Coney Island just got state approval to build small brewery in… you guessed it Coney Island.  It will be just a 10-bbl brewhouse with about 1,000 bbls of capacity that will sell small-batch distinctive, local draft beers as well as provide tours and consumer education.  This will mark the 3d facility under Boston’s brand incubation unit called Alchemy & Science, which is headed up by Magic Hat founder Alan Newman.  The others are Angel City in Los Angeles, which has 6-8,000 bbls of capacity and Concrete Beach in Miami (which hasn’t yet opened).  Concrete City will begin with 6,000 bbls of capacity, but could easily get to 15,000 bbls.  Including much larger breweries in Lehigh and Cincinatti as well as Boston Beer’s small Jamaica Plains facility, this will be Boston’s 6^th brewery.

But Alchemy and Science’s big play in 2015 is national expansion of Traveler’s Shandy. “We’re getting a pretty healthy approval list from off-premise chains” and “starting to build” on-premise chain distribution too,  Alan Newman told CBN.   Boston Beer sales team “fully behind” Traveler’s and Alan eager to get after opportunity “to put our stake in the ground and build a brand.”  He’d “like to see distribution numbers fill out” and “depletions numbers” coming in, but so far they’re getting “great reception” from retailers.  

It’s only January and beer tax battles are already getting messy, more complicated and name calling has begun.  BA’s Small BREW Act has 11 House co-sponsors at presstime.  Recall it cuts off tax relief for US brewers at 6 mil bbls. Beer Institute-supported Fair BEER excise tax bill about to be intro’d in 114^th Congress.  That bill proposes tax relief to all suppliers, including importers and biggest brewers.  Early days, but dueling tax bills, BI and NBWA active opposition to BREW and small number of cosponsors so far, all suggest a tougher slog ahead.  (Note: this article is adapted and expanded from today’s edition of beer marketer’s INSIGHTS with new info.)

A “Dear Colleague” letter from Rep. Steve Womack (AR) discussing soon-to-be intro’d BI-supported Fair BEER Act is already circulating in Congress.   BEER “offers a unique solution to industry tax issues without altering the industry structure,” Womack wrote, or forcing Congress to pick “winners and losers in the marketplace,” sounding key theme that all brewers get a break with BEER.  What’s more, bill is “fair, equitable and comprehensive” and allows Congress to “stand with microbrewers, national craft brewers and the major brewers and importers,” again instead of having to “choose winners and losers.”  BEER uses graduated tax scheme so that smallest brewers get the most relief.  Details not in letter, but Womack notes that “major brewers at the top of the scale get less than pennies per bbl in relief.”  TTB, Womack points out, has “determined a small brewer to be one who produces 7,143 bbls or fewer per year.”  (That’s from rule change TTB promulgated last yr to change tax paperwork requirements.)  And that’s point where BEER determines “the greatest need for tax relief lies and begins at this number the lowest threshold for any beer tax to be imposed.” So smallest brewers (who are more than 90% of all brewers) won’t pay any tax at all.   

Multi-Natl Brewers “Laying Off” Workers while Small Brewers Hiring, Sez BA’s BobAs Womack letter circulated this week, BA took new shots at BI and NBWA. CEO Bob Pease wrote “Dear Congress” letter to past co-sponsors of Small BREW.  Bob points to 110K jobs created by Main Street brewers/brewpubs over last 25 yrs and proposed 5200 more jobs Small BREW “would help create” in 12-18 mos.  He contrasts these extra workers being hired with “large multi-national brewers” who are “laying them off.”  BI’s previous “passive opposition” to Small BREW turned into “vocal opposition,” sez Bob, because BREW provides no cut for “importers of foreign-produced beer (two of BI’s five voting members)” and cuts off relief at 6 mil bbls.  But “Why should the Congress give a handout to foreign brewers?” asks Bob, playing patriotism card.  Bob takes on NBWA opposition to BREW’s cap of 6 mil bbls too. Calls NBWA’s claim that 6-mil-bbl definition would extend to state franchise laws also “false” and “a red herring.”  BI and NBWA opposition may give prospective sponsor “pause,” writes Bob, but they should “press them on their arguments.” So, here we go. 

