florida with JJ Taylor. That's as high-end SoCal co The Bruery and sister-co Bruery Terreux re-launched Nevada market with Wirtz this week (just as that operation transitions into big Breakthru Beverage Group, combo of Wirtz and Charmer Sunbelt wine/spirits distribs). Top Kansas brewer Tallgrass Brewing announced Indiana distribution with Cavalier. Calif's Heretic Brewing will move into Massachusetts and Rhode Island with Atlantic Importing, it announced. And Delaware's Mispillion River will work with Stockertown Beverage in Eastern PA. Separately, Scottish barrel-focused Innis & Gunn brands announced it appointed United States Beverage to take over importing rights from the co's own Innis & Gunn USA affiliate. US managing director Dan Deluca stays on to work with US Bev, which starts work with I&G next month, boosting import portfolio that already includes Moosehead from Canada, Tiger from Japan and Damm brands from Spain.  

Since the end of 2013, continued construction at Virginia-based Devils Backbone's "Outpost" facility allowed it to expand production 150%. If it hits 2016 goals, it'll come close to quadrupling in 3 years. Devils Backbone "produced about 62,000 barrels last year and expect[s] to hit the mid-90s this year," CEO Steven Crandall explained to Craft Brew News. That's just barely shy of 65K-bbl goal Steve shared early last yr. The co shipped just 25K bbls in 2013. So it grew volume about 38% in 2015. Its off-premise retail growth was just slightly faster, +44% in IRI's multi-outlet + convenience data last yr thru Dec 27. That put it at #50 overall beer supplier by $$, with about 0.37 share of craft $$, +0.07. Lead brand Vienna Lager $$ +52%.

DBB brought a new 120-bbl brewhouse online last June, Steve told us, while keeping previous 30-bbl system for specialty brews, natch. But expansion ain't over at the Outpost. Handful of 960-bbl tanks will arrive in coming weeks to boost capacity into 150K-bbl/yr universe. Longer-term goal to hit about 250K bbls by 2020 still in place. Addition of North Carolina, Tennessee and West Virginia markets aided in 2015 growth. But the co is "holding pat this year," digging deeper into these and existing Mid-Atlantic/Southeast markets. DBB got about a half-share of craft $$ in North Carolina foodstores during last 13 wks of 2015, making it a top-30 craft supplier there, according to IRI state-level data. Another side of this expansion pace: it "caused us to hire about one new employee every 10 days in 2015," Steve wrote to CBN. Whoa.

New brewing capabilities free up space for Devils Backbone to expand its packaged lineup too, which it'll do in serious way in 2016. Indeed, it'll put somewhere around 15 new beers into packages over the course of the year, Steve shared. It's got 16-oz singles of top brands Vienna Lager and Eight Point IPA, 12 pks of Vienna Lager and 2 new brands in canned 6-pk "Daypack Series" (Cran Gose and Ginger Brau) all coming down pike. Recall, it also released collab 12-pk with 5 other brewers (see CBN vol 6, #95). That may be "heady level of new releases," as Steve acknowledged, but most of 'em have been brewed at DBB's Base Camp brewpub for years (and earned the co some of its many medals). That location also got big $2-mil upgrade last year, adding 400 seats and expanding outdoor space. At same time, DBB also diggin' deeper much further afield: it sold about 20K bbls in England last year. But that's separate from 62K bbls in US as its beer brewed under contract with Banks Brewery there and sold through JD Wetherspoon pub group, Steve shared. The group operates well over 900 pubs in the UK.  

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