Still no real slowdown in sight: craft sales +20.4% by $$ YTD thru Feb 22, according to IRI multi-outlet + convenience (MULC) stats. It gained over 1 full $$-share pt to 8.2; volume +17% to just over 5 share. Craft jumped 30% in less-developed c-store channel and climbed over 17 share of $$, +2, in supers, closing in on imports.

Flying from the get-go in 2015, Sierra Nevada $$ sales up 26% YTD thru Feb 22. And it’s accelerating: +33% for 4 wks in MULC data. Look at health across top brands too: biggest craft brand in scans Sierra Pale +10% and Torpedo Extra IPA +16%. The co got off to “torrid sales start,” IRI’s Dan Wandel said during BA Power Hour today (see below). Recall Sierra intro’d 3 new brands early in yr. Beer Camp Hoppy Lager, taking on spring seasonal spot this year, put Sierra Seasonal +12% YTD, +27% for 4 wks. Neither Nooner Pilsner nor new Hop Hunter IPA hit top 30 craft brands immediately, but Dan said Hop Hunter already at $355K in sales in supers (about 0.16 share of craft in the channel). Sierra’s variety pack, new last yr, still all incremental so far in 2015, at about 0.8 share of craft in MULC. Joining Sierra in the strong-start club? Shiner Bock, +11% YTD. Total Gambrinus biz pretty solid too, +8%. And Lagunitas ain’t slowin’ down: total $$ +59%, IPA +61%, Sumpin Sumpin +62%, sheesh.

But Sam Adams and New Belgium flagships had tuffer kick off to 2015. Sam Adams Seasonal up just 1% YTD as Cold Snap cycles big intro year, but Boston Lager down near 4% and variety pk -12%. Emphasis eased off of variety last yr after intro of Rebel, likely to pass the Sam variety pk soon. Much of Rebel growth still incremental so far in 2015; it’s #9 craft brand in MULC channel, at near 1.7 share. But total Boston biz +18% YTD. Top Angry Orchard brand Crisp Apple now biggest Boston brand in MULC, +40% and posting $$ sales about 37% higher than Sam Adams Seasonal so far this yr. Twisted Tea had good couple months too, +23% YTD. Crisp Apple, Rebel and Twisted Tea Original were about 86% of total Boston Beer growth thru Feb 22. New Belgium $$ up 12% YTD, but +5% for 4 wks. Fat Tire +5% and Ranger IPA +9% YTD, but both down about 1% for 4 wks. Yet, NBB Variety Pk still goin’ great guns, +41% in 2015 thru Feb 22.

Other top craft suppliers saw variable trends in the early part of the year too. Deschutes $$ +11% all in, but top brand Mirror Pond -4.5%, down steeper for 4 wks. Both Stone and SweetWater up in the mid-40s YTD, Stone IPA up in the mid-20s, same as all New Glarus products combined. Bell’s Two Hearted IPA and SweetWater 420 still growing 43-44%, just behind Sumpin Sumpin, Sierra Variety and Stone IPA at about 0.8 share of craft. Smaller in these channels, Dogfish Head 60 Minute +16% in MULC (stronger in supers, with 90 Minute even stronger, +23% there). Harpoon IPA maintained +5% growth; Widmer Hefe +3% (see below for more on CBA in IRI). But Goose Island 312 Urban Wheat -4% YTD and Magic Hat #9 -13%. 

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

Branches are being blocked, intentions questioned and constitutionality challenged as beer-focused legislation moves forward in the states. And in many places, the legislation does keep moving forward. That’s notably so in both Kentucky and Tennessee, where legislators inch toward increasing the number of states to recently pass legislation that bars brewers from owning wholesalers. This week, legislators in both states voted to advance both bills on their paths to becoming laws. The fight over HB186 in Kentucky has garnered much more attention (and acrimony), but the bill faces just one more step to become law after the Senate passed the bill without amendment today. That doesn’t mean debate over the issue is over. AB says it “will continue to fight for business we’ve successfully built,” suggesting a legal fight may follow if the governor signs it into law.

