Not much has changed over the last buncha mos in scanner data for craft; trends have slowed a bit but craft keeps truckin’, $$ up 21% YTD, gainin’ share, with a whole lotta growth from all over the map.  So CBN thought to take a closer look at top-50 pkgs in IRI MULC to switch things up a bit. 

Half of Top Pkgs from Top-3 Cos; Sam Seasonal is #1 6pk and 12pk, Ahead of Angry Orchard  Sam Adams has 9 of top-50 pkgs, followed by Sierra with 8 and New Belgium with 7.  Rest of suppliers only have 1-3 pkgs tops (Shiner & Lagunitas each have 3).  Number 1 selling total brand Sam Adams Seasonal has #1 and 2 selling packs too.  Its 6pk and 12pk each up low double-digits yr-to-date thru Nov 2 in IRI multi-outlet + convenience; 6pk has maintained 6% growth in latest 13 weeks while 12pk is up just under 1% in same period.  Despite slower trends, Sam Seasonal passed Angry Orchard as Boston Beer’s top selling brand in scans thru Nov 2, after fall seasonals boosted brand an extra notch. 

Top IPA 12pks Trendin’ Noticeably Better Than 6pks; Mix of Flagships and Seasonals with Better 6pk Trends Lotsa top IPA 12pks are trendin’ noticeably faster than 6pks in scans.  Lagunitas IPA 12pk up 90% compared to +56% on 6pk; Sierra Torpedo 12pk up 21% while 6pk up just 2%; and Redhook Long Hammer 12pk up 9% while 6pk actually down 2%.  NBB Ranger IPA, Bells Two Hearted Ale, Stone IPA and SweetWater IPA also have faster growin’ 12pks tho not as big of a discrepancy compared to 6pks.  Gotta note, 6pks are majority of these brands’ total biz.  

Meanwhile, Sam Seasonal, NBB Fat Tire, Sierra Seasonal, Deschutes Mirror Pond Pale, Deschutes Seasonal, Kona Longboard Lager have better 6pk trends compared to 12pks.  Most are marginal differences, tho Sierra Seasonal stands out; 6pk +4% vs 12pk -5% yr-to-date (6pk +40% vs 12pk flat in latest 4 wks).  

One 12pk Can, One 4pk Bottle, One 22oz Bottle in Top-50; Handful of Pkgs from Outside Top Brands Top-50 pks are of course filled with mostly 6pk and 12pk bottles (31 6pk bottles, and 16 12pk bottles). Only 3 packages that deviate from tradition on the list.  Sierra Pale Ale 12pk can (+21%) remains the only can pkg in top-50, at the 18^th best-selling craft package.  It represents only 12.5% of total Sierra Pale sales, yet 32% of Sierra Pale total growth.  Dogfish Head 90 Minute 4pk (+35%) is the only 4pk in the top-50, and the 37^th highest selling pack.  Stone Arrogant Bastard Ale, #39, is only 22oz bottle in top-50; up 9% YTD but down 3% in latest 4 wks. 

Handful of other top-50 pkgs are from brands outside of the top-30 in scans.  NBB’s Rampant Imperial IPA 6pk up nearly double yr-to-date, and is co’s 6^th best-selling package. This yr’s intro, Snapshot Wheat already has 6pk in top-50 pkgs too at #49.  Sam Adams Seasonal Overlay 6pk up 44%, while Sam Cherry Wheat 6pk down 7% at #50.  SweetWater IPA 6pk is #46 best-selling pack, up 15%.  And #48, Kona Island Hopper Variety Pk up 30%.

Big juicy topic of franchise law reform closed out the day at our Beer INSIGHTS Seminar earlier this week, after filtering thru earlier segments.  For an issue that can get quickly contentious, discussion stayed civil but lively, balancing perspective of a pair of industry attys with a beer biz vet. “Original purpose” of franchise laws in the ’70s had everything to do with “perceived inequity of bargaining power” considering “maximum concentration at the supplier tier vis a vis the wholesaler tier” at the time, Marc Sorini, counsel to Brewers Assn, led off.  But given subsequent distrib consolidation and “massive fragmentation of suppliers” the “disparity argument doesn’t hold up” now, except for large brewers.  So small brewers should be able to move brands (with compensation) and self-distribute to “incubate” before moving to distribs, exemptions to be crafted state-by-state.

