Craft share gains slowed dramatically, only up 0.3 share in last 4 weeks thru Oct 4 in GuestMetrics data. That's vs +0.9 yr-to-date and a 1.9 share gain in 2014. And total beer biz is down lots in this channel too; off 5.8% last 4 weeks, in GuestMetrics universe of over 15,000 accounts. Means craft segment volume declined in these accounts. But don't forget that craft already has huge share here. At 30.7 share of volume and 34.6 share of $$ last yr in GuestMetrics data. So if beer sales shrinking 4-5% in account universe and craft over 1/3 of $$, hard for it to grow much, if at all. Not only that, "new [craft] brewer/brand introductions continue to outpace segment volume growth significantly." So it's gettin' mighty crowded and more competitive out there, not even taking continued migration to tasting rooms in many major metro areas into account. One major metro beer distrib estimates that tasting rooms and brewpubs, which he does not service, account for several points of biz in mkt, sez source. Makes it harder for distrib to grow. Meanwhile, another former firecracker, the cider segment, did not gain any share at all in last 4 weeks, meaning it was down several points.  

Ain't over 'til the judge makes final ruling. But MillerCoors got "tentative" dismissal of attempted class action suit accusing it of misleading consumers into thinking Blue Moon is craft, even tho it does not fit Brewers Assn definition. Judge gave plaintiff one more crack (but not much time, just a day or so) to amend complaint at hearing scheduled for today. But he ruled strongly for MC on 3 key issues. First, judge agreed with MC that "the safe harbor doctrine does apply" and bars plaintiff's claims under key Calif consumer protection laws. In fact, "MillerCoors' use of the Blue Moon [Brewing] Company trade name on the Blue Moon label is…specifically authorized by federal and state regulations." So MC's "omission of their ownership interest" and identification of Blue Moon Brewing Co as the brewer are legit under the law and bar plaintiff's claims of deception. Judge also rejected plaintiff's argument that a "reasonable consumer" would be deceived by Blue Moon's labeling, advertising or shelf placement. He also ruled against plaintiff's request for injunctive relief in form of new labels/corrective advertising.

Judge Avoids Defining "Craft Beer" On issue of whether reasonable consumer would be deceived by Blue Moon's labeling/ads/shelf placement, judge refused to resolve "whether or not there is a legal or controlling definition of 'craft beer,'" because "even assuming that there is such a definition, Plaintiff cannot rely on it for their argument that the phrase 'Artfully Crafted' is misleading." He likened that phrase to "non-actionable puffery" since it is not a specific statement of an objective fact. Then too, since MC's use of the Blue Moon Brewing Co is "specifically protected by the safe harbor doctrine, Plaintiff cannot argue" that MC's use of it "contributes to a deceptive atmosphere or context within which MillerCoors' use of the phrase 'Artfully Crafted' should be evaluated." Nor can "other features" of the advertising/placement/pricing be considered deceptive, judge added, since plaintiff did not identify any other deceptive features in the ads, indicate that MC "has any control" over Blue Moon's shelf placement or provide any support for notion that pricing "can constitute a representation or statement about the product."

Lastly, plaintiff made big deal that Blue Moon website does not identify MC as brewer/owner, but MC's website "prominently" displays Blue Moon, judge found, so not probable that significant number of consumers would be misled by Blue Moon's "internet presence." But even after judge strongly rejected each of plaintiff's main argument in this Oct 21 notice, he "does not find it impossible that the Plaintiff could allege other facts as to MillerCoors' advertising or sales practices that would support their claim that MillerCoors deceptively or misleadingly represents Blue Moon as a craft beer." Plaintiff just can't use the trade name, labeling, packaging or the "Artfully Crafted" trademark to make consumer protection claims, he reminded. Judge will "entertain additional argument" during today's hearing.  

FX Matt will introduce Jed's Hard Soda line this November starting with Root Beer, Orange Cream and Black Cherry Cream flavors, each based off of Saranac 1888 non-alc soda line, co announced last week. Each flavor is 5.9% abv and will be sold in 6pk bottles. "I can't tell you how many times people have called or come up to me and referenced our award winning root beer, asking when we plan on releasing our own hard root beer…and we're feeling like we can make a really strong impact on the category," said president Fred Matt. This project has been in the pipeline for some time already, as it took 43 attempts to finalize Jed's Hard Root Beer during product development, he added. Previously Jed's line was used to release FX Matt's hard lemonade before it was discontinued.

