While craft’s growth remains robust in early 2015, overall pace seemingly a little slower than in 2014 (with a number of leading craft brewers much slower).  But several top Calif craft brewers off to very fast starts indeed in 2015.  Start with the second largest craft brewer, Sierra Nevada. Sierra will be very close to its ambitious goal of 30% growth in 1st qtr, mktg and sales director Joe Whitney confirmed, on strength of a lot of new news and a big push. Recall, Sierra Nevada had 2 mos of incremental volume from variety packs, launch of Hop Hunter IPA and seasonal Hoppy Lager that was originally a Beer Camp Across America collaboration with Ballast Point.   Sierra Nevada should get another shot of growth in fall when it intros its Octoberfest.  This will be brewed here in collaboration with the German brewer Riegele, in biz since 1386.  Sierra and Riegele will also collaborate on a barrel aged beer that will be brewed in Germany.  This fast start plus Octoberfest should make Sierra’s double digit growth goal for full yr 2015 within reach.

Speaking of Ballast Point, it is still reportedly flying in SoCal, even in home mkt San Diego.  Ballast Point is getting an extra shot of growth from much in demand Grapefruit Sculpin.  And Firestone Walker still riding the wave of its 805, growing very rapidly.  But question for Firestone will be, can it make enough beer to capture its growth opportunities? 

Finally, Lagunitas is still on a roll.  Lagunitas up a half mil bbls last 4 yrs alone.  That’s more than any other craft brewer during that period.  These 4 brewers, Sierra Nevada, Lagunitas, Firestone Walker and Ballast Point about 2 mil bbls between ’em in 2014 and so slightly more than 10% of segment as we count it.  They could easily grow another 400-500,000 bbls in 2015.  Suggests that craft segment, even if some lag, could easily still put up 2.5-3 mil bbls of growth again in 2015.

Oskar Blues is just one of the craft brewers that has had an investment deal book out for months (with Lazard), but CBN didn’t understand until recently that its stated goal was actually to sell an undisclosed stake to help fund an acquisition strategy.  So it is both a seller and a buyer.   That became crystal clear this afternoon as Oskar Blues announced the acquisition of Mich craft brewer Perrin in conjunction with Fireman Capital and former beer wholesaler Keith Klopcic, clearly emphasizing its Perrin buy and not the sale of a stake in Oskar Blues.  But it also simultaneously acknowledged that Fireman Capital took an undisclosed stake in Oskar.

Earlier this mo, Oskar Blues sold a stake to Fireman Capital, which previously bought stakes in 2 Utah Craft Brewers – Wasatch and Squatters.  CBN heard repeatedly in the last couple of weeks that deal done or nearly done.  But when we called Dan Fireman earlier this week, he would not confirm.  

This afternoon we talked to Oskar Blues founder Dale Katechis. Oskar Blues acquisition strategy is to “help combat hyperlocal,” Dale said and “make sure we have sufficient ammo.” In new environment, “boots on the ground are not enough” and “you can’t be” local enuf “unless you’re there.” So this acquisition strategy is a way “to take collaboration to the next level.”  Oskar Blues got hip to this when it built brewery in NC and collaborated with brewers there.  Very rapidly, North Carolina became one of Oskar’s biggest and fastest growing mkts. It is already #3 behind home state Colo and Calif, and Oskar grew almost 70% in NC last yr.  This yr, North Carolina will become Oskar’s #2 mkt, Dale said.  When they saw what was happening in NC, that’s what “got the gears kind of turning,” said Dale, about the “need to be more local” in more places. Traditional banks were not really tuned into this new M&A strategy, but in Fireman, Dale found “aggressive, good guys” to help “fund this strategy.” This is not an “exit strategy,” emphasized Dale, but rather a way “to aggressively stay in but do it on our own terms.”

Perrin sold 14,000 bbls last yr.  And Oskar Blues sold 149,000 bbls.   Meanwhile, Oskar in combo with Fireman are looking to acquire other craft brewers. Recall, Fireman already owns a majority of 2 Utah craft brewers, Wasatch and Squatters, now dubbed the Utah Brewers’ Cooperative.   They sold 52,000 bbls last yr.  Unknown whether Fireman Capital Partners’ Oskar stake is minority or majority.  Supposedly, at least a couple of more acquisitions are in the works. Already, the combo of Utah Brewers Cooperative, Oskar and Perrin well over 200,000 bbls and growing.  Eventually, the plan is reportedly to take this entity public, though Dale would not confirm this. Other private equity firms are chasing the same dream.  It’s going to get very interesting in the coming months.  

