A pair of brewery-count milestones came (and just as quickly went) this week: the US has more operating breweries now than ever, passing the previous record set in the late 1800s and California passed 600 breweries in the state for the first time. In 1873, 4131 breweries operated in the US, according to the Brewers Assn. By the end of Nov, the org counted 4144 breweries, "a remarkable achievement," BA economist Bart Watson said in a statement. "And it's just the beginning," he said. Indeed, The rate of average openings per day keeps accelerating: "openings now exceed two a day," the BA wrote. It also counts 15 states with over a 100 breweries. Topping that list is California, of course, which got 600th operating brewery this week, the Calif Craft Brewers Assn announced. Indeed, the state's "doubled the number of breweries in the last three years," exec director Tom McCormick said during Brewbound Session yesterday. So "half of all the operating breweries in California have been in business for three years or less." Of course, "it's getting more competitive," he said: "It's competitive today and it will be more competitive tomorrow and going forward," across all industry tiers.  

Craft and domestic specialty brands that are at least partially (25%+) owned by large brewers represent 37% of craft segment's volume in Nielsen data, Nielsen vp of alc bevs Danelle Kosmal shared at Brewbound conference yesterday. Gotta note, that's using Nielsen definition of craft, so Blue Moon, Leinie and Shock Top a significant chunk of that. But again, this only includes those companies at least partially owned by large strategic buyers. With more deals in the works, Danelle raised the question: "is craft small?" And is "the new craft brand expansion" thru partnerships? All in, craft segment up solid 10.5%, $$ up 14.5% for 52 wks thru Nov 7, tho has slowed a bit in recent periods (as we've written). Breaking down category into 3 "sub-segments," Danelle showed that 19 "Large brands" - those with 1+ share of craft $$ - are collectively up 8% and represent 61 share of $$. Then 82 "Midtier" brands collectively up 11% and represent 27 share of $$. And remaining 12 share of category is represented by 1097 "Long tail" brands, +19%. (Editor's note: it appears that "brands" here refer to total brand families or companies, tho Danelle didn't have a chance to clarify.)

Meanwhile, number of craft brands (referring to actual brands this time) that sell more than $1000 in Nielsen acct universe has grown from 4234 to 6662 in about 3 yrs. Yet this is "first year where we've seen the number of new entrants decline," noted Danelle. In 2012 there were 849 new entrants, and that number shot up to 1098 in 2013. But last yr stayed about even, with 1097 new brands tracked, and in latest 52 wks it's slowed to 845 new. Keep in mind, this is "not taking into account" the craft brands under $1000 in sales, or those previously existing brands that've significantly expanded distribution, she acknowledged.

More Premium, Mexican Import, W&S Drinkers Purchasing Craft Too Premium beer drinkers, as well as Mexican import drinkers and wine & spirits drinkers are gradually purchasing more craft, Nielsen data found. The percentage of premium beer households that also purchased craft beer increased from 27% two years ago to 32% in latest 52 wks. And "not only are there more people purchasing craft, they're spending more," Danelle added. Similarly, 45% of Mexican import drinkers are also purchasing craft. And although wine and spirits continue to take share from total beer category as a whole, "we're seeing a lot more interaction" between craft drinkers and wine & spirits drinkers, Danelle showed. Particularly, there "tends to be a lot of interaction" between whiskey drinkers and craft beer drinkers. And recall, "the high end of whiskey is driving a lot of" spirits category growth. From 2012 to 2014 the amount of wine drinkers that also drank craft rose from 26% to 28%. And 29% of spirits drinkers also purchased craft beer in 2014, up from 25% in 2012. All in, "I think we'll continue…to see that increase," sez Danelle.

Gose, Herb/Spice Beer & Berliner Weisse Top Hottest Trending Styles Lookin' at styles that have best trends of the bunch, Gose (+291%), Herb/Spice beer (+254%), and Berliner Weisse (+182%) were at the top, all up triple-digits, Danelle showed. Keep in mind, these are "not necessarily the largest" styles, and her list excludes "flavored craft beers" up 5361%, which include hard root beer. Only three styles on her list of 14 top growth styles were above 1 share of craft: IPAs, natch, up 40%; Pilsners, up 76%; and catchall category "Remaining Ales," up 87%. And some other fast trending styles include Cream Ale (+96%), Foreign Extra Stout (+66%), Sour/American Wild Ale (+56%), and Blonde Ale/Golden Ale (+50%).  

