Two St. Lou-based cos, small soda supplier Fitz's Bottling Co and O'Fallon Brewery, are launching new Fitz's Hard Root Beer, "set to hit store shelves in late January," reported St Lou Post-Dispatch. Fitz's is another example of a storied non-alc root beer/soda line that's decided to enter the alc soda game (think FX Matt with Jed's Hard Soda line), as a handful of other smaller regional brands continue to surface (Mission Hard Root Beer, Forbidden Root, Root Sellers, Wild Ginger Brewing, etc). "People have been asking for a hard root beer forever," Fitz's owner Michael Alter told paper. Now with help of O'Fallon and its recently built $10 mil, 25K bbl brewing facility, Fitz's Hard Root Beer will hit the mkt, in both package and draft. Interestingly, it was employees at mutual distrib, Grey Eagle Distributors, which initially suggested Fitz's and O'Fallon "work together," to brew a root beer, noted paper. O'Fallon on its own expects to finish yr up 10% to 10,500 bbls. Recall, it's run by ex-AB marketing exec, Jim Gorczyca.  

Denmark-based Mikkeller Brewing "has officially entered into an agreement with AleSmith Brewing Company owner and brewmaster Peter Zien for the duo to establish a new company called Mikkeller Brewing San Diego," cos announced. Recall, early this yr news broke that Mikkeller was "finalizing agreement" to enter "creative partnership" with Zien for Mikkeller to occupy AleSmith's old 20K sq-ft (15K bbl/yr) facility and give Mikkeller a US home for production (see Feb 18 issue). And that partnership also involves Zien "maintaining" a "minority stake" in Mikkeller Brewing San Diego, while "initially" calling for him to "oversee multiple components of the brewing process and provide ongoing assistance on an as-needed basis."

So far they've concocted two new brews - AleSmith Mikkeller IPA and AleSmith-Mikkeller APA (American Pale Ale) - which are both on tap at Mikkeller's bar in San Fran, as well as AleSmith's "recently debuted 25,000 square-foot Miramar tasting room," and "numerous craft beer-centric venues throughout San Diego County," per release (seems that the new brews, at least initially, will be jointly named). Coming up next is "an imperial take on an English-style porter, which will be released via a similar distribution method." And it'll soon begin construction of tasting room, expected to open in early 2016. Ultimately, "Mikkeller San Diego beers will be bottled, canned and distributed more widely nationally and internationally." "I like being a 'gypsy brewer,' but know that having a stake in a US brewery will change our position here," said Mikkeller founder, Mikkel Borg Bjergso. Stay tuned.

Northern United Brewing Partners with South Korean Brewer to Get It Started; Empire Collaborates with Chinese Brewer In just this past week, two more partnerships and/or collaborations between cos on an international spectrum were also announced. Mich-based Northern United Brewing Co, makers of Jolly Pumpkin and North Peak Beer Co beers among other products, has partnered with South Korean brewer, Playground Brewing, co announced yesterday. Nature of the "partnership" is not fully explained, however NUBC "has been working with and training" Playground partners for over a yr, both in US and in South Korea, and is helping Playground start a brewery in the city of Seoul, per release. They've installed 37-bbl system and brewery "is set to have a soft opening December 9th [today], with an official opening planned for December 19th." Idea is to "brew great beers that don't exist in Korea's market today," said Playground founder and partner, Soonbung Chun. "Our partnership with NUBC enabled us to get here and we see them as more than just a partner." Playground will start with 3 beers: a Czech Pilsner, a Saison, and a Korean IPA.

Then too, NY's Empire Brewing announced 2d collaboration with a Chinese company in ongoing effort to expand its brand "into the world's largest economic market," per syracuse.com report. This time it'll collaborate with Panda Brew, "a Chinese co with 4 brewpubs and sells packaged beer in 40 Chinese cities," to brew Kuding-Ta IPA flavored with Asian tea ingredients. The beer will be available in Empire's Armory Square brewpub in a coupla weeks, and Panda Brew will make a version that'll "debut" in its China brewpubs. "It's a way to get our name into the Chinese market, and get Panda Brew's name out here," Empire owner David Katleski told paper. So the beer will be "brewed independently by both" cos. Empire's first collaboration was with China's Jingwei Fu Tea co to produce a beer called Two Dragons. That will be brewed again "at an as-yet-unnamed Upstate New York brewery for the Chinese market," sez paper. Meanwhile, Empire's new production facility that'll be able to produce 70K bbls/yr is still under construction, but Katleski and co "hoping to start production there by May."  

