Unique cultural phenom of searching for and buying cultish Heady Topper from Vermont’s the Alchemist provided entree for not one but two stories in major East Coast papers over weekend. It was all about the growth for Boston Globe: a new brewery will double the Alchemist’s output, if not supply of Heady Topper as founders John and Jen Kimmich will be able to spend more time brewing other beers. But that growth was just first example that small business is back for Rachel Maddow’s guest column in Washington Post. Maddow moves from beer successes across Northeast to other regional success stories and broader economic signals of health to argue that “the economic resurgence we’re experiencing right now is a moment we shouldn’t waste.” The beer story turns into a call for “nonpartisan” support for improving infrastructure: transportation and broadband internet. Recall, last yr we covered multiple right-leaning think tanks focusing attention on small brewers. This has a similar feel from a figure that’s just as politically polarizing from opposite side of the aisle. Where to next?

“Where getting big begins to hurt the product, small can be bountiful,” concludes New Yorker in long piece regarding success small-scale businesses across various industries, including, of course, American craft beer.  While “scale does yield natural efficiencies,” in some instances it “also introduces blind spots in areas such as customer service, flavor, curation, or other intangibles not entirely consistent with mass production and standardization.”    Strategy of “true-differentiation” has been established in beer industry with “a product [craft beer] that in the mind of the consumer, is markedly and undeniably different.”  Mag goes on to mention niches like independent movies, bookstores, coffee shops, farmers who sell “organic or free-range foods,” as prime examples of “true-differentiation.”  

Took a while to push thru crowds and find spaces suitable for brewing, but New Yorkers finally found a way. Eight new breweries opened in NYC last yr, according to Wall St Journal report. Between 3 new operations in Brooklyn, a pair each in Queens and the Bronx and Staten Island’s first brewery, last yr was quite a yr for small beer in the big city. Importantly, Manhattan remains a challenge: Union Square location of Heartland Brewery closed due to big rent spike and fairly young 508 Gastrobrewery brewpub closed up shop at the end of the yr too (tho lookout for new brewery from last brewmaster there, Chris Cuzme, and partner Mary Izett). Rent is just one issue, tho. Competition is another, according to couple of brewers WSJ spoke to. “When Brooklyn started, there were just a few Goliaths like Bud and Heineken,” Bronx Brewery’s Chris Gallant said after paying respect and noting model Brooklyn provides. But “now, there are a lot more Goliaths, and they’re one of them,” he added.

After last year’s mini-boom, Braven Brewing just launched this month in hip Bushwick neighborhood of Brooklyn. Looking for style they can call their own, cofounders Marshall Thompson and Eric Feldman – friends of 14 years and homebrewing buddies for 5 – have opted for White IPA as year-round flagship, style they spotted in abundance in markets like Colo but generally as seasonal offering. (That said, claim to uniqueness just took a hit with launch of white IPA from MillerCoors’ Blue Moon.)  It will soon be mated with year-round Black Pale Ale that gives them black-and-white beer array. Duo is aiming to get nano-size brewery and taproom up and running in Bushwick by year-end to handle experimental styles, while continuing to brew flagships at Saratoga.  Draft product should be supplemented by cans this spring. SKI Distributing was quick to pick up entry for its territory in and around NYC, landing about 100 accounts in first 2 weeks. 

On night before Elysian sale went public, founders of 10 Barrel Brewing told “packed house” of around 300 local biz leaders and entrepreneurs in Bend about positive changes at brewery since they sold to AB last summer.  AB’s “sinking 10 million into expanding the brewery,” with 6 new 400-bbl tanks and adding new hires too, noted The Bend Bulletin.  “We feel 100 percent that we have nothing to apologize for, and never would we apologize for the sale,” Garret Wales told audience to “ringing applause.”  Next day, he told Bulletin “We’re stoked” about Elysian deal as well.  He assured that 10 Barrel will never hand over creative control to AB and noted AB is changing to their culture instead, claiming 10 Barrel “will continue to close on snow days so employees can ski,” even tho AB “doesn’t really like that.”  10 Barrel originally put out feelers for a partner with capital back in 2013 and 3 days later AB’s m&a exec was in Bend, noted report.  10 Barrel originally offered 25% stake but AB wanted whole brewery and they agreed once they had assurances AB would retain all employees and keep founding partners Garrett, and Jeremy and Chris Cox of course. Since deal, 10 Barrel has lost 1 sales rep out of around 215 employees, noted Chris. (This article appeared in INSIGHTS Express, yesterday.)