Small Got Bigger Last Few Yrs, Sez Brooklyn’s Steve; Hindy Then and Now; “Smell Test”?  This issue taken up at recent Beer Biz Daily Summit during conversation between Brooklyn Beer’s co-founder and long-time BA board member Steve Hindy and NBWA’s Craig Purser.  Craig said again that NBWA does not believe 6 mil is “small,” and one reason it wrote letter in Dec telling Congress not to support Small BREW was because there are 73 new members and NBWA was “hearing repeatedly” lines like “hey, we’re on your bill.”  Members confused; they thought BREW was actually NBWA’s bill, tho NBWA never supported it.  Then Steve said: “A few years ago I was a dissenter on the 6 million.  But I’ve gotten used to it.  Unity is really important for our association.  [Jim Koch] is our leader essentially.  We’re not ready to throw him out the door in a legislative effort.  Yes, I think Jim will create more jobs in America.” 

How things change! “I can see a small brewer going to 6 million barrels,” said Steve in 2012 keynote address to Craft Brewers Conference. “I don’t think 6 million barrels is a small brewer.” Steve also said then: excise tax relief “is not going to happen until we reduce the threshold…. Not because it’s going to be opposed by the NBWA and the Beer Institute,” tho those are “two good reasons.” But rather because 6 million barrels “doesn’t pass the smell test.”  Those comments were markedly different from BA party line then and now.  

Ain’t About the Consumer Anymore, Sez Everyone  So, BEER Inst once again on separate page with separate bill from BA.  NBWA also against BREW.  As result, no bill likely to pass.  Everyone understands need for unity on a tax bill but unity for now impossible to achieve.  Actually, with verbiage coming out of BI and BA, there’s likely to be more acrimony to come.  Different industry lobbyists will pitch contradictory ideas to Congress, likely with nasty charges over who’s American and who’s not, who’s payin’ what taxes and who’s a billionaire, and members can more easily dismiss both bills.  Meanwhile, one traditional justification for an excise tax cut ‒ that tax is unfair burden on working class ‒ completely dismissed by BA, which pitches Small BREW as a jobs bill. That justification mostly back-burnered by big brewers too.  Womack letter calls fed excise a “hidden tax” and that over 40% of what consumers pay for beer is some form of tax.  But he also wrote that Fair BEER “designed to encourage reinvestment into skilled workforce and capital needs” for beer biz.  Meanwhile, big brewers will have more difficulty making another traditional argument ‒ that higher fed taxes hurt overall industry employment ‒ given number of people AB InBev and MC have shed. 

ABI and MC high-end portfolios playing in craft space each slowed significantly in 2014 scans as Shock Top, Goose Island and Blue Point combined $$ up 6%, and Tenth and Blake craft-like brands’ $$ sales up 0.7% (volume down 1%), in IRI multi-outlet + convenience thru Dec 28.   

Shock Top Slows to +3%, Tuff Q4 for Goose; Blue Point Improves Under AB’s Wing  Shock Top family up just 3%, Goose Island +16% in 2014 MULC, compared to up 16% and 75% respectively in 2013.  Even amidst marked slowdown, lots went well for Shock Top series too.  Notably, flagship Belgian White returned to growth, +7%. Plus it got notable lifts from recent innovations like Honeycrisp Apple Wheat, $$ up 275% (tho down 2% in latest 13 weeks), intro’d Honey Bourbon Cask Wheat, and solid Variety Pk growth, up 24%.  However all other Shock Top brands down in 2014. Shock Top Seasonal took a big hit, down 45% in 2014 vs up 75% in 2013.  Also, Raspberry Wheat continued to decline, down 27%, and Lemon Shandy Wheat swung from more than tripling sales in 2013 to down 73%.

Growth for Goose Island family of brands steadily slowed since Q1, facing tuff comps from national launch.  In fact, volume actually down 1% for last 13 weeks thru Dec 28. Both volume and $$ down low-to-mid single digits in final 4 weeks.  Biggest changes: Goose Island 312 Wheat just eked out 3% gain for the yr, down 10% in Q4, and Honkers Ale fell 20% for yr.  Intro of 312 Urban Pale Ale helped soothe those brands’ struggles, yet nearly every other Goose brand declined in Q4, aside from Goose IPA and a couple smaller brands.

Blue Point Brewing improved in 1st yr under AB’s wing. Flagship Blue Point Toasted Lager (+19%) and Hoptical Illusion (+78%) trends, both much improved, and new Mosaic Session IPA added enuf growth to boost total $$ 16% in 2014.  Editor’s note: CBN doesn’t have final numbers from 10 Barrel or just-acquired Elysian Brewing, but 10 Barrel was up 125%, Elysian +36.5% in IRI thru Sep 7.  Either way, neither deal closed last yr, so wouldn’t be included in AB’s 2014 numbers.