The 2015 Beer INSIGHTS Spring Conference, focused on the high end of the beer biz,  will take place May 11-12 at the Ritz Carlton in Chicago.  Just added: Revolution Brewing’s managing partner Josh Deth will join Firestone Walker co-founder David Walker in a wide-ranging panel discussion moderated by BMI’s Benj Steinman.  Also, on Monday afternoon, Goose Island will host a special event for conference attendees, visiting their barrel warehouse and brand new tap room in Chicago, before the opening reception.  The conference program on May 12^th will feature presentations and interviews with the industry’s leading high-end players, plus top craft execs, keen quantitative analysis, actionable insights and much more.  Get up-to-date with the latest high-end trends and network with your peers at the Beer INSIGHTS Spring Conference. Space is limited. Click here for more information and click here to reserve your spot.

Brewers play a role in educating curious and passionate beer drinkers just about every day, but a growing number formalize those efforts. Indeed, the market for doling out beer knowledge has grown significantly, answering a relatively newfound demand from interested consumers and budding professionals alike. Enter Flying Dog University, a new series of classes the Maryland brewer launches next month on Saturday mornings at the brewery, the co announced last week. FDU will offer 101, 201 and 301 classes covering beer tasting and brewing basics to more advanced brewing processes and food pairing topics. The 101 and 201 courses run $30 apiece; it’s $45 for the 301. They’ll run for the first time on 3 Saturdays in April from 10am to noon, when the brewery starts filling growlers for the day. That’s one way to deepen connections with fans thru sharing useful information, not to mention bringing in some extra cashflow when opening up full retail isn’t an option.

Retailers need to give the craft segment appropriate “Space,” provide an easy shopping “Experience” and encourage “Trade Up” to “sell more craft,” according to tips provided by Brewers Assn market development committee’s for BA Insider publication. Using this 3-step “SET” process can help off-premise retailers “capture more craft sales and thus higher margins,” the group writes. The article pools info and insights from many top craft payers, including IRI data and images from Boston Beer, to make the case for more, and more ideal, craft space.  

First, retailers should switch thinking about space allocation from focus on past to future: rather than look at “historical data,” ID “forward-looking goals,” article recommends. And if goals include growing craft, retailers “need to dedicate more space” to the segment and “decide where to take that space from, e.g., declining beer segments like premium and sub-premium.” To determine share of space for craft, BA committee offers 2 options, requiring decisions about whether retailer wants to “overindex with craft or underindex.” Most common option for determining appropriate space is to multiply share of $$ sales by the segment’s growth trend (+1, so if trend is 14.8%, multiply by 1.148). Add a couple points to overindex, subtract a few to underindex, article shows. Second, “ideal,” option is multiplying segment’s share of profit by its trend.

Next step: simplify shopping experience so shoppers can easily find craft, committee members write. “Blocking and labeling” the segment and “billboarding” top brands in an “eye-level position” helps. “Larger craft brands can serve as a signpost for the craft segment,” according to article. Finally, to “encourage your shopper to trade up,” put “the craft segment early in the traffic flow,” a “tried and true philosophy in retail.” Try to keep “big price jumps” to a minimum, the article suggests, noting that “high-end specialty imports and cider make great neighbors to craft.”   

Blurred lines between what’s craft, what isn’t and how to count the barrels has, like craft generally, gone global. Indeed, Mintel research in the UK found that 36% of respondents don’t know what “craft beer” means, research that Pete Brown cited in a Guardian piece over the weekend. There, “craft accounts for 2%, 10% or maybe 20% of the market, depending on who you ask, and how they define it,” he wrote. But “for more of the mainstream audience,” he concluded, “craft is a useful shorthand for quality, flavour and integrity. It’s something a bit different from the normal, mass-produced homogeneity; something worth paying a bit more for. And that’s all the definition it needs.”