Three expanding brewers of varying sizes across the country – Colo’s Odell, Mass’s Jack’s Abby, and Oreg’s Commons Brewery, were briefly profiled in recent Wall Street Journal article where brewers “share the recipe for success.” Quick look at Odell with founders Doug, Wynne and Corkie Odell mostly review for CBN readers: +28% to just under 100K bbls last yr after expanding into Tex and big expansion at brewery including $2.5-mil brewhouse. Odell employs 107 in its 25 th yr after “an initial outlay of $135,000” in 1989.  

Jack’s Abby Up 134% to 14,500 Bbls  Jack’s Abby brewed 14,500 bbls in 2014, according WSJ.  It more than doubled, again, and has averaged 150% growth since founded by Jack, Eric and Sam Hendler in 2011. Recall, Jack’s Abby recently announced plans to build 2d brewery (67K sq-ft, with eventual 125K bbl/yr cap) in downtown Framingham.  Ultimately co lookin’ to expand distribution outside of its current 3 states (Mass, CT and NY) and become a regional brewer in Northeast, Sam told paper. The brothers “pooled $1 million of family money” to start biz, appointing Jack brewmaster, while Eric focuses on the biz and Sam handles sales.

Commons Brewery Up 30%; Purchased $1.5 Mil Building in Jun 2014  Smallest of the bunch, Commons Brewery grew 30% last yr and did $845,000 in sales with 7 employees.  Michael Wright founded the Commons (as Beetje Brewing) in 2010, with “just $85,000” initial investment.  Michael started running the biz out of his garage before leasing 1500 sq ft space. “Dealing with a three-tier distribution” is one of co’s biggest challenges, according to Michael, as “getting product to market is complex.” In Jun 2014 he purchased much bigger locations for $1.5 mil to further expand biz. 

Annual compliance survey run by TTB found incorrect ABV listed on 31% of the 450 alc bevs tested by the agency. Tho spirits again had largest group of brands listing wrong alc content (56 of 190 products), about 22% of the malt beverages TTB looked into stated they had either higher or lower ABV than they actually did. A total of 46 malt bev products had noncompliance issues of 155 tested by TTB, about 30%. Could 30% of malt bevs (and 31% of all alc bevs) really be noncompliant? Most other instances of noncompliance related to labels that didn’t match labels approved by TTB, the agency reported.

Announcement that AB has deal to acquire Elysian Brewing on Friday sent shockwaves still rippling thru some parts of the craft community. But many expressed surprise that Elysian would be latest brand to find itself in AB’s growing craft portfolio, tho rumors had swirled before deal broke. Elysian’s proven itself a strong brand in an increasingly competitive market. Overall, Elysian grew from 34K bbls to about 53K bbls last yr, co-founder Dave Buhler told CBN last week. It’s also stayed relevant and continued to grow in crowded Washington craft market, still 55% of its biz, +50%, Dave said. Stats from the state liquor board show Elysian’s shipments just in Wash grew 42% to near 34K bbls for 11 months thru Nov of last yr.

Lead brand Immortal IPA is about a quarter of Elysian’s biz, the co reported. That brand was up 26% in IRI multi-outlet + convenience data YTD thru Oct 5 last yr and the #46 IPA in that data set. Combined with two other smaller Elysian IPAs, Idiot Sauvin (+29%) and Avatar Jasmine IPA (+33%), the group grew near a half-mil $$ to $2.4 mil thru early Oct. Recall, Elysian grew 66% to near 2 share of craft $$ in Seattle/Tacoma foodstores in 2013, according to IRI. Its $$ sales were larger than Sierra Nevada and Alaskan in its home market and about twice the size of Gambrinus (Shiner/BridgePort).

Challenges Ahead Aligning Distribution, Branding?  Though Elysian currently with AB-owned branch in Seattle, the rest of its 11-state distrib footprint is far from all red. It’s carried by a handful of MC or indie/craft-focused distribs in Oreg and Ida. Out on east coast, L Knife operations have the brand in NY and NJ, but mostly MC houses (plus 1 AB house) have it in Pennsy and a few largely indie houses carry Elysian in Maryland and Delaware. As AB works to “continue to provide its distributors [with] brands that are relevant in the local market,” as high-end CEO Andy Goeler told us Friday, likely that it’ll seek to move Elysian into its red network where possible.

