Steady rise of craft drinkers in major metro markets continued throughout 2014-2015, surveys by Scarborough Research show. Over 43% of 21+ adults in the 10 largest US cities reported any beer drinking in the last 30 days and over 16% of those folks said they had "any craft/microbrew" in that time. That's up over a point since surveys taken the year prior and up from just 9% in 2010. But the size of the group varies pretty widely from market to market. Over 20% of beer drinkers reported recent craft consumption in 4 markets last year, including almost 26% in San Francisco. That number's been pretty volatile last couple years, but it's back above level in 2012-2013 surveys. And over 20% of SF beer drinkers said they had a Sierra Nevada too, up 4 points. That's just slightly more than popularity of Bud Light and Blue Moon in the city. About 12% said they had an Anchor Steam recently, 10% reported recent Sam Adams consumption. (Note these survey results do not measure volume.)

In Boston, 23.5% of beer drinkers chose at least one craft beer in month before survey, up near 5 points. But that highlights one of oddities of this survey: most-named brand by Boston beer drinkers was again Sam Adams, reported by over a third of beer drinkers. In many of these markets, a single craft brand was reported by more drinkers than "any craft/microbrew," indicating at least some confusion still. Other big hometown brand, Harpoon, continues to perform better in these surveys. It was #4 most popular brand in Boston, up 6 ranks in 3 years, reported by 14.5% of beer drinkers. Sam Adams Light also appears on list at #10, but that's down 3 spots and reported by less than 10% of beer drinkers.

Almost 23% of beer drinkers had a craft brand recently in Chicago, up 3 pts. Sam Adams was reported by almost 14% of beer drinkers, down near 2 points, while over 12% of beer drinkers had a Goose Island there, up over 2 pts. Washington DC was only other market where more than 20% of beer drinkers told Scarborough they had a craft beer recently. Almost 22% said so, about a point higher than the 21% who said they had #2 brand Sam Adams recently and about identical to group of folks who had a Yuengling, #1 brand. Population of craft drinkers inched up a touch in New York to 14.4%, Houston to 13.6% and Dallas/Fort Worth to just over 10%. That's lowest number in all 10 markets, the last one to cross into double-digits. The percent of beer drinkers who remembered drinking any craft in last 30 days dipped a bit to 12% in Atlanta and LA and 13% in Philly. But local brands did better in some of those markets. Between 19-20% of beer drinkers in both Texas markets said they had a Shiner Bock recently, #3 brand in Houston, #4 in DFW. In Philly, almost 17% of beer drinkers had a Sam Adams. In Atlanta, about 11% of beer drinkers had a SweetWater and 10% had a Sam Adams.  

As Firestone Walker plans to grow biz about 28% to 340K bbls in 2016, it will expand into 8 new states - KS, MT, ME, VT, CT, NM, IA, NE - by May this year, along with new territory in Canada and Sweden, co announced. Now that it has "additional flexibility" capacity-wise, Firestone mainly "just filling out some places where we think we can get some footprint cleaned up," sales & mktg veep Dave Macon told CBN. Expansion into Midwest is viewed as "one of our biggest areas of opportunities, especially considering our partnership [with DuvelUSA]." Indeed, Firestone currently only in MO and Chicago area, IL in Midwest region. So Firestone will enter KS in Mar with Central States Beverage and Crown Distributors ("more regions to follow"), as well as IA and NE in May. "Potential is there" for Firestone to brew Midwest production at Boulevard facility and "I know they've been discussing…but that's definitely down the road," said Dave. Recall, Firestone will brew select Boulevard beers at its Paso Robles facility this yr for west coast distribution (see Feb 2 issue). It recently added 8 new tanks that "bought us the additional room from where we were last year" and expects to break ground on Paso Robles facility expansion in May, taking anywhere from 18-24 mos to complete.

