There had been rumblings this was comin' earlier this yr, but yesterday Abita Brewing officially launched Bayou Bootlegger Hard Root Beer, "its first product in its line of 'Bayou Bootlegger' hard sodas," co announced. This is at least the 8th new alc soda line announced this year in response to explosion of Not Your Father's Root Beer: Coney Island, Wild Ginger, Mission, FX Matt, Fitz Bottling Co (w/ O'Fallon Brewing), along with MC's Henry Weinhards and AB's Best Damned lines, all introduced in 2d half of this yr or early 2016. Not to mention, continued sales of Sprecher, Root Sellers, and Forbidden Root alc soda lines. Similar to FX Matt, Abita based its hard root beer recipe off of its non-alc root beer that been produced for over 20 yrs. Six-packs expected to hit the shelves in home-state LA this week, and hit "national distribution by early 2016." (Last we heard, Abita available in 41 states + DC, via Aug 14, 2014 article). So Bayou Bootlegger is the only other craft brewer aside from Boston Beer's Coney Island that will sell its root beer across the country, while the others are seemingly smaller, more regional brands. Fans have "been asking for an alcoholic version for years," said president and ceo, David Blossman, per release. "It only made sense for us to enhance our already famous root beer with this fun, new twist."  

The TTB just cut a little more red tape, easing the route to market for many more beers as well as its own workload. Recall, following petition from the Brewers Assn and some individual breweries, the federal agency already expanded the list of ingredients that brewers can use without submitting a formula for approval last June (see CBN vol 5, no 51). At that time, BA said it would seek additions to the TTB's list of 35 exempt ingredients. It did just that. And late last week the TTB issued a ruling that "updated" previous list "to include more than 50 additional ingredients." Crucially, it also added barrel-aging to list of exempt processes, including use of wood chips. Since BA's initial petition in 2006, TTB "has seen an unprecedented surge in formula approval requests for fruit beers, spiced beers, and beer aged in barrels that were previously used in the production or storage of wine or distilled spirits," according to its ruling. And that "increase in formula submissions played a role" in current "reconsideration."

This change doesn't just affect paperwork though, as it also frees up the language that brewers can use on their labels to explain the use of these ingredients. As with last year's ruling, TTB reminds that exempt ingredients don't require the sometimes clunky label explanation of "ale brewed with" such-and-such fruit. Brewers still need to call attention to these ingredients on the label, either specifically or by using more general terms like "fruit" or "spice." But now they can drop the addition of "brewed with" or "fermented with" and use the exempt ingredients up front (as in: "fruit ale" or "cinnamon stout"). The TTB reminds throughout its ruling that any misleading statements still violate labelling and advertising rules. And it "considers it misleading to claim that producers were aged in barrels if they were aged using woodchips rather than barrels." As with previous expansion of exempt ingredients, this ruling should cut down time to market for many new beers from a lot of brewers.  

They just won't stop. Overseas, ABI also struck deal to acquire north London-based Camden Town Brewery, Camden announced yesterday. This is just a few weeks after ABI announced it will explore options to sell off Meantime Brewing, another UK craft brewer that was purchased by SABMiller earlier this yr (and right between announcement of 2 latest US craft acquisitions, Four Peaks and Breckenridge, see above). With ABI-SAB deal looming, it seemed to some that ABI would take it easy on m&a side for a bit while Justice Department(s) review the mega-deal. Recall, on top of "exploring" Meantime sale, it announced divestiture of part of its NJ and Colo distrib branches (about 2.4 mil cases) almost directly after Senate hearing in which several folks called into question ABI's ability to own branches in US. What's more, Camden Town sold about 12 mil pints (~48K bbls) in 2015, which isn't much smaller than Meantime Brewing's approx 55,400 bbls in 2014 (see May 15 issue). Apparently, ABI doesn't believe any of these latest deals will impact MegaBrew review.

