Sam Adams may still be “the heart and soul” of Boston Beer, but the co’s got lots more goin’ on well outside the bounds of craft, clearly on display during interview with founder/chairman Jim Koch at Beer Business Daily’s Summit in San Diego earlier this week. Wide-ranging talk reviewed bevy of non-beer innovations and Boston’s bullishness on seltzer, natch. But craft is “in transition to becoming a mature business,” he acknowledged. Folks expecting 5% gains “forever” were/are “delusional,” he pointed out. Segment “is always going to be crucial,” but growth will remain in low-single-digit range and “a lot of that will be taprooms,” he expects. (A different version of this article appeared in INSIGHTS Express, yesterday.)

Part of issue is that craft is “structurally challenged,” with “low barriers to entry” and “high barriers to exit.” Rush of thousands of brewery openings in last few yrs evidence of the former and as Jim (and others) often remind, once built, capacity “ain’t going away.” Folks getting in to get rich, won’t, he said (with much more colorful language) and “Constellation is not going to spend a billion dollars on the next one,” he quipped. He also suggested more pricing pressure coming, citing “15-pack syndrome” and likelihood of craft 18-pks. But that’s a “typical thing when you have overcapacity and 8,000 competitors.”

Jim promised to “continue to overinvest in Sam Adams in general and Boston Lager in particular.” Since new ad campaign debuted, co has seen a 5-point change in trend, he reported. Reviewing some of the things Boston is trying in 2019, the 26.2 beer (low alc gose named for marathon mileage and created to support Boston Marathon over last few yrs) is the “biggest bet probably” among all of Boston’s 2019 launches, Jim said. Co also using its Angel City brewery in LA to test Truly Pure seltzer, a draft version of hard seltzer going after on-premise vodka-soda occasions.

He also offered some interesting color for why Boston has largely steered clear of buying smaller brewers as craft M&A heated up. It “doesn’t feel right to me,” Jim shared. Aligning distrib networks ain’t easy, he pointed out again. But then too, “synergies are just firing people,” he said bluntly, and “that’s just not an inspiring endeavor.” Instead, “innovating” is more “inspiring” to Jim. So Boston will keep hoeing that row.

Craft may be slowin’, but it’s is far from “dead,” still “leading the charge to get that sentiment back among younger drinkers.” So stated Dogfish Head founder/CEO Sam Calagione and so agreed Founders co-founder/CEO Mike Stevens and Firestone Walker co-founder/CEO David Walker on panel at Beer Business Daily Summit in San Diego yesterday morning. Each of these top craft cos positioned themselves for growth amid tuffer times by reshaping their portfolios (in very different ways), leaning into changing headwinds. And each co becoming more sophisticated and willing to spend on marketing too. Here are some different ways they’re lookin’ to grow in 2019 and beyond.

Founders Expects 675K Bbls in ’19; Solid Gold Double to 120K Bbls; Chasin’ the American Dream  Founders ended up 21%, +96K bbls to 564K bbls in 2018, Mike Stevens shared. That puts Founders as largest barrel gainer in craft for 2d straight year, even as co finished a fair amount behind initial projections of reaching 625K bbls. Big part of growth, aside from flagship All Day IPA, was incremental 60K bbls from new lower-priced lager, Solid Gold. That’s double what co initially projected for the year, Mike noted. And co expects to double Solid Gold again in 2019, as total co projecting to grow another ~20%, +110K bbls to 675K bbls.  Growth is still coming from distribution, which underindexes relative to largest craft brewers, typically ranging anywhere from 40-75% ACV depending on mkt. But co also seeing growth in velocity, sez Mike.

Recall, Solid Gold announced it would swap out 15pk cans to 12pk bottles late last year. That’s ’cause Founders lookin’ to place Solid Gold next to other superpremium brands on retail shelves in all similar packages, i.e. 12pks and suitcases. When placing in superpremium sets, co’s “not seeing cannibalization there.” Indeed, Founders still aims to punch thru the “ceiling” of craft and compete in “green pastures” with remaining 85% of consumers and attempt to become “the next great American brewer,” Mike explained. Asked if it matters that the next great American brewer is part-owned by a Spanish brewer (Mahou San Miguel), Mike plainly stated “no.” Founders is “chasing after the American dream” and to do that, it needs “a partner that gets it,” and “can keep up with it.” ’Cause it’s gonna “take a lot of resources.” And Founders is “dead serious about tackling it.”