Out west, Firestone will enter MT in Mar with Cardinal Dist, Mountain Country Dist, Eagle Dist, Briggs Dist, Summit Dist and one more in Kalispell/northwest MT area to be determined, as well as NM in Apr. Both MT and NM are "very important" to PacNW and SW grocery chain networks, and "it starts filling out the west for us," Dave noted. Firestone also filling in its 3 remaining northeast states starting with Sheehan Family Co's Craft Beer Guild in ME and VT, still deciding on CT distrib. Firestone is with Sheehan Family in most northeast states with exception of Philly area, PA and NJ, Dave acknowledged. Lastly, Firestone will also expand its export biz to Sweden with Spendrups Byrggeri later this mo and Canada (Alberta, Saskatchewan, Manitoba) with Horizon Beers. While it's already "dabbling in the UK" and Germany, this is co's "first real attempt to get our handle on" export biz and there's "an awful lot of opportunity," said Dave. "If you don't have export as part of your strategy right now, you're already behind," tho "shouldn't be first and foremost." Going forward, Duvel "certainly going to play a role in certain geographies" too (Horizon Beers is also Duvel's Canadian importer, for instance).

805 up 71% in Jan, On Pace for 150K Bbls This Yr; New Products/Packaging for Easy Jack, Merlin Nitro, DBA, Rotating Hoppy Series Firestone 805 Blonde Ale still zoomin' in Jan amid slower overall mo for the industry, Dave noted; up 71% with an extra boost from draft-only rollouts into AZ, NV and TX. It's definitely a "big part of our growth in CA" and in new states "so far the draft rollout has exceeded expectations," he said, adding "velocity is fantastic." Typically Firestone does draft-only rollout "for the first 60-90 days" before package rollout begins, since "we try to time that with chain resets." Net-net, 805 is currently around 45% of Firestone's total biz and "once package comes on line it will probably grow." Indeed, 805 up 161% in Jan scans (see above), still all in Calif and is more like 67% of total volume and 62% of total $$ in national IRI MULC to start this yr. So all things considered, 805 will likely be over 150K bbls this year on its own, with vast majority in CA.

Then too, Firestone launching several new products and packages this yr. Recall, Easy Jack IPA will be available in 12pk bottles and cans starting this March. Last yr was Easy Jack's first as a year-round offering, and it easily quadrupled to 200K ce's, roughly 5% of Firestone's total biz. And this yr co expects Easy Jack to grow "double-digits." Notably, "one of the cool things we did" with Easy Jack was to leave out "session" on the packaging, he added. "The word 'easy' sort of said it all." Firestone also added nitro version of its Merlin Oatmeal Stout year round on draft as well as a version of DBA nitro later in the yr. Firestone partnered with local cookie company, Brown Butter cookie co, to pair with Merlin nitro for on-premise promotion dubbed "cookies and milk": they "pair amazingly well." And since Firestone is celebrating its 20th anniversary this year, it will give extra "attention to the beer that got us here," Firestone DBA. First keg of DBA nitro will tap at their 20th anniversary celebration at the brewery and Firestone will do various "on premise promotions" of nitro version and unfiltered DBA in select mkts. And Firestone created new rotating hoppy series called "Luponic Distortion" that looks to "make music out of different hops." Available in 6pk cans and on draft, it'll change brews nearly quarterly, tho they're "not tied to any season" and "hop combinations will change" to get "very different beer" for "each rotation."  

Today, Bell's announced officially that it will be going to 3 more new states this yr: KS, NE and SD. That followed AR earlier this week. Bell's also expects to add LA, MS and maybe even 1 more in 2016, plus start to export more, Larry Bell told CBN this week over a Two Hearted Ale in St Thomas, while we were both attending the MI/IL/WI beer distribs' convention there ("workcation"). No surprise then that Larry and his vp and daughter Laura expect to easily pass 400,000 bbls in 2016. That would be less than a 10% gain (Bell's up 16% to 371,000 bbls in 2015). The quickened expansion pace is partly because Bell's simply has the capacity but also a little bit because of "strike while the iron is hot," Larry said. These 3 new states will bring Bell's to 27 + Puerto Rico and DC. Bell's is expanding its brewery another 210,000 square feet. Its expansions in recent yrs will cost it a total of $70 mil. Ultimately, its goal is to have 1 centrally located brewery that can someday brew as much as 1 mil bbls. Bell's currently has 475 employees.

