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Beer Biz Up 1% for 4 Wks Thru 12/19 in Nielsen; Trading Up Continues But Craft Slows, Cider Tanks
Total beer up 1.2% for 4 weeks thru Dec 19 in Nielsen all outlet data, slightly faster than 1% yr-to-date trend. And trading up continues apace into holiday season. All above premium segments are up 7.6%, slightly slower than 8.1% YTD. Still gaining 2.3 share of $$ last 4 weeks to 41.4. But composition of that trading up has changed pretty dramatically over course of 2015.
Imports are now clearly leading the charge. Up 1.1 share of $$ YTD (and for 4 weeks). Really flying in c-stores, where imports up 1.6 share of $$ for 4 wks. Craft up 0.8 share YTD in all outlet, but has slowed markedly in recent periods. Craft volume up just 4.3% last 4 weeks. That’s only half 8.7% pace YTD. And so craft segment only gained 0.4 share of $$ last 4 weeks. But gotta note this set of Nielsen data’s craft segment includes Blue Moon, Shock Top and Leinie. And while Blue Moon Brewing still up 3% for 4 weeks, Leinie’s franchise down 22.5% and Shock Top franchise down 17.5% same period. Sam Adams franchise down double digits last 4 weeks too; off 11%. So Sam (-0.2), Leinie’s and Shock Top (each down 0.1) lost 0.4 share of $$ last 4 weeks, really cutting into craft overall growth.
Then too, lately, FMBs have stolen craft’s thunder (led by hard root beers, which are included here in Nielsen). Up 13.7% and gained 0.7 share of $$ last 4 weeks, compared to 0.4 YTD. Another notable shift: cider declined at nearly a double digit rate in last 4 weeks. It’s down 9.7% compared to up 10% YTD. Many have commented that hard root beers have taken biz from ciders, but might they have taken some biz from craft too?
Trends among top suppliers continue along similar lines as in recent mos with slight shifts. For last 4 weeks, MC lost 1.2% while AB down only 0.5%. MC’s share losses have steepened, while AB’s moderated somewhat. AB losing more share overall (because its base so much larger). Constellation still surging. Its volume up 18% and $$ sales up 21% last 4 weeks. Up 1.2 share of $$ last 4 weeks (more than all of import gain). HUSA has weakened in recent periods (down 2.6% for 4 weeks) as has Boston Beer.
Every year our anonymous columnist Diogenes (named after the ancient Greek philosopher who wandered the streets with a lantern in search of an honest man) reflects on the shadowy and seemingly shrinking Founder's Preservation Society, i.e. the many craft founders who helped build this movement. This year, he describes a new group, the Founder's Enrichment Society
By Diogenes
Looking at the craft beer movement from the perspective of the Founders Preservation Society as 2015 draws to a close, I can only conclude that preservation is no longer a relevant descriptor for at least part of the industry. We have entered the era of the Founders Enrichment Society.
A couple of years ago, the craft beer revolution seemed to be for sale. As of 2015, the top craft brewers are billionaires, at least on paper. And many of the Top 50 craft brewers have been sold, enriching their founders and investors.
At the top of the list, Dick Yuengling, Jim Koch and Ken Grossman each have been tagged as billionaires.
Tony Magee of Lagunitas and Jack White of Ballast Point got billion dollar valuations for their companies by selling half to Heineken and 100% to Constellation respectively. Another dozen or so have cashed in through private equity deals or acquisition by foreign brewers. Seven have sold to Anheuser-Busch InBev. One sold to MillerCoors. ESOPs have enriched some founders.
I am quite sure that all others on the Top 50 list are looking at the valuations and calculating their own value. They have to wonder whether the big valuations will endure after ABI, MillerCoors, Heineken and Constellation end their shopping sprees.
The words of the great British writer Samuel Johnson have always haunted me. Johnson was the executor of the estate of British brewer Henry Thrale who died without an heir. Overseeing the auction of the brewery, Johnson is reputed to have said, "We are not here to sell a parcel of boilers and vats, but the potentiality of growing rich beyond the dreams of avarice."
That view of the brewing industry clearly is shared by the three Brazilian billionaires behind ABI. The book "Dream Big" shows that the threesome decided to get into the beer business because they saw that many of the great fortunes of South America were built on beer.