Firestone Plans for 500K Bbls This Yr; 805 Build-Out “Takes Time, Like Anything”  Firestone hit 454K bbls in 2018, and if co hits “half a million barrels, we’re all going to Scotland,” said David Walker. That’d be about 10% growth.  Firestone still lookin’ to “accommodate” for massive growth of 805 Blonde Ale, while adding and tweaking different parts of its portfolio too. “It’s not hard to get chain placements” with 805 in mkts outside of CA, but “it’s hard to get consumers engaged,” he acknowledged.  “It takes time…like anything,” and co plans for it to “slowly move in all directions.” Recall, Firestone also recently launched new Rosalie rosé ale with unique packaging in slim cans, revamped Easy Jack IPA with lower ABV, new pack sizes for Firestone Lager and Mind Haze IPA among other initiatives.

Dogfish Revs Up Slightly in ’18; Vol +13% in Jan; Watching the Price Gaps, Committed to Staying #1  Dogfish finished with revs up slightly in 2018, Sam shared. That was also a notable slowdown, particularly in back half of the year. But co came roarin’ out of the gate, up 13% so far in Jan (editor’s note: we’re hearing about better Jans for a handful of other top craft brewers as well). SeaQuench and Namaste continue to perform well. And Dogfish betting big on new Slighty Mighty Lo-Cal IPA, rolling out in 2 mos.

“As craft matures, pricing becomes a bigger factor,” Sam acknowledged. And Dogfish is “watching the gap” between #2 and #3 top-priced craft cos. But it still vows to be highest-priced craft brewer among top cos, currently at $50+ per case in scan data. As portfolio shifts to more SeaQuench and Namaste (among others), “naturally our [average] price has to come down a bit.” But Dogfish is “committed to staying number one.”

Upping Their Mktg Games  All 3 cos are upping their mktg spends in different ways as well. Founders will have $6 mil mktg budget, including increased focus on digital ads (see Vol 9, #86). Dogfish will spend $3 mil, including $400K with YouTube in 12 metro markets, looking to show “acceleration when running these ads” to distrib network. “That’s something we never conceived wanting or needing to do,” said Sam. And in more typical off-centered fashion, co will donate over $1 mil to Delaware chapter of the Nature Conservancy to raise awareness of rising sea levels as he takes a boat all the way from Key West to Maine with his son, while also promoting new Super EIGHT summer seasonal and visiting wholesalers along the way. Firestone “giving more emphasis” to marketing as well, David shared. Co spending roughly 25% of revs on marketing support (including sales team), lookin’ to “build out a little more.”

After segment volume spent almost all of the 2nd half of 2018 declining slightly in off-premise retail scans, a modest gain in early 2019 marks a welcome shift. Total craft cases up 2.1% for 4 wks thru 1/19 in Nielsen all-outlet + convenience data. Note that includes last week or so of 2018 (and slower YTD trend suggests week leading up to New Year’s a good week). Craft $$ +3% for 4 wks. But also gotta point out that other high-end segments still leading the charge, accelerating in off-premise data early in 2019. Import, superpremium and FMB segments all up double digits for 4 wks (and faster for brief 3-wk YTD period). Total beer category volume actually up for 4 wks, +3.2%, with $$ up impressive 5.6%. So craft still losing some share. Precise timing and comps definitely playing a role in brighter trends; stay tuned to track any shifts over next few wks.

On brand family level, no major revelations in early-2019 scans. All 6 top craft brand franchises provided in Nielsen report stayed soft for last 4 wks. Both Sierra Nevada and New Belgium volumes off a little less than 2%, while Sam Adams down high single-digits. Also included in Nielsen craft segment, Blue Moon franchise off near 4%, Shock Top -9% and Leinie Shandies down by over 1/4 from this time last yr. Without those 3 AB/MC brands, craft volume up by over 3%. And rest of segment outside of these 6 brand families up 5% for 4 wks.