AB's "new plan to reverse declining volumes in the U.S.-by rewarding distributors who focus" on AB brands "is raising alarm among craft brewers," began big Wall St Jnl feature this AM. (Note this article appeared in INSIGHTS Express this morning.) Distribs could get annual reimbursements of as much as $1.5 mil, 2 distribs told WSJ anonymously, if they sold 98% or more of their volume in AB brands. AB had said avg distrib would be eligible for benefit of around $200K. "At least one distributor has dropped a craft brewer as a result of the incentive program," wrote WSJ. That would be Grey Eagle in St Lou, which told Deschutes last week that it was dropping the brands, according to prexy Michale Lalonde because it "had to make a choice to go with the incentive program or stay with craft." WSJ also noted that "adding to craft brewers' concern is AB InBev's acquisition of five craft breweries." Between acquisitions and incentive program, ABI is "basically saying, 'we would like to shut down a massive pillar of the United States distribution system to craft,'" said Ninkasi founder Nikos Ridge. And Lagunitas founder Tony Magee also took issue with AB provision which allows distribs to carry craft brewers of less than 15,000 bbls or confined to just 1 state and still get incentives, because "cap could curb" distrib's motivation to increase craft beer sales if demand were to go beyond 15,000 bbls. "It's a very Machiavellian lever they're pulling," said Tony. In response, AB veep Ricardo Melo said program voluntary and nothing "prevents distribution of other brands."  

Is this a cautionary tale for US craft brewers? Meantime, one of UK's leading indy craft brewers, will be bought and sold 3x in 12-18 mos. It got bought earlier this yr by SABMiller, the world's #2 global brewer, then again by ABI as part of MegaBrew. Yesterday, SABMiller announced that ABI will explore sale of Meantime yet again, seemingly because of UK regulatory concerns regarding share in above premium. So imagine if you were a proud employee of Meantime. Less than a yr ago, you were battling the big boys as an indy craft, then owned by one giant, then bought by another and soon to be sold to who knows who. As it gets whipsawed between owners, Meantime essentially a pawn in someone else's game. That's gotta lead to a very different self-image. Could that happen to US craft brewers that have done transactions of various kinds? Already, one ESOP (Full Sail) elected to sell to private equity. Could there be other craft brewers that undergo multiple ownership changes in coming yrs? That's the potential meaning of Meantime.  

Panel of financial advisors outlined exit strategies at Brewbound conference yesterday, from ESOPs and IPOs to private equity stakes and outright sale. First Beverage Group's Ryan Lake noted "smattering of deals" in 2007-2013 which had average EBITDA multiples between 6-12X. Deals picked up in 2014 and avg EBITDA multiples rose to 10-15X. In 2015, things took off and EBITDA multiples jumped to 12-25X, with top end skewed by "pretty exceptionally high" 30X in Ballast Point deal. (Multiples of revs over these yrs ranged from 0.5X to 9X, Ryan also showed.) In context, median EBITDA multiple for all beer was 13X during this period. So 2015 craft numbers indicate "significant increase." Net-net: "we know more deals are coming. A lot more are coming in the medium term," said Ryan, tho he's not sure next year will match this yr, as AB and MC may take pause given ABI-SAB. But still plenty of private equity and foreign strategic interest in craft: biz is growing and margins are strong. At same time there's "scarcity of assets." That may sound strange given announcement of 4144 craft brewers now out there (see below). But not that many are "scale-able, with good growth and good margins," said Ryan. While there are still more buyers than sellers, "that may be changing," he added. He, Prairie Capital Advisors' Rocky Fiore and Spencer Fane's Mike McCann agreed that multiple/valuation in Ballast Point deal was an "outlier" given combo of growth rate and high margin Ballast Point offered. On Lagunitas, Heineken viewed oppy for intl craft brand and "how many of those can there be?" Ryan asked.

Key unknowns that may determine deal pace and valuations going forward are whether: 1) craft growth can be maintained; 2) big brewers "get their fill," drop out of the mkt; 3) increased competition demands more mktg spend, higher costs, leads to price war; 4) consumers will change perception of craft given number and size of deals. Then too, macro factors - cheap debt, disposable income, employment rates - can change landscape. Asked about potential for IPO and/or craft roll-up, Mike said changes in law have made it "tougher to be a small public company these days," given disclosure rules, expenses and more. Landscape "not conducive to be a small public company" and more companies going private than public, he said. It's an option, "but you have to have scale," as in a "multi-billion dollar" co. "Math makes sense" for a craft roll-up, said Rocky, but owners still have to get comfortable with giving up control" and someone has to manage the brands and run the co.  

After over a year of consideration, Fort Collins finally approved plans for a self-storage facility that also wants to house a small brewery. Fort Collins Self-Storage LLC plans to carve out space for a 20-bbl system in about 7000 sq ft, leaving over 100K sq ft for the primary business, according to the Coloradoan. The new combo biz begins construction within a mile of both Odell and New Belgium, as well as a handful of smaller breweries. No brewer has yet been selected, but owner Stan Scott seeks "an aspirational brewer that wants to move to the next step beyond the typical three barrel brewery that is common in the industry," he told the paper early in 2015.  After over a year of consideration, Fort Collins finally approved plans for a self-storage facility that also wants to house a small brewery. Fort Collins Self-Storage LLC plans to carve out space for a 20-bbl system in about 7000 sq ft, leaving over 100K sq ft for the primary business, according to the Coloradoan. The new combo biz begins construction within a mile of both Odell and New Belgium, as well as a handful of smaller breweries. No brewer has yet been selected, but owner Stan Scott seeks "an aspirational brewer that wants to move to the next step beyond the typical three barrel brewery that is common in the industry," he told the paper early in 2015.

