That is the question in 3 states already this year, and likely more. But the answers in Arizona, Indiana and Montana look pretty different. Recall, Ariz brewers and beer distribs came together to offer Ariz Beer Bill late in the year, which chooses not to increase the volume cap from 40K bbls. (Under that cap, microbreweries can sell on-site, self-distribute and hold other retail licenses.) Instead, new bill would allow brewers producing more than 40K bbls to keep existing retail licenses but not add any more. The only opponent has been the Arizona Wine and Spirits Wholesalers Assn. This week, ASWSA offers its own solution: up the microbrewery cap to near 160K bbls, according to a draft of bill shared with CBN. The draft repeals entirety of current statute governing microbreweries in Ariz, replacing it with much greater detail. It also keeps current cap at around 40K bbls for cos operating just one microbrewery location, while allowing those with multiple microbrewery licenses to produce nearly 160K bbls across all locations (essentially 4X single-location limit). Proposal limits self-distribution to single-location small brewers, while still allowing all micro license holders to pick up other retail licenses.

In Indiana, a trio of bills seeks to adjust volume caps for microbrewery privileges. One bill would raise cap for “microbreweries” in state code from 30K bbls to 90K bbls. Two others would increase cap to 60K bbls. Recall that in Indiana, volume cap only applies to beer sold on-site or distributed within Ind. Small brewers may distribute production over cap outside of the state. But if they choose to sell more than that in Ind, brewers would lose right to self-distribute and operate tap rooms. The issue’s being pushed by a pair of brewers bumping up against 30K-bbl limit, Sun King and 3 Floyds, which launched “Support Indiana Brewers” campaign last week. Sun King “cut ties” with some distribs late last yr to keep its in-state total under 30K bbls. That’s as 3 Floyds is prepping $10 mil expansion, but “will have to ship any increase in production out of state if current laws don’t change,” per joint release from the cos.

The coalition of alc industry members in Montana announced intro of Montana Brewers Act this week, slightly adjusting original proposal that simply suggested license stacking (see Dec 31 issue of CBN). Bill announced this week would raise microbrewery volume cap in Mont from 10K bbls to 60K bbls. Backed by the Montana Brewers Assn, Montana Tavern Assn and others, the bill seeks to “allow microbreweries to keep their tap rooms and employees as they grow, and to provide brewers with choices about how they can grow their business,” according to release. Those “choices” include “co-locating” a retail license for the same location as the brewery, held by the same individual, currently barred by state law. It also would allow retailers to add a brewers license to one location. License holders that “co-locate” a brewery and retail outlet would be limited to holding two other retail licenses in the state, according to announcement which cites many Mont industry members, including assn execs, handful of brewery owners as well as Restaurant Assn member and owner of Montana Buffalo Wild Wings. Recall distrib assn backed out of coalition late last yr. No official text yet.

Small Florida brewers recently launched both a crowdfunding campaign and petition in reponse to perceived threats to their taprooms in form of legal filing last week (see Jan 13 issue). And the tumult has garnered a ton of attention, not to mention cash. The “Florida Breweries Under Attack” IndieGoGo campaign launched by Florida Brewers Guild last week amassed over $10K worth of donations within hours and has accumulated over $43K from over 200 funders in less than a week. It seeks $100K to fund participation in the litigation brought by retailers last week. Separately, a Change.org petition to “Save Florida Craft Breweries” nears 4000 signatures. Both campaigns make special note of assumption held by many small brewery owners and supporters in Fla that, if successful, the legal action will “decimate the bourgeoning craft beer industry in Florida,” per petition. Simultaneously, brewers continue to flood local press with pleas for help.

Execs from both distrib assns echoed previous comments about 64 oz growlers during a committee hearing in Tallahassee yesterday, according to the Miami Herald and others. Two current bills on the table in Fla would legalize 64 oz containers while requiring labels and seals, as requested by distrib advocates Mitch Rubin of Florida Beer Wholesalers Assn and Eric Criss of Beer Industry of Florida. But discussion at the hearing wound its way into broader issues like “the relationships brewers have with distributors and exemptions to a select few regulations granted to small-time brewers,” the Herald wrote, indicating much discussion about issues that got caught up with growlers last yr and those addressed by Rep Steube’s bill (again, see Jan 13 issue and read on).

Rep Steube Maintains He’s Acting Alone, Expects Amendments to Big Bill  Above legal action would be “moot” if bill intro’d last week passes, its author Rep Greg Steube told Craft Brew News. He pulled much of the first draft of this bill from one that “got caught up in the fight about growlers” last session. He crafted the bill based on his understanding of the way small brewers currently operate in the state after much testimony Rep Steube heard as committee vice chair last session. He’s currently “trying to work with both sides to come up with a good product” while focusing on “what’s the best public policy for the state of Florida.” Interestingly, Rep Steube finds the “most controversial” piece of the bill to be the removal of the “barrier requirement,” which affects retail sales of liquor, not beer. Currently large stores like Walmart can sell beer and wine in the main store but must have a barrier separating that location from area selling spirits.