The US beer and craft beer industries seem to evolve faster and faster, year after year. Join us to explore the past, present and future of the biz at our Beer INSIGHTS Spring Conference in Chicago, this spring. With programming built around the theme of Where We Are, Where We’re Going and Where We’ve Been, we’ll once again focus on the many growing and promising aspects of high end segments. But we’ll also take a broader look at how shifts over the last decade led to the present moment and how that might continue to evolve going forward. Both senior editors of Craft Brew News will take the stage. Christopher Shepard will present an up-tempo overview of the latest data and news developments in craft. David Steinman will interview president of the fast-moving CANarchy collective, Matt Fraser. Also hear from industry leaders like Constellation Brands COO (and soon-to-be CEO) Bill Newlands, Mike’s Hard Lemonade prexy Phil Rosse and mktg veep Sanjiv Gajiwala, Diageo Beer Co USA prexy Nuno Teles and more. The Ritz Carlton Chicago will host us once again for a reception the evening of Wednesday, May 15 and full day of presentations, interviews and networking on Thursday, May 16. Head to our website for more info and register today.

While brewer M&A started off small here in the US (see last issue), relatively sizable deal just struck in the UK. Japanese brewer Asahi acquired historic London-based brewer, Fuller’s, “for an enterprise value of £250 million,” ($330 mil), Fuller’s announced today and several UK papers reported. That represents multiple of 23.6X EBITDA, based on £10.6 mil earned for 52 wks thru Mar 31 2018. Deal is expected to close in 6 mos, for “entirety of Fuller’s beer, cider and soft drinks brewing and production, wine wholesaling, as well as the distribution thereof,” and various production facilities. Fuller’s will subsequently focus on its pub and hotel biz, and “form a strategic alliance with Asahi” to “ensure continued access” to Fuller’s beer brands, sez co. And Fuller’s retains ownership of the “Fuller’s” trademark while giving Asahi rights to use it globally. Recall, this is Asahi’s first M&A move after digesting sizable $10 bil investment in parts of SAB’s European biz as part of ABI-SAB merger divestitures, including rights to Pilsner Urquell, Peroni and Grolsch (excluding US), plus UK craft brewer Meantime. Gotta note, Asahi among a handful of major global brewers without a US-based acquisition, even as it keeps pushing westward thru acquisition.

First brewery in Jackson, Mississippi, Lucky Town Brewing is no longer brewing and will close its taproom on March 9, co announced via Facebook late last week. Lucky Town was still the only brewery in Jackson after opening 6 yrs ago, according to the Clarion Ledger. State of MS remains underdeveloped, home to just 12 breweries as of 2017, according to Brewers Assn count. Co moved downtown almost 5 yrs ago, after starting its biz contracting at Back Forty Brewery in Alabama. It was “undercapitalized” from the start, co wrote, and faced a “consistent string of issues” that eventually led to closing.

In Minnesota, year-and-a-half old Portage Brewing was destroyed by a fire at the start of the year, the Star Tribune reported. Thankfully the overnight fire caused no injuries, but it destroyed $100K-worth of equipment. Co down but not out, tho. Owners are already working on plans to get back up and running, even hoping to now “build our dream brewery.” Meanwhile, fires that ravaged northern Calif city of Santa Rosa in 2017 led directly to closing of 2 Tread Brewing, a brewpub downtown, owners told the Press Democrat. The brewpub opened less than a month before the Tubbs Fire that caused much damage in the city. Co never found its footing and closed early in 2019.

Separately, Cincinnati-area’s Oxford Barrel Brewery & Pub, which operated 2 locations near Cincy, closed early in the year, according to WCPO. The Ram Restaurant & Brewery chain also closed two separate locations recently, both in the suburbs of Chicago. The Wheeling restaurant closed earlier this month, the Daily Herald reported. The nearby Schaumberg Ram location closed last October, paper notes.

Capacity expansions at large, existing craft brewing facilities come fairly few and far between these days. But here’s one: Stone got initial approval for a $1-mil, 900 sq-ft expansion of its Richmond, VA brewery. That’s just a modest increase for 200K sq-ft brewery, according to Richmond Times-Dispatch report. Recall, co leases building from city’s economic development group, which approved Stone’s basic plan at meeting Wednesday. Full plans for project will need approval too. Stone “hopes to break ground on the project in late summer,” paper wrote. Expected pricetag includes new equipment to improve efficiency, increase yield and, generally, “add capacity,” a spokesperson told paper. Plans for expansive restaurant near the site remain on hold.

Elsewhere in Virginia, small Aslin Beer Co announced plans to build new headquarters and brewery in Alexandria, per Alexandria Living. Co opened its current facility not far from Washington’s Dulles airport in 2015. It hopes to have 25K sq-ft brewery open by mid-2019. Most of that will be devoted to production, though about 10K sq ft will be used for offices, tasting room/retail and event space.

