Dear Client:
Bart Watson took to the Brewers Association blog yesterday to take a deeper dive into the 2017 numbers presented earlier this week. A couple of things grabbed our attention from the chief economist’s post:
First, was the growth or lack thereof coming from craft regionals during the year. This cohort, which is made up of independent production breweries above 15,000 barrels, “grew only slightly in 2017,” Bart wrote.
Bad news is close to a third (30%) of the 202 regional brewers were down more than 1%, according to Bart, and “another 8% were between -1% and 1%.” Good news is more than half of them (62%) posted growth above 1%. Though, Bart noted that the majority of the regionals up more than 1% were smaller than 30,000 barrels. “So the regionals that are growing tend to be the smallest regionals,” Bart pointed out.
Looking at the other categories of brewers, we see that brewpubs (2,252 of them in 2017) logged in a nice year, “up 15%, accounting for about 16% of the craft category’s total growth,” but microbreweries stole the show accounting for “nearly 60%” of total growth, according to Bart. He reasons that microbreweries continue to “be the bigger growth engine, both because of the number of breweries in the category [3,812] and because of higher growth/brewery.”
Something else we’d like to draw attention to is Bart crunching the numbers on brewers’ onsite sales. Providing figures for this space is still tough. Seriously, you could see Bart’s PhD come out in trying to offer up a growth number here. Ultimately, Bart thinks “it’s fair to say that craft at the brewery sales grew 400,000 barrels in 2017 – contributing about one-third of total craft growth – and are now somewhere between 2.5-2.7 million barrels, making growth 17-19% last year for this channel.”
CONSTELLATION CRAFT “CONTINUES TO STABILIZE”; NO WORRIES ON CRAFT PRICING
We got a brief update on Constellation’s craft portfolio during the company’s earnings call this morning. No trends, but Constellation CEO Rob Sands said their craft beer portfolio “continues to stabilize.”
He gave Ballast Point’s Fathom IPA, which rolled out nationally last fall, a shout out – stating that Fathom, which clocks in at 6% ABV and priced at $9.99 – $10.99 a 6-pack, is “already the third-best selling craft brand in our portfolio.” Recall too that the company is currently rolling out the brand on draft across the nation.
Looking ahead, Rob said they will continue their Ballast Point “distributor transition to the Gold Network, drive focus… deliver innovation and leverage our new tasting rooms to build stronger, local brand presence.”
As for Funky Buddha, Rob said they will continue to expand the Florida-based brewer’s distribution footprint, hitting “select markets” this year. And also have a “series of new product launches” lined up for the brand this year.
ROB AIN’T WORRIED ABOUT CRAFT PRICING. In the Q&A portion of the call, one analyst asked Rob for his thoughts on some of the reduced pricing happening within craft and how that affects Constellation’s thinking on price realization.
There may be “anecdotal reports of various craft beer companies reducing prices and introducing cheaper, larger pack sizes,” Rob said, but it’s “not really affecting pricing” in the craft category.
IT’S ACTUALLY “PRETTY STABLE.” Overall, craft pricing is “pretty stable,” he said, at about “1.5%.”
“More importantly,” Rob said, these “anecdotal” price drops have “zero interaction with us… it does not affect us whatsoever.” Adding, “If a craft brand falling out of bed drops their price to $9.99 or introduces a 15-packs at some cheap price, it matters not to us whatsoever and really doesn’t affect the parts of the business we play in.”
Rob finished up saying they “don’t see anything going on across the beer industry or any category for that matter that would cause us to do anything differently than our normal 1% to 2% price increase to cover typical inflation.”
BEER BRIEFS:
NEW YEAR-ROUND IPA FROM GOOSE ISLAND. Goose Island is currently rolling out an “easy-drinking” IPA across the nation. Midway IPA, as it’s called in a nod to Goose Island’s Chicago roots, clocks in at 4.6% ABV and is currently only available on draft and in 6-pack, 12-oz. cans. The new year-round brew will be priced in line with Goose IPA, CBD understands. And one other interesting note on this brand – it is one of the beers being brewed, at least in part, by Craft Brew Alliance. Recall CBA announced earlier this year that they’ll begin contract brewing some of Anheuser-Busch’s High End beers at its Portsmouth Facility in New Hampshire this year. Midway IPA is one of them.
DEVILS BACKBONE’S BEER FOR THE NATS POPPING UP OUTSIDE THE PARK THIS SEASON. Devils Backbone’s beer for the Washington Nationals, dubbed Earned Run Ale, will be available for purchase outside of Nats Park this season, per WTOP. After debuting the 4.2% ABV session pale ale on draft at its “Left Field Lounge” last season, the Virginia brewer has decided to expand the offering outside of the park. Earned Run Ale will hit retail stores “across the D.C. area” in 4-packs of 16-oz. cans, which have the Nats logo slapped on them. The High End brewer said it will continue to serve the brew at its Left Field Lounge this season alongside its core brews like Vienna Lager and Eight Point IPA.
WE’LL BACK BACK IN YOUR INBOX MONDAY. Due to the Easter and Passover holidays, we’re taking a break tomorrow and will resume publication on Monday. Enjoy the long weekend and family time!
Until then,
Jordan, Jenn, and Harry
“Nothing is permanent in this wicked world – not even our troubles.” – Charlie Chaplin
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