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Beer Insights Extras

Extra beer business news, thoughts and insights from the publishers of Beer Marketer’s Insights, Insights Express, Craft Brew News, Beverage Business Insights and Alcohol Issues Insights.
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BA Beer Pairing Dinner at Union Square Cafe 2-5-19

Beer Marketer's Insights participated in a Brewer's Association dinner on Feb 5th, highlighting how 4 small brewery's selected beers both complemented and were complemented by food pairings.  The beers featured carbonation, yeast, hops and malt.  

Melissa Romano from Lake Anne Brew House shared her only-on-tap Lake Ann Skinny Dip carbonation-focused beer and the story of her small taproom in historic Reston, VA. This offering highlighted the Brewer's Association's new taproom membership class. Rather than get 85 cents per pint through a wholesaler, Lake Anne gets $7/pint at their brew house.  Their company's slogan is "Brewing Beer, Building Community."

Gun Hill Brewery's Dave Lopez introduced the media crowd to Rise Up Rye, with ties to the Broadway musical, Hamilton.  His brewery's location in a difficult to get to area of the Bronx is both "a blessing & a curse."  With a 30 bbl brewhouse he "can't make mistakes -- we have to brew what will sell!"  

Maine Beer's Dan Kleban shared the story of how their flagship beer, Lunch IPA, got its name. They adopted a whale who, as it turned out, was named Lunch.  Maine Beer is committed to giving back to the community. So their $7-$8 bottle beer pricing was reverse engineered to enable them to offer full healthcare coverage and a pension to all employees.

Finally, Leslie Henderson of Lazy Magnolia Brewery sampled her flagship  , the "original pecan nut brown ale."  It's still 65-70%  of sales, but she and husband Mark (both engineers) want to "make Mississippi a better place."  For the 1st 8 years, it was the only brewery in the state.  As local laws gradually became more hospitable to breweries, they "went from crazy people to leaders."

Overall, an enjoyable and delicious experience, highlighting small brewery BA members along with a restaurant whose chef understood what it takes to bring out the beer's features, and visa versa.

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#TBT - Beer Stocks in 2008 vs 2013

In today’s INSIGHTS Express we wrote about continued growth of beer stocks in 2013, including the immense success of Constellation and Boston Beer.  For a throwback we decided to look at an article we published in Jan 2009 about beer stocks the previous yr to see how 2013 stacked up against 2008 - when US beer volume reached its highest point ever.  Sales don’t always equate to higher stock prices, as we wrote in article dubbed “Tuff Yr for Beer Stocks Too,” in our first Insights Express issue of 2009.  Of course, this was in midst of the economic downturn, so stocks were down in most industries.  Now 5 yrs later, we’ve seen volume declines in 4 of last 5 yrs, yet  increased $$ sales and increased stock value.  Interesting to see how far many of these stocks  have come in just 5 yrs.  Take a look at the article below:

 

Tuff Yr for Beer Stocks Too (published Jan 5, 2009)  Beer industry stocks declined in 08, tho several did better than major indexes (S&P down 39% for yr, London exchange down about 2/3).  MolsonCoors stock price slipped 5.2% in 08 after 37% surge in 07.  SABMiller dropped 18% in 08, but has actually surged by almost 60% from its Oct lows.   Meanwhile, AB InBev sunk down to 10 Euros at its low, but since jumped back to over 17 Euros.  That’s still less than half its 08 peak (adjusting for new shares).  Heineken stock dropped 50.5% in 08 too; it had gained 23.7% in 07.  As for other alc bev stocks, the largest, Diageo, dropped by 34%.  And largest vintner (as well as half owner of Crown), Constellation Brands also fell by 1/3 to $15.77 in 08.  But it too surged 60% from Oct lows.   Craft brewers had rough 08 in mkts.  Boston Beer stock off 24.6% to $28.40 and Craft Brewers Alliance stock dropped 82% to $1.20 after closing 07 at $6.65.   So-called “vice” stocks, like alc bev, tobacco and gambling cos, are “often touted as great investments during economic downturns,” wrote Biz Week in article titled “Are Vice Stocks Losing Their Allure?”  In this downturn, “the naughty are still waiting for their reward.”  Biz Week concluded: “It remains to be seen if alcohol, tobacco and other vices continue to prosper as affordable luxuries for many people. Or if, desperate to cut costs, consumers decide to clean up their act.”  