Camden Town founder Jasper Cuppaidge spoke to prospective expansion opportunities in deal announcement. ABI will help "maintain the character and quality of our beers while giving us access to the investment we need to drive Camden to being ever more successful at home and abroad," said Jasper, adding "we believe we must have the ambition to grab this opportunity and turn Camden Town Brewery, and the quality it stands for, from being an outstanding London brewer to being a world famous one." The brands are currently "available in over 1,000 pubs, bars and restaurants and retailers around the UK, as well as further afield in Sweden, Australia and Japan," per release. While deal details were not disclosed, earlier this yr Camden was valued at £75 mil, later cut to £50 million in a secondary round," of crowdfunding campaign that raised £2.75 mil, per Business Insider report. In the "past few years" Camden Town grew its revs 10x from £900K to £9 mil, according to its Crowdcube crowdfunding page. Deal is expected to close on Jan 7.

Ironically, Jasper Cuppaidge is a founding member of UK's United Craft Brewers group, which was formed earlier this yr to operate like Brewers Assn in US. Back in May, United Craft Brewers group announced its first official definition of "craft beer" in the UK, seemingly heavily modeled on BA definition: "authentic" brews that're "independent" (less than 25% owned or controlled by non-craft brewer) and "honest" with their labelling. So UK's craft definition quickly got blurred like it has in US in recent yrs. And Camden Town already getting public backlash from UK craft community. BrewDog co-founder James Watt quickly tweeted that BrewDog "will no longer be selling any" Camden Brewery beers at its bars, cause it refuses to sell ABI products. Again: is this a calculated move by ABI to disrupt UK craft, or simply an attempt to better play in high-end? Perhaps both? Stay tuned.  

For the most part, reactions and responses to announcement that Four Peaks will join ABI's High End unit sounded much like those to other similar announcements. Co-founder Andy Ingram told various press that he and his 300 employees "are staying" and "it will be business as usual," acknowledging that "it almost sounds too good to be true, but it is" for the Arizona Republic. Access to AB's network to expand distribution beyond Arizona for the first time factored into Andy's decision, he told the paper, with hopes to distribute from Texas to SoCal, at least. Like others, he spoke to other buyers, including PE firms looking "to grow aggressively for two to three years and sell or flip us," Andy said. He also told consumers to look out for experimentation in new styles for Four Peaks, "such as bock and a sour-style called gose." Elsewhere, he asked fans of Four Peaks to wait and see what the brewery's doing in a month or a year before judging them too harshly.

Gov Congratulatory, Guild Concerned; Can AB Have a Microbrewery License? Arizona's Governor Ducey fell in line with those congratulating Ingram and the other Four Peaks co-founders for this "Arizona success story." Back in March he signed legislation that Four Peaks pushed for, raising the state's microbrewery production cap (as we wrote last issue). The Arizona Craft Brewers Guild, which backed that bill, has mixed feelings of course. It's "assessing the impact of this announcement," it said in a statement on Friday. "Consolidation," the guild asserts, "represents a threat to local breweries because it affects our ability to gain access to markets, raw ingredients and resources." Meanwhile, even though AB believes "there's no licensing issue," as AP reported, a spokesperson for the state Liquor Dept said they're looking into it. Officially, "they'll wait for a formal application filing that lays out the new ownership structure," per AP story, likely to come only once deal is finalized. The agency will have to consider whether AB can hold a "microbrewery" license in the state, which AB seems to believe it can according to current law. But does that jibe with the intent behind the license structure? And how many other states will need to consider similar questions?

Consumers Dealing with Complex Thinking? 60% Say "Disappointed" But "Toasting Owners" Initial "social media reaction to the deal was largely negative," according to Ariz Republic, as in other AB deals. It cited one mourner telling Four Peaks "RIP," another asking for "a moment of silence" and a third shaming the brewery for "[slapping] the faces" of early local supporters. Another provided less knee-jerk, more disappointment, saying "it would have been nice to keep it local" to Tucson News Now. That middle-of-the-road response seems to be most prevalent, at least according to informal poll from Phoenix Biz Journal. Almost 60% of respondents told that outlet that they'll "toast the owners of Four Peaks but [are] disappointed a great local company is now part of a conglomerate" in response to the deal. That was by far the most common response among 500+ readers too. "Time to switch my allegiance to another Arizona brewery" was second most common response, at about 16%. "I'm disappointed, like my beer has gone flat" and "So long as the beer still tastes good, I don't care who owns them" received 11 and 13% of votes, respectively. Could the frequencies of these reactions be similar following other craft deals?