But proposed changes to franchise agreements certainly represent bill’s most controversial aspect to beer folks. While recognizing opposition, Rep Steube told us “anybody from the outside,” particularly lawyers like him, do a double-take at language like “contract in perpetuity.” He “didn’t get the language from either side of the debate” on franchise law, perhaps why it’s particularly unique, but he’s “willing to amend” too. Indeed, he doesn’t expect the bill to be passed as is, but believes “the conversation kind of needs to be started.” And as far as section of the bill that invalidates current legal skirmish, Rep Steube insists that the way small brewers currently operate “needs to be in statute,” he said, “instead of operating in this gray tourism exception.” He believes a legislative fix would be best solution “so there’s some stability and knowledge.”

A key X factor in Fla? The public. Some small brewers there feel confident that the support they’ve earned from beer drinkers there will help combat more traditional political muscle. Head over to our blog, Beer Insights Extras, for more on whether those grassroots efforts will keep Florida politics from being business as usual.

Lots of bills and proposals poppin’ early in 2015, even before many state legislatures fully back in session. Backing legislation that makes everything from tiny tweaks to major overhauls, small brewers across the US are feeling their oats, getting a handle of state politics and taking a seat at the table. Before the end of January, we’re already tracking movement in well over a dozen states. Keep in mind that lots can change before all is said and done, but activity and chatter sure is mounting. Note that ideas, proposals, bills and current law across US see “small” in widely varying ways: from 10K bbls on the books in Montana and 30K in Indiana, to proposals for 60K, 90K and one suggestion of up to 10 mil bbls. In the background of all of this: debate over federal excise taxes that pits the Brewers Assn against the Beer Institute and Natl Beer Wholesalers Assn that’s poised to spark nastiest intra-industry battle since CARE. One of the sticking points there? BA’s insistence that 6 mil bbls is “small.”

One of most contentious state-level legislative battles shaping up for 2015 is once again in Florida. There, brewers have responded to recent legal activity by ramping up grassroots efforts to garner greater public support and funds. Another major battle will be over anti-branch bill in Kentucky, mainly about AB but which has implications for small brewers too, particularly Rhinegeist and its new craft distributorship in the state. States just seeing the beginnings of craft growth are looking elsewhere for guidance, while other states consider how best to support beer-related agriculture. And craft impacts conversations about what beverages which types of retailers can sell, a perennial debate in many states. Read on for details on many of these early stage proposals.

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High-end grocers continue to expand on-premise offerings and beer’s no exception. Whole Foods plans to include small bar and dining options to each of 6 new stores coming to Chicago market. “If bricks-and-mortar (grocers) are going to survive, they must offer a compelling experience to customers,” Whole Foods’ Midwest region prexy Michael Bashaw told Crain’s Chicago Business. Reporting “strong” response from customers at 110 locations with in-store drinking and dining, over a quarter of nation-wide Whole Foods locations, Michael promises “to do more of that.” Recall the upscale grocer got into the brewing biz recently, adding small brewhouses in both San Jose, Calif and Houston, Tex. Its craft-focused in-store taps will come to 3 new South Fla locations in 2015, expanding presence from at least 8 other in-store bars in Fla, per Broward Palm Beach New Times. And Whole Foods ain’t alone in its hope to attract customers with in-store drinking: “it’s all part of the new movement in socialization,” David Livingston, prexy of DJL Research told Crain’s. “It’s all about the experience.”    

A series of separate, yet semi-related maps and graphs have popped up in the last week or so, focused on number of breweries, both nationally and in specific states.

As number of breweries continues to skyrocket toward wine-like numbers, Wash Post’s Wonkblog put together a map showing “geography of beer and wine production in the United States,” for comparison.  Looking at the map, you can see breweries and wineries are most concentrated in similar spots for the most part: along Calif coast, Oreg, Wash, (majority of wineries in those 3 states), as well as parts of Colo, Ariz, Tex, and pockets in the Northeast.  Coupla key differences for beer that blog points out: Denver region is “dominant”; “Tucson may be wine country, but brewers rule in Phoenix”; “brewers are strongly represented along the coast of Lake Michigan”; and Florida has stronger brewery presence.  Since 1998, “number of breweries are up 175 percent, with almost all of that increase happening since 2010,” blog notes.  Meanwhile “number of American wineries has increased by about 260 percent” in same time, and “Census data suggest(s) that the number of wineries is starting to plateau.” Editor’s note: Wonkblog used a “crowdsourced geocoded list of US commercial breweries from poi-factory.com, a site for GPS enthusiasts,” which shows “more than 4,000 breweries.” The TTB “maintains a list of permitted wine producers.”