Ongoing battle over Georgia brewers' ability to sell facility tours took new turn today after strong support voiced by the state's Republican House Speaker David Ralston. "I was disappointed in what the Department of Revenue did," he told the Atlanta Journal-Constitution, referring to the late-September ruling that placed additional limitations on sales of brewery tours (see Oct 1 and Nov 24 issues). He believes that bulletin "thwarted the legislative intent" of the bill passed by lawmakers earlier in the year. Additionally, Speaker Ralston "would like to see them eliminate the need for legislative action, if they would go back and revisit that, because if they don't, we may have to." So this battle (which pits small state brewers that seek on-site sales of not just tours but beer itself as out-of-state competitors enjoy, against wholesalers that wish to preserve 3-tier ideals) sure ain't over.  

Perhaps takin' a page out of the Sierra Nevada Beer Camp Across America book, both New Belgium and Devils Backbone Brewing will debut their own collaboration 12pks which include various different brewer partners and beer styles. NBB is collaborating with Firestone Walker, Allagash, Avery, Rhinegeist and Hopworks Urban Brewery to create "Fat Tire & Friends Collaboration Pack," celebrating the 25th yr of brewing Fat Tire, reported wcpo.com. Each brewer will put their own "creative twist" on Fat Tire, that include various hopped up, sour, and/or Belgian style versions (see the list of brews in article link). Again, similar to Sierra last year, the collaboration pack will launch in Jun 2016 at NBB's new Asheville brewery (which is expected to be up and running by then), noted paper. The 12pk will include 2 of each collab brew, as well as two Fat Tires. Each beer will be available on draft too.

Similarly, Devils Backbone will release 2016 "Adventure Pack Collaboration Sampler" 12pk with five other brewers set to release in mid-Jan thruout VA, Wash DC, MD, NC and WV, co announced yesterday. The 12pk will also include 6 different beers (two of each) from NC's NoDa and Wicked Weed Brewing, IN's Sun King, MN's Surly, and Australian Thunder Road Brewing, as well as Devil's Backbone Vienna Lager. Brewers from each brewery have been makin' trips to DBB's Outpost Brewery "over the past few months" to nail their collab brews. Beer styles range all over from NoDa IPL to Thunder Road Australian strong ale, Sun King "double dank cream-style ale," Surly "coffee and oak, double brown ale," to Wicked Weed Imperial Stout with ingredients from each of the world's Seven Summits. See full descriptions of the beers here.  

Sierra Nevada will intro a new spring seasonal, again picking a recipe from its Beer Camp. This year it'll brew Tropical IPA, comin' in at 6.7% abv with "huge mango tropical" flavor that comes "strictly from the hops," said Brian Grossman at joint event for new year round gose style beer, Otra Vez, and Tropical IPA tasting. No fruit is added. The liquid served at the event was actually still a test batch, and the official release will be slightly less bitter, Ken noted. To clarify, this recipe is not from Beer Camp Across America like last year's Hoppy Lager collab with Ballast Point, but rather a recipe selected from their "almost weekly" Beer Camp that Sierra hosts. And recall the plan is to continue using a new Beer Camp recipe every year for its spring seasonal.

Then too, Sierra talked more about its sole new yr-round brand intro for 2016, Otra Vez Gose. Sierra's actually "been talking about this style for years," and it took 119 different batches to "get it right," Brian shared. First it was picking the right bacteria, then it was figuring out how to "round it." "It's a simple style but a complex brewing process," chimed Ken. Sierra's had the name "Otra Vez" trademarked for years without knowing what it'd be used for, until now. And they're already workin' on some different versions of this that may be barrel aged, noted Ken. Otra Vez begins shipping next week.  

Debt racked up via recent expansion seems to have squeezed San Francisco's Magnolia Brewing too tight to recover on its own, according to the company's filing for Chapter 11 bankruptcy on Nov 30. Recall Magnolia began as a brewpub in the late 90s. Founder Dave McLean later opened nearby Alembic bar then just last year opened a Magnolia production facility attached to a new BBQ restaurant, Smokestack. That expansion cost about $3 mil, Dave estimated at the time, and the co took on $2.2 mil from investors to get it done (see CBN vol 5, #75). Now, the recent voluntary filing reveals the co (which includes original Magnolia, Smokestack and brewery but not Alembic) has about $5.25 mil in debt. That includes about $1.7 mil in secured debt to 3 separate creditors. That's the key piece for this filing, which will proposes that the co make interest-only payments on this debt. Importantly, Magnolia shows that its estimated $3 mil in assets is well beyond its secured debt. The co has another $2.5 mil in unsecured debt and just over $1 mil of "outstanding tax debt." The co projects revs of about $7.5 mil, but high operating expenses totaling about $6.9 mil, according to filing. It expects to be cash flow positive come January.