I used to believe a showdown was looming between BA-defined craft brewers-small and independent-and big brewer owned craft brewers. But 2015 has raised new questions in my mind. The BA and the Beer Institute now are working together to pass a tax bill that would benefit both the big big and small brewers. That is a good thing, because the impasse over the dueling tax bills was a dead end.
But now the BA is facing questions about the relevance of its craft brewer definition.
For one thing, the acquisition of Lagunitas, Ballast Point and others will reduce the BA's market share by over 1.5 million barrels next year, making it more difficult to achieve the goal of 20% market share by 2020. St Arnold founder Brock Wagner, a member of the 2006 BA Board that created the definition, just penned a column titled "Craft Can't Be Defined" in the Ale Street News saying he no longer agrees with the pillar of the definition that excludes brewers who are more than 25% owned by a non-craft brewer.
"Who is better for the beer drinker, the brewery that has non-craft ownership and is innovating and promoting great beer culture or the independent brewery with poor beer quality and questionable marketing techniques?" wrote Wagner.
The future of the definition will be in the hands of a new BA Board that is no longer dominated by the first generation of craft brewers, who have been term-limited off the board. The BA is being inherited by the "long tail" of the industry-the Bottom 4,050 brewers. Many of these brewers seem to have different aspirations than the Top 50. They talk of staying local, limiting themselves to one state or even one city. They embrace the "back to the future" vision of a world where every town has its own brewery. SKU-mageddon is good for them.
For the most part, the folks who have joined the Founders Enrichment Society and many of the Top 50 do not share this vision. Some are national brands and many have national and international ambitions. For them, SKU-mageddon means "death by a thousand cuts." Many are aligned with Samuel Johnson's vision.
The challenge for the new BA Board is to reconcile these competing visions of craft brewing so it can effectively continue to "promote and protect" an increasingly diverse world of craft brewers.
As our busiest year yet comes to a close, thanks to all of our readers for another fun ride. We wish you all a very Happy and Healthy New Year!
Local Press Buzzin' About Developing Craft Beer Scenes: From LA, to Dayton, to AR, MS and More
"Nearly a dozen new breweries" opened in L.A County this yr, LA Times noted in recent article lookin' back at "a watershed year for craft beer" in the area. Similar to other major cities that've seen a concentration of brewers open in their respective art districts (like Denver), "five new operations" opened their doors in Downtown Arts District, along with a pair of breweries just across the LA River and another pair opened in San Fernando Valley. Already established local brands such as Strand Brewing, Beachwood Brewing, and Smog City are gradually developing and expanding, paper continued. Also, Modern Times "teased" opening of LA tasting room and Karl Strauss "reportedly opening a brewpub in the downtown financial district." And paper points to several "big mergers" involving cos in close proximity to LA, including Lagunitas JV with Heineken, Golden Road acquired by AB, Saint Archer acquired by MillerCoors and Ballast Point acquired by Constellation. Editor's note: not mentioned in paper, but another top co, Boston Beer with its Alchemy & Science unit has been ramping up LA-based Angel City brands. Taking all into account, whether thru "expansions, the new brewery openings, the buyouts and the sellouts, the beer in Los Angeles is getting better," sez paper, and "2016 looks like the most promising year for craft beer fans in LA yet."
Then too, Dayton, OH was dubbed "an underrated beer vacation destination" in recent Paste mag article. Dayton's first local brewery didn't open until 2012, and now there are 12 craft breweries (and one gypsy brewer), with "at least one more coming this winter." Dayton is also very close to Cincinnati and Columbus, which both have thriving beer scenes, notes mag. So "there are more than 50 craft breweries within 90 minutes of downtown Dayton."
Lookin' at a coupla underdeveloped craft states, Arkansas now has 19 small brewery permits held in-state, "along with 12 microbrewery restaurant permits," noted Arkansas Online citing Ark Alcoholic Beverage Control. One of the more established brewers in-state, Ozark Beer Co just signed its first distribution deal with Central and Moon Distributors to sell in Little Rock area and rest of Pulaski County. Ozark is Central and Moon's first in-state craft brand as well (better late than never). And in Mississippi, 12 new breweries sprouted since 2012 to give state 13 total, reported War On The Rocks digital publication. Article highlights changes in state laws that raised alc level ceiling to 10.1% abv and gave each of the 82 counties autonomy "to decide whether to remain dry or go wet" as pivotal for MS developing beer scene. Yet MS "could still do more to ease restriction," sez paper, as brewers seek to rid of abv cap altogether, and lookin' for direct sales at tasting rooms.