25 New Breweries in MN in 2014; 67 Total Separately, new breweries opening in Minnesota have taken off since “Surly bill” passed in 2011, which allowed on-site sales among other things; before bill “there were 13 breweries,” and “there are now 67 breweries, including 25 that opened in 2014,” reported SC Times. See graph, and list of new brewers here (scroll down to Chapter 6). 

“Brewery Failures Do Happen,” Tho Well Below “All Firms” Avg Rate But “brewery failures do happen,” as Oregon Office of Economic Analysis pointed out with recent tweet.  Graph shows “number of brewery failures” in Oreg still far below “all firms failure rate,” however still occurring at about 2% a yr since 2010.  Nationwide there were only a small handful as well, tho number of openings continues to completely offset closures.

Shortly after announcing changes to its distribution partners in the PacNW, Oreg-based Ninkasi shared it’ll expand its footprint in Southern Calif with Craft Beer Distributing of Calif – Los Angeles. Recall, the craft-focused L Knife entity launched in 2013 in handful of counties around LA, and also will take on Bell’s brands starting next mo (both Bell’s and Ninkasi already with group in San Diego).  The area “can be a little tough in terms of putting a network together,” CEO Nikos Ridge said in release, so this choice gives Ninkasi “more coverage.” It also expands Ninkasi’s existing relationship with other L Knife operations, which paved the way for some special shipments the co sent out last yr to NYC. Those special shipments, intended to sprinkle the market with Ninkasi brands for a short time rather than provide continuous attention, will continue this yr, Nikos told us last week. It’s a strategy the co will also employ in the Philly market this yr, timed for the city’s very popular Beer Week

Boston Beer climbed over $4 billion in total stock market capitalization yesterday for first time.  Catalyst appeared to be initiation of coverage (with a “buy” rating) by investment firm Jefferies last Friday.  In 50-page report called “Long Runway for Strong Secular Growth Story,” Jefferies analyst Kevin Grundy made case for continued Boston Beer growth averaging 13% per yr for next 5 yrs.  That would put total Boston Beer volume about 7.7 mil bbls in 5 yrs time.  But one especially interesting aspect of Kevin’s report were his forecasts on how Boston Beer would achieve that growth. 

It’s not craft beer’s growth which he forecasts as main driver of Boston Beer’s big upside potential.  Rather, he expects Angry Orchard to be the biggest driver of that growth, up 25% per yr, keeping pace with the segment and getting 2/3 of Boston’s overall growth over next 5 yrs. Angry Orchard already over half of Boston’s growth 2011-2014, sez Kevin.  That would make Angry Orchard about 3 mil bbls in 5 yrs.  He also forecasts FMBs up 5% per yr  and only getting 3% of Boston’s growth.  While Kevin expects craft beer overall to continue to grow at low double-digit rate, he expects that Boston Beer’s craft beer shipments will increase 7% per yr and account for 1/3 of Boston’s growth. 

“Approximately 96% of SAM’s sales are derived from the US and its international sales/profits are generally viewed as non-core,” points out Kevin.  Therefore “potential for international expansion” amounts to “free-call option for the stock,” as it might represent further upside, but isn’t part of his modeling.  Lots of other good insights and info in this extensive, thought-provoking report.  

New Belgium up over 150,000 bbls, almost 20% in 2014, including 6% growth in existing mkts, co-founder Kim Jordan told BBD’s Beer Summit.  That’s easily NBB’s biggest bbls growth ever.   NBB never before grew 100K bbls in a given yr.  But new mkts at least 2/3 of NBB growth.  An existing mkt growth rate of 6% would be less than 50,000 bbls.  Meanwhile, this yr will be the reverse. NBB will get vast majority of any growth from existing mkts in 2015 as it has virtually no expansion plans; NBB “may open up one city in 2015,” said Kim, as it is “walking the gauntlet of swinging knives,” attempting to deal with capacity shortages before Asheville comes on line late in 2015.  Last yr, NBB “up in our home town,” “up in our state,” said Kim.  As for pot use, now legal in Colo, “I don’t think it’s that big of an issue,” asserted Kim.  “We don’t see any big difference…. I smell more pot in San Francisco than Fort Collins.” 

New Belgium’s Asheville brewery project is “going pretty well,” said Kim, showing pictures of progress, which were quite a marked departure from several mos back when CBN viewed it in Sep.  “People thought we were not coming,” said Kim, adding “this has set their minds at ease.” But “we have miles to go.”  NBB anticipates “being able to start testing [batches] early to mid-summer,” she said, with “flavor-matching in September.”  NBB will be “brewing there by the end of the year” as it has said for awhile.  NBB expects to invest $140 mil in the building of the brewery.  Last yr, NBB hired 85-90 people. 