Additional document details some of unsecured debt, including 20 largest claims that total about $2.2 mil. Over $1.8 mil of that is from 10 loans, owed to creditors largely listed as individuals or pairs of people. Another $370K in trade debt is listed here too, mostly to equipment or food/beer ingredient suppliers. "Our two restaurants are busy, sales are strong, and we're seeing really great growth in our beer distribution," Dave told the SF Business Times. The co plans to keep all businesses open while it works to "reorganize and emerge from chapter 11," according to the filing. Of course, it's "keeping all options open," per claim, including "the sale of the business as a going-concern."  

Debt racked up via recent expansion seems to have squeezed San Francisco's Magnolia Brewing too tight to recover on its own, according to the company's filing for Chapter 11 bankruptcy on Nov 30. Recall Magnolia began as a brewpub in the late 90s. Founder Dave McLean later opened nearby Alembic bar then just last year opened a Magnolia production facility attached to a new BBQ restaurant, Smokestack. That expansion cost about $3 mil, Dave estimated at the time, and the co took on $2.2 mil from investors to get it done (see CBN vol 5, #75). Now, the recent voluntary filing reveals the co (which includes original Magnolia, Smokestack and brewery but not Alembic) has about $5.25 mil in debt. That includes about $1.7 mil in secured debt to 3 separate creditors. That's the key piece for this filing, which will proposes that the co make interest-only payments on this debt. Importantly, Magnolia shows that its estimated $3 mil in assets is well beyond its secured debt. The co has another $2.5 mil in unsecured debt and just over $1 mil of "outstanding tax debt." The co projects revs of about $7.5 mil, but high operating expenses totaling about $6.9 mil, according to filing. It expects to be cash flow positive come January.

Additional document details some of unsecured debt, including 20 largest claims that total about $2.2 mil. Over $1.8 mil of that is from 10 loans, owed to creditors largely listed as individuals or pairs of people. Another $370K in trade debt is listed here too, mostly to equipment or food/beer ingredient suppliers. "Our two restaurants are busy, sales are strong, and we're seeing really great growth in our beer distribution," Dave told the SF Business Times. The co plans to keep all businesses open while it works to "reorganize and emerge from chapter 11," according to the filing. Of course, it's "keeping all options open," per claim, including "the sale of the business as a going-concern."  

Reyes Beverage Group closed on deal Friday to buy almost 300,000 cases of Saint Archer out in Southern Calif from Stone Dist, tho it will sell off portion to neighboring MillerCoors distribs Classic and Beauchamp. This now makes Saint Archer completely aligned with MC's distribution network. MC ready to expand its prize craft acquisition without headaches from footprints. So Stone's distribution arm just sold off its 2d largest brand that was reportedly about 10% of its volume. That's a hit to a co that has heretofore grown very quickly. Across-the-country, RBG, thru its Premium Bevs unit, picked up about 200,000 cases of both Stone and Lagunitas in Northern Va and DC from Hop and Wine. Recall, earlier this yr, Hop and Wine sold its craft portfolio in other parts of VA to Blue Ridge and Loveland.

Union & Manhattan Swap: Magic Hat to Manhattan for Anchor and KelSo Coupla large NYC distribs swappin' brands. Sheehan Family Co's Union Dist swapped approx 125K cases of Magic Hat to Manhattan Beer for ~125K cases of Anchor and KelSo. Not too long ago Magic Hat was more like 200K cases in NYC, before dwindling over the last few yrs (as it has nationally too). Recall, Anchor was previously with Phoenix Beehive before Manhattan deal.  