Small Brewers in Calif and Beyond Plan 2nd Locations, Restaurants  On top of taproom plans we noted last issue, plenty of other brewers (especially in California) making similar moves as San Francisco’s Cellarmaker, opening new locations often as restaurants with modest or no production. On different note in same city, Seven Stills is in process of building out large 18K sq-ft brewery in Mission Bay. But before it’s done co has a “pop-up taproom” open to sell beer while production area still in process, Eater SF wrote.

But more brewers bringing more focus to food in SoCal. East of LA, Progress Brewing plans a second site in downtown El Monte, building biz it established in 2010 in South El Monte, the Pasadena Star-News wrote. Co also hoping to build out a distillery at its initial location. But new downtown spot outfitted with kitchen plus plans for food truck visits expected to open by summer. On the coast, just south of LAX, El Segundo Brewing has a new pizza and beer restaurant called The Slice and Pint currently doing a soft opening of sorts in brewery’s namesake community, per Eater LA. Farther down Calif coast, San Diego’s Thorn St Brewery expects to open a tasting room in Mission Hills nabe of same city also by summer, according to Eater SD.

Meanwhile in the midwest, Chicago-based Middle Brow, initially established by contract brewing, plans to open a brewpub called Middle Brow Bungalow in Logan Square, per Eater Chicago. On-site foedres will help it produce wild ales and location will also serve house-made kombucha, sodas and coffee. Then too, out in Sioux Falls, SD, city’s Fernson Brewing has plans to take over a closing restaurant downtown. “We’re doing this to be more of a part of Sioux Falls,” CEO Joel Thompson told the Argus Leader. The 3-yr old co brewed about 5,000 bbls last yr, making it the biggest brewer in the biggest city in SD. Around 2/3 of that is its Lions Paw lager, an entry-level beer for plenty of drinkers used to mainstream brands. Co will close its 2nd taproom, just outside of downtown, to focus on new heart-of-downtown location, co shared when confirming purchase of new location.

Lagunitas #1 initiative and “day-to-day focus” is to “hold onto” its #1 spot in IPA with flagship Lagunitas IPA, Maria assured. Recall, Lagunitas IPA declined 3% in IRI data last yr, including particularly tuff Q4 trends. So big part of effort to “put more emphasis” on the flagship will be Lagunitas IPA’s foray into cans. Co already launched 19.2oz cans of IPA with “great c-store mandates” and focus on event venues. And this fall, co will launch 12oz 12pk cans of IPA. “We knew eventually we’d have to go into cans” with Lagunitas IPA, tho it was “unclear exactly when to pull the trigger,” said Maria. But Lagunitas “can’t ignore” craft can growth and specifically canned IPA growth. Total craft cans grew 37% vs bottles down 11% last yr, she noted, citing Nielsen data. A whopping 20 of top-25 IPA growth SKUs were cans. And IPA cans grew 52% last yr, snagging 12 share points to 44 share of total IPA sales in tracked Nielsen data. So the best-selling IPA is lookin’ to tap into some of that outsized can growth to shore up trends and hang onto #1 spot.

Little Sumpin’ “More Competitive on Pricing” in 2019 Lagunitas’ #2 brand, Little Sumpin’ Sumpin’ also comin’ off of a tuffer year as off-premise volume dipped 4% in 2018 IRI. So co will get “more competitive with pricing” on Little Sumpin’ this yr, said Maria. Currently, Little Sumpin’ priced “a tier higher than our core,” she noted (over $40/case on avg in IRI). But “that price might be inhibiting its growth at this stage.” So “sales team will be very aggressive to right-size price to be competitive along the rest” of the competitive set, she said, adding that co expects better growth and “fair return on investment” at lower price.  

Sticking with 12th of Never and Sumpin’ Easy; Lookin’ to Own 3 of Top-4 19.2oz SKUs Lagunitas’ 2 initial canned brands, 12th of Never Pale Ale and Little Sumpin’ Easy, are “still growing” and co sees “no reason to change plans between either brand,” said Maria. Last yr’s intro of 6pk cans for 12th of Never “helped a lot,” she noted. 12th of Never and Sumpin’ Easy 19.2oz cans were #2 and #3 19.2oz can SKUs in c-stores last year. And goal is to make flagship Lagunitas IPA the #1 19.2oz can SKU this yr.