A “quasi-regulatory role” of beer distributors as buffer between suppliers and retailers is just one of “two public policies that underlie franchise laws,” Mike Madigan (counsel to Minn wholesalers and NBWA, tho speaking on his own), countered.  The other protects the “millions of dollars” distributors and other franchisees invest in suppliers’ brands “from being unfairly usurped by a supplier,” a protection that “underlies all franchise laws in this country” (40 states have ’em.)  Mike stressed small brewers seek exemptions from 3 tier laws, tied house laws, franchise laws and tax laws, to “sell any beer, any wine any spirit” in retail ops, self-distribute and move brands without cause. “If successful,” that would lead to deregulation of biz, in Mike’s view.  That’s bad for small brewers and unfair to distribs that have invested those millions.      

In contrast with the clear differences in perspective of the lawyers, Manhattan Beer coo Bill Bessette laid out how his co “commissioned the writing of the franchise law in New York” about 20 yrs ago and then how NY industry members found accord when helping to craft franchise law carve out for small brewers in 2012.  That allows brewers who are less than 3% of a distrib’s volume and under 300K bbls production to move brands without cause if distrib gets fair mkt value. Small brewer and wholesaler orgs “came up with something we thought would work,” and after “maybe a dozen transactions,” he believes law has “worked very well.” Mike shared his understanding that “unique circumstances” led to that law, which in turn resulted in “at least one lawsuit” (Garal case), so carve outs are no “panacea for litigation,” he reminded.  Marc noted lessons learned from NY in drafting such carve out laws while adding that in his view, similar carve outs will likely work best “based purely on percentage” of a distrib’s biz, which would include small importers too, as Bill suggested.

Marc: “Special Treatment” for Whom? Look to “Ordinary Contract Law” and “Target the Worst States” NY’s carve out and other 3-tier exemptions are often thought of and referred to as just that: exceptions to existing rules. But Marc flipped that, characterizing franchise law for beer distributors as “a special carve out to normal commercial purposes.” This “special treatment” rose out of specific circumstances, but still “a major departure from ordinary contractual law.” In his view, disagreements between most small brewers and distributors “can be addressed by ordinary contract law.”  Without naming names (as BA’s Bob Pease did for CNBC’s Squawk Box earlier in AM), Marc suggested “you can target the worst laws,” those in states where “you simply cannot move unless your wholesaler was caught with an axe standing over the body of your first born. Those are the first places to reform,” Marc said, adding that “there are states that need reform more, but many states need reform.”

Mike: “Truly Small” Ain’t 6 Mil Bbls and “Deregulation” Hurts Small Players  “Some, perhaps many, small brewers” seek a laundry list of “exemptions,” Mike noted, but legitimizing 6-mil-bbl cap used by the Brewers Assn “would essentially deregulate the business.” That’s because only 4 brewers don’t fit under that cap and those brewers would “undoubtedly be successful” in challenging laws that use such a cap. So he raised concern that a “truly small” brewer couldn’t compete after such “deregulation.” Yet Mike may be more understanding than some of his clients about some specific exemptions.  He laid out 3 questions he believes regulators need to ask when considering such exemptions: first, “is there a compelling reason for the exemption?” then “would it undermine effective liquor regulation?” and finally “does it tip the level playing field among the different tiers and among competitors within the tier unfairly?” If those answers are yes, no and no, then exceptions can be “reasonable.” He personally finds taprooms “a reasonable tool that brewers ought to have to promote a following for their brands,” and self-distribution for “truly small brewers” gives them “an opportunity to demonstrate the commercial viability of their product.” Mike did not define “truly small,” but noted cap for self-distribution in Minn is 20K bbls.  That’s a lot of negotiating room: 20K to 6 mil bbls.    