 In the midst of the coffee chain's plan to serve beer and wine in about 2000 of 12K stores, Utah regulators might get in the way of that expansion, at least within state's borders. Commissioners of the state's Dept of Alc Bev Control want lawmakers to decide whether Starbucks cafes can be considered restaurants or not and therefore whether they can be given licenses for alc bev sales, the AP reports. Starbucks sought licenses for 5 UT locations, but the DABC chose not to rule on those applications early last week, choosing instead to ask legislators to decide the matter. Because chain locations only heat food on-site, rather than prepare it, the DABC chairman questioned if such an operation could be called a restaurant, asking "where does that end?" if Starbucks is approved for licenses. Utah, of course, tends to be particularly strict with alcohol policy. If the licenses are granted, the Starbucks locations will need to take some additional precautions "to conform to some of the state's quirkier alcohol laws," as AP wrote, which stores in other states don't. Those include pouring alc bevs out of sight from patrons, requiring any customer purchasing alcohol to also purchase food and ensuring that at least 70% of sales comes from food, which apparently includes coffee.

Nashville, TN's beer scene continues to evolve, and is now in "third wave" of evolution, sez Metro Councilman Anthony Davis in recent Tennessean article. Of course, Yazoo Brewing represents Nashville's first wave, and this year Yazoo expects to hit 25K bbls; up 6% vs last yr, according to Brewers Assn stats. And it hasn't expanded to a new mkt in 3 yrs, honing in at home. Second wave of craft brewers, according to paper, are a handful that "all hit the scene after 2009," including Jackalope, Tennessee Brew Works, Black Abbey, Fat Bottom Brewery, Little Harpeth, Mayday, HonkyTonk, and Corsair Taproom. Paper points to Fat Bottom, which expects to "nearly double production," and already plans to launch distribution in Louisville, KY and Birmingham, AL. And Jackalope, which expects grow 50% to reach "about 4,500 barrels" this yr. Now, amid this 3d wave there are currently 15 breweries in middle TN, with "more than half a dozen on the way" including "two more" coming to East Nashville, noted paper. And that's all as many out-of-state craft brands continue to enter TN, including Bell's starting this mo, and Dogfish Head (re-entered), Founders, SweetWater, Blue Point (AB), Smuttynose, New Holland, among others in the last couple yrs. Gotta note, with Tenn's largest in-state brewer only at 25K bbls/yr and many others that've yet to hit even 5K bbls/yr, it seems there's ample room in Nashville, as well as the rest of TN, for more craft.

Indeed, "I don't think Nashville is anywhere near a saturation point," BA chief economist Bart Watson told paper, adding "we have more than 20 breweries in Boulder (Colo), and that has a population of 100,000 people." (Editor's note: Nashville population was more than 6x that as of 2013, and closer to 1.8 mil including rest of the metropolitan area). Craft beer growth in TN has been somewhat "inhibited by certain legislative factors," such as law that limits sale of beer over 6.2% ABV by requiring special license to brew stronger beers, Bart added. But starting Jan 2017, new bill will raise that limit to 10.1% abv and "will allow grocery and convenience stores to sell."  

In case you lost track of all the craft brewer territory expansions in the last mo, we've put 'em all together for you in one handy pdf. Organized by state, this list includes craft brewer distribution expansions with sales expected to begin in Nov 2015, as well as a preview for Dec 2015 expansions. While it may not be comprehensive, this list includes announcements made by the largest craft brewers and many expansions by smaller players.  

Dogfish Head keeps figuring out new ways to be "off-centered." It announced that a new limited edition brew, Hoo Lawd, is "the hoppiest beer ever documented through scientific analysis," comin' in at a pungent 658 IBUs. It's a dark IPA brewed with an experimental hop called Alpha Beast, "along with Simcoe, Warrior and Amarillo hops in CO2 extract." Hoo Lawd will be available on tap at Dogfish Head Brewings & Eats in downtown Rehoboth starting tomorrow at 5pm, where it'll show latest episode in new web-series, "That's Odd…Let's Drink It," which "showcases" the beer with actors Ken Marino and Joe LoTruglio. The beer will also be available at upcoming Extreme Beer Fest in Boston this spring.

Another new DFH project is a coming seafood restaurant called Chesapeake & Maine located in downtown Rehoboth Beach next door to its brewpub, co announced via its blog. It'll also be "spotlighting our just launched 100% scratch-made spirits line with a draft cocktail menu that highlights Analog Vodka, Compelling Gin and Whole Leaf Gin." Restaurant is expected to open Feb 2016 and "initially" only open for dinner.

And lastly, this fall Dogfish Head distributed a limited batch of "Pennsylvania Tuxedo" beer, in partnership with Woolrich clothing company, for the first time, reported Penn Live. The beer is "a spruce-infused pale ale" that was first made in 2014, "named after the hunting suit" and only available at its brewpub. "Demand far exceeded the limited supply," paper noted. Bald Eagle Distributors in Lock Haven, PA "sold all 25 cases…within a day and a half," and warehouse manager said "it was the most demand for any beer release I've seen in this area, for sure."