June 27, 2011
Craft’s Growth Rungs
Dear Client:
We know that craft has grown 10-15% for the last few years, depending on your source. But 1700+ brewers aren’t all gobbling the same share. And certainly the biggest guys aren’t growing at the same rate as the regional or even more local breweries further down the list, and there are sweet spots and speed bumps throughout.
We bet you’d like to see those gradients. So Nielsen’s Nick Lake has compiled for us a chart that helps track growth by supplier size. Note that it does include what Nielsen calls “craft affiliated,” such as Tenth & Blake and A-B craft, which falls outside of the BA’s classification – ’cause let’s face it, definitions aside, knowing their contribution to the category is of interest to everyone.
METHODOLOGY AND BREAKOUTS. Nick segmented brewers using CYTD info through May 21 in food, drug, convenience and liquor channels into the following buckets: The biggest producers, 1 – 4+ million cases, which includes Tenth and Blake, Boston, Sierra, CBA, New Belgium and Gambrinus; then 500K – 870K cases, which includes KPS Capital Partners [NAB], A-B, and Deschutes; the more regional 21 brewers in the 100K – 292K case realm, which includes Mass Bay Brewing Co., Full Sail, Lagunitas, Bell’s, Alaskan, Fulton Street, Boulevard, Abita, Matt, Great Lakes, Dogfish, Summit, Stone, Long Trail, Flying Dog, Lost Coast, United Breweries Group [Mendocino], Oskar Blues, Sweetwater, Shipyard and New Glarus. The next echelon, 50K – 100K cases, tend to own their local backyard, and includes 15 breweries, including (but not limited to) Brooklyn, Winery Exchange [private label], Griffin Group [Anchor], Odell, Big Sky, Gordon Biersch, Oregon Brewing Co., Smuttynose, Firestone Walker, Breckenridge, The Saint Louis Brewery [Schlafly], Ninkasi and Victory. After that there are a lot more players; the 10K – 50K case level includes 62 brewers and below 10K represents 314 before we cut it off.
SO WHERE IS THE GROWTH? Nick then created a “Fair Share of Growth” index, in which anything over 100 is good because “that means you are getting more than your fair share of category growth,” Nick says. Reason being, if you had a 5 share, for example, you should get 5% of the growth, everything else equal. The results are as follows.
BREWERS IN THE 500K-PLUS RANGE REFLECT SCALE, SLOWER GROWTH. They do contribute the most segment growth, mostly due to that scale and brand equity. And even despite their huge case numbers, Tenth and Blake and A-B are still overindexing in their individual fair share of growth. “Tenth & Blake and A-B combined have contributed 36% of all craft growth with a combined share of 23% of craft volume for an index of 157,” says Nick. “Clearly the top two brewers in country are having an impact in this segment.”
But the remaining 7 brewers underindex in their fair share of growth, with a composite score of 76. In fact, Boston’s fair share index is at -19, and the other 6 are all mostly well below 100. “The Top 9 [“crafty”] brewers represent 69% of all volume and have generated 51% of the growth (fair share index of 74) at a rate of 9.2%, well below the craft average of 12.9%,” Nick says. Still, Nick points out the top 7, even excluding A-B and Tenth, have generated more case volume growth than the next 15 brewers combined. “So there is indeed advantage to scale and brand awareness.”
BREWERS IN THE 100K – 500K RANGE OVERINDEX IN THEIR FAIR SHARE. Their fair share score is 133, with a growth rate of 17.2%. “These brewers combined have a 15 share but represent 20% of the category growth,” Nick says. “Most of these brands are strong regional players. The winners in this segment are Lagunitas, Sweetwater and Oskar Blues,” with fair share indexes in the 200 – 300 range.
BUT 50K – 100K BREWERS ARE FASTEST-GROWING. In this “still-room-to-grow” sweet spot, you find suppliers that do the majority of their volume in their close backyard. Their growth rate is 33.1% with a fair share index of 220, “as they represent 5% of the category but are contributing 11% of the growth. The biggest winners are Ninkasi, Breckenridge and Firestone,” says Nick.
AND THE REST. The 60+ brewers between 10K and 50K cases represent 6% share of craft (Nick reminds this is roughly the size of CBA). Still they get more than twice their “fair share” of growth, growing at a rate of almost 27% and contributing 13% of category growth.
And you would expect that those brands below 10K cases have a growth rate of 23% as many are new and excitedly filling orders in a bullish market. They rep 2% of category volume and 5% of category growth.
TAKEAWAYS. Nick concludes from this survey that we need not worry much about how the category will fare. “It’s growing through new entrants, consumer passion for the beer and variety, as well as attracting new consumers as the category continues to expand,” he says. But there are a couple of caveats. One that strikes us: Here we are trying to guess from whence will come the next Blue Moon, when perhaps we don’t realize how much it already dominates craft. “Clearly the big brewers get it and know how to make craft styles that resonate with consumers,” Nick says.
Another crystallizing industry imperative: The biggest independent brewers have some flat or declining flagships. But they are seeing growth with innovation, Nick says. Could this be why even strong regional brands like Boulevard, which only distributes its edgy Smokestack Series to select markets, isn’t getting its “fair share” of growth? And we know the story with Boston. The Brewmasters Collection and like innovations helped last earnings report. We expect to see their new Latitude 48 IPA Deconstructed variety pack help too.
And we can’t talk about the bevy of brands without acknowledging the shelf space discrepancies their relative shares beg. “For perspective, 376 brewers represent 8% of category volume (Sierra Nevada alone has nearly an 8 share) and 11% of category growth. Does a retailer really need the long tail or would focus on bigger brands bring a better return?” asks Nick.
BEER BRIEFS:
WISC. GOV. SCOTT WALKER SIGNED THE CONTROVERSIAL BUDGET BILL SUNDAY WITHOUT VETOING the beer leg. in question. “A bipartisan group of more than 20 lawmakers asked Walker to veto the proposal, which they said would punish Wisconsin’s more than 60 craft brewers,” The Chippewa Herald recapped. Recall that the bill raises the cap for self-distribution from 50K to 300K barrels, but also combines the wholesalers and brewer licenses, and bans brewers from creating their own distributorships, and distributors from owning any piece of a brewer. Nor can A-B now own a distrib in the state.
OLD CHICAGO’S LATEST MINI TOUR – “AMERICA’S BEER MINI TOUR” – kicks off Wednesday and runs through July 17. The brand-new tour for the restaurant’s more than 1 million World Beer Tour members will feature eight beers from “iconic American breweries that have impacted America’s beer industry,” according to company statement, as well as American-style beers made exclusively for the occasion. Beers include Miller High Life, Sam Adams Boston Lager, Rogue American Amber, Budweiser lager, Woodchuck Amber Cider and restaurant beer choices that vary by location, such as Boulder Beer Kinda Blue and Pabst Blue Ribbon. The Tour also will offer exclusive beers that vary by location – in addition to the Old Chicago American Red Ale – including the Empyrean Brewing Co. Slow Your Roll.
BREWPIC: Atlanta Demolition wrecked the building next to SweetWater Brewing Co. Friday so the regional brewer can expand. Roughly 98% of the building will be recycled.
Until tomorrow, Jenn
“Do I contradict myself? Very well, then I contradict myself, I am large, I contain multitudes.” – Walt Whitman
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