Of the top 10 craft brewers, Laura pointed out that Bell's has both the "smallest footprint" and the "highest average price" which is a pretty nifty combo. And it is one of the few leading craft brewers (Sierra being the other that comes to mind) that has embarked on a process of generational succession and proudly proclaims that it's family-owned. Bell's "began in 1985 with a quest for better beer and a 15 gallon soup kettle," notes press release. "100% family-owned and independent, we strive to bring an authentic and pleasant experience to all of our customers through our unique ales and beers."  

IRI's newly defined craft segment saw $$ sales grow 14% and gain 0.8 share to 10.9 of total beer in IRI multi-outlet + convenience data YTD thru Jan 24. New definition includes Blue Moon, Shock Top and Leinenkugel brand families while switching out Not Your Father's Root Beer to flavored malt beverages (tho it kept Coney Island Hard Root Beer as craft). Blue Moon, Shock Top and Leinie collectively add 1.7 share of $$ to the category, primarily from Blue Moon's full share. And since both Shock Top (-11%) and Leinie (-4%) each continued to decline in Jan, they certainly dragged overall craft trend down a bit. Without all 3 of 'em, craft $$ would have gained 0.9 share to 9.2 of total biz and would be up 17%. But either way you look at it, category growth has slowed down a bit in IRI scans to start the yr.

Meanwhile, still a mixed bag for top craft cos in Jan. Blue Moon, largest craft co in this data set, saw solid 6% $$ gain thru Jan 24, slightly slower than last yr's trend. Sierra jumped up 11% headin' into tuff Q1 comps. Sam Adams top brands and New Belgium co continued to decline: Sam top 4 brands (Seasonal, Boston Lager, Variety Pk, Rebel IPA) collectively down 7% to start the yr (slightly better compared to last handful of mos thanks to much improved Variety Pk trend, +3%); and New Belgium down 3% goin' against 17% gain in Jan 2015. Lagunitas "slowed" to 32% growth, tho still had highest $$ gain of any craft co aside from Boston subsidiary, Alchemy & Science. Lagunitas jumped ahead of both Craft Brew Alliance (-2%) and Gambrinus (+4%) in scans. Editor's note: to get a picture of Boston Beer's total beer trend, if you combine Alchemy & Science and Sam Adams top brands, sales are up 8%; also, Sam Adams Rebel Grapefruit IPA and Nitro Series should provide an extra lift this yr.

Deschutes kept up strong 20% plus growth pace that it closed last yr with, while Stone (+19%) and SweetWater (+9%) each slowed. Impressively, Firestone Walker (+78%) and Founders (+64%) each saw strong enuf growth to jump ahead of Bell's (+19%) in early 2016. Duvel Moortgat USA (w/o Firestone) accelerated to 23% growth to start yr with extra boost from several new Boulevard mkts. And Dogfish Head saw both volume and $$ up 6%. Gotta note, collectively all these cos listed above lost 2.7 share of craft $$ as more local and regional cos continue to snag share of segment. In fact, 8 of the top-10 craft cos collectively lost a whopping 6 share of craft $$, while A&S (+1.3), Lagunitas (+0.6), Firestone (+0.5), Founders and Goose (each +0.4), Deschutes (+0.2) and other top cos made up a little under 60% of that.

Different Top-30 Craft Brands Picture With New Def'n; Hot Brands Still Hot, Tho Fewer Up Strong to Start Year Top-30 craft brands in scans sure look different with the craft definition change. Blue Moon has 3 brands in top-30 including largest of the bunch, Belgian Wheat, still 2X larger than next closest brand (Sierra Pale), as well as Blue Moon Seasonal (#21) and Blue Moon Variety Pk (#26). Belgian White started off Jan strong, $$ up 13%, however both other top brands took tuff hits: Blue Moon Seasonal down steep 44% and Blue Moon Variety Pk down 19%. Shock Top Belgian White ranks 7th in terms of $$ sales, just ahead of Lagunitas IPA and just behind New Belgium Fat Tire. Yet it continued to decline in Jan; $$ down 5% thru Jan 24 while Lagunitas IPA up 27% and NBB Fat Tire down 2%. It'll be interesting to see if Shock Top's Super Bowl ad helps improve trend in next 4 wk period. Lastly, Leinie Shandy and Leinie Seasonal make the top 30 list at #14 and #27 respectively. Leinie Shandy notably improved trend after a tuff Q4 2015, tho volume still down 3%, $$ up 2%. And Leinie Seasonal $$ down 12%. All in, these 6 brands replaced Sierra Variety Pk, Shiner Seasonal, Kona Longboard Lager, Bell's Seasonal, New Belgium Seasonal and Not Your Father's Root Beer from last yr's top-30 list. But top brands have changed over even more compared to last Jan: SweetWater IPA, Harpoon IPA, Deschutes Mirror Pond Ale, Goose Island 312 Wheat and Magic Hat #9 were also top-30 brands in scans back then, tho each lost their spots thruout last yr.