Importantly, “craft is hazily defined,” Brown writes, “apart from in one aspect.” Big brewers’ brands aren’t included, article implies. He notes stateside acquisitions as well as largish UK brands like Greene King. Large brewers “might be jumping on the bandwagon, but they could end up helping us,” Stuart Ross, head brewer of Magic Rock in England told Brown. “If they’re half-way between factory-produced lager and what we do, it might bring in more people and introduce them to more interesting beer.” That reminds us of the kind of “gateway” talk many use when referring to brands like Blue Moon and Shock Top. 

Almost a quarter of US consumers say they drink craft, according to Mintel research. But almost 30% of men say so compared to just 17% of women. About 29% of 25-34 year olds choose craft, more than younger legal-drinking age counterparts, based on surveys Mintel conducted last year. The co found that over 80% of craft drinkers will also drink non-craft beer. Recall, 55% of respondents told Mintel they’d spend more for a craft beer, as the co shared when report first released last year (see CBN vol 5 no 53, July 25). But Mintel dipped a little further into report this month to share some more details about why and when craft drinkers choose craft.

About half of craft drinkers choose craft as a reward/treat or to relax (53%). The percent of folks turning to the segment for relaxation jumps up to 63% when just looking at 22-44 yr olds. Another half of all craft drinkers associate the beverage with casual occasions, “more than twice” the group that associate it with formal occasions, according to Mintel. Another half of beer drinkers (51%) said they consider style when making purchase decisions; 44% consider “full-bodied flavor.” Style also plays into trying new beers for craft drinkers, as about 48% seek “familiar styles” in such cases. Just under a third of craft drinkers look for “familiar taste,” “familiar terminology” or “on-package descriptors” when trying something new. Finally, about a quarter of millennials will “take recommendations” when they’ve not tried a beer, “significantly more likely” than older beer drinkers. 

The growing heft of the highest end of the high end has yet to weigh it down. Craft and other craft-competing high-end segments of the beer industry grew volume anywhere from 14-19% in aggregate in 2014. US craft brands make up a large portion of this broader group’s volume as well as its growth. But some imports and other US-made specialty beers join craft to form a much larger spectrum of brands than those included in the 19.15 mil bbls we pegged as our craft volume total earlier in the year. In fact, that universe is closer to 28 mil bbls. They’re differentiated much of the time from brands with taste profiles that may remind consumers of the largest pale or light lager brands. And they all often appear in close proximity on off-premise retail shelves, where they’re typically priced on or about $30/case and above, according to IRI Multi-Outlet + Convenience (MULC) data.

Averaging about $35/case in IRI MULC data in 2014, craft commands a significant price premium to the average beer, which cost not quite $22.50/case. The highest-priced of top-30 craft brands, Stone IPA, cost about twice that, over $44, last yr. The larger import segment cost an average of near $29/case in IRI MULC data last yr. That’s about the same as avg price of Sam Adams Variety Pack. Across total imports, the price range can be broad: from about $19/case for the average Canadian brand to almost $20 more for the average Belgian.

Including once-independent breweries, like Goose Island or Magic Hat (now owned by larger companies that don’t often break out brand volume), adds another 700+ thousand bbls to that 19 mil bbls. So a broader craft total just shy of 20 mil bbls. Many other small, indie imported brands are sold in the US and compete with American counterparts. We estimate another 1.5-2 mil bbls of these small imported brands last yr. That includes those owned by Duvel Moortgat USA, which sells Boulevard and Ommegang. Also included here: classic Trappist brands of Belgium, well-respected German lager brewers and newer, small hip brands like Norway’s Nøgne Ø.

US craft brewers have somewhat put a damper on the growth of larger import brands sold for years in the US as alternatives to popular light lagers. Brands like Guinness, Harp and Smithwicks, all owned by spirits-giant Diageo USA, and Newcastle, imported by Heineken USA, still represent another 1.5-2 mil bbls of the US market. We estimate those brands were down in 2014, but they’re also sold at comparable prices to top craft brands, according to IRI data, often within the $31-35/case range. Add these larger and the smaller, independent imports to the above US craft brands and you’re looking at over 23 mil bbls of US beer shipments last year, collectively up in the mid-to-high teens.