"Official Definition" No Longer Necessary, Sez St Arnold's Brock Wagner; Sure Is, Paul G Counters
An intriguing pair of opinion pieces with opposing views of BA's "craft brewer" definition appear in December-January Ale Street News. Perhaps most interesting of all: they both come, at least partially, from inside. Saint Arnold founder Brock Wagner, a previous BA board member, outs himself as "the one who proposed" a lower cap for the "independent" pillar of BA's "craft brewer" definition. Recall, the assn lowered "allowable ownership" stake by a non-craft co from 49% to 25%. "The intended result was knocking Widmer Brothers from the ranks of craft brewers," Brock wrote. "While this was done in a different time, I no longer agree with that decision." In fact, "trying to jump through the hoops of one definition has become so tortured and painful that defending it has become useless," in his view. Brock thinks that craft breweries have successfully reshaped "how Americans view beer." Answers to "what's your favorite beer?" now "likely" come in the form of styles, like IPA, rather than brands. So "an official definition of 'craft'" is now unnecessary. Of course, brewers "need to keep fighting for improved laws and maintaining access to market." (He also poses a compelling question repeated by Diogenes, below.)
Alongside Brock's view, BA director Paul Gatza defended the definition, reminding of course that the BA defines "craft brewer" and not "craft beer." It does this because, "fundamentally, statistics and trend data are at the heart of what the Brewers Association does," Paul argues. As we know all too well at CBN, defining any data set's boundaries is of utmost importance to that data set. And the BA's data set not only guides its actions but also "serves as an important business planning tool for brewers and distributors," as well as retailers and lenders, Paul argues. Craft brewers differ in other ways too, in Paul's view: decision makers at craft breweries are typically "local businesspeople and entrepreneurs" compared to "corporate executives and global banking conglomerates" that lead large brewers, for example. He does acknowledge that various PE deals in craft "add a gray area to the equation." The BA's craft definition establishes a "collective brand," that provides "better access to raw materials" and "creates consumer, retailer and wholesaler interest" better or more efficiently than individual companies could. To Paul, craft is "not just a marketing term," as some critics claim. Instead, it "differentiates" the BA's "small and independent" members and helps them "retain their hard earned identity and authenticity." Paul notes that "craft as a definition and craft as a consumer mindset have not always and may not always align," but that doesn't mean the term or the definition should be abandoned, in his view.
Specifically, MC argues that: 1) far from concealing its ownership of Blue Moon, MC "prominently and proudly features Blue Moon" on its website; 2) despite the claim that MC controls product placement and retail price, it does not do either and plaintiff has "provided zero actionable support for this novel theory"; 3) Blue Moon mktg materials "do nothing but tell the true story" of the brand; 4) MC is not liable for what "third parties" may or may not have said about the brand; 5) plaintiff "nowhere alleges that he relied on any" of the specific supposedly misleading statements when he decided to purchase the brand, thereby foreclosing any rights to collect damages. "The road is closed and leave to amend must be denied," MC concludes.
The judge (or possibly a jury) will decide the specific legal issues here. But this case, from the beginning, has always reflected the ambiguity and complexities of what the phrases "craft beer" and "craft brewer" mean or don't mean and to whom. MC execs for years have talked proudly about their Tenth and Blake division as the country's "biggest craft brewer" and Blue Moon and Leinenkugel as among the segment's biggest craft brands. But the lawsuit forced MC to argue, among other things, that "reasonable consumers" would not believe from MC's efforts that Blue Moon was a "microbrew" made exclusively by a small, independent "microbrewer," or that the same reasonable consumers would necessarily believe all "craft beer" comes from a "craft brewer" (microbrewery) as BA defines it. Quotes from the latest filing illustrate these points and the larger issues at stake that consumers, BA, the media and brewers themselves are wrestling with these days.