Craft has played a supporting role in the Ky drama on both sides of the debate. Small Ky brewers like Country Boy Brewing testified in support of the bill and advocate group KEG regularly spoke on their behalf. But Ohio brewers turned Ky distribs, founders of Rhinegeist Brewing/Riverghost Distributing repeatedly pushed back against the bill, claiming it would “nullify our investment” in their latest op-ed in Lexington Herald-Leader. A separate op-ed takes opposite tack, backing anti-branch bill in Tenn to defend “small, independent craft brewers.” Penned by Tenn distribs Fred Dettwiller (DET Distributing) and Kurt Strickmayer (BountyBev), the opinion piece in the Tennessean suggests that “some international beer conglomerates want to come in and monopolize our three-tier system,” so “by closing a loophole,” this bill will keep the middle-tier independent.

Motives Questioned: “Pure” 3-Tier? Calling “Crony”  Debate over the anti-branch bills in Kentucky and Tennessee highlighted the opposition of the free market and the three-tier system. Limiting private transactions or the profitability of private companies became a sticking point for some legislators in both states during committee hearings this week. While the Tenn sponsor of anti-branch legislation in the House pointed to the significance of maintaining “pure” 3-tier, other legislators pushed back. One suggested that parties currently in power and supportive of the bill hoped to push it thru quickly to maintain their positions. Another noted that the very next bill on the docket further “eroded” such a pure system by expanding the ability of small brewers to retail their own beer. (That bill primarily focused on removing current limitations on the geographies in which small brewers may open in Tenn.) Both bills passed anyway.

Folks threw around the phrase “free market” a fair amount in Georgia too, recently. There, non-industry critics questioned exactly how invested in free-market thinking elected officials that ran on conservative values continue to be. As foreshadowed by some of the anti-three tier think-pieces released by think tanks in the last year or so, many of those critiques came from free-market backing conservatives that voted for lawmakers blamed for blocking the Georgia Beer Jobs bill. Conservative talk radio host Erick Erickson blasted Lt. Governor Casey Cagle, the donations he’s received from distributors and the claims that he’s been “working behind the scenes to obstruct passage” of the small-brewer backed bill. The word “crony” appeared repeatedly here and elsewhere. An editorial from the Atlanta Journal-Constitution took similar stance in a more measured tone. Off the bat, it reminded readers they’d “heard many a Georgia Republican pledge allegiance” to such “principles” as “help small business” and “get government out of the way.” But the Beer Jobs Bill is “being held up without so much as a committee vote.”

That streak ended this week as the bill will be taken up during a committee hearing tomorrow. And, notably, comments from industry members have remained largely considerate and so far not devolved into the kind of name-calling we’ve seen elsewhere. Instead, many small brewer advocates focus attention on numbers and making clear comparisons to nearby, competing states. Whether that works or if tougher tactics may be required to keep the bill moving could become clear during tomorrow’s hearing.

Pesky Commerce Clause Rears Its Head in Arizona  Bill supported by small brewers and beer wholesalers in Ariz derailed quickly last week when questions arose about whether its passage invites challenges based on the crucial inter-state Commerce Clause in the US Constitution that prevents states from favoring in state entities. Attorney for the state Senate’s Rules committee brought commerce clause concerns, so legislators held the bill last week, according to the Daily Miner. Amendments to fix the issue likely to be filed, but bill not yet back on committee’s agenda.

More Notes from the States: FL, IN, NM, AL  The most promising bill to allow 64oz growlers in Florida was introduced to the full Senate on Tuesday in a new form. The bill originally proposed by Sen Latvala has been amended to include a taproom compromise (requiring that alcohol produced by another brewer/supplier be purchased from a distrib, but that some beer produced by the same brewer can be transferred between brewing locations) and a section allowing off-site malt beverage tastings as well as container size provisions. In Indiana, the Senate passed SB297 last week, which would raise the microbrewery cap from 30K bbls to 90K bbls, under which breweries may conduct on-site sales and self-distribution. It heads to the state House. Bills have been introduced in New Mexico: one would make allowances for small brewery license-holders to also have interest in distribs and retail outlets; another clarifies growler filling and sales. And Alabama legislators introduced HB96 this week, paving the way for a new Craft Brewer’s License (see above) and for brewpubs to conduct sales for off-premise consumption.  