Then too, the hottest brands remained the hottest brands in Jan. Especially Goose IPA. It accelerated in Jan to +320%, shooting past several brands in its path to become #16 top craft brand and #5 IPA in scans by $$ (#14 craft brand and #4 IPA by volume). That's only just behind another hot IPA with Chicago ties - Lagunitas Lil Sumpin' Sumpin' (+66%). Firestone Walker 805 Blonde also accelerated in latest period; up 161% thru Jan 24 and now the 19th best-selling craft brand in scans. And Founders All Day more than doubled its sales, +120%, just behind Stone IPA (+19%). Tho that's a fair amount slower than its 2015 growth rate. Interestingly, each of these fast growin' brands' avg prices per case were down more than any other top-30 brand, other than Rebel IPA (-$2.58 to $31.12 per case): Firestone 805 down $1.97 to $32.51 per case; Goose IPA down $1.29 to $33.72 per case; Founders All Day down $0.97 to $30.24. Other honorable mentions: Lagunitas IPA continued to slow, tho still up 27%; Sierra Seasonal jumped 27% with new spring offering, Tropical IPA; and Bell's Two Hearted Ale maintained solid 35% growth. All in, fewer top brands growin' strong to start the yr. Only 12 of top-30 brands up double-digits plus (including Coney Island Root Beer, still all incremental) while rest are either up mid-to-low single digits or down. And 11 top brands are declining: including everything from Sam Adams Rebel IPA and New Belgium Fat Tire (-2%) to Widmer Hefe, Redhook Longhammer IPA (-5%), to steeper NBB Ranger IPA and Leinie Seasonal (-12%) and steepest, Blue Moon Seasonal and Variety Pk (see above).  

Massachusetts ABCC handed down tough decision in pay-to-play case against Craft Brewers Guild, a Sheehan Family Co, and TTB clarified its position on category management practices, effectively killing Kroger's plan with Southern Wine and Spirits, both in just the last 24 hours. Both rulings come down hard on much-discussed practices, often seen as being legally fuzzy or difficult to prove after years of questions, either formally posed or in private discussion. Many questions still remain about exact fallout from rulings: Craft Brewers Guild has option to appeal among others; TTB handed down general ruling about practices without mention of any specific violation. However, taken in tandem, these developments indicate that though much slower moving than industry, regulators still pay attention and will act when they deem it necessary.

Importantly, both rulings indicate that the regulatory agencies preparing them believe the respective laws are cut and dry, regardless of arguments to the contrary. The MABCC followed "an extensive paper trail" to show violations, not contested by CBG, which instead argued that regulations in question are no longer in effect, overly vague and being selectively enforced, for example. But MABCC repeatedly expressed confidence in rulings, regulations and violations. Similarly, TTB acknowledges that "the language [of regulation] is clear," even if it's been awhile since it was written. Exception that allows wholesalers or suppliers to offer shelf plans or schematics "as a stand-alone marketing tool" with "little or no intrinsic value" covers that practice and no more. Time since any regulation in question was written or last enforced totally irrelevant, it seems, to both MABCC and TTB. And considering violations found by MABCC investigation and TTB's "review of current practices," both see trade practices far beyond those they deem allowable. (Portions of the following appeared in INSIGHTS Express earlier today.)

