US craft brands keep growing strong overseas, not just at home. Total BA-defined craft exports grew 35.7% last year, inching closer and closer to 400K bbls. Total of 383,422 bbls shipped out of US last year was about 1.7% of 22.2 mil bbls in BA craft bucket in 2014. BA estimates sales thru its Export Development Program (EDP) hit near $100 mil, it announced today. Biggest market remains Canada, which bought over half of craft exports last yr, +32%. Sweden, including big presence of Brooklyn Brewery brands, still represents about 12% of total exports, followed by the UK at just under 11%. Taken together, exports to Western Europe grew 37%, right on par with global average. Fastest growing market was Brazil, +64%, then Asia-Pacific +38%. Number 4 and 5 top export markets both in Asia-Pacific: Australia (5.1%) and South Korea (3.4%). Indeed, South Korea pushed past Japan for #5 spot. Craft exports to Japan still grew 32% in 2014. Last yr was EDP’s 10th yr, after launching “in 2004 with funds from” US Dept of Agriculture’s Market Access Program. About 80 US brewers participate in the fast-growing BA program.

This year’s crowd at Cigar City’s 6th annual Hunahpu’s Day festival “seemed better behaved” after Cigar City took extra precautions to ensure the festival ran smoothly, reported Tampa Tribune.  Recall, Cigar City ran out of its renowned Hunahpu’s Imperial Stout earlier than expected at last year’s festival, leaving customers angry and empty-handed after waiting on line for hours (see March 12, 2014 issue).  Some customers created “counterfeit/duplicate tickets” to beat the system and get more Hunahpu’s than the amount that was allotted to them.  Cigar City responded quickly offering refunds to unsatisfied customers, tho co’s founder, Joey Redner initially thought he’d call off the festival and any other bottle release events for good before eventually changing his tune.  This year co “limited the ticket sales [from 3,500 to “over 2,000”] – they sold out in minutes online – and streamlined the admission process,” which seemed to do the trick.  Tickets were $200 a piece, which included “4 bottles of Hunahpu’s Imperial Stout (750 ml), a meal ticket for food from Cigar City Catering, a bottle tote bag, and access to over 200 beers from 60+ breweries from all over the world,” per co’s website.  Cigar City brewed over 87 bbls of Hunahpu’s Imperial Stout this year, according to paper. Then too, plenty of other exclusive beers were offered by the 60+ other breweries, including The Alchemist’s Heady Topper, which reportedly drew a long line “only 15 minutes after the gates opened.”   

Late last yr OH’s Rhinegeist Brewing said it purchased current brewery for $4.5 mil (previously leased), and will more than double its total facility space, via Cincinnati Business Courier (see Dec 10 issue).  Now, Rhinegeist plans to spend $10 mil for total expansion so it can “produce as much as 50,000 barrels” to start and “nearly triple production this year” to 30,000 bbls, new Cincinnati.com report reveals.  “With additional fermenters, Rhinegeist could grow to 100,000 barrels.”  Indeed, Rhinegeist’s expansion is happening way ahead of schedule, “less than two years after the brewery opened,” co-owner Bob Bonder told paper.  Recall, Rhinegeist was top new craft vendor in IRI-tracked foodstores (see Mar 5 issue), largely thru Kroger outlets.  “Rhinegeist just launched cans last February and only had its product in five Kroger stores by last July; 65 by last September,” noted paper.  

Another part of the brewery expansion includes “a new 7,000 square-foot roof deck” with “room for 200 people” as well as “a nearly 8,000 square-foot private event space” to host 250. Both expect to be complete by “late summer”/“September.”  In the meantime, Rhinegeist had its “busiest day in the brewery’s history” a couple weekends back: 3-4,000 people visited for relaunch of Saber Tooth Tiger Imperial IPA.  By 2017 it plans to nearly double its employees too, to over 100 total. 

Columbus in Coming Mos; Lookin’ to Lease 17K Sq-Ft Space for Warehouse Big part of Rhinegeist growth this yr will be expansion into Columbus “in the coming months” with continued “self-distribution model,” paper notes.  “The partners are working to lease a 17,000 square-foot space near downtown Columbus to house a refrigerator and a fleet of vans to serve that market.”  Its longer term goal is to “expand throughout Ohio, Kentucky and Indiana.” Recall recent anti-branch bill in KY could shut down new Riverghost Distributing that Rhinegeist founders opened to distribute their beer and others’ there, barring successful legal challenge.