But perhaps bigger challenge will be maintaining Elysian’s rep in a city that’s viewed it as counter-cultural cornerstone for 20+ years. “We hope the loyalty our consumers have will transcend this transaction,” Dave told CBN. But in vocal craft community that likes to paint AB as darkly as possible, it could be tough. Indeed, rather than “why Elysian?” many observers seem to be wondering “why AB?” Beyond the obvious – the price was right – it seems the choice of AB “was not a unanimous decision,” according to Washington Beer Blog’s Kendall Jones. Instead, Dick Cantwell, Elysian’s co-founder, brewmaster and public face of the brand, not to mention the team member most closely linked to Brewers Assn and craft community, “was outvoted,” Kendall wrote. We’ve heard other comments echoing that. Others in Wash craft scene have already been able to divorce their respect for Dick from their expectations for Elysian’s future. “Anyone who says Dick sold us out needs to think twice,” founder of Fremont Brewing, Matt Lincecum told the Puget Sound Biz Journal. But he expects AB “will use Elysian as a weapon against the craft brewing industry here in this state,” he added. How many consumers will take same view? All 3 Elysian founders say they’re staying put, but for how long?

In wake of announcement, many pointed to already-ironic tagline Elysian uses on its Loser Pale Ale,“Corporate Beer Still Sucks,” as somehow proof of the “sellout” label. For the unfamiliar, it references a t-shirt Nirvana’s Kurt Cobain wore on the cover of Rolling Stone in 1992: “Corporate Magazines Still Suck.” But if Cobain’s statement read as an insistence that Nirvana can be both underground grunge and on the cover of Rolling Stone (or rather: that Rolling Stone can still “suck” even with Nirvana on the cover), then logic follows that Elysian can still be both craft and owned by AB (or rather: well, you know).

3 Deals in 12 Months; Cutting Loose “Regional Strategy”; 3-Tier  AB has announced deals to buy 3 small breweries since last Feb: Blue Point, 10 Barrel and now Elysian. All 3 shipped between about 40K and 60K bbls last yr (or 2013 for Blue Point). Each of them do most of their biz within a tight geography and have a strong hometown if not regional rep. But latest announcement somewhat debunks theory that AB has “regional strategy” for craft. Then too, in crowded PacNW market, one brand likely not nearly enough to make up for AB’s total share losses. The co still views these purchases as “separate local entities with distinct identities,” Andy told CBN. And Seattle is not the same as Bend or Portland.  Craft-centric territories, like PacNW, tend to be both areas where AB has most to gain from acquisitions and where law provides broadest exceptions to 3-tier system. So they’re also the places AB could have easiest time operating in multiple tiers. It’s already the biggest brewer and one of biggest distributors in the US. Addition of 3 Elysian brewpubs and 1 restaurant in Seattle, plus three 10 Barrel locations in Oreg and Ida mean AB will do plenty more direct sales to consumers, as it does in Europe. How far will it go?

The first scan data that is (mostly) 2015 started to appear today.  Boston Beer’s beer $$ sales  up 5.5% for 4 weeks thru Jan 17 in Nielsen, reported Goldman Sachs.  Volume up 3.8%.  That’s an improvement from 0.4% $$ sales increase for 4 weeks thru Dec 20 (and 1% volume drop), noted Goldman Sachs Judy Hong.  But a yr ago, in same periods, Boston Beer’s beer brands were still up double digits, Nielsen data shows.  Angry Orchard doing the heavy lifting for Boston Beer these days, again up 44% latest 4 weeks.  So total Boston Beer up 16.6% for 4 weeks, compared to 12% gain in prior period.  Speaking to one major craft distrib yesterday, he said a number of craft brewers off to slower start in 2015.  But it’s still way too early to say what craft trends will be like in 2015.  

Everyone’s talking about coming craft deals these days, it seems.  There are at least 2 top 50 craft brewers which have deal books with investment bankers (one with venerable firm Lazard), as we’ve noted.  AB alone is looking at several more deals, probably not including the 2 with books out. Otherwise one could surmise those deals would be done.  AB is not shy about pulling trigger on attractive assets.  Recall, AB’s outgoing North American prexy Luiz Edmond told WSJ last mo that AB was “late to the game” and “don’t be surprised” if AB does several more deals in craft space.  Then there’s another top 50 craft brewer which desired to sell, but only to another craft brewer. It reportedly had list of acceptable buyers.  Stay tuned.  So that makes at least around a half dozen deals in the works.  We’re sure there are many others that are considering their options or further along.  

There are many, many other rumblings about potential transactions, a good number of which may only be thinly grounded in reality.  Yet employees at some craft brewers have to be wondering about their founders’ intentions, and whether they’re planning on staying in it for the long haul.  It’s yet another consequence of so much deal activity.  

In our haste to get out news that AB has deal to buy Elysian Brewing in Seattle (see FLASH earlier today), we forgot about 10 Barrel’s coming Portland, Oreg pub. So AB could own and operate 7 on-premise locations in 3 northwest states by end of 2015.