"Craft" Vs "High End" Finally, a quick moment to note a shift in the linguistic tug of war that always seems to surround the segment. When announcing its last few craft brewery acquisitions, you may have noticed that press materials and commentary from AB often minimize mentions of the parent company, focusing instead on "The High End." That unit inside AB is responsible for work on craft brands plus some import brands, the two segments leading overall beer growth that make up the vast majority of high-end volume. And it seems to be taking many available opportunities to identify simply as "The High End." Some employees already use email addresses @thehighend.beer. Though that website isn't yet up, AB does own it. Another early adopter of a .beer domain (like .com, for instance) is the Brewers Assn, of course, which has craft.beer (or craftbeer.com).  

New Belgium founder Kim Jordan responded to Reuters report that New Belgium is on the block with email stating "there is no deal pending at this time," reported Denver Post among other papers. But Kim did acknowledge "New Belgium Brewing's board of directors has an obligation to have ongoing dialogue with capital markets with the goal of making sure that we remain strong leaders in the craft brewing industry."  

Year-end note from New Holland sales veep Adam Lambert to distrib partners reveals not only growing brands within mid-sized midwestern brewer's biz but also growing sophistication required to operate on this scale. Both New Holland's beer and spirits bizzes should finish 2015 up 24%, Adam shared. That would put its beer volume just south of 40K bbls this year, we estimate. The brewery's core beers still represent almost 3/4 of its biz and those brands are up 33% collectively, according to Adam. Its barrel-aged stout Dragon's Milk leads that group, +48%. Both The Poet oatmeal stout and Mad Hatter IPA up over 20%, Adam wrote. The rest of New Holland's beer biz split about evenly between seasonals and special releases. But while special releases collectively grew 31% this yr, seasonals were "slightly down." Adam counters that "this was intentional as we brewed to our wholesalers orders."

The co will stay on that path headed into 2016, promising its distribs a "simple to understand, simple to execute, organized, profitable and sku rationalized" plan for the year. He reminded of above-average profit per case delivered by Dragon's Milk after noting the co's goal to grow thru "regimented business plans built upon simple distribution objectives." At the same time, Adam recapped that New Holland "added five Regional Managers, a Sales Analyst and a Sales Support person" and its beer entered 4 new mkts, including Dallas, Baltimore and Las Vegas. New Holland now sells beer in 28 states with 93 distribs; indeed, it added 29 new beer wholesalers simply due to M&A. Adam's emphasis on targeted growth, offering simplicity and higher profits to distribs, suggests increasing importance of these factors, over beer quality and brand story, in current competitive landscape.  

Lotsa significant personnel announcements from Boston Beer last week, and the last broke late Friday afternoon. That reduced coverage and no one tied 'em together. But 3 of 9 executive officers of Boston Beer will leave next yr (this article appeared in a slightly different form in INSIGHTS Express yesterday). On Friday, Boston named Frank Smalla sr veep of finance starting Jan 4, 2016 at a starting salary of $500K, with potential bonus of 60% of salary (if 100% of sales/EBITDA and other targets for 2016 are hit) and options on top of that. Frank is a 20 yr vet of Kraft Foods. He will become CFO upon retirement of current CFO Bill Urich. Bill's retirement next yr previously announced.

Earlier last week, Boston also announced retirement of ops veep Thomas Lance and brand development veep Robert Pagano, stepping down from their roles by end of yr, and retiring fully as of Mar 31, 2016 in govt filing. Tom at Boston since 2007. "Tom came aboard just as we were in the early years of a period of astronomical growth," said founder Jim Koch in statement later in week, crediting Tom: "Not only did he restore the Samuel Adams Pennsylvania brewery, but also guided expansion of our brewing capabilities across the board and developed our transportation capabilities." Tom cashed in about $9 mil in Boston Beer stock options over last 2 yrs. He owns 3 buildings in Gloucester Mass, according to Gloucester Daily Times, and will return there. Boston has reportedly been searching for a chief supply chain officer.

Boston "intends to undertake a broad assessment of avenues for finding the leadership talent needed to assume the responsibilities of Mr. Pagano and Mr. Lance, including the evaluation of existing internal and external candidates." Amidst all these changes, one of constants remains John Geist. John just got promoted from sales veep to "newly created position" of chief sales officer on Jan 1. His salary gets bumped 11% to $500K and his bonus potential is 60% of base salary if targets are hit as well.  