Blue Moon & Leinie Slow, But Weinhards, Killian’s & Batch 19 Declines Keep T&B $$ Flattish, Vol Down Tenth & Blake portfolio (teasing out cider and import numbers) went from 16% gain in $$ sales in 2013 to under 1% growth in 2014.  One reason: Blue Moon family slowed from low-double-digit growth in 2013 to $$ sales only up 3% in 2014 IRI MULC.  Flagship Belgian White, slowed to 6% gain.  But Blue Moon Seasonal and Variety pk both declined, -6% and -4%, respectively. That took biggest toll on total Blue Moon.  Other than Belgian White, Farmhouse Red (+107%), new Cinnamon Horchata Ale, and smaller Short Straw Farmhouse Red, every other Blue Moon brand declined in 2014.  This yr Blue Moon releases new White IPA nation-wide  in Apr, with earlier releases in “a few select cities”: Austin, Chicago, LA, Nashville and NYC starting Jan 29.

Leinenkugel family slowed from over 30% plus growth in 2013 to 12% $$ sales gain in 2014. Summer Shandy, +29%, Leinie Variety pk, +36%, and much smaller Hoppin’ Helles lager and Winter Sampler pk were only brands that grew in scans. All others took tuff declines in 2014: Seasonal (-9%), Leinenkugels original (-11%), Lemon Berry Shandy (-63%), Sunset Wheat (-23%), Honey Weiss (-14%), and Berry Weiss (-12%).

But declines for Henry Weinhards, -40%, George Killian’s, -23%, and Coors Batch 19, -59%, were most detrimental to Tenth & Blake growth.  Weinhards (-396K cases), Killians (-308K cases) and Batch 19 (-182K cases) combined shed nearly 900K cases.

Craft had another incredible year overall in 2014. The segment gained estimated 3 mil bbls, +18.6% to over 19 mil bbls in 2014, all in, staking its claim once again as major driver of growth in beer. Based on current estimates, US beer biz gained about a mil bbls last yr, up 0.5%. So craft dug in deeper, gained another 1.5 share of beer volume to about 9.2. These figures could change slightly once all numbers final and as TTB tweaks stats throughout 2015. Over last 5 yrs craft a source of massive change in US beer biz. The segment more than doubled. Craft gained near 10 mil bbls, over 4.5 share, since 2009. (No wonder AB’s buying a bunch of ’em and interest in investing in segment comin’ from far and wide.)

Table below shows self-reported data from almost all of top 32 craft brewers, those that shipped at least 100K bbls in 2014. We estimated figures for public cos Boston Beer and Craft Brew Alliance (they’ll disclose data in next month or so), as well as Shipyard and Long Trail. Craft growth split evenly among brewers over 100K bbls and the long, long, ever-longer tail of smaller brewers for 2d year in a row. Indeed, the long tail of 3000+ brewers under 100K bbls added just over 1.5 mil bbls to the segment in 2014. That’s slightly more bbls than their larger counterparts again. Since 2009, top 32 brewers up 73%, as all others up 170%. So the top 32 lost 8 share of craft segment in that time. Brewers shipping less than 100K bbls gained almost 5 mil bbls in 5 yrs, over half of that in the last 2 yrs alone. But largest craft brewers maintained general health in 2014 too. These 32 were up 15% altogether to 11.3 mil bbls. Stories of individual bizzes varied, natch, but most still full of good news and good growth even as competitive landscape got more crowded.

Boston, Lagunitas, New Belgium Grab Biggest Bbl-Gains; Top 6 Over a Third  Top craft volume growers in 2014 should be no surprise. Boston Beer up 11%, 255K bbls, we estimate, led by big incremental Rebel IPA volume. Lagunitas stayed on a tear. Added another 199K bbls, +50%. New Belgium, with couple of big new markets and 6% growth in established mkts, grew 19%, 153K bbls. That’s its first yr of over 100K-bbl growth. This trio contributed over 600K bbls to craft’s growth alone. But Lagunitas was only one among ’em to gain share of the segment, +0.6 to 3.1. The brewer has firmly implanted itself in upper echelon of craft players, up 732% since 2009. NBB held last yr at 4.9 share of craft and Boston lost almost a full share pt in 2014, down to 13.5. In fact, Boston lost over 6 share of the segment since 2009, when it had about 20 share.

Three other brewers had over 2 share of craft segment. Sierra Nevada up solid 8% last yr, only second craft brewer to pass 1-mil-bbl mark. Craft Brew Alliance maintained 9% gain, we estimate, to just under 800K bbls. And Spoetzl (Shiner) up 5.6%, holding onto #5 spot ahead of Lagunitas by just 1,000 bbls. All 3 lost 0.4-0.5 share of segment last yr. So top 6 craft brewers now just 34.4 share of craft, collectively down 1.5 share in 2014. Take out Lagunitas and same group of 5 were only brewers with over 2 share of craft in 2009. Another way to look at it: that group lost about 10 share pts of segment in last 5 yrs.