Craft or Not? What Reasonable Consumers Believe Plaintiff singled out three videos on Blue Moon's website as misleading, including one that went up in 2015, 4 years after he started drinking Blue Moon and well after he sez he stopped. But that video only tells the "true history" of the brand and its beginnings in The SandLot brewpub back in 1995. "Neither the words 'craft' nor 'microbrew' are ever uttered. And the fact that Blue Moon is brewed in Golden, Colorado is prominently disclosed," MC points out. Similarly, videos that feature the brewing process and 3 SandLot guys neither suggest that all Blue Moon is made at SandLot nor that it's all made by just 3 guys, nor would any reasonable consumer believe that from watching them. Plaintiff claims MC and 3d parties misrepresent Blue Moon as craft, but nowhere does he "allege that MillerCoors refers to Blue Moon as a craft beer/microbrew in its advertising, including its internet presence." And even if that allegation made, "a reasonable consumer would not be misled to believe Blue Moon is, in turn a microbrew -- a beer brewed on a small scale by an independent brewer," again since MC features its ownership of Blue Moon on its website.
"Moreover, a reasonable consumer would not assume craft beer comes from a 'craft brewer' (microbrewery)" under BA's "ever-changing definition." "Many popular microbreweries that make craft beer have allied themselves with conglomerates," MC points out, like Ballast Point. Such acquisitions do not "change the taste, brewing methods, ingredients, recipe, craft or artisan nature of the beer," even tho they may change the brewer's status within BA. "At most," MC summarizes, "'craft' is a subjective opinion that Blue Moon beer is produced uniquely with care or skill, not a specific and actionable claim." And since BA "has consistently refrained from limiting itself, or its members, by defining craft beer," instead of craft brewers, no reason court should do so here. MC also argues it's not liable for how 3d parties represent Blue Moon. Retailers control the pricing and placement of the brand. And MC "is prohibited by state and federal law from entering into any agreements with retailers, subject to very limited exceptions." (MC does not mention here its CatMan schematics, nor suggested PTRs.) All in, while attys may have crafted some interesting arguments in this case, the outcome is not likely to end the heated debate over these loaded terms.
AB's Blue Point Runs "Boston Toast Party," Does Blind Taste Tests of Toasted Lager in Boston Bars
Breck Deal Follows "Natural Dividing Line" Between Existing Bizzes; Trends; AB in Colo; Responses
Following Breck's JV with the Wynkoop group 5-6 years ago, there was still a "natural dividing line" between the brewery and the restaurant bizzes that AB didn't buy in the current deal. Most of those restaurant outlets have "more of their own identity," Todd explained to Craft Brew News. Importantly, AB "was interested in the Breckenridge Brewery," not the restaurants, he told us. "My two operating partners were more the restaurant guys," he added. "My partners got us together and said we were being approached by private equity group after private equity group after private equity group," he further explained to Westword's Jonathan Shikes. And following the $36-mil investment in the new Littleton brewery, those partners "were not interested in overseeing a company as large as Breckenridge was becoming," according to Denver Biz Journal. Recall, original plans for that brewery pegged costs closer to $20 mil (see CBN vol 5, #62). Todd "was out-voted," he told DBJ, and understood the operating partners' "responsibility to our shareholder group." But he "was not forced into anything," he told Westword (the DBJ headline said he "had to sell"). Instead, he "was shocked by how normal and authentic" the AB folks were. "I'm a brewer at heart, so I thought it made sense to align with a brewer," he added, rather "than a bank."
There will be a lot more brewing going on at Breckenridge's new Littleton brewery too: it's currently outfitted with about 110K bbls of fermentation capacity. Again, the co should ship about 70K bbls this yr, up from about 64K bbl last year, so "close to double-digits by year-end," as sales veep George O'Neill told CBN. It can eventually expand fermentation capacity to match the 300K bbls it can brew on current 100-bbl brewhouse and package on current equipment. Meanwhile, its home-state biz in "Colorado is good," George said. It's likely to be up 10% in all in 2015, after the co was "capacity constrained for the past 18 months prior to moving into the Littleton" brewery. Colo is still about 45% of Breck's biz, or over 30K bbls. Combo of Texas and Ohio represents another 15% of volume. Illinois and Florida fill out the rest of the co's top 5 markets. So high volume mkts are "not really dictated by proximity to Colorado," George noted, "a real strength for us." Of course, the Breck brands are sold in 30 other states. "Where the opportunity exists, we will absolutely explore" aligning more distribution with its new AB parent co, George confirmed. New mkts could come, "given time," he said, as "opportunities are really endless" now.