Kim also sounded off on industry issues, speaking out eloquently in favor of BA’s craft definition and also asking for a redo on franchise reform.  Craft brewers are the “spark” that has made US beer biz flat, maintained Kim, “rather than down.”  Often one hears the argument that craft growth depresses aggregate demand; Kim flipped that argument on its ear, i.e. beer biz would be down without craft halo.  Since craft provides “spark,” definition of a craft brewer is “important,” according to Kim.  If meaning of craft brewer becomes “amorphous” then “it loses any energy and power.”  And if that energy and power “is the thing that intrigues beer drinkers” then it’s “important that we protect that like our business lives mattered.” And so Kim believes definition “matters in our relationship with beer drinkers.  We collectively benefit from this notion.”

“Sometimes I think we need a do over on this whole topic” of franchise reform, said Kim.  “Sometimes I think craft brewers have not done a very good job of leading with the headline.”  What’s that?  “We’re wildly appreciative of the work our distributors do for us and we absolutely need you.  We appreciate you and we respect you. I’m sorry that somehow all got lost in the shuffle.  And I wish we could start over with that.”  

Sierra Nevada grew 83,000 bbls, 8.4% in 2014.  It crossed the 1-mil-bbl milestone for the 1st time in 2014 (1.067 mil bbls). Sierra is just the 2d craft brewer to do so, following Boston Beer.  New Belgium will likely be next as it climbed all the way to 945,000 bbls in 2014.   Sierra really picked up steam in 2d half of 2014; recall it was up just 4.5% in 1st half. So its 8.4% growth for full yr implies near 12% gain in 2d half.  In fact, Sierra up double digits every mo after May, except two when there was one less selling day, said mktg and sales director, Joe Whitney.  So especially with the way biz “took off” after May, plus halo effect of Beer Camp Across America and opening of Asheville brewery, 2014 was a “good year,” according to Joe. 

But not without its growing pains.  Lead brand Sierra Nevada Pale Ale down 0.8% on shipments at about 8.2 mil cases.  Packaged Pale up solidly, but draft “pulling everything down.”  On-premise remains exceedingly “tough” for established craft brands, where seemingly “everyone wants an IPA on draft” and then “they move on to flavor of the month.”  Even Torpedo up less than 10% for 1st time in 2014; up 9% to 2.7 mil cases.  Those 2 brands about 3/4 of Sierra’s biz.  And Seasonals improved as yr went along, but still dropped 7%.  Tho Sierra’s vaunted Celebration had good yr with new packaging, only so much beer available since Asheville not fully on line and so Sierra “could only make 3.5% more” than yr before.  Much of Sierra Nevada’s growth in 2014 attributable to intro of variety packs; they did just under 1 mil cases in 2014.  That was over 80% of Sierra’s growth last yr.

Variety packs will help 2015 get off to a fast start too.  They are all incremental for the first 2 mos of 2015 and didn’t get full distribution until Apr last yr. What’s more, upcoming intro of Hop Hunter IPA is a “big deal,” sez Joe (he declined comment on recent legal challenge by Lagunitas, which was subsequently dropped).  It just packaged late last week.  Between variety packs, Hop Hunter and other new Sierra initiatives, recall that Sierra seeking huge 1st qtr in 2015.  How big?  Up 30%.  If that sounds like a stretch, the math ain’t as crazy as it seems.  Mostly incremental variety packs alone could account for 15-20,000 bbls of growth, plus Sierra will have 3 new brand intros.  In addition to Hop Hunter, Sierra also looking for shot-in-the arm from its other new product intros, Nooner Pilsner and Hoppy Lager (collab with Ballast Point featured in Beer Camp Across America).   What’s more, Sierra’s full yr 2015 target of 9.5% growth only implies modest growth for rest of yr.  That should be “totally doable,” sez Joe, “if we can make all the beer.” 

Sierra Nevada Founder Ken Grossman A Billionaire, Sez Bloomberg  Bloomberg’s Businessweek mag did feature on craft pioneer and Sierra founder Ken Grossman that labeled him a billionaire.  Bloomberg said “brewer is valued at more than $1 billion based on the enterprise value to sales and enterprise value to EBITDA of Boston Beer.”  Boston Beer valuation hit $4 bil yesterday (see below) and Sierra does roughly 1/4 of the volume, so kinda makes some sense.  Boston chairman Jim Koch is also called a beer billionaire (estimated worth of $1.3 bil) along with Dick Yuengling at $2.6 bil.  “I didn’t get into the business to try and make a ton of money and I’ve made enough money that I am totally comfortable and don’t want for anything,” said Ken.