As Revolution begins the process of expanding its facility and tripling capacity to eventual 300,000 bbls a yr (see Feb 12 issue), founder Josh Deth reflected on how far Revolution has come and his aspirations from the start via Crain’s Chicago Business article.  “From the start we wanted to be a bigger brewery,” Josh told paper.  “We wanted to give Goose Island a run for their money. I’m not afraid to say it.”  Recall, Josh and his head brewer, Jim Cibak, both worked for Goose Island in the late 90’s before starting Revolution.  It was only after Goose Island sold to ABI that Josh could pitch his brewery as “Chicago’s true hometown craft brewer.”  Revolution doubled again in 2014 to 50,000 bbls and has zoomed up 42,000 bbls in just the last 2 yrs.  This yr it’s “on track to produce about 70,000 barrels,” according to paper. So it seems Revolution is planning for more methodical growth in 2015 at more modest 40% rate opposed to doubling production as it has the last coupla yrs.  Then too, “sooner or later…the company will expand beyond Illinois and Ohio,” yet its aspirations are not to grow anywhere near nation-wide, according to cfo (and Josh’s wife) Krista Sahakian.  “The end game is maybe eight states” she sez, “but the question for me is, when is enough enough?  When are we happy?  It’s a constant struggle.”

Just before deadline for new bills to be intro’d in Texas late last week, a pair of pretty opposite proposals put forth by politicians there. It’s still early and lots can change, so quickly: one bill would allow consumers to buy up to 2 cases of beer per month for off-premise consumption from brewers producing less than 225K bbls/yr; another would limit self-distribution to 5000 bbls/yr, a big cut from current 40K bbl-cap. Both revisit “package” of bills all passed during last legislative session, in 2013 (Tex legislators in session every other year). Recall, brewers then granted limited on-premise sales if under 225K bbls. Texas Craft Brewers Guild supports off-premise push this year as in past at least in part because “both wine and spirits enjoy the right to sell to consumers for on and off-premise consumption,” guild prexy Scott Metzger told CBN. Self-distribution also part of compromise in 2013: brewers under 125K bbls can self-distribute up to 40K bbls. That was change from law allowing brewers under 75K bbls to self-distribute up to the full 75K bbls. The guild “opposes” newly intro’d bill that limits self-distribution even further, “as we would any bills that would impair the rights currently enjoyed by our state’s craft brewers,” Scott said. 

Georgia brewers can’t sell beer directly to consumers. They can only offer tours or sell souvenir glasses, into which they can pour free samples of beer. Small brewers there got bill intro’d early in year to change that and allow limited sales for on- and off-premise consumption. But a replacement bill that appeared in committee last week and passed with a pair of small adjustments by the state Senate on Friday, tweaks current unique structure: breweries can charge for a “brewery tour” and then provide a “free souvenir” and “free tastings,” according to bill. Instead of allowing breweries to charge visitors for the beer, current bill expands the amount of free beer that brewery visitors can “sample” on site (from 32 to 36oz) and allows breweries to provide “a complimentary, single container” of up to 64oz (a growler, basically, which comes with more restriction, read on). Fees charged for tours “may be based on the amount of malt beverages to be furnished,” bill offers. So if passed, law would require “some twists and winks” in transactions between brewers and consumers, as Atlanta Journal-Constitution described last week (read on for more).

Bill also adjusts laws governing brewpubs. New version again pulls back on original, which sought to allow brewpubs limited off-premise sales options. Now bill would allow brewpub patrons to bring home growlers “partially consumed” during a meal. But bill doesn’t make it easy to bring home growlers from brewpubs or breweries. Consumer has to cap the growler, licensee has to then put it “in a bag or container that is secured in such a manner that it is visibly apparent if the bag or container has been subsequently opened or tampered with,” then, at brewpubs, attach a “dated receipt.” Finally, if patrons drive home, they must put growler “in a locked glove compartment, a locked trunk, or the area behind the last upright seat of a motor vehicle that is not equipped with a trunk,” according to text of bill.

“Decimated” and “drastically altered” version of bill, per Creative Loafing Atlanta (CLAtl) report, “disappointed” Ga Craft Brewers Guild exec director Nancy Palmer. But “no matter how silly it may seem, the main thing is to get a bill passed,” guild prexy/Terrapin prexy John Cochran told the paper. “The focus for us is the House,” Nancy told CLAtl last week. In the meantime, Georgia-focused political site Peach Pundit blasted the action, headlining that original bill got “skunked in committee.” Write-up includes some tough words for state distribs and asserts that “their fear of eroding their fiefdom led them to try and tank the bill.” Peach Pundit argues that amending bill “to smooth the egos of wrongheaded entrenched interests is anti-democratic, heavy-handed and just plain wrong.”