Pick a State, Any State: Craft Grows Many Places; “Straight Jackets” and Divorce  While above exceptions can work, “exemption to franchise laws are a bad idea,” said Mike, adding “I don’t understand what the problem is.” He ticked off top 5 states by breweries per capita (including VT, OR and MT), noting each has franchise laws that “have not inhibited the growth of craft brewers.” Marc countered with his own list of states (CA, NY, WA) that have “no mandatory three tier” but still a healthy distrib tier and craft market. While 3-tier has led to “great variety” in many places, “that doesn’t mean you should have a mandatory system that becomes a straightjacket for small brands.”  Later, Marc compared difficulty of moving brands in some states to “undergoing a nasty divorce but being ordered to sleep in the same bedroom.” Mike returned again that deregulation would be terrible for small players, just see “the soft drink industry” where there’s so little brand choice.  Elsewhere, Bill acknowledged the respect he gained for franchise and 3-tier laws by visiting other countries, noting that while at Labatt, “the best wholesalers were usually in the franchise states” because “they were more willing to invest in my brands because those brands had a value.” During Q&A, Mike acknowledged that laws permitting suppliers that represent small pieces of distrib’s biz to move would “not really deregulate” the industry, but he wouldn’t agree with “the need for it.”

Finding Common Ground: Inter-tier Ownership Stakes a No-No; What’s the Need? Biz is “Best Protection” Mike and Bill agreed that players in one tier should not have ownership in players in another tier. “There definitely should be disclosure,” if distributors are allowed to have stakes in suppliers, Bill said, but in his view “wholesalers should not own brewers.” Mike agreed that “I don’t think brewers should own distributors and I don’t think distributors should own brewers,” allowing that a self-distribution “privilege” for suppliers is not the same as “cross-ownership.” But throughout the program, panelists and audience members repeatedly wondered about the necessity of either franchise laws or exemptions to them. While recognizing the value of both, Bill reminded that “our best protection is running a good business.” Manhattan Beer’s view has long been that if a supplier wants to leave, it can leave, which it puts in every contract, “not just rhetoric.” Therefore, “carve outs should not be necessary,” he said, that is if every wholesaler had the same perspective of Manhattan.  Indeed, even Mike noted that he advises distributor clients to let go of brands that want to leave their houses if the brands represent a small enough case volume, telling them that “it is not going to be worth your while to litigate.” Bill agreed again, providing more examples from his days at Labatt USA when “hundreds and hundreds” of distribs let smaller brands go after sitting down with them, as well as more recent examples in NY. So “by communications and by having good relationships with your customers, by presenting good business cases: you’re in a system that’s worked for 75 years,” he said. “It can work, it doesn’t require a lot of change.”

AB’s purchase of 10 Barrel has sparked a lot of attention and comment from around the beer biz.  Here’s our guest columnist Nestor’s take. 

By Nestor

                                                                                                                                                                                      The recent announcement that Oregon’s 10 Barrel will sell to Anheuser-Busch (boo! hiss!) has generated a lot of shock and horror in Bend and around the US craft industry.

My colleague Diogenes has weighed in on this matter as have any number of craft luminaries.  I agree with much of what Dio has said, but I have a few views about the future that I would like to share.

First, a lot of current craft owners are going to get out.  Some will sell because they are getting up in years; don’t have interested kids ready to take over the business; and don’t feel like doing the ESOP thing.  Some will sell because they have been very successful over time but now want to try something else.  Some will sell because they believe that they need to go “national” to survive, but have concluded that the cost and risk are just too daunting.  Some will sell because they are despicable opportunists who want to cash out after a relatively brief but quite successful run.   It turns out that there are no laws against this.

Second, a number of buyers (and this includes those who will be minority partners with options or at least first rights to become majority owners) will be family offices and, even worse, private equity firms.  They have available capital that they need to deploy… many have whole lots of it.  They like the business for several reasons ‒ segment growth, margins, and (in some cases) management teams that are willing to stay on.  And, at least right now, craft looks like an easy business to exit down the road if they wish. These people may not be able to tell an IPA from an APL (American Pale Lager).  They may also have close personal relationships with Satan.  There is probably some way to exclude them from the BA.  But they are coming.  Get used to it.

Third, A-B is likely to buy more crafts.  This does not mean that they can’t create their own craft brands.  Rather, this is Early Stage Investment 101.  Why chew up several years developing in-house crafts and testing them in the marketplace when you can, for a very reasonable price, buy a proven winner? (“Reasonable” given the facts that A-B has available capacity to make scads more beer and a semi-dedicated  distributor network that includes many houses that are under-weighted in craft.)  Will consumers buy non-BA approved crafts from a big brewer like A-B?  Hard to be sure.  But Blue Moon and Shock Top and Leinenkugel have done okay.