Fourteen Brewers Over 200K Bbls; Strong Stone Moves Up; Firestone Walker +38%  Just 5 yrs ago, only those 5 craft brewers above shipped over 200K bbls. But the ranks have swelled: 14 brewers shipped that much beer last yr. Both Deschutes and Bell’s crossed 300K-bbl mark in 2014. Deschutes saw its best growth trend in ten years, +17%. Bell’s and Stone gained over 70K bbls each last yr, +29% and +35%, respectively and both up 0.2 share of craft volume. Stone’s strong growth bumped it past Brooklyn, which kept up double-digit pace even as it slowed later in year. Similar story for Dogfish Head, which also maintained double-digit growth, if slower than past few yrs. Not so for Matt and Harpoon, up 3% and 2%, respectively, last yr. Only brewer to pass 200K bbls last yr rounds out this group: Firestone Walker had big +38% year, adding near 60K bbls to reach 208K bbls total.

Founders Gains Ground; Ballast Point Zooms Past 100K Bbls; Odell Just Makes Cut; Mixed Bag in Middle   Biggest variations seen among next 18 brewers, each with 0.5 to 1.1 share of craft. Trends vary from flat to better than +70% for Founders and Ballast Point. Founders screamed up 72%, over 80K bbls. That’s 4th largest bbl-gain behind Boston, Lagunitas and New Belgium. Both Founders and SweetWater, +34%, came in around 193K bbls in 2014, poised to pass 200K-bbl mark this yr. Both brewers blew past Boulevard, New Glarus, Alaskan, Abita and Shipyard. Founders passed 7 other brewers too. Handful of brewers in that group just barely grew volume last yr, while New Glarus and Alaskan maintained identical +11% growth to 162K bbls. Anchor kept pace with segment and Oskar Blues beat it, still up 25% but not quite at breakneck speed it grew in recent yrs. Victory also kept pace above +20%, gaining a little share last yr.

Ballast Point put up fastest trend among top 32 brewers, +73%, gaining 52K bbls and flying into 100K-bbl club. Note that Ballast’s base is quite a bit lower than it reported last yr, making 2014 growth that much more impressive. Odell too joined the crew, after strong yr at home and solid incremental growth from intro in Tex. On other side of spectrum, Full Sail flat last yr, as was Schell, we estimate. Boulevard eked out 0.5% gain, Abita up just 2%. So craft seems to be stratifying. A number of brewers fly higher and higher, pulling out stops and putting up year after year of stellar growth. Others keep finding ways to keep pace or close by adding incremental bbls in new markets or digging deeper at home. Still others struggle to keep up with increasingly competitive segment.

Another craft deal announced in PacNW. AB announced it has deal to purchase Elysian Brewing, one of long-time leaders of Seattle craft biz. No details of deal disclosed yet. “After a lot of hard work,” Elysian founders Joe Bisacca, Dick Cantwell and David Buhler grew Elysian “from one Seattle brewpub to four pub locations and a production brewery. With the support of Anheuser-Busch, we will build on past successes and share our beers with more beer lovers moving forward,” CEO Joe said in release. Deal will allow Elysian team to “be able to take the next steps” in growth, brewmaster Dick Cantwell said. The co produced over 50K bbls last yr, suggesting over 60% growth from just under 32K bbls in 2013, according to Brewers Assn stats. “Elysian’s brands are an important addition to our high-end beer portfolio,” not to mention its “unique venues that celebrate beer,” AB high-end CEO Andy Goeler said. Barring any legal changes, AB will operate a half-dozen brewpubs in PacNW, adding Elysian’s 4 in Seattle to 10 Barrel’s pair in Oregon and Idaho. Stay tuned for more. 

Leadership roles in state brewers guilds continue to be filled, showing further development in this arena. The Brewers Assn of Maryland announced appointment of Kevin Atticks as new executive director earlier this month. Kevin has led the Maryland Wineries Assn since 2002. His new management firm Grow & Fortify will assist both BAM and MWA. The Minnesota Craft Brewers Guild also brought on a new executive director this month, Phil Platt, who spent 12 years working in marketing and club membership at the University of Minnesota (and some time giving tours and getting to know beer at Summit Brewing).