Branches are being blocked, intentions questioned and constitutionality challenged as beer-focused legislation moves forward in the states. And in many places, the legislation does keep moving forward. That’s notably so in both Kentucky and Tennessee, where legislators inch toward increasing the number of states to recently pass legislation that bars brewers from owning wholesalers. This week, legislators in both states voted to advance both bills on their paths to becoming laws. The fight over HB186 in Kentucky has garnered much more attention (and acrimony), but the bill faces just one more step to become law after the Senate passed the bill without amendment today. That doesn’t mean debate over the issue is over. AB says it “will continue to fight for business we’ve successfully built,” suggesting a legal fight may follow if the governor signs it into law.

Craft has played a supporting role in the Ky drama on both sides of the debate. Small Ky brewers like Country Boy Brewing testified in support of the bill and advocate group KEG regularly spoke on their behalf. But Ohio brewers turned Ky distribs, founders of Rhinegeist Brewing/Riverghost Distributing repeatedly pushed back against the bill, claiming it would “nullify our investment” in their latest op-ed in Lexington Herald-Leader. A separate op-ed takes opposite tack, backing anti-branch bill in Tenn to defend “small, independent craft brewers.” Penned by Tenn distribs Fred Dettwiller (DET Distributing) and Kurt Strickmayer (BountyBev), the opinion piece in the Tennessean suggests that “some international beer conglomerates want to come in and monopolize our three-tier system,” so “by closing a loophole,” this bill will keep the middle-tier independent.

Motives Questioned: “Pure” 3-Tier? Calling “Crony”  Debate over the anti-branch bills in Kentucky and Tennessee highlighted the opposition of the free market and the three-tier system. Limiting private transactions or the profitability of private companies became a sticking point for some legislators in both states during committee hearings this week. While the Tenn sponsor of anti-branch legislation in the House pointed to the significance of maintaining “pure” 3-tier, other legislators pushed back. One suggested that parties currently in power and supportive of the bill hoped to push it thru quickly to maintain their positions. Another noted that the very next bill on the docket further “eroded” such a pure system by expanding the ability of small brewers to retail their own beer. (That bill primarily focused on removing current limitations on the geographies in which small brewers may open in Tenn.) Both bills passed anyway.

Folks threw around the phrase “free market” a fair amount in Georgia too, recently. There, non-industry critics questioned exactly how invested in free-market thinking elected officials that ran on conservative values continue to be. As foreshadowed by some of the anti-three tier think-pieces released by think tanks in the last year or so, many of those critiques came from free-market backing conservatives that voted for lawmakers blamed for blocking the Georgia Beer Jobs bill. Conservative talk radio host Erick Erickson blasted Lt. Governor Casey Cagle, the donations he’s received from distributors and the claims that he’s been “working behind the scenes to obstruct passage” of the small-brewer backed bill. The word “crony” appeared repeatedly here and elsewhere. An editorial from the Atlanta Journal-Constitution took similar stance in a more measured tone. Off the bat, it reminded readers they’d “heard many a Georgia Republican pledge allegiance” to such “principles” as “help small business” and “get government out of the way.” But the Beer Jobs Bill is “being held up without so much as a committee vote.”

That streak ended this week as the bill will be taken up during a committee hearing tomorrow. And, notably, comments from industry members have remained largely considerate and so far not devolved into the kind of name-calling we’ve seen elsewhere. Instead, many small brewer advocates focus attention on numbers and making clear comparisons to nearby, competing states. Whether that works or if tougher tactics may be required to keep the bill moving could become clear during tomorrow’s hearing.

Pesky Commerce Clause Rears Its Head in Arizona  Bill supported by small brewers and beer wholesalers in Ariz derailed quickly last week when questions arose about whether its passage invites challenges based on the crucial inter-state Commerce Clause in the US Constitution that prevents states from favoring in state entities. Attorney for the state Senate’s Rules committee brought commerce clause concerns, so legislators held the bill last week, according to the Daily Miner. Amendments to fix the issue likely to be filed, but bill not yet back on committee’s agenda.