Fourth,  MillerCoors.  Constellation.  Heineken.  Diageo.  New New Pabst.  Expect some of these firms to look hard at adding crafts to their portfolios.

The craft beer business has always been justly proud of its diversity.  My prediction is that it is going to get a bunch more diverse.  

Subsequent to launching its brands in Arizona with a new distributorship it’s running, Two Brother Brewing announced plan to open new Tap House and Brewery brewpub in Scottsdale in January. This 3d Two Bros restaurant will be home to a 10-bbl brewing system, so production likely to focus on supplying the pub rather than supplement larger production at plant in suburbs of Chicago. Recall, when Two Brothers announced new distrib biz in Ariz, cofounder Jason Ebel hinted that a brewery might be coming, telling us that he and brother Jim spend considerable time with family in the state.

In another unique change in craft landscape, San Diego’s Green Flash Brewing has deal to acquire much smaller Alpine Beer Co, also of San Diego. Green Flash (about 56K bbls in 2013) started brewing a handful of Alpine brands for local draft distribution since last Nov, the cos reminded in announcement, boosting annual production to about 3000 bbls for Alpine (which produced just over 900 bbls on its own last yr, per Brewers Assn stats). This deal formally extends that relationship. Though both brands will remain “independently operated,” Green Flash will also produce some Alpine brands in 22oz bottles beginning early next yr, still overseen by that co’s prexy/brewmaster Pat McIlhenney. Dual brand brews, particularly utilizing Green Flash’s new Cellar 3 barrel-aging facility in San Diego, are already being considered. Eventually, Alpine brands will make their way out into broader distribution, which Green Flash aggressively pushed into over past few years. It expanded into its 49th state, Hawaii, earlier this yr, leaving only Utah. Green Flash announced it’d be brewing some beer at Brewery St-Feuillien in Belgium for European distribution in July and broke ground on its 100K-bbl Virginia Beach brewery last month, timed to come online once the San Diego facility maxes out at around 100K bbls.

At last count there are 3178 operating breweries (different than permitted breweries), 1308 brewpubs, 1721 micros, 124 regional brewers, and 25 large brewers, Brewers Assn director Paul Gatza told BIF.  By next update, that’ll be “a little over 3200” total. There’s 1968 breweries in planning, which has been “up up up” in the last coupla years, but that’s “starting to level off a little bit,” he noted.

Fla “Big Blue Ocean” for Craft; Top-6 Styles Up Double-Digits Plus Paul went thru some Fla-specific data too, noting craft has 13.5 share in liquor channel, tho still only 3.2 share of $$ in Multi-outlet + convenience. Florida craft cos up 39% in last 52 weeks. It’s a “big blue ocean” for craft in Fla, sez Paul. There’s “a lot more room on the shelves” for craft compared to other areas in country, IRI’s Dan Wandel told him. All 6 top styles are growin’ double-digits in scans outpacing natl trends. Top style IPA up 93% while avg price per case dropped $1.90. One that jumped out in great contrast to natl trend was Amber Ale, up huge 1170% thanks to intro of New Belgium Fat Tire, Paul noted.

Growler Quality Concerns with Off-Premise Retailers; Thoughts on Pending Lawsuit Paul had a couple comments about growlers, with pending growler bill, and pending lawsuit in state. “It sounds like we’re going to move beyond that this year,” said Paul, but his concern is about quality, particularly with off-premise retailers. Over 70% of the country allows growler sales in all channels. “Is that a good thing?” he asked. “It’s a little concerning from a quality perception,” particularly for grocery/convenience stores, where “that’s a secondary business,” while it’s “not a problem” for a brewery or a bar. Current lawsuit against state of Fla for “arbitrarily banning” sale of 64 oz growler is interesting because 21st amendment gives states the power to decide, so “why wouldn’t this case be thrown out?” he asked. But “from what I understand this specific legal foundation is somewhat formidable.” When there’s an “outright ban” people look for business oppys and “look to change things.”