 

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#TBT - Beer Wholesalers Have a Friend in Judge Sotomayor (5/29/09)

Beer Marketer’s INSIGHTS and our sister pubs have included scads of articles about the 21st Amendment over the years.  Most have probed whether this or that legal or policy decision supports or weakens states’ rights to regulate alc bev biz under the 21st Amendment, which ended Prohibition.  Modern debate got kicked off by vintner’s/consumers pursuit of direct shipping the product to consumers’ homes, bypassing wholesalers and retailers.  Many in industry viewed this as weakening states’ regulatory authority/oversight of the biz.  Over the years, debate over scope of states’ rights under 21st Amendment has occurred in US Supreme Court and other federal and state courts, not to mention numerous industry panels on deregulation, different business models and other policy questions.

In honor of Repeal Day, on this 80th anniversary of the end of Prohibiton and the ratification of the 21st Amendment, here's an article from a 2009 edition of Insights Express that re-examined a 2004 US Court of Appeal decision (later overturned by Granholm case) on the occasion of Judge Sotomayor's nomination to the Supreme Court.  Enjoy.

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Beer Wholesalers Have A Friend in Judge Sotomayor (published May 29, 2009)

Her views on the 21st Amendment vs. Commerce Clause may not be the hottest topic surrounding the nomination of Judge Sotomayor to the US Sup Ct, but distribs gotta remember she’s a fan of states’ rights under 21st Amendment.  A big fan.  Judge Sotomayor was part of 3-judge panel in US Ct of Appeals for 2d Circuit that upheld NY restrictions limiting direct shipments from out-of-state shippers.  That decision later reversed by US Sup Ct in Granholm, but it included some of the strongest language on record in favor of 21st Amendment’s grant of states’ rights to regulate alc bevs.  From beginning to end, judges embraced uniqueness of alcohol’s legal status in US.   Second paragraph of decision starts: “The 21st Amendment is unequaled in our constitutional experience – it repeals one constitutional provision and creates an exception to another.  The Amendment was not a narrow legislative delegation of federal authority; it was the will of a nation speaking through its constitutional process.”

The judges questioned analysis of other circuit courts in direct shipping cases that first determined whether laws violated dormant Commerce Clause, then whether 21st Amendment “saved” them.  This approach “is flawed because it has the effect of unnecessarily limiting the authority delegated to the states through the clear and unambiguous language” of 21A, 2d Circuit wrote.  Inquiry in these cases, judges wrote, “should not allow” Commerce Clause to “subordinate the plain language” of 21A.

As distrib advocates have argued for yrs, panel acknowledged that those who drafted 21A did so specifically “to allow states authority to circumvent dormant Commerce Clause protections, providing that they were regulating the intrastate flow of alcohol.”  That’s why they decided that NY’s law -- recall it forced out-of-state wineries who wanted to ship direct to set up bricks and mortar within the state – “falls squarely within the ambit of section 2’s grant of authority.”  Regarding that requirement, the panel concluded succinctly: “Presence ensures accountability.”  That presence requirement raises costs, they acknowledged and would “create substantial… problems” if it involved any product “other than alcohol.”  Here’s the kicker: “But business efficiency must give way to valid regulatory concerns in this unique area of commerce.”   A final hug: “Changes in marketing techniques or national consumer demand for a product do not alter the meaning of a constitutional amendment.”

This is the kind of language that distrib advocates would love to resurrect in legal strategies going forward.  Having someone on the US Sup Ct who has already signed off on it (Judge Sotomayor did not write the opinion) can’t hurt their cause.  Note: INSIGHTS was prompted to return to the 2d Circuit’s 2004 opinion after reading about Judge’s Sotomayor’s involvement in the case in Mark Brown’s Daily Industry News update this morning.  His source: www.fermentation.typepad.com, a pro-direct shipping site.

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Archive Diving for Throwback Thursday

Beer Marketer’s Insights has been walking this beer biz beat for a while now, leaving us with 40+ years of archived text.  Sounds like a perfect opportunity to participate in Throwback Thursday (#tbt out here in the wilds of the web) to us.  Expect to see us dive into our archives more often on Thursdays and share what we find right here.

For our first #tbt post, we looked at our flagship publication, Beer Marketer’s Insights from 20 years ago.  1993.  In many ways, a very different beer industry.  But disagreements between tiers over state franchise laws have been fairly constant, even if the individuals, specific issues and even some association names have changed.