Mass ABCC Ruling Could Suspend CBG License for 90 Days; "No Disruption" CBG Sez Decision to suspend Massachusetts distrib Craft Brewers Guild for 90 days based on violations of so-called "pay-to-play" came down today. It "sent shockwaves through the industry," said one sizeable distrib. The "unprecedented" and "unusually harsh" decision, as Boston Globe called it, finds that CBG "engaged in a pervasive illegal enterprise involving numerous retailers and corporations that spanned at least five years," according to ruling. It lays out damning set of evidence, including invoices, check requests and checks totaling about $120K to 12 retail licensees in Boston, under auspices of "brand allocation," "marketing support," and/or "menu programming." MABCC found CBG paid between $1000 to $2000 per committed draft line or a $10-20 rebate per keg of certain brands. Paper trail summarized by ruling highlights numerous suppliers, including some of largest payments in support of dedicated Yuengling draft lines and repeated rebates totalling many thousands of dollars specifically naming "Lagunitas," "Sierra," "Wachusett," "Cisco," "Magic Hat," "Brooklyn," "Smuttynose" and many more.

CBG has a few options. It can appeal to state court within 30 days. It may also petition the ABCC "to accept an offer in compromise," within 20 days. That compromise would include payment of a fine totalling 50% of gross profits for 90 days. "We are in the process of reviewing the decision with our legal counsel," said Craft Brewers Guild gm Michael Bernfeld. "Regardless of which option we exercise, there will be no disruption in our business and we will continue our high level of service to our valued customers," he added. Lotsa balls in play at this point, as ABCC still investigating 4 more allegations of pay-to-pay, according to Globe, and retailers in question will get hearing later this month. Meanwhile, Mass franchise law allows for termination of distrib for good cause, including for "engaging in improper or proscribed trade practices." Since Sheehan has indicated that it will either appeal or pay fine, and that there will be "no disruption" in biz, one could assume it won't face terminations. But again, multiple possible scenarios for how this plays out.

TTB CatMan Ruling Likely Puts Kibosh on Kroger/SWS Plan; Other CatMan Activity? Lines clearly drawn between "simple" sales "tool" in form of shelf plan recommendations, allowed by current exception in tied house rules, and "additional services that far exceed that exception," according to TTB ruling handed down yesterday. "Additional services constitute 'things of value,'" it goes on, and therefore "a means to induce." Those services could include taking on "a retailer's purchasing or pricing decisions" or shelving decisions for "a competitor's products," "receiving and analyzing" private info on competing products for retailers, giving market data to a retailer and more.

Recall, TTB looked at CatMan practices after letters from many industry members about Kroger's planned "Planogram Center of Excellence," where Southern Wine and Spirits was going to collect and provide all kinds of data and support to Kroger, ostensibly paid for by "voluntary" contributions from suppliers and distribs. This ruling then is a "resounding thumbs down to Kroger," veteran alc bev atty Richard Blau told CBN. Yet, TTB does not specifically mention Kroger or its proposed plan in ruling. And many questions remain about whether any other industry members provide those "additional services" under current CatMan programs and whether TTB will pursue them as potential violations.  

Late in 3d quarter, follow-up to last year's inflammatory Budweiser Super Bowl ad, "Brewed the Hard Way," took similar thematic tack with a couple key (and clever) distinctions. The new ad, "Not Backing Down," again works to instill pride in Bud drinkers with a driving beat underscoring images of power and strength, ostensibly showing viewers what Bud is while describing with all-caps titles what it isn't. Oddly, considering ad's name, it's notably less harsh on craft community. Whereas "Hard Way" depicted (in arguably less-than-positive way) mustachioed hipsters "fussing" and "dissecting," this yr's take doesn't even consider them. Instead, the "playfully rude, macho without bullying" spot, as Ad Age described it, speaks directly to beer drinkers attracted by brands that are "Not Small," "Not Sipped" and "Not Imported," as the text announces. Yet as many picked up in commentary after the ad aired, brewer of Bud, AB, also brews plenty of brands now that fit those descriptions too: its recent craft acquisitions are all pretty small, the co happily promotes sipping its high-end Goose Island brands like Sofie or Bourbon County Brand Stout and it's still investing heavily in Belgian import brand Stella Artois and others. Strikingly, pronouncement that Bud is "Not for Everyone" falls in direct contrast to new Bud Light spots, which also debuted at Super Bowl and argue that "nothing brings America together like Bud Light." Further, lemon wedge flicked unceremoniously from a glass by older drinker in "Not Backing Down" recalls orange Wedgehead character that made its debut earlier in game promoting Shock Top, a brand AB wants to grow into #1 craft brand in US (see above). But so goes the duality of selling multiple brands to the same audience.