AB’s Purchase of 10 Barrel AB’s purchase of 10 Barrel “caught me by surprise.” But “it’s because they’re small that they can probably do this deal.” When a brewer buys another brewer there’s typically a “distributor footprint issue,” so 10 Barrel, in only 4 states, is less of a task to switch distribs. 10 Barrel’s with some AB houses, but some MC and Wine & Spirits wholesalers too, so “more complex set of negotiations gonna happen going forward.” Recently there’s been more private equity money for purchase of craft brewers, Paul acknowledged, ’cause they don’t have to worry about distrib footprints, and just looking to get in “where they can make more money and they do what they do, which is often flip companies.” Paul sees AB purchase as another step toward “regionalization” play, with Blue Point on the east, Goose Island in central and 10 Barrel in the west. He compared it to what Pabst is doing with brands that are very much aligned “with the cities they’re located in.” Then the list of craft brewers opening 2d facilities also plays into “interesting movement in regionalization” in beer industry.

Cannabis and Beer; So far Colo Beer Sales Pacing Ahead of Natl Trends Data’s still really thin, but in Colo beer sales are “pacing ahead” of natl sales, so marijuana sales haven’t hurt beer. In fact, recently Paul’s seen rhetoric start to change more towards idea that beer sales “may be helped by legalization.” The “psychological impact is similar to” Prohibition ending, where consumers now can be open about their use of marijuana in Colo, rather than hide it. It “actually does make sense that this could help beer sales a little bit,” he thought. Still gotta watch out for negative rhetoric that it’s “safer than alcohol…that’s a problem for us” and “we’re going to keep hearing it.” In Paul’s eyes, legalization “is going to happen nationally, it’s just going to take a while.”

“Quality Challenges” for Maltsters and Brewers Too; “Pretty Optimistic” About Hops As for agricultural developments, it was a “good European barley year” and a “lousy North America year” due to early sprouting and having “high protein levels.” So there’s gonna be quality challenges going forward for not just brewers but maltsters too. “Good brewers” that are “science based and know what they’re doing” will figure out how to deal with the barley, but “in my mind this is going to separate some people,” particularly for some of the newer brewers.

Meanwhile, hop growers continue to shift towards aroma hops. Six or seven years ago aroma hops were 20-25% of what they grew, and now it’s around 60%. “Still see stories all the time” about “hop crisis.” It’ll be tuffer to get “certain varieties” sez Paul, but “90% of the breweries out there are contracted…and they’ll be fine.” So the brewers “planning ahead” will have “pretty good supply” and all in, “I’m pretty optimistic about the hops situation.”

Rhetoric continues to rule much of media debate over small brewer efforts to seek carve-outs to state franchise laws.  On Monday, just as Brooklyn’s founder Steve Hindy acknowledged at our Beer INSIGHTS Seminar that NY wholesalers are “aggressively courting new craft breweries” that have “no trouble getting product to market,” BA prexy Bob Pease had different take on CNBC’s “Squawk Box.”   Small brewers, he said (twice), face “access to market issue,” agreeing with host that they have “a distribution problem,” somehow neglecting number that some 3500 craft brands are in off-premise distribution right now, according to IRI, and many more available in taprooms, brewpubs, etc across US. 

Bob voiced “unequivocal support” for 3-tier system and said distribs are brewers’ “partners,” but again insisted that “we just want the right to be able to change distributors if there is a poorly performing distributor” who’s “not meeting your sales goals.”  Or, as one of the interviewers put it, “if you suck, I can’t fire you.”  That’s the case in some states, Bob said.  Where do small brewers “have it the hardest?”  Worst states with “most onerous laws” are Conn and Ga, said Bob, adding Tex and Md as sates where distribs who suck can’t be fired.  Not about self-distribution, since “distribution is a tough business,” Bob allowed, but “brewers are required in most states to use a distributor to get their beer to market” and in “most states” can’t sell direct.  Repeating that for small brewers “this is an access to market issue,” Bob said “that’s important because it is the beer drinker that fuels this revolution. They want choice.” Implication is they’re not getting it.  But BA's own website shows that most states allow self-distribution, every state franchise law allows termination for cause and again, there’s massive beer choice across US.      