The last 18 months brought a wave of craft deals, including at least 8 publicly disclosed stakes by private equity firms. In chronological order those were Riverside (Uinta), Ulysses Group (Southern Tier), TSG (Sweetwater), Encore Capital (Full Sail), Friedman, Fleisher & Lowe (Abita), Fireman's (Oskar Blues), Tenth Avenue Holdings (Bronx) and LNK Partners (Dogfish Head). To some extent, these deals brought a new breed of cat to craft beer world.

So how's it going so far? CBN talked to one of first in wave, Southern Tier founder Phin DeMink, its CEO John Coleman and Ulysses Group managing director Paul Barnett, one year after Southern Tier officially closed on deal to sell majority stake to Ulysses Group. "The new partnership is really working," said Phin. He's been able to "get back to doing what I love," i.e. brewing innovative beers and spirits. That's exactly what Ulysses and Phin had talked about as objective when they did deal. "The vision is coming to reality," said Paul.

Southern Tier expects to finish 2015 up "double-digits," officially cracking the 100K bbl-mark in first yr backed by Ulysses Group (last yr it shipped 99K bbls). Growth improved as yr went on; up 13.8% in Q2 and 15% in Q3, all with co's main focus on core brands and core mkts. Its 4 core brands - 2XIPA, IPA, Tangier IPA, and Pale - are collectively growing 20% led by its 2XIPA up "over 40%" in core mkts, they shared. In 2016 Southern Tier will make Tangier a full time yr-round after having "great success with it," replacing this yr's intro, Right of Way session IPA. And its variety pk sales picked up this yr after switching to "all IPAs and Pale Ales." There are "no black jelly beans," as Phin put it, adding: "give the customers what they want." This yr was its first using "Pack of Pales" variety pk, and sales were up 87% in IRI multi-outlet + convenience data thru Oct 25. "As soon as we did that we did see a lift," they acknowledged. Then too, while it's in 31 states, Southern Tier's focus is on its core mkts - NY, PA, OH, and NJ - which make up 67% of its total volume "and growing." It's up 20% in those mkts this yr.

Located in Lakeland, NY, the brewery is within close proximity to several large northeast cities, including its #1 mkt Buffalo, #2 mkt Pittsburgh as well as Cleveland and even Toronto. Production capacity is currently "just a little shy of" 300K bbls with a 110-bbl brewhouse. So Southern Tier has some yrs before it has to think about another cap expansion that'll "carry us further into the future." And they've got plenty of space to expand. The brewery sits on 160 acres of land set in the woods with "western New York feel."

Phin spoke to what's changed thruout this first year under new ownership, noting the extra resources are "extremely helpful" amid extra competitive mkt to "help fight back." Indeed, Southern Tier's "first order priority" this yr was to ramp up its sales team, said Paul, as Southern Tier's sales efforts previously primarily outsourced to a broker. So co hired 26 new sales people all in last year alone to get extra feet on the street. Recall, both CEO John and sales vp Brendan Smith joined Southern Tier toward the end of last yr, each with prior experience working for large brewers; John with Pabst as its COO and with AB for many years, and Brendan with AB as regional sales director. Next yr Southern Tier will add 3 more sales people and add "additional support" in the Mid-Atlantic region where Southern Tier lookin' to boost presence. But it will not enter any new states. Co will be able to focus more on "field marketing"/"experiential marketing" in 2016 and it is searching for a sr mktg exec.

This yr was "definitely challenging…integrating so many people all at once," while simultaneously "managing" its employees that've been around longer, said Phin. Took 7 mos to hire, train and integrate its added sales team, and Phin and John were very "sensitive" about keeping the culture intact. Yet the hardest part of transition in this 1st yr with Ulysses for Phin was "letting go of some of the day-to-day," he said. First he was "excited" to let it go, but for awhile he found he missed it. Gradually as he adjusted, Phin grew able to intently focus on innovation side of biz, and "get back to developing products." Currently Phin is helping ramp up its new distillery, located on-site in the same building where the original brewery started in late 2002. Also, Southern Tier lookin' to "go deeper" with its barrel aging program and Cellar Vault series, looking to tap local partnerships, including NY wineries and "access to really good fruit." Phin and co will look for different ways to "cross market" its beers and spirits products and "meld industries."