Meanwhile, CBN's heard rumblings that Abita, another beer co with a storied non-alc root beer line, could be next established brewery to release an alc soda. Meanwhile, both AB and MC are getting into the hard soda game next yr with Best Damned Root Beer and Henry Weinhard's Hard Soda lines. And plenty other smaller cos are takin' a shot at this fast-trendin' sub-segment. "Is sugar the new hops?" asked Dallas Observer in article highlighting Audacity Brewing's new "Evil Cream Soda" brand. Either way, as the alc soda space keeps getting more crowded, it'll be interesting to see how the category evolves, and who else will decide to join.

"How Tart is Reclaiming Turf from Sweet," Sez NPR Contrastingly, recent NPR article highlights the return of sour flavors into American diets, and headlines "How Tart is Reclaiming Turf from Sweet." Now "it seems we're finally rebelling against the sugar that now saturates us. But that's not all - our palates are growing more sophisticated, thanks to globalization, and we've rediscovered the health benefits of fermented foods." Article lists "seriously unhealthy" average sugar consumption among Americans that "has been linked to high blood pressure, heart disease and diabetes risk." And "new evidence" shows "that sour, fermented foods may enhance digestion, balance gut flora and boost the immune system." So which is it? In the beer world it's a little bit of both, as more and more craft cos are experimenting with sour brews, yet volume is certainly lopsided towards sweet soda flavors at this point.

Duvel Moortgat USA's Boulevard Brewing will add several new states in 2016, starting with AZ with Hensley Beverage and KY with Beer House Distributors in Jan 2016, co announced today. Recall, co just recently added six new 1000-bbl fermentation tanks that boosted capacity up to 400K bbls/yr (already planning another cap expansion to 500K bbls/yr - see Oct 1 issue). So now "plans to expand our distribution territory can become a reality," said vp of sales for DuvelUSA Bobby Dykstra. By "early 2016" co will also add MI, CT, RI, DE, Albany NY and "parts of upstate New York," tho "distributor agreements are still in the works," per release. Altogether, these will mark 12 new states for Boulevard added under the Duvel regime in relatively short order (entered first new states in Sep 2014).  

How hot is hot! Ballast Point's volumes absolutely flying. It's up 72K bbls, 151% for 6 mos thru Jun, 2015 to 118.8K bbls. At that rate, it's on pace to sell over 300K bbls in 2015, excluding taproom. Even if it slows somewhat in 2d half, Ballast Point will leapfrog 15-20 competitors this yr. And that's just volume. Ballast Point's sales and profit growth even faster than that torrid pace at a higher rev per bbl than most.

Makin' Lotsa Moolah Revs from brewing operations, excluding tasting room sales, up 166% for 6 mos thru Jun 2015 to $42.5 mil, while costs up just 140%. So Ballast Point gross profits nearly tripled to $23 mil. And net income from brewing operations nearly quintupled from $1.8 mil to $8.4 mil, again for 6 mos. Its operating income totaled $7.8 mil in 2014, nearly doubling. This yr, it jumped from $3.6 mil to $14.3 mil in 1st half alone. That's an operating margin of 26.6%, considerably higher than Boston Beer's.

Rev Per Bbl Up 6% to $358 in 1st Half; Compare to Other Public Craft Brewers Ballast Point's rev per bbl on beer it ships is a very healthy $357.66 for 6 mos this yr. That's up nearly 6% per bbl. Compare to 2 other publicly owned brewers. Craft Brew Alliance had avg rev/bbl of $241 last yr. CBA made less net income ($3.7 mil) in 2014 than Ballast Point ($3.9 mil). That's even tho it sold more 7x as much volume. This yr, Ballast Point will blow CBA away on income line. CBA net income per bbl last yr: $3.70 vs Ballast's $33.63 (already more than doubled per bbl this yr). Boston Beer had avg rev/bbl of $220 last yr, net income about $22/bbl. Ballast Point sez its avg six pack of Sculpin is $14.70 in IRI, a 56% premium to $9.40 avg for top 20. Sculpin and Sculpin Grapefruit are over half of Ballast Point's beer sales.