A group of grocers seek broader alc bev sales in Kansas; folks lookin’ to legislate “pints” in Maine; lotsa tweaks on the table in New Hampshire. “Consumers are going to win on convenience, variety and price because there is more competition,” David Dillon, retired CEO/chairman of Kroger and leader of Uncork Kansas, told Lawrence Journal-World of his group’s push to allow groceries to sell beer over 3.2% ABV, wine and spirits. The proposal would force grocers to purchase licenses to sell all alc bevs from liquor stores, while c-stores would be able to buy new licenses that would allow them to sell stronger beer too. Uncork Kansas points to craft as serious consideration: they’d like to sell more of it but can’t, a spokesperson told High Plains Daily Dealer. Current liquor store owners oppose, natch.

Up in New England, a Maine state Senator seeks to respond to constituent calls with a bill that requires pints to be pints. “Truth in advertising,” Sen John Patrick said of the reasoning behind to-be-written bill to Portland Press Herald. Proposed bill would require bars promising “pints” to pour full 16 oz (many commonly used “shaker pints” only hold about 14 oz, max). In nearby New Hampshire, a state rep’s bid to add a clause allowing the state liquor commission to approve labels picturing minors (like that of Founders Breakfast Stout) got plenty of attention this week. But “the current language offers the commission a bright line standard,” director of enforcement and licensing for NH Liquor Commission told Fox News, expressing opposition to such a change. Also on the docket there: a bill to move the demarcation line between “beer” and “specialty beer” from 6% ABV to 8% ABV as well as one forming a committee to study sampling at farmers markets.

Lots of talk but just a glimmer of how laws may change in states with fledgling craft segments like West Virginia and Arkansas. Gov Earl Ray Tomblin of WVa promised “legislation to give our craft brewers increased opportunities to succeed” during his State of the State speech, noting “unnecessary state restrictions,” per MetroNews report. “We’re looking at the law in North Carolina,” State Sen Chris Walters told the Charleston Daily Mail separately. He’s looking to change current growler law, which limits sales to brewpubs, barring standalone breweries and restaurants. That caused minor kerfuffle when Charleston Brewing, opened as a brewpub, sold off restaurant biz to focus on brewing last year. A bill intro’d yesterday would fix that issue, allowing breweries to sell growlers as well as provide samples to folks taking a tour, according to AP report. Recall small brewers in WVa asked for relief on license fees (again, see Dec 31 issue); bill lowers those too.

Questions also remain about potential changes in Ark, but “there are things in the hopper,” Jesse Core, owner of Core Brewing, told Arkansas Business. He kept his lips firmly zipped about what those might be, only noting that self-distribution is “a biggie. We need to make sure we keep that.” Meanwhile, the number of small brewers has sextupled in the state in 4 yrs to 19 native brewers and 3 brewpubs, state ABC director Michael Langley told the paper. 

Debate over financial support for beer-related farming has cropped up in New York and Nebraska. As NY brewers try to increase their use of NY-grown ingredients, the difficulty of growing barley in the state has come into sharper relief. So Sen Chuck Schumer wants to see the US Dept of Agriculture expand its malted barley crop insurance program to NY, the Albany Times-Union reported last week. Not everyone’s on board tho, per op-ed in same paper over weekend. Schumer’s plan equates to having “the government cover farmers for a risky crop so that beer growers can meet the unrealistic standards of another government program” for the author, who would rather see the new farm brewery standards revised.

At same time, a Neb legislator intro’d a bill to provide tax breaks to brewers that use state-grown ingredients, similar to state wineries, per the Custer County Chief. The bill would offer a 15% credit to brewers using state crops for 10-40% of annual production, a 25% credit for 40-70% of production and a 35% credit if over 70% of production only uses crops grown in Neb.

Many eyes closely focused on Kentucky, where legislation intro’d early in year to ban brewers from owning distributor branches. The bill makes no indication that existing AB branches in Louisville and Owensboro, or just-opened Riverghost Distributing from folks at Cincinnati’s Rhinegeist Brewing would be grandfathered, if passed. Growth for Rhinegeist and Riverghost in Ky “will only be possible if this legislation is modified or does not pass at all,” co-owner Bob Bonder told Louisville Courier-Journal. He’d prefer to see an exemption for brewers under 10 mil bbls (that’s significantly higher than any other bbl-cap for small brewers we’ve seen). Ky ABC supports bill but didn’t ask for it, agency spokesperson Dick Brown told same paper. Recall malt bev director Stephanie Stumbo vehemently opposed AB’s acquisition of Owensboro branch last yr. Instead, bill was brought by Ky’s Speaker of the House Greg Stumbo to ensure “these distributors will not be taken over by large, out-of-state corporate companies,” he explained to Louisville Business First.