Two top 10 craft brewers and longtime leaders of the segment, Deschutes founder Gary Fish and Brooklyn co-founder Steve Hindy, sounded off on wide range of topics at Beer Insights Seminar in NYC on Monday, including very recent news regarding AB purchase of 10 Barrel and newly appointed Beer Inst board member, Rogue’s Brett  Joyce.  They also gave glimpse at each of their co’s trends and approach.

Deschutes’ “methodical approach” to “managing capacity” has co set to blow past 300K bbls in 2014, as shipments up 14%, depletions up 15% this yr, Gary noted. Deschutes targeting 320-340K bbls at yr end.  Editor’s note: Deschutes will be the 7^th craft brewer to surpass 300,000 bbls; Bell’s Brewery also likely to pass 300K bbls this yr.  Next yr Brooklyn Brewery has internal goal to reach 300K bbls.  It is presently on pace to do so with room to spare. 

Deschutes gettin’ extra boost from 5 new states plus DC entered this yr, mostly in the Midwest/Mid-Atlantic regions.  But in “2015 we’re not planning for any market expansions,” sez Gary.  Those new states make 28 + DC total.  “We haven’t made it any secret, we’re looking at the East Coast,” for a 2d brewery, he added.  “All you West Coast guys want to be in the East ‘cause you know the margins are a lot fatter,” Steve chimed in.  While Gary joked that he “secretly covets what [Steve’s] always had,” even without distribution in many East Coast states, “the last 2 years, our pricing has gone up”; margins, volume, quality and “everything else” has gone up, and “it’s become a healthier marketplace as a result.”   Currently Deschutes has about 500 workers and co is 8% ESOP.  But Deschutes has no “specific” succession plans lined up.  Gary’s “not planning on going anywhere,” so “no reason I should plan any kind of exit at this stage of the game,” tho when the time comes “certainly ESOP is one option.”  “Everybody likes being a co-owner.”  At this point it’s all “pure speculation.” 

Meanwhile Brooklyn on pace for 260K bbls in 2014, and 34-35% of that will be from booming export biz, Steve noted (see Sep 23 issue).  Brooklyn eyeing Staten Island for its 2d brewery, tho it’s “a very complicated project” that they’re hoping to complete by late 2017.  Co also lookin’ at “other alternative sites” in NJ and Hudson Valley but “we’d like to be in New York City.”  Brooklyn’s in 26 states and “don’t really have plans to go much beyond that” tho once the brewery’s complete “it’s possible we could go further out west.”  Brooklyn has 105 employees in Brooklyn and will need to hire plenty more once a 2d^d facility is in place.  

More Breweries in Bend Area Than  NYC; 10 Barrel Purchase A “Shock and Surprise” in Bend  In Bend and surrounding areas, 28 breweries serve population of 125,000 and there are “little ones opening all the time.” Contrast with NYC, largest metro area in the US with 18 mil people, but only 25-26 breweries, according to Steve.  Biz is “ever more complex…competitive…crowded” said Gary, but “competition has nothing to do with the other guy.”  Deschutes has to “win wherever we can.”  Despite Deschutes “substantial presence” in Bend, lotsa retailers will say “but you guys have been around,” and “give the little guy” taps/shelf space instead.   “That’s going to sort itself out in the next couple years” said Steve, speaking to quality.  Consumers will go with brewers “we know we can trust.”  

NYC hasn’t historically been as much of a “happy place” for breweries as Bend, Oreg (until more recently), noted Steve.  Probably “about 30 start-ups failed…in and around New York City” in the first 15 yrs of Brooklyn’s existence, and probably still “half the population of New York City doesn’t even know Brooklyn Brewery exists,” said Steve.  Yet NY wholesalers are “very aggressively courting these breweries” that started up in recent years.  They “haven’t had any trouble getting their products to market” and Steve “wouldn’t be surprised” if there’s 100 breweries in NYC in the next few yrs. 