All in, the deal has allowed Phin to "play around more," and "mentor" others within the company, sez Paul. Phin summed it up best: 2013 was "massive year for us" yet after that he already sensed the need to "assess" where Southern Tier was in relation to the rest of the mkt; 2014 was about "making a decision," and ultimately deciding to sell stake to Ulysses; this yr was about "restructuring" its sales force, and shifting his role within the co. Now, 2016 is "back to the races" with all "pieces in place." Southern Tier is targeting 15% growth in 2016 without adding any new mkts. It'll add cans to the mix for first time, expected to be in the mkt by April.

Ulysses "Very Open" to More Brewery Partners "If it's The Right Fit"; Don't Need To "Blend" Cos Together Meanwhile, Ulysses is still "very open" to finding more brewery partners "if it's the right fit," yet "we don't feel we have a need," said Paul. And if Ulysses does partner with another craft brewer, "I don't think you blend it" with other cos as an "integration," Paul added, referring to potential roll-up strategy that some have speculated may take place. There "has to be an opportunity…to collaborate and cooperate" between cos under same management firm, but "not integration." For example, brewers "buy a lot of the same stuff," so there's an oppy to reduce costs. Yet each craft brewer is "thimble in the ocean" with plenty of room to operate with a fair degree of independence.  

Could a second employee-owned craft co decide to sell? Maybe so, if sources talking to Reuters (and others) are right: New Belgium is currently searching for a buyer, reportedly valuing the co at over a billion dollars, according to those pesky "people familiar with the matter." Recall, Full Sail employees voted to sell to PE firm earlier this yr. Lazard Middle Market is advising NBB on the sale, Reuters wrote today, tho neither co commented officially. No word on who the potential buyer would be, but asking price likely to factor in heavily there. Not many entities can afford such a hefty price tag. Indeed, "craft beer companies often command rich valuations," the paper wrote. A billion dollars for NBB would not be as rich as a similar valuation for Ballast Point, which shipped only about 15% as much as NBB last year. On other hand, NBB will be down for the first time in 2015, while Ballast Point will more than double. And NBB ESOP reportedly has a lot of debt, both paying off co-founder Kim Jordan and building out New Belgium's big facility in Asheville. NBB volume was up about 1% thru Nov 29 in IRI multi-outlet + convenience, $$ +2%. Lead brand Fat Tire $$ declined 1.4%, while #2 Ranger IPA -2%. Unlike some other top craft cos, those trends improved for last 4 wks by a few points. This year, its numbers bolstered significantly by intro of Slow Ride Session IPA: thru Oct 25 it had reached almost $7 mil in sales in IRI's MULC channel. But big question will be whether that brand cycles in 2016, since Snapshot Wheat (2014 intro) did not. Sales for that brand fell 42% thru Oct 25.  

Amidst all the hand-wringing, commentary, investigations and more about AB activities in craftland, deals keep comin'. Long-expected deal for AB to buy Arizona's biggest craft brewer, Four Peaks, announced today, bringing number of brewers in AB's High End business unit to 6. Deal expected to close in Q1 next yr. Clearly, AB undeterred by noise surrounding ABI-SAB. And new deal hadda pass DoJ muster as well. Four Peaks hit 59K bbls in 2014, according to BA stats, up from 23K in 2010. Expects to ship 70K bbls this year, AB said in release. Flagship Kilt Lifter, a Scottish Ale, is over 60% of volume and up 40% thru Oct 25 in IRI MULC data. Overall, total Four Peaks $$ up 44%. Four Peaks has 3 primary locations now, where it has retail license, plus a partnership at Sky Harbor Airport. And it can add a few more retail spots. Recall, Ariz changed beer laws earlier this yr, including significantly raising microbrewery cap - from 40K bbls to 200K bbls - in part to keep Four Peaks under it. Also allowed microbrewers to keep retail privileges, added guest tap privileges. At same time, it limited self-distribution and # of retail licenses (to 7). When bill passed, Four Peaks founder Andy said: "With the implementation of SB 1030, Four Peaks will no longer be faced with an arbitrary cap on our success that forces us to choose between making more beer and our 200 employees. It amends a short-sighted law so that we can continue to grow and create jobs."