Fallout from proposed Kroger plan to have Southern Wine & Spirits run vast planogram plan for its stores, paid for by industry members, continues. (Note this article appeared earlier today in INSIGHTS Express.) A group of 6 alc bev industry assns, representing on-premise retailers, distillers, importers, vintners, NBWA (again) and Brewers Assn wrote separate Dec 7 letter to Dept of Treasury Secy Jacob Lew. Like NBWA earlier, and then Beer Inst, these assns are "specifically requesting clarification of TTB's category management guidance and enforcement" of the FAA Act's "various trade practice provisions such as the tied house, commercial bribery and exclusive outlet prohibitions." Another "immediate concern" for these assns: "providing items of value," via direct payments or "indirect inducements such as mandated arrangements with third party data centers owned by the retailer." Letter does not mention Kroger specifically, but that's what they're talking about. The CatMan proposal "raises serious issues of compliance by the alcohol industry with both state and federal law." Assns also mention previous TTB revisions that allowed schematics, but those exceptions "were intended to be limited, with narrow definitions and specific values attached to the services," the assns remind. Proposed (Kroger) plan "does not appear to fit within the scope of permissible activity under TTB regulations and is contrary to the FAA Act," the assns state, and what's more, "goes far beyond the scope of the amendments and is contrary to the purpose" of the FAA Act.

Between two global brewer CEOs who insisted that the proposed ABI-SAB deal will have "no impact" on ABI's US biz and it's "business as usual" at MillerCoors, a quartet of skeptical speakers contended otherwise during Senate subcommittee hearing yesterday. Four speakers in turn suggested conditions they believe must be met before the Dept of Justice green lights the deal, each in line with respective speakers' talking points. Indeed, the entire hearing largely provided an opportunity for all 6 witnesses to reiterate those points on a national stage and for Senators to show constituents concern over the availability of a pint.

BA Asks DoJ to Force Divestiture of ABI's Branches Brewers Assn CEO Bob Pease took his change to make arguably the biggest asks: require ABI to divest its wholly-owned distributors and to change its incentive program for independent ones to be exclusive. That was first time the BA has requested that ABI divest branches. J. Wilson of the Iowa Brewers Guild echoed those same requests, adding that an approval of the ABI-SAB deal should also ensure a consistently competitive market for raw materials like hops, barley, bottles and cans. NBWA CEO/prexy Craig Purser did not join in calls to dismantle ABI's branches. Instead, he suggested that DoJ restrict both ABI and MC from terminating any independent wholesalers after the deal as well as limit any expansion of ABI in both the wholesale and retail tiers. Finally, prexy of American Antitrust Institute Diana Moss insisted that any remedy offered by the DoJ must ensure a "completely independent" Molson Coors (and therefore MillerCoors), including a prohibition of any contract brewing or supply agreements between the cos whatsoever. While these requests made in front of Senate subcommittee, remember it's DoJ that decides on outcomes.

Curb Anticompetitive Behavior with Distribs, Urge Pease, Purser and Wilson Concerns over distribution, and particularly craft brewers' access to it, received a great deal of attention during the hearing, just as prior statements suggested. In written testimony, Bob laid out above requests, explaining that the deal "must be viewed in light of other developments affecting competition in the beer industry." Those include state laws that "effectively mandate the use of beer wholesalers" and "special franchise protection for beer wholesalers that makes it difficult or virtually impossible" for brewers to change distribs. Due to high share held by ABI and MC, plus distrib consolidation they "actively fostered," the original "goal" of franchise laws, to keep an independent middle tier, "has been thwarted." Now "most markets" have just "two substantial wholesalers," according to Bob, making it harder for new brands to find distribution. And since 15 states allow ABI to own branches, "in communities where ABI or a closely-related wholesaler is one of two choices for a brewer to access the retail market, the wholesale tier is simply not competitive." In his view, states are "generally" unresponsive to this dynamic industry, ignoring calls by FTC "to change blatantly anticompetitive distribution laws." That's as exceptions like "limited self-distribution" are "insignificant" and "totally inadequate" to level playing field.

The deal could shift current marketplace from one driven by "consumer pull" to one driven by "supplier push," Craig testified. The deal "could upset the equilibrium" currently in place, he said. Craig sought assurance that no independent distribs would be terminated, by either a new ABI or a Molson Coors-owned MC, as a result of the deal. He believes the DoJ should look at limiting wholly-owned distribs, retail privileges provided by recent craft deals as well as any "exclusivity mandates" and "interference in distributors' sales of competing brands."