There are also "two very different dynamics to our business," George noted: what happens inside Colo isn't always the same as what happens outside. That's most apparent when looking at Breckenridge's biz in IRI data, which only covers a small fraction of Colo mkt. Overall, Agave Wheat joins Vanilla Porter near the top for Breck, but in IRI Vanilla Porter is the clear leader. About half of the co's scan biz, it was up 14% by $$ thru Oct 25 in IRI MULC data. Breckenridge grew 5% in IRI in toto during the same period. Introing a nitro version of Vanilla Porter is "capitalizing on a real strength," George said. And they've been "working on this for quite a while," he said. The nitro launch will be a "cornerstone of our efforts" next yr, George added. It's a "point of difference right now," he believes, that will "help us stand apart." To that end, the co will "add a seasonal SKU" to its nitro line to bring 4 rotating offerings into the mix.
Littleton Restaurant, Original Brewpub, Coming 10 Barrel Site Expand AB-Owned Retail in Colo While AB's High End unit did not buy all of the Breckenridge-Wynkoop group's off-premise retail sites, it will gain two more. Breckenridge's original "true to form brewpub," as Todd said, in the co's namesake mountain town, is one. The other is a much-larger restaurant at the farm-style Littleton campus. That site includes a large outdoor beer garden and all told can seat 400 diners, Todd said. That restaurant on the 12-acre Littleton site, 11-12 miles from downtown Denver, "is so busy," he noted, the co's "contemplating an addition now," as the current kitchen can't seem to keep up. But recall, the Breck sites won't be the only retail options that AB's High End operates in the state: it's planning the next 10 Barrel brewpub in Denver for next year. These outlets expand AB's cross-tier operations in one of its lowest share states, where it also has a large brewery and will distribute about 3/4 of its total volume after deals to expand distrib branches close.
Notable Responses: "Scorched Earth," "Premature Handwringing" and "Superstitious Fools" Sifting through the onslaught of commentary following the pre-holiday announcement, a handful of responses seem particularly noteworthy. First, for fellow Colo craft pioneer Eric Wallace of Left Hand, last Tuesday was "a sad day." For Eric, "it is inconceivable. How do you sell out to those guys?" he asked when talking to Westword. "They are the ones who caused the scorched earth that [craft brewers] have repopulated and reinhabited." On the other hand, the Denver Post Editorial Board wondered why "so much angst," pointing out that there are more small, independent Colo brewers "than ever" and "their market share is likely to continue to grow given how popular tastes are evolving." But "more to the point," the editors questioned "the goal of the craft beer movement," suggesting that "isn't it to produce great beer in a wide spectrum of styles?" Indeed, considering the "huge diversity" of "the present beer culture" is not "at risk," in their view, "handwringing is premature." However, out in St Louis, columnist Tony Messenger explored a bit more of the subtlety within that handwringing, noting that, like sports, decisions on beer can be both highly personal and "superstitious." As a Littleton native, "the news hit me like a keg falling out of the sky and landing on my head. It hurt, but, then again, there was now a keg of beer sitting next to me." Indeed, "there are many of us superstitious fools," he wrote, comparing his Broncos fanaticism with that of craft beer drinkers.
"Craft" Slows to +4% for 4 Wks in Nielsen, Due to Steeper Sam, Leinie, Shock Top Declines
Founders All Day and Firestone 805 are Top-10 Growth Brands in Supers Two of the fastest growin' craft brands this year also became two of the fastest growin' overall beer brands in latest Nielsen grocery store data. Founders All Day IPA (+158%) and Firestone Walker 805 Blonde Ale (+180%) each gained 0.1 share of total beer volume and $$ for latest 4 wks in supers. That put both in top-10 growth brands for the total industry in this period. Actually, Founders All Day volume share gains yr-to-date are ahead of a handful of other top growth brands on the list, including Redd's Green Apple, Coney Island Hard Root Beer, Coors Banquet and Blue Moon Belgian White (tho both CIHRB and Redd's Green Apple released later in yr and $$ gains still ahead of All Day). Pretty impressive. And Firestone 805 volume share gains are ahead of Coors Banquet and Blue Moon Belgian White too, with all of its sales from just one state, Calif. Gotta note, Founders All Day trend has gradually slowed in recent periods tho still soarin' up 211% YTD. Firestone 805 continues to keep up rapid pace, up 179% YTD.