AB’s purchase of 10 Barrel was “a shock and surprise to say the least” in Deschutes’ hometown Bend and “most people who responded in [social media] venue responded rather poorly” to the purchase, Gary noted.  But 10 Barrel “not going anywhere” and “there’s a lot of potential there,” for further expansion.  Then too, “retail presence” with 10 Barrel’s brewpub biz “creates a whole different dynamic.”  From Gary’s understanding of law, brewpub license in Oreg doesn’t have a ceiling on volume production tho not sure if law “allows you to wholesale as well.” Then too, “legal conclusions have been challenged in the past (i.e. Owensboro).” In stark contrast to 10 Barrel deal, AB’s deal for Blue Point Brewing earlier this yr didn’t receive “anywhere near the reaction that 10 Barrel got,” Steve pointed out.  In general, there are going to a lot more deals.  Top-50 craft brewers are “much more attractive businesses now” and “private equity guys are swarming all over the top 50” and below these days, said Steve.   “More and more are going to be sold and bought and merged…there’s going to be a lot more churn, there just has to be,” Gary added.  Over time “it’s going to look like ‘normal business.’”

Brett Joyce a “Good Choice” for BI Board  Both Steve and Gary thought Rogue Brewing’s Brett Joyce is a “good choice” for craft brewer representative on Beer Institute board.  Recall Steve Hindy (also on BA board) was last craft brewer rep to sit on BI board, and he admitted “the seat got to be a little hotter as time went on in the last couple years.”  BI “didn’t want a BA board member on their board cause that would create a conflict,” tho needed to maintain “image of representing craft,” Gary added.  “Main role of that small brewer position in the BI is to facilitate communication,” said Steve. 

More from Gary and Steve  On distribs paying large upfront costs for craft brands Gary questioned why wholesalers are “only ones who can sell our brand rights.”  “I find it completely disingenuous” that “they can’t buy an asset but they can sell it.” On franchise Laws “I think that franchise laws are unfair to the smallest brewers,” said Steve.  NY carve out is “great example of how to solve that problem.” That’s what the NY-Times op-ed was about, and that we’re “still talking about it” is a “good thing.”  On minorities drinking craft Steve spoke to bringing more minorities, particularly African Americans and Hispanics, into craft space as “sort of the new frontier for us.”  Cities like NYC, Miami and LA are “international cities” that aren’t as loyal to their local brands.  So Brooklyn’s lookin’ to “be part of extending craft into those communities…in the next few years.”  Indeed, Craft has “not begun to communicate with a lot of those communities” yet, but “where we have you’ve seen very positive results,” Gary noted.  “I think, given the opportunity, everybody can and will” try to reach more minority consumers. 

Megadistrib Columbia in Pac NW is 35 mil cases of beer and 15 mil cases of non-alcs, prexy (Washington) Chris Steffanci told Beer INSIGHTS Seminar.  And it’s having a great yr, +3.5%, driven by continued double digit increases on craft. Craft climbed to 36 share of volume in Wash and is already 50+ in $$, Chris said.  Craft “could easily” reach 50 share of volume in his mkt.  Columbia has 2600 SKUs (including non-alcs) and represents 80 different suppliers.  “Forty percent of our tap handles rotate every single month,” Chris noted. What’s more cider at 5 share of $$ in Seattle and Chris expects that to double in next 5 yrs.  Angry Orchard is “massive brand” there. Believe it or not, Angry Orchard just passed Bud to become #4 in all channel scan data in Seattle.  Wow!   

Craft up to 34.9 share of $$ in 3d qtr in GuestMetrics data.  Gained 2 share to 34.4 of $$ for 9 mos.  Craft now more than 1.5x as big as premium lights on-premise, which fell 1.4 share to 21.8 of $$. Imports also almost as big as premium lights, at 20.8 share of $$, down 0.5 share.  But overall, on premise volume measured by GuestMetrics is still tough.  Down 3.6% yr-to-date, altho that improved to 2.7% drop in 3d qtr.  But remember GuestMetrics data is strongest in capturing chains, hotels, fast casual and the like.  Doesn’t fully capture the tap rooms, tasting rooms, brewpubs and microbreweries that are cropping up all over.  So craft share of all on-premise biz likely now even higher. Could it be 40%?  And total on-premise trend likely not quite as soft.  GuestMetrics still gives useful picture of rapid remaking of on-premise channel, especially towards craft, in recent yrs.  And ongoing struggles to get traction with premium lights, even tho top 2 throwing lotsa resources against on premise and getting some tap handles back recently.