Dear Client:
Tuesday’s NBWA craft session “Trends, Tips and Tricks from U.S. Craft Brewers” could have been the most popular among the bunch. By 8 a.m. it was standing room only, with another half-room standing against the back wall.
First Brewers Association Director Paul Gatza ran down the latest numbers: YTD thru September 9, SIG scans show craft up 11.2%, its dollars up 15.6%, and average case price up $1.28 to $33.49. Pricing is up 4%, wherein Paul flagged a flip flop: “Last year, pricing was up about 1.2%, and at that time inflation was double that. Now inflation is less than half of that 4%,” he said.
BA-defined craft continues to outpace SIG-defined craft (the latter which is more inclusive of some big brewer-affiliated brands): BA-defined is up 17% in food, SIG up 15%. BA craft is up 28% in liquor, SIG is up 26%. BA craft is up 26% in convenience, SIG is up 24%.
Segment darling IPA is gaining 3 share within craft per year. It’s up 37% by volume in scans. Pricing here is up about 4.5%, $1.57 per case.
As of Sept. 30, we’re at 2,171 craft breweries operating. With, of course, more on the way: Next year we’re looking at a potential 400ish openings. The leading indicator is the breweries-in-planning number, now at 1,348. Paul said a lot are relying on the tasting room model, building their brand through people coming to them.
The audience had questions. One guy asked if we’re simply building out too much capacity between all these expanding and new breweries. Paul conceded that it’s possible. “A lot of people are betting really big,” he said, with “established regional craft making the move from 100,000 barrels to 400,000+ … that’s a lot of capacity.” On the other end, he said they’re “definitely seeing a model where someone’s starting as a contract or alternate proprietor, and then after a year or two they have enough cash flow to start their own brewery.”
Then he recapped GABF. This year he helped major media outlets like CNN and Salon.com find some interesting players and points about the convention hall. He repeated a few as investigation-worthy: Funkwerks, 5 Rabbit, Distill, Heretic and Crooked Stave among them. We’ll add to that the brewers from the GABF media luncheon as ones to watch: Epic Brewing, Telegraph, 5 Rabbit, La Cumbre, and North Carolina’s Catawba. These relative unknowns have a habit of blowing up after they’ve been on stage in front of so many journalists (Cigar City and Nebraska Brewing are two good examples).
CRAFT STOCKING TRENDS. Then Ninkasi business developer Jessica Jones presented the research behind her recent Brewers Association website article on stocking craft by brand vs. style. Though she says insights as to how people prefer to shop is less clear, she outlined definitive concerns for stocking by style. They’re the regular suspects: among them, eroded brand support, commodification, findability, and price flow issues, the latter especially problematic when cheaper priced “faux craft beers” next to higher rings encourage buying down.
Lagunitas COO Todd Stevenson finished the panel with in-house research on craft’s share of shelf vs. share of gross and incremental gross profits, and where those numbers might be in the future. If you read our Mid-August article on his research regarding craft shelf space vs. productivity in California, it’s the same thesis extended to more markets. The idea is that craft spacing is actually underallocated. Considering craft’s upside from generational trends (Gen Y drink twice as much craft as Gen X predecessors) and current growth trends, Todd thinks the segment could grow three times by 2020.
Todd has developed a series of examples examining craft trends in chains across various markets that are less and more developed for craft. The research first compares percentage of craft shelf space in these markets vs. gross profit generated. Chicago, for example, has craft at about 8% of space and 14% of gross profit across sampled chains. The SoCal sample has craft at 18% of space and 11% of gross profit. The Northeast chains studied displayed craft at 29% of the space and 22% of gross profit. In NorCal it’s 26% vs. 27%.
Then he explored the incremental gross profit craft adds across these markets, and found that craft adds the most incremental gross profit in every market he covered except SoCal. Then he broke it down along craft’s space vs. share of incremental gross profit: Craft in Chicago occupies 12% of shelf space but adds 63% of incremental gross profit. SoCal’s breakdown is 18/31. In the Northeast, craft beer is 29% of shelf space and 56% of incremental profits. In NorCal, it’s 26/71.
But Todd’s point is as much about what’s going to happen in the future. In Chicago, if craft’s 4-year growth rate continues, total craft will add $6.1 million in gross profits, while premiums could decrease by $1.3 million by 2016. In the Northeast, craft’s continued 1-year growth rate will allow it to add $22 million in gross profit. Premiums could increase gross profits by $0.5 million in the same time frame. And so on. Will be interesting to see where this data goes.
DESCHUTES DESIGNATES AN EXPANSION MANAGER
Deschutes Brewery has promoted their own veteran zone sales manager Stacy Denbow to expansion manager. The newly formed position will be responsible for identifying and opening new retail markets for the brewery, creating market launch plans and working on distributor partnerships.
According to an official statement, as the brewery continues to expand distribution further away from its Bend headquarters it will be increasingly important to be in close touch with retailers in order to identify trends and preferences in new markets.
National sales director Andy Tysler said Stacy’s extensive experience with opening new markets and his success managing teams in multiple states made the decision to select him for this new position “very easy.”
“Stacy has developed and incorporated many processes and procedures that have helped him, and his team, drive extensive growth in distribution and sales in his zone,” he said.
BEER BRIEFS:
NO-LI HITS DC WITH DOPS DISTRIBUTING. No-Li has sent the first-ever beers from Spokane, Washington to the Eastern Seaboard, John Bryant told CBD. DOPS Distributing and Global Brewers Guild will represent No-Li in Washington, D.C. at the Churchkey Pub this Monday; the brand will be available in Washington, D.C.and Baltimore “in the coming days.”
BROWN TAKES TOP HONORS FOR CRAFT BEER DISTRIBUTOR OF THE YEAR. For those of you who didn’t read BBD’s announcement, Florida’s Brown Distributing won the NBWA-BA Craft Beer Distributor of the Year Award, followed by New York’s DeCrescente and North Carolina’s Tryon. We have a few more of those nominee profiles to run through the end of the year.
WINNERS FROM THE GABF CAN BE FOUND HERE. As Paul Gatza pointed out at the NBWA craft session, there were a lot of new winners at the table — in fact, the winner of the most competitive award, American style IPA, was California’s Tap it Brewing Company, est. 2010.
BREWPIC: CROWN Beverage Packaging North America received the ‘Most Cantacular Award’ for 2012, from Sly Fox Brewing Co., of Pottstown, PA. The award salutes the companies, people and places that help advance the packaging of craft beer in cans and was presented at the Sly Fox Brewing Company’s Can Jam festival.
Until tomorrow, Jenn
“The problem with cats is that they get the same exact look whether they see a moth or an ax-murderer.” –Paula Poundstone
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