More Notes from the States: FL, IN, NM, AL  The most promising bill to allow 64oz growlers in Florida was introduced to the full Senate on Tuesday in a new form. The bill originally proposed by Sen Latvala has been amended to include a taproom compromise (requiring that alcohol produced by another brewer/supplier be purchased from a distrib, but that some beer produced by the same brewer can be transferred between brewing locations) and a section allowing off-site malt beverage tastings as well as container size provisions. In Indiana, the Senate passed SB297 last week, which would raise the microbrewery cap from 30K bbls to 90K bbls, under which breweries may conduct on-site sales and self-distribution. It heads to the state House. Bills have been introduced in New Mexico: one would make allowances for small brewery license-holders to also have interest in distribs and retail outlets; another clarifies growler filling and sales. And Alabama legislators introduced HB96 this week, paving the way for a new Craft Brewer’s License (see above) and for brewpubs to conduct sales for off-premise consumption.  

Now the largest small brewer in Kansas, Tallgrass Brewing will open a new 60K sq ft brewery with capacity to brew 100K bbls/yr this spring as well as a small downtown Manhattan (KS) brewpub, the Topeka Capital-Journal reported. It shipped 15K bbls last yr. When making plans to hit 2016 goals, “it became clear we needed a new brewery and to increase the quality and consistency” of its beers for broader distribution, founder/prexy Jeff Gill told the paper. Its new $7 mil facility could employ 30 and expand Tallgrass distribution from current 13-state footprint. The co plans to open a new 5900 sq ft brewpub with room for about 200 diners this summer. Jeff cites two key changes Tallgrass made over last 5 years for increased attention on the go: switching to cans and to the AB distrib network. 

Letter from BA CEO Bob Pease to Senate Finance Committee yesterday aimed to “correct a few of the misstatements” in Letter NBWA sent urging Committee members not to support Small BREW.  Bob clarifies that Small Brew is primarily a “jobs creation bill.”  Then too, NBWA’s “assertion” that the bill has engendered “significant controversy” is “misplaced,” sez Bob, since only controversy is that NBWA and Beer Inst oppose BREW for first time “because they recognize it could become law.”  Bob also counters what he calls NBWA’s “assertion” that Small BREW “could have implications for state franchise laws, specifically that BREW’s 6-mil-bbl cap for tax relief and by implication definition of small “would be imported into state franchise laws.”  But “NBWA is tilting at windmills on this point,” Bob believes.  Why?  No state currently uses the current 2 mil bbl cap in Internal Rev Code for state franchise laws, Bob notes and “we seriously doubt that states would rush to amend their state franchise laws to reflect the new 6 million barrel level” if Small BREW passes.

Editor’s Note:  As far as we know, only state law proposal to consider a cap as high as 6 mil bbls was in Mass a coupla sessions back when Boston’s Jim Koch and others tried to revise franchise law there.  But that cap subsequently dropped and current version of bill does not include it.  Then too, NBWA reminds that its letter to Hill did not specify “franchise laws”; NBWA’s issue with “small” definition is much broader, involving taxes, licenses, self-distribution, more.  Coincidentally, Alabama state rep intro’d bill yesterday that creates new Craft Brewers License in state that applies only to breweries that “produce less than 2 million barrels annually – the federal definition of a small brewer,” as the Ala Brewers Guild put it.  So some folks pay attention to these caps.     

Proposed Mass Bill Defines Small Brewer As Anyone 20% or Less of Distrib’s “Total Sales” Current version of franchise reform bill filed in Mass allows “small brewers” to move brands without cause if that brewer’s brands were 20% or less of the wholesaler’s sales in prior calendar yr.  Doesn’t specify volume or $$ sales.  Small brewer has to give 30 days’ written notice and tell distribs who successor is.  Successor must pay distrib that loses brands fair mkt value of distribs rights and can start servicing territory “regardless of whether the successor has compensated the affected wholesaler.”  If distribs can’t decide on fair mkt value, goes to binding arbitration. Also: since law does not define “small” other than the 20% cap, presumably it would apply to any brewer whose biz is under 20% cap via acquired brands, for example, that have not previously moved.    