Consumers Tiring of “Entrenched Industries,” But “Ideas Change Slowly”  While Peach Pundit matched “heavy-handed” politics with heavy-handed commentary, similar questions about legislating markets appeared in frontpage story of Atlanta Journal-Constitution last Thursday. Article examining beer bill as well as pair of others that tweak solar energy and car dealership regulations acknowledges difficulty of easing restrictions in all 3 industries. This unique trio of bills at least in part appeared because “consumers show diminishing patience when it comes to getting what they want,” influenced by largely technological advancements that streamline consumer experiences for many goods and services. “Empowered” consumers can get legislators to intro bills, but “the people with the entrenched industries are going to be lobbying also,” a Rutgers prof told the paper, “and they generally have more power.”

Law “can’t protect these old business models,” Republican state Rep Chuck Martin told the paper. He’s behind a bill loosening restrictions on car dealerships, paving the way for Tesla to sell cars directly to consumers. The author of a bill easing the path for homeowners to have solar panels installed, a “tech industry executive,” noted that his industry “is very wide open, very competitive,” likely affecting his view of others. But “he doesn’t expect any Georgia legislators to significantly challenge what he calls ‘the white whales,’” the paper wrote, or “big traditional protections, like the state’s three-tiered alcohol system.” Indeed, all 3 bills were revised to be more restrictive than originally written, and now “only barely crack open the doors for fresh competition,” according to the Journal-Constitution. “It is difficult for any member of the legislature to go against the tried and true business leaders,” an ex-state Senator said, adding that “ideas change slowly in the General Assembly.”

After dueling bills and constitutionality challenge in Arizona, compromise reached on original brewer/beer distrib-backed bill; SB1030 passed state Senate last week and hits its first House committee Weds. Amended bill multiplies by 5 current volume cap for microbrewery license, from 40K bbls to 200K bbls. Under that, license-holders would also be able to hold up to 7 on-premise retail licenses where they can sell guest beer, wine and spirits up to 20% of total retail sales (purchased from licensed distrib). But 40K-bbl limit still in place for most other privileges. Under 40K bbls, micros can self-distribute up to 3000 bbls and transfer unlimited amounts of their own beer to other owned retail locations. They can apply for new retail licenses too (up to 7). But between 40K bbls and 200K bbls, micros lose self-distribution rights, cannot add any more retail licenses and must use distrib to transfer their own beer to remote retail locations. As in past, after micro-cap passed, all remote retail licenses must be surrendered: sold off or closed. Again, this bill raises that cap to 200K bbls.

Compromise bill passed by Senate last week aligns interest of all parties: small brewers guild, beer/wine distrib assn and wine/spirits distrib assn. Now that all on-board with amended bill, it’s expected to move thru House without opposition. Recall, AWSWA, org representing mostly large multi-state wine/spirits distribs, objected to original version of bill and offered its own (see Jan 22 issue). Why? Because original SB1030 made adjustment to producer’s license, not microbrewery license, it seems. In Ariz, “in-state producer license allows for the manufacturing or production of all types of spirituous liquor,” not just beer, according to bill’s fact sheet. For now, barring unexpected activity in state House, pathway to growth for small Ariz brewers seems clear.

With constant buzz about privatization and package reform, plus intermittent attempts at franchise law reform, yet also a stubborn sticking to the status quo, Pennsy has been a land of lotsa rhetoric in recent yrs, but not much action.  That may change.  Pennsy Liquor Control Board (PLCB) issued early March opinion allowing distributors (not full-fledged wholesalers, but 4th tier, local “home ds” who sell most of the off-premise beer in Pennsy) to sell 12-packs.  Anywhere else in the US this would not exactly be big news.  But since the end of Prohibition, these distribs could only sell cases and kegs.  Why hasn’t this changed?  Lotsa reasons, but entrenched interests happier with status quo than potential for blowing up mkt if Pennsy started looking like other states and consumers could, say, buy a six-pack in most grocery and/or c-stores.  Some of those stores sell beer in Pennsy, but not vast majority.  Six-packs can only be bought in bars, but they tend to be pricey and consumers can only purchase 2 at a time.  Recent legal opinion came in response to lawsuit by one small craft brewer and “two interested distributors.”  But the ruling “radically changes the Pennsylvania landscape,” as one source described.  Why?  Because it opens way for 15-packs, 18-packs and other packages not previously sold anywhere in Pennsy.  That would probably suit AB and maybe MillerCoors just fine, tho many local brewers can be expected to mount a vigorous opposition. 