DayTime and SuperCluster Rounds Out 6pk Can Roster; LAGUR Summer Seasonal Newer initiatives for 2019 include Supercluster double IPA, which launched late last yr, revamped DayTime IPA with just 4% ABV and 98 calories, and new summer seasonal lager called “LAGUR.”  Supercluster quickly graduated from taproom-only to seasonal, to year-round in 6pk cans, and co currently “chasing production to keep up with demand.” Revamped DayTime IPA already rolled out nationally in 6pk cans and draft, priced in-line with the rest of Lagunitas’ core portfolio. Interestingly, DayTime also viewed as an answer to brut IPA trend, Maria noted, since it’s fermented dry with “solid hop backbone.” “We were exploring bruts last year,” and “it made sense to try that lighter, drier IPA with also not letting up on hops,” while “bringing down the ABV and calories.” So Lagunitas now has roster of 4 craft brands in 6pk cans, with strong presence in 19.2oz cans and Lagunitas IPA 12pk cans comin’ late this yr. Then too, Lagunitas will give craft lager another shot with new summer seasonal LAGUR this yr, Maria shared. Recall, Lagunitas Pils has been around, tho its sales tapered off more recently. LAGUR lookin’ to fill that gap, available in bottles and draft, clocking in at 5% ABV. Notably, LAGUR labels able to get approved just 1 week before gov’t shutdown, according to COLA registry. Net-net, Lagunitas looks to be “very specific about the type of new items that will mean most to our consumers,” said Maria.

Hi-Fi Hops in ~100 Accts Across CA; 300-400 Accts Goal in Yr-1; Looking at 6-7 States; Glass Bottles Early innings for Lagunitas and Cannacraft’s infused cannabis bev, Hi-Fi Hops, have proven to be a learning experience as co steadily builds brand in CA. After launching cans in late July, Hi-Fi relaunched in glass bottles last Nov after learning the package “provided a higher quality beverage,” Maria explained. It built network to roughly 100 accounts thruout CA, “moving closer to our target for the year” of 300-400 accounts. And co “learning every day about the type of dispensaries that work well with the product” vs those that “might not.” For starters, dispensaries have to be “large enough” to sell bevs “the right way.” And “sampling” its non-infused HOP Sparkling Water on-site at some dispensaries “helps people understand what it can be.” Thus far, at least in NorCal, Lagunitas hasn’t seen “much beverage choice in the THC space,” but “people are curious,” she added. Lagunitas and Cannacraft still struggling to “keep up with demand from a production standpoint.” So they don’t yet have “a perfect line of sight,” into demand for these types of products. This yr cos will consider expanding Hi-Fi Hops into 6-7 states, including CO, MA, MI, AZ, NV, OR, WA or IL.

HOP Sparkling Water Going Natl and International; On-Prem and Cocktail Mixer Oppys Separately, Lagunitas is rolling out non-alc/infused HOP Sparkling Water nationally this yr. Co’s “currently sending it to all of our distributors,” Maria shared. Interestingly, Lagunitas focusing on on-premise accounts looking to expand their non-alc beer selection and also utilize it as a cocktail mixer. HOP “drinks like a beer” but “doesn’t have calories or gluten,” she added. “That’s how we’re positioning the brand,” including “internationally.”

Onto the Next Phase with Several New Initiatives Altogether, Lagunitas is movin’ in several interesting directions in 2019 as it enters new phase of growth post-1 million barrels. Only Boston Beer’s Sam Adams and Sierra Nevada have been able to reach and maintain that level of volume or higher among craft cos to this point. Can Lagunitas keep it goin’?

Lagunitas’ incredible growth run in the US came to an end in 2018, but its run overseas might just be getting started. While co finished flattish in US last yr, we estimate, Lagunitas surpassed 1 mil bbls in total including 90% growth in 30 countries outside the US, CEO Maria Stipp shared with CBN. Recall, no craft brewer has grown more than Lagunitas in the last decade. Lagunitas volume skyrocketed +880K bbls to 980K bbls from 2010 to 2017. Last yr, Lagunitas total volume up near 5% to around 1.02 mil bbls, we estimate, including in neighborhood of 100K bbls of exports. And co’s “on track” to double international biz again this year, while lookin’ to improve in US with several new initiatives.

While Sierra has received commitments for from brewers, distribs and retailers for over $15 mil, based on its Resilience IPA project (see Jan 15 issue), “that money is just starting to come in now,” said chief commercial officer Joe Whitney.  So hard to know how much the total will be down the line. 

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