BP Gets 15% of Revs from Tasting Room; It's in 30 States Of Ballast Point's $53.7 mil in revs in 1st half, $42.5 mil from brewing operations. Then too, Ballast Point also booked $8.1 mil revs from its tasting room alone in 1st half this yr (not far below last yr's 12-mo total). And that's up 133%. Ballast has modest sales of spirits ($1 mil in 1st half), but it loses money on spirits sales so far. Last yr, Ballast Point sold 70% of its volume in state of Calif. Its 70,000 bbls of growth in 1st half "primarily driven by product sales growth in existing states and to a lesser extent expansion into eight new states." Ballast Point in 30 states in all.

Calif Is 53% of Biz; San Diego Up 38% in 1st Half But home-state Calif still over half its biz: 53% of revs and volume for 6 most. Indeed, its San Diego distrib Crest Beverage still represented 21% of Ballast revs for 6 mos, but that's down from over 40% for full-yr 2013. Its revs in San Diego grew 38% for 6 mos thru June 30 this yr. Its second-largest distrib represented about 7% of revs, according to filing. Ballast Point sent about 6% of volume in first half of this yr to Massachusetts, second-largest mkt, followed by Tex at 4% and NY at 3%. Thru the first 6 mos of the year, Ballast's top 5 states represented over 70% of volume. Revs up 130% in those mkts. Indeed, Ballast more than doubled its biz in 21 states during the first half of this yr. Vast majority of remaining 20 states where Ballast does not distribute located in the middle of country. It's also available in 10 countries, up from 4 in 2012, but they still represent less than 5% of net revs. International biz is, however, "a compelling growth opportunity over the long term."

It's got plenty of other levers left to pull to as it pursues future growth. Obviously it's got more mkts to enter, but it also hopes to accelerate velocity and expand offerings at current accounts while adding new ones within current territory. Ballast reports 90 distribs "servicing 34,000 doors" currently. The co lists "adding sales personnel" among it's plans to achieve growth, just before promising to "selectively sign on new distributors."

Another Major Moment for Craft This represents yet another major moment for craft in a yr filled with them. Ballast Point is the first top 30 craft brewer to go public since the 1990s. Presuming it happens, it will easily be the most consequential public craft offering since the wave of them in the late 1990s (Pyramid, Redhook, Boston Beer, Pete's, plus many smaller ones). Of all of them, only Boston has really proved especially successful as a public entity.

Ballast Point filed a 176-page S-1 document with the Securities and Exchange Commission, a registration statement declaring its intent to go public, a move much rumored in recent months. Two of the premier investment banks are taking it public: Goldman Sachs and Morgan Stanley. They look to raise up to $172.5 mil in IPO and seek the ticker symbol PINT. This is yet another example of next wave of craft transactions; in the Big Leagues now.

Letter to Distribs Earlier this morn, Ballast Point exec veep sales and mktg Earl Kight sent letter to its distribs, saying that it was going to file document with the SEC that "is the first step in a process" leading to an initial public offering. Ballast Point determined that an "IPO is the best way to move forward into the future…. The funds we're hoping to raise will simply provide greater financial flexibility. It won't change who we are," Earl continued. Filing this form "doesn't necessarily guarantee" Ballast Point will be going public but if all goes according to plan, they "should be in position to go public in November." Goal is for owner Jack White to stay in control. Ballast Point is on a tear, one of fastest growing craft brewers of recent yrs, #1 with a bullet in its home mkt San Diego, and its beers sell at very high prices, over $350 per bbl (see below).

Republic would still be 2d largest distrib with about $7 bil in revs and 8500 employees, notes a reliable source, not Breakthru as Chi Trib reported (and we followed).  Some question about which entities would even be included in merger.  Turns out some entities such as Charmer’s NY alliance with Magliocco family or its Ariz partnership with Glazer’s or Wirtz’s Diageo brokerage in Canada will not be owned by Breakthru , but will still be managed by the new entity. INSIGHTS raised some questions about possibilities of Breakthru’s beer biz (buyer? seller?) without predicting.  But Breakthru Bev’s vice chairman Danny Wirtz told INSIGHTS: “We see beer as a strategic opportunity for Breakthru, building on our experience with both large core beer suppliers and craft brewers.” Both cos “have a commitment to growing that piece of our business.”