However, memory of sting from last year's ad still seemed to be pretty fresh for some observers, who again felt mocked by this year's follow-up. Plenty of media outlets sympathized with small brewers, headlining the perceived mockery or "taunting." And plenty of industry members responded too. Handful of hashtagged tweets from breweries announced they too would not back down. Short video re-make of the ad from Speakeasy took oppy to put its brands in front of all the eyes paying attention. And since Bud ad also touts that brand is "Not a Hobby," director of American Homebrewers Assn, Gary Glass, sent out statement acknowledging that Bud's pronouncement was "not really" surprising, while noting that it's probably "the antithesis of homebrew: beer that's made to be as light in flavor as possible and to never change." Yet, whereas offensive lines hit craft community hard in 2015, tone of both ad itself and responses to it seem much less combative. Cheers to that.  

After nearly tripling biz to 31,470 bbls sold in just its 3d year in biz (see Jan 6 issue), Rhinegeist Brewing is still in process of expanding distribution in its home-state, Ohio. Co plans to enter Toledo, Lorain and Southeast OH mkts this spring, as well as Cleveland area this summer, co-founder Bryant Goulding noted in letter sent to recap 2015 as well as highlight what's ahead in 2016. Rhinegeist is "in the midst of choosing distributor partners," which will mark its first distrib partners in its home state. Indeed, Rhinegeist touted its self-distribution model that sold "more than 25,000 bbls this year" in OH with "fleet of (12 and counting) Sprinter vans" and "box truck and 54' semi" along with Columbus warehouse that it built last yr. Self-distribution "continue[s] to be a foundational element in our growth," said Bryant, adding that it allows for more innovation to help "shuck and jive and maintain flow with rotational accounts." Seems there's still plenty of run room for Rhinegeist at home since it only has 35.6% ACV distribution in IRI foodstores thruout OH and is already 14th largest beer vendor there (see above). Recall, rest of Rhinegeist's volume was in KY with Heidelberg after law change forced co to sell its KY distributorship last yr. Once brand shifted to Heidelberg (in July) "they immediately doubled our sales and sold just shy of 100,000 CE this [past] year."

Meanwhile, recently released cider line, Cidergeist (just launched in Oct) is already expanding distribution outside of home-state. Cidergeist will enter MA statewide with Mass Beverage Alliance starting with Boston on Feb 25 and rest of the state starting Mar 1. And it plans to enter NY in May. So Rhinegeist takin' a much different approach to cider distribution compared to its beer brands, which are still only available in parts of OH and KY. But that's not for lack of local success. Cidergeist sales took off immediately, already accounting for "just under 20% of our package sales" in 3 mos time, Bryant shared, adding "our success locally with Cidergeist gives us big hopes for this brand and we're planning on running deeper with it as this year unfolds." He's bullish on cider category as a whole too, since cider category slowdown was mainly from top-6 producers at "85% of the market." Outside of that, "we're seeing robust growth of the more regional players," around +40% in 2015.

Truth IPA is 40% of Sales; More Space and More Experimentation Rhinegeist portfolio is led by flagship Truth IPA, which was "about 40% of our business, followed closely by Cougar Blonde Ale and Zen Session IPA." Its seasonal program had "strong sophomore year growth" too, with "addition of a Rotational Pale Ale" - Bryant and co "are bullish on the classic Pale Ale style." All in, Rhinegeist released 76 different brews using "many of these to learn about new hops, help educate ourselves (and the market) on new hops and push our own brewing boundaries stylistically." And "each month we try and release a different malty/dark as well as a Belgian inspired brew." Recall, Rhinegeist spent much of last yr expanding capacity, which is now up to over 80K bbls/yr after adding 60-bbl Braukon and 12 new 240-bbl fermenters thruout the yr. That's not only "running room for growth" but "experimentation space for more lagers," Bryant assured.  