What about specialty brands from larger brewers often sorted into the superpremium segment in IRI data? Average superpremium case prices hit about $27.50 last year, but the big Belgian Whites, Blue Moon and Shock Top, often sell for a touch more. Combined, the two brands were well over 3 mil bbls last yr, with Blue Moon almost twice the size of Shock Top. Leinenkugel brands hit almost a million bbls too. They also tend to fall in that $28-30/case range, near pricing for top import brands. Those plus another handful of smaller US-made Tenth and Blake brands push this count to over 27 mil bbls.

There are plenty of other wrinkles to peek between as well. Take Pabst’s Ballantine IPA. It’s often priced close to top craft brands, as far as we’ve seen. To get near that 28-mil bbls, add in another half-mil bbls of specialty imports owned by AB InBev and MillerCoors, all priced in that sweet spot in the low-$30s. This broader group of brands has grown about 70% collectively since 2010. And premiumization of the beer industry continues. 

Shipments for top 20 craft brewers in Washington were up 12%, 65,000 bbls to 622,000 bbls in 2014.  That’s up from a 7% gain in 2013.  Once again craft grew at much faster pace than total shipments which were up 2.3%, 93,000 bbls to 4.1 mil bbls last year.  These top 20 craft brewers picked up another 1.2 share and now account for over 15 share of Wash beer shipments.

Craft Brew Alliance shipments were down 2%, 2,000 bbls to slip under 118,000 bbls in Wash. CBA remains largest craft supplier in Wash by far with 18.9 share of top craft, but lost 1.6 share of top craft in 2014 and has lost over 4 share to other key craft players in past 2 years.  Deschutes, next largest craft supplier in Wash, gained 6% to 63,000 bbls.  Seattle-based Georgetown’s gain pace slowed to +9.5%.  Another in-state brewer, Mack & Jack’s is still #4 craft player in state, just ahead of Boston Beer.  Mac & Jack’s was up 3%, 2,000 bbls. 

Elysian, recently purchased by AB, was biggest gainer among top craft players in Wash. Up 45%, 11,500 bbls to over 37,000 bbls and grabbed 1.4 share of top craft to 6.0.  That put Elysian right behind Boston in Wash in #6 spot. Boston Beer returned to double-digit growth in Wash (+19.3%) and added 0.4 share of top craft to 6.1.  Alaskan slowed from +10% gain in 2013 to 3.7% increase last year. Sierra Nevada posted a solid 10.5%, 3,000-bbl gain in Wash last year.  New Belgium returned to growth with an 8% shipments increase, while Ninkasi, from neighboring Oregon, was up 6% but gain pace slowed considerably compared to prior few years.

Boston Beer up 15% for 12 weeks thru Mar 15 in IRI Multi-Outlet + Convenience data reported today by Morgan Stanley.  But Sam Adams Boston Lager down 5% and Sam Seasonals down 3.7% for 12 weeks.  Total Sam franchise still up 14% for 12 weeks (including Rebel line; Traveler line could be in this number as well) but 0.6% for 4 weeks.  Total Boston Beer “slowed” to still strong 11% last 4 weeks.  Its growth really driven this yr by continued rapid growth of Angry Orchard.  Up 42% for 12 weeks and still 36.5% for 4 weeks.  And Twisted Tea still up 15-16% for 4 and 12 weeks.  Total Boston Beer avg prices up 2.5% for 12 weeks, but Sam Adams franchise prices only up 1.5%. 

Boston Beer has a lot of levers to pull.  “Boston Beer now sells over 100 varieties of beers and hard beverages,” wrote Motley Fool, “60 under its flagship Sam Adams brands, 11 in the Twisted Tea franchise, 10 from Angry Orchard and 20 under the brand name of its Alchemy & Science incubator.”  Motley Fool showed 2 interesting charts; one depicted the deceleration of its depletions trend from near 35% in 1st qtr 2014, steadily downwards to only about +10% estimated for 2015.  And yet revs climbed from under $250 bil in 2006 to anticipated $1+ bil in 2015.  Even tho “all that [product] expansion has made for a more complex business,” the Fool concluded, “the bigger picture is quite positive for longterm shareholders.”