The size of deals coming down the pike these days is pretty staggering. At all levels. Largest wine and spirits distrib Southern Wine and Spirits has letter of intent “to form a strategic alliance” with 4th largest wine and spirits distrib, reported Shanken News Daily yesterday. The two companies could have combined revs of $16 bil, wrote Shanken and they collectively operate in more than 40 states. So this gigantic distrib would be very close to a national footprint. But contemplated transaction likely would not include Glazer’s very substantial beer biz, according to sources.

This megadeal follows directly on the heels of another one announced earlier this week, the merger of Wirtz Bevs and Charmer Sunbelt intro Breakthru, which it sez will have $6 bil in revs and employ more than 7000.

MillerCoors got “tentative” dismissal of attempted class action suit accusing it of misleading consumers into thinking Blue Moon is craft, even tho it does not fit Brewers Assn definition. Judge gave plaintiff one more crack to amend complaint at hearing scheduled for today. But he ruled strongly for MC on 3 key issues. First, judge agreed with MC that “the safe harbor doctrine does apply” and bars plaintiff’s claims under key Calif consumer protection laws. In fact, “MillerCoors’ use of the Blue Moon Trading [Brewing] Company trade name on the Blue Moon label is…specifically authorized by federal and state regulations.” So MC’s “omission of their ownership interest” and labeling Blue Moon Brewing Co as brewer are legit and bar claims of deception. Judge also rejected argument that a “reasonable consumer” would be deceived by Blue Moons labeling, ads or shelf placement. He also ruled against request for new labels/corrective advertising.

Judge Avoids Defining “Craft Beer” On issue of whether reasonable consumer would be deceived by Blue Moon’s labeling/ads/shelf placement, judge refused to resolve “whether or not there is a legal or controlling definition of ‘craft beer,’” because “even assuming that there is such a definition, Plaintiff cannot rely on it for their argument that the phrase ‘Artfully Crafted’ is misleading.” He likened that phrase to “non-actionable puffery” since it is not a specific statement of an objective fact. Then too, neither the use of the phrase “Artfully Crafted,” nor “other features” of the ads/placement/pricing can be considered deceptive, judge added. Lastly, plaintiff made big deal that Blue Moon website does not identify MC as brewer/owner, but MC’s website “prominently” displays Blue Moon, so not probable that consumers would be misled by Blue Moon’s “internet presence.” Even so, judge left open possibility that “Plaintiff could allege other facts” to show MC “deceptively or misleadingly represents Blue Moon as a craft beer” during today’s hearing.

The Not Your Father’s Root Beer freight train keeps rolling. And it’s still picking up steam!! NYFRB $$ share up to 0.71 in latest 4 weeks thru 10/10 in latest Nielsen all channel (some syndicated data in this article came from Pabst sources). That was 1/3 of total Pabst share $$. This below-premium company is quickly becoming more-and-more above premium. Could it be over half next year with other new above premium intros? NYFRB alone catapulted Pabst Brewing Co to 47% total company $$ sales growth for 4 weeks. That’s pretty crazy.

What’s more, NYFRB rising steadily, according to Nielsen. It was at .18 share for 4 weeks thru Jun 20, .32 for 4 weeks thru 7/18, .42 thru 8/15, .55 thru 9/12 and .71 thru 10/10. And that’s even while its first natl competitor Coney Island Root Beer also coming on. Still, NYFRB outsells Coney Island by about 4 to 1, tho make no mistake, Coney Island also sold a lot of Root Beer. Nearly $6 mil for 4 weeks thru 9/12 in Nielsen. But that dipped to $5.1 mil for 4 weeks thru 10/10. Meanwhile, NYFRB kept right on climbin’. At $15.7 mil for 4 weeks thru 9/12. And hit $18.7 mil for 4 weeks thru 10/10.

In supers, NYFRB now over 1 share. Climbed from 0.9 for 4 weeks thru 9/12 to 1.17 thru 10/10. It has nearly 65% distribution in food channel, but only 30% ACV in convenience channel. And averages over 53% distribution in all channels. Makes you wonder how high is up. Tho many predict NYFRB is a fad and competition will certainly intensify dramatically next yr, its sales will be almost all incremental in 1st half. And in 2d half next yr, it will be going against period (this yr) when it couldn’t get enuf liquid to meet demand.