Bell's just announced it will enter Arkansas in late April with Arkansas Craft Distributors, LLC and O'Connor Dist. Recall, late last yr Bell's entered Tenn and announced plans to fill out its "southeastern footprint" in 2016, lookin' to enter Mississippi, Louisiana and Arkansas, tho had only just begun search back then. So Ark is the first off the list, and will mark 24th state + DC and Puerto Rico for Bell's. Co currently employs "more than 470 people."  

In state where Boston Beer operates one of 2 primary production facilities, plenty of chairman Jim Koch's recent comments (see above) play out in off-premise retail scans. Ohio foodstore IRI data thru Dec 27, 2015 includes some evidence of Jim's leaky bucket, emergence of high-margin innovations, onslaught of new breweries/brands and tightening at retail. The data also shows some wide variation between full-yr and (largely slower) 13-wk trends, as we've seen elsewhere. For example: craft $$ up 13% for the yr, +5% for 13 wks. But it's still grabbing some of the share leaking out of mainstream segments. Craft gained 1.7 share of beer $$ to over 26 in Ohio supers in 2015. That's more than twice import share and not far from 31 share held by domestic premiums, -1 full share. Similarly, top 5 beer brands in market collectively lost 1.2 share of $$ even tho only #5, Busch Light, declined.

New, high-margin Small Town Not Your Father's Root Beer made big impact here: got 1.7 share of $$ for full-yr, #9 beer brand in Ohio foodstores. That's just slightly bigger than Corona. And at an avg price in OH of $44/case, NYFRB sold about 1/3 of volume that Corona did at over 50% price premium. But it tapered off a little at end of year, still got 1.2 share of $$ for 13 wks. More craft brands started showing up in OH scans as year went on too, but top brands still important. Almost half of top 500 beer brands were craft for full-yr. These 249 craft brands represented about 90% of total craft $$ sales, about $100 mil. For 13 wks, 263 craft brands appeared in top 500, represented about 92% of craft sales. Average craft brand here gained 11 points of distribution in Q4 of 2015, while top 10 brands actually lost some shelf space. At same time, just 5 of top 20 craft brands represented well over half of the segment's growth, had only 3 share of beer $$, +0.9.

Top Vendor Trends All Over Map; Rhinegeist Making Big Moves in Tight Distribution Moves among the top craft suppliers in Ohio foodstores particularly striking in light of broader craft slowdown in final 13 weeks of 2015. Boston Beer overtook Yuengling to be #3 beer supplier overall in OH, even tho both declined by $$ and volume in the state. In-state craft powerhouse Great Lakes Brewing is #6 overall, ahead of Pabst (which nearly doubled $$ sales due to NYFRB), Constellation and Heineken. But GLBC $$ up just 1% in home state last year, slipped below 4 share of beer $$. And it dipped about 9% for 13 wks, largely due to slower year for its popular Christmas Ale. (GLBC Christmas makes massive impact in OH for the few months it's available: it was still #4 beer brand for 13 wks, even tho it was down about 18% overall.) New Belgium grew its OH biz 8%, held onto about 1.6 share of $$. And it accelerated to +19% for 13 wks. Sierra Nevada went in opposite direction here, +10% for the full yr but -5% for 13 wks.

In-state player Rhinegeist exploded to #5 craft supplier, almost quintupling $$ sales last yr. And tho every larger vendor has placements in over 95% of stores that sell beer, Rhinegeist did that with about 1/3 the level of distribution (see below for more on this fast grower). Bell's grew $$ 7% in OH; Founders doubled; Southern Tier dipped 7%. Other top in-state players varied a bit: MadTree +163%, Fat Head's +22%, Thirsty Dog +5%. Each of those trends slower for 13 wks. But much bigger trend variation seen in SweetWater, which entered OH at end of 2014. For first full year, it got near 0.3 share, behind a handful of other national and in-state players, +253% tho mostly incremental. For 13 wks thru Dec 27 tho, SweetWater -22% in OH. Other (semi-)national craft brewers struggled at tail end of year in OH too: Breckenridge -8%, and both Stone and Dogfish Head -15% for 13 wks. But Deschutes up big, +37%, Lagunitas +35% and CBA got nice 12% pop to end year.  