Fuller picture of Boston Beer now available shows some serious changes to the company since just 2010: big jumps in sales force and employees as well as exports and volume/distribs in the Freshest Beer Program. Craft brewers regularly refer to importance of having “feet on the street,” particularly for key on-premise piece of the biz. Well Boston’s invested heavily here and grown its sales force from about 275 in 2010 to 330 in 2012 and 410 by the end of 2014, up almost 50% in 4 yrs. Its total employee-count has swelled too: +70% to 1325 since 2010. In that time, the co’s total shipments grew about 80%. Boston’s been shipping more of its beer across borders too. It exported just 1% of its beer volume in 2010. That grew to 3% in 2012 and then to 4%, about 100K bbls last yr. Its total distributor network slimmed down a bit, based on its full-yr filings, from about 400 in 2010 to 350 in 2014 (consolidation explains much of this). Of those wholesalers, 121 that distributed 68% of Boston’s volume last year participated in the co’s Freshest Beer Program, which aims to cut down on inventories and time it takes for beer to go from Boston’s breweries to retail shelves. Boston expects share of its biz in program to hit 72-78% in 2015.

The craft category’s overall upside (see above) provides additional upside to its largest player, Boston Beer. That’s one of the primary points of a recent Cowen and Co report analyst Vivien Azer penned in response to investors asking “Why not an Underperform?” Recall, Cowen downgraded Boston’s SAM stock from Outperform to Market perform after most recent results and guidance came in lower than expected. But it ain’t that bad, suspects Vivien. Sure, gaining share could be tuff for Boston with “heightened craft competition,” but all those new entrants are “also driving accelerating growth” for the whole category. Similar story in cider, which experienced “explosive growth” since 2011. “Heightened competition and decelerating category growth are a cause for concern,” Vivien says, but “growth still remains impressive.” At the same time, Boston’s beer portfolio grew 5% for 4 wks thru Feb 21, according to Nielsen all outlet + c-store data as reported by Goldman Sachs. That’s “a deceleration” from 8% gain posted during previous 4-wk period.

They weren’t alone in revisiting Boston’s results. Seeking Alpha took deep dive into “Hangover” it believes Boston is experiencing thanks to craft competition. It still finds stock price well above its “$200 entry target.” Speaking of SAM stock, its price continued further downward in the week following latest results, tho it’s up slightly today to about $263. That’s still about 15% below $310 price prior to last week’s results. Meanwhile, after picking up and selling 50K shares in Jan, prexy/CEO Martin Roper bought and sold up another 120K shares in early-mid Feb before Q4/2014 results announced. He bought shares at approx $234/share and sold same number on open market for prices between $304 and $317/share for total of about $37 mil.

Craft drinkers love craft, according to research recently shared by investment firm Cowen and Company. Just over a quarter of surveyed beer drinkers “indicated they drank craft beer almost always or often,” based on responses from a total 2500 consumers that participated in the co’s monthly surveys. But zero in on key demographic groups and that number grows. About 34% of 18-34 year old beer drinkers choose craft most of the time and a full 40% with household incomes over $100K/yr said so. Across beer drinking respondents, about 32% expressed “a strong consumer preference for craft beer.” But again, the category “meaningfully over-indexes with key cohorts.” About 40% of those same 18-34 yr olds said they “prefer” craft and about 42% in that higher annual income bracket responded the same way. That’s compared to about 32% of 35-54 yr old beer drinkers that “prefer” craft and 34% with household income between $50K and $100K. That all indicates a pretty clear upside for craft to Cowen analyst Vivien Azer. Indeed, she shared the research to conclude recent “Why We Didn’t Downgrade SAM to Underperform” report that provided more color on recent Boston Beer results. Read on for more.

Craft Brew Alliance announced shipments +9% to 791K bbls in 2014.  Kona drove 2/3 of increase, up 44K bbls, 17% to 301K bbls.  That’s about 38 share of CBA biz.  Widmer Bros brands +14K bbls, 5.6% to 267K bbls, another third of CBA volume.  Redhook up 6K bbls to 223K.  Shipments ran ahead of depletions for the yr, with depletions up 7%.  CBA’s packaged beer biz +13.6% while draft down 3.4%.  And draft drifted down from 32 share of CBA biz in 2012 to 25% last yr.  Net sales up 12% and passed $200-mil mark for first time.  Gross profits rose 17%.   Operating income jumped 50% to $5.7 mil, but operating margin still pretty thin at just 2.9.  More details after tomorrow’s conference call.