Minister of Iowa Beer, J Wilson also focused on distribution and ensuring his members have access to it. His testimony reviewed a handful of existing investigations into ABI's market practices. Those include the much-discussed set of inquiries by the Calif Attorney General's office and DoJ into ABI's Bay Area distrib acquisition and a look into actions by Missouri distrib Krey back in 2013. The Washington State Liquor and Cannabis Board is currently investigating "aggressive tactics" taken by ABI's Seattle branch "to shut out competition" in concert venues and the football stadium. "Just last week," the Iowa Attorney General's office contacted Wilson to look into the impacts of ABI-SAB as well.

Chairman Refocuses on Deal's Direct Impact; Some Sens Skeptical But "how will this deal have any impact on distribution," subcommittee chairman Sen Mike Lee (R-UT) asked right after witnesses provided prepared testimony. ABI CEO Carlos Brito gave testimony first ("no impact") and Molson Coors CEO Mark Hunter concluded the witness panel ("business as usual"). But Sen Lee chose to direct this first question to Bob and Craig. "Isn't it true," he said, "that AB InBev's negotiating leverage will be no greater the day after this deal closes than the day before?" Neither Bob nor Craig affirmed that assertion, instead sticking to prior arguments about separate ABI actions plus resulting share of global profits after ABI-SAB and potential market power. Bob reminded that, in BA's view, current distrib incentive programs "are more designed to encourage their distributors not to sell the products of the independent smaller players." Craig pointed to Calif before arguing that "there's a very fine line to an incentive program," between "carrots and sticks," claiming "that incentive can switch" to "a stick that's held over an independent distributor."

In his second round of questions, Sen Lee returned to the issue, again seeking an answer: "why divest wholesalers, when [ABI is] not acquiring any wholesalers, let alone any assets at all in the United States?" ABI is of course acquiring wholesalers, Bob reminded, just not in this deal. "They've acquired 5 in just the last few months," he said. In markets where that happens, "that effectively shuts off one of two plausible paths to market for my members," Bob reiterated. Given a chance to respond, Brito noted that "it's interesting to see that despite" over 100 years of ABI owning wholesalers, craft has still grown to where it is today. "Even more interesting," he claimed, "the major wholesalers that we own are in New York, Boston, San Diego and Denver," which are some of "hottest beds for the growth of craft beer in this country." Therefore, he sees no "link" between ABI's branches and "craft brewers being disadvantaged in the marketplace."

Not every Senator on the panel accepted Brito's insistence that the deal has "no impact" here, though. Sen Blumenthal (D-CT) pressured Brito to commit to the panel that no terminations or renegotiations of distrib contracts would occur due to the deal. Brito did so eventually, but when pressed further if he'd agree to a "binding document" with DoJ, he deferred: "that's for the Department of Justice to decide." Similarly, Sen Franken (D-MN) shared a fair amount of skepticism towards Brito's assurances. But in statement issued after the hearing, Sen Lee asserted that it "mitigated many of our concerns about the transaction."

Hops, Barley, Bottles and Cans Pushed to Sidelines Though concerns over access to raw materials touched on during hearing and in written testimony, they were certainly a sideshow to the main event. They received the most attention in J. Wilson's written testimony. ABI's deep pockets means it could "buy up an entire year's hop crop (or simply a key varietal or two) and kill the craft sector in one fell swoop," he suggested. Indeed, "this could actually happen inadvertently if ABI were to significantly increase production of a hop-forward beer such as Goose Island IPA." In sum, "the future of hop supplies for beer are tenuous without an aggressive player seeking to wipe out a growing sector of the market," Wilson contended. He also mentioned barley and concerns over cans without providing many details. During the hearing, Brito responded to these concerns by rattling off what percent of the US supply of each of these goods ABI buys (not including anything it produces itself): 8% of US hops, 12% of cans, 25% of barley, 27% of bottles and "all of those numbers will remain the same." Responding to Brito's prior assertion that "there would be no increase in ingredient usage," as Wilson paraphrased, he quipped that "to me that sounds like freezing production and being happy with exactly where they are in the US market." While "that's delightful if that's the case," he didn't buy it.

Legislators' Love of Craft Clear Throughout the hearing, Senators on the Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights certainly seemed to enjoy bragging about their home state's small brewers. They took turns touting the work of their brewing constituents, referencing their recent growth and insisting on the importance of that continued growth. The lawmakers clearly showed that they hear, embrace and re-tell the stories told to them by small brewers and their trade groups. "Beer is extremely important to Minnesotans," Sen Franken (D-MN) said, echoing Sen Blumenthal's insistence of the "profoundly important topic" at hand and the respective "importance" of small brewers to economies in Delaware, North Carolina, Iowa and more.