Even while the "leaky bucket" of mass domestic beers "continues to leak," Boston Beer chairman Jim Koch told Michigan, Illinois and Wisc distribs in St Thomas "there is not a next big thing like there was with light beer. That makes the business more difficult" even tho it's also "a good thing" because it "leads to innovation" and "higher margin products." But "everybody's business is much more complicated" and it "makes the future harder to predict." Expanding some thoughts he shared at recent Beer Business Daily Summit (see Jan 29 issue), Jim sees "confusing" and "contradictory" trends "crosscutting" which will take awhile to "sort themselves out."

Like what kinds of contradictions? "Fragmentation" on the one hand. And on the other "brands and scale continue to drive the business." Another contradiction: "the incredible onslaught" of new breweries" while at the same time craft brewers are "beginning to see the door closing at wholesale and retail." And a third contradiction: "low barriers to entry," "high barriers to exit" and "significant barriers to scale" for craft brewers. "

Onslaught" of New Breweries Is "Staggering" It "doesn't show any signs of slowing down.... Even the BA can't keep track," said Jim. It "looks like there were 1000 new breweries that opened last yr," he added, tho it could be 1200-1300. (Editor's note: that's higher than early tallies we've seen.) Not everybody contacts Brewers Association, Jim reminds. There are 20% more Fed permits than BA reports as brewers. And 1800-2000 more breweries are in planning. But overwhelming majority of these new breweries (95-98%, said Jim) "won't enter the distribution system in a meaningful way." Rather they'll just be tasting rooms or self-distribute locally. That's "a pretty viable business," Jim notes. "It's surprising to me how much money they make," Jim added, noting Boston's experience building three of them with Alchemy & Science.

"Beginning to See the Door Closing at Wholesale and Retail" "Retailers are kind of saying 'no mas,'" according to Jim. "For 10 years we've expanded our shelves, and compressed the space of mass domestics. We're beginning to see an end to that," said Jim, tho it's "not there yet." Growth of shelf space is "slowing down" as retailers note that every incremental SKU they add "sells less than the average SKU they have." This "can't go on forever" and at some point will reach a "saturation point." While it "hasn't gotten there yet, we're beginning to see the end of that" expansion.

Jim used example of bar that goes from 30 to 50 tap handles but "you're generally not going to sell more beer." But all the new breweries "not going to stop" while space on shelf "is not going to continue to grow at same rate." And that "same thing is happening at the wholesale level" where the "real constraint" is "share of mind" because there's a "limited number of brands you can adequately represent." So "brands do matter."

"Significant Barriers to Scale" and "Increasing Pressure" on Middle A 3d contradiction: there is "very little barrier to entry" for craft brewers, but "there are barriers to exit." "Anyone who can raise a bit of money can start a craft brewery" but even if biz goes bad "brewery doesn't go away," others will use the equipment. "Craft has to get really crummy" before "people cut up equipment for scrap" (as happened with regionals in 60s and 70s, according to Jim), which Jim doesn't foresee. So again there are "low barriers to entry," "high barriers to exit" and "significant barriers to scale," according to Jim.

The next Bell's, Founders or even Short's is "probably not going to happen," said Jim. There are simply too many small viable competitors. There could be "thousands and thousands," Jim reiterated, ultimately as many as 10,000. Pointed to Grand Rapids, Mich; already 45 breweries in metro area and yet 6 new ones still opening up, or San Diego with 120 breweries. "It's a great model" and "a lot of those breweries make great beer." But they do take some margin, volume out of biz. He pointed to Minneapolis where taprooms are between 5-8% of on-premise biz.

How Will Craft Evolve? So Jim sees craft evolving into "handful of strong national brands" with "full market support" and many, many "meaningful local brands" across US. While a good number may have gotten into biz yrs ago, they "don't have ability to support" expansion now. So their competitive field has narrowed from a region, to a metro area, to an area code, and "now it's a zip code." All this will "eventually sort itself out to some lead brands." But for now "what's left in the middle" (a lot of brewers) is under "increasing pressure" as it becomes more difficult for brewers to expand beyond a region or even a state. These brewers will be "pushed back into a more defensible core." While beer is still a "brand-driven business," on the other hand it's become "hyper local." So there will "probably be a lot of churn for awhile." In Jim's view, the "long curve in this fragmented craft beer business, eventually favors brands and breweries that have name recognition."