BoP Bops “Predatory”18-Pks  Indeed, Brewers of Pennsylvania (BoP), representing brewers as large as Yuengling/Boston Beer as well as thriving tho much smaller craft brewers, blasted the PLCB opinion as “a blow to the craft brewing industry” that will have “deleterious effects on the Pennsylvania economy and sacrifices quality, variety, and potentially PA jobs.”  Why?  Because while “foreign-owned, mega brewers have such predatory, ‘loss leader’ packages in states all around us,” turns out that “nearly all of our members do not have manufacturing and packaging capability to offer 18 packs.”  Thus, allowing that “predatory” package “serves up a competitive disadvantage that can be destructive to small businesses, such as our suppliers, across the state.”  BoP supports sales of 6- and 12-packs at distribs, but not 18 pks.  BoP is also alarmed that this long standing limitation was lifted by the “interpretation of an administrative agency” rather than through the “legislative process.”

Craft beer supporter and popular beer scribe Joe Sixpack expressed ambivalence in Philly Daily News. He wonders whether Pennsy consumers really want “the same ethics-challenged price-gougers who run the state’s” liquor monopoly to be “making rules for private beer retailers.”  He also points out the change “screws your local bar,” or at least its 6- and 12-pk sales.  Key reason why those are so pricey is bars have to collect a hefty tax that distributors don’t, a tax that’s not likely to disappear.  Joe also cites the small brewers’ concern about 18-pks and suggests some distributors may face stocking challenges with additional packages.

Who Benefits from Status Quo, Changes?  Some firmly believe that the Pennsy system ‒ with home ds, limited package choice and virtually no grocery/c-store sales ‒ significantly contributed to the survival of small brewers there by preventing big brewer pricing/packaging tactics that they believe hurt regional brewers elsewhere.  Independent wholesalers haven’t howled too much about system either, since it makes for lots fewer drops, much easier logistics compared to other states.  But limiting consumers to case purchases or pricey six packs has also limited experimentation needed by craft brewers, given the cost.  Current option of experimenting with craft at home ds dubbed “the $36 leap of faith” by one wholesaler.  Clearly, AB would benefit from these changes. Following this bombshell ruling, interested parties reportedly taking time to sort out all the implications. Meanwhile, newly emboldened PLCB dropped another shoe last week, clearing the way for home delivery of beer, with restrictions, of course.

Craft hit 11 share of total beer volume in 2014, the Brewers Assn announced today, +18% for second year in a row. Recall, BA craft definition, and therefore craft stats, adjusted last year. Biggest change is inclusion of almost 3 million bbls of Yuengling volume for first time. So 22.2 mil bbls now under BA craft umbrella. Craft retail dollar sales jumped another 22%, BA estimates, to $19.6 bil and over 19 share (assuming $101.5 bil total beer market; note that BA teases out FMBs/malternatives when calculating share). The org tracked 3,464 total US breweries last year, +19%. As usual the vast majority, over 3,400 count as craft for BA. And number of smallest breweries in US keeps gettin’ bigger and bigger. Once again, number of microbreweries (less than 15K bbls) grew fastest, +24% to almost 1,900 last yr. Number of brewpubs +10% to over 1,400. The BA counted 135 regional craft breweries that each produced over 15K bbls in 2014. Again, open/close rate still way positive. The BA tracked 615 openings and just 46 closings.

Plenty of key craft insights on tap at BMI’s annual Spring Conference coming up May 11-12 in Chicago.  Attendees will get another deep dive into the High End of the US beer biz, the engine of growth and opportunity for years now.  The conference will feature an all-star panel including key leaders of the high end: Constellation prexy Bill Hackett, HUSA prexy Dolf van den Brink and Boston Beer chairman Jim Koch.  We’ll also feature David Walker of Firestone Walker, one of the fastest-growing craft brewers in the US.  AB InBev’s new hi-end veep Felipe Szpigel and Tenth & Blake’s leader Scott Whitley will provide the big brewers’ take on the segment.  Also on tap: Mike’s Hard founder Anthony von Mandl to talk about the growing flavored malt bev mkt; Dan Wandel and Bill Pecoriello from IRI and GuestMetrics to dig into the retail data.  BMI publisher Benj Steinman will provide his annual detailed review of the high end.  More speakers to be added.  Once again, we’re returning to the centrally located and appropriately high-end Ritz Carlton in Chicago for a full day of thought-provoking presentations, Q&A and plenty of networking time, including two receptions.  Click here for more info.  Click here to register. Reserve your seat today.