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Calif Bill Package in 94?  Biggie Support?  Now Calif Small Brewers Anti Franchise Law (published Nov 29, 1993)

In lively session at BAA meeting (Brewers Association of America), Roger Hanney, veep of Calif beer distribs assn, said all 7 bills in legislative package to shore up 3-tier system are "still alive and well," tho didn't pass this yr. "We believe we could get it (the package) through to the governor in 94," Roger added, but distribs "don't necessarily have wholehearted support of major brewers."  Calif small brewers, staunch ally of beleaguered Calif beer distribs on this bill package, part ways with distribs on franchise law. Robert Judd, exec dir of Calif Small Brewers Assn (now 85-90 small brewers, includ­ing brewpubs) told BAA his members were "the 1st and only brewers to go out and sup­port" Calif beer wholesalers legislative package.  "We received the criticism of the major brewers" for that support, Bob added.  But he warned that Calif small brewers "oppose the franchise bill as proposed."  Don't like such fundamental provisions, like exclusive territories. Bob said his members view franchise bill as "in effect, a 'no-divorce' law."  Roger responded:  "You can't have it both ways," meaning that if small brewers are with wholesalers, must understand need for franchise law to preserve 3-tier system.  "We can't sit back and do nothing or we won't have the system," Roger added....  A few days later, Wall St Jnl, in long, overly pessimistic article on beer wholesaling, quoted prexy of Calif Grocers Assn on 3-tier system: "It's an antiquated system.  Eventually it must be changed.... The major brewers know they've got to change. It's happening today in all other products."  Meanwhile, top AB brass including August III recently met with distribs in Calif and pledged continued support of 3-tier system.

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Article: BrewDog Blogs About "Craft" Definition in UK, Europe

In yesterday's issue of Craft Brew News (vol. 4, no. 58), we included the below article about the suggestion for an official "craft brewer(y)" definition in the UK and Europe, from the founders of Scotland's BrewDog.  We include it here for your consideration.

BrewDog Dudes Get Down to Defining “Craft Beer,” Er “Craft Brewer”; BFM Ain’t Their BFF

Taking cues and quotes from Stone’s Greg Koch and Brewers Assn, BrewDog founders James Watt and Martin Dickie posted a manifesto of sorts on their blog on why they “categorically believe we need to define craft beer” in UK and Europe.  Why?  The longer version is to: 1) “protect craft brewers and what we are building”; 2) “guide consumers” in this new category; 3) “ensure craft brewers can charge a fair and sustainable price for their masterpieces” and; 4) enable craft beer to grow in UK as it has in US.  Their 3-word, and perhaps more revealing, version: Blue F*%#!@G Moon.  Dickie and Watt, for years among the most vicious and funniest critics of global, mainstream beer, are lighter than usual on the rhetoric, but do point out they don’t want retailers to create craft beer sections that get “carpet bombed by beers that are not craft” and also charge the large global brewers with “bastardizing beer on a colossal scale.” Net-net: without a recognized definition they fear “the large monolithic brewers will simply exploit all that we have worked so hard to build.”

Although the post starts out to define “craft beer,” Watt and Dickie ultimately follow BA in defining “craft brewer” instead, while going circular in explanation that “the definition of a craft beer is a beer brewed by a craft brewer at a craft brewery.”  Note that the definition moves between defining both a company and the facilities it operates.  Not surprisingly, their proposal, like BA’s definition, doesn’t actually have much to do with those liquid “masterpieces.”  A European craft brewery, in this draft proposal (they’re open to suggestion), is limited to less than 500K hl annually.  That’s about 425,000 bbls, so no single craft brewer could have much more than 0.1 share of 300-mil-bbl Euro beer mkt.  That’s significantly smaller than BA’s definition, which allows a 6 mil-bbl to have nearly 3% of 208-mil-bbl mkt.  The guys also amend BA’s “traditional” with their own “authentic” (brewing all beer at original gravity and not using corn, rice other adjuncts to “lessen flavor and reduce costs”), add “honest” (labeling all ingredients and production location and brewing all of its beer at “craft breweries”) and use tighter definition of “independent,” less than 20% owned by brewing co that operates any brewery that doesn’t qualify as craft.

Dickie and Watt acknowledge the size limit may be the most “contentious” aspect and suggest it could be dropped entirely, since most brewers over 500K hl would likely fail the “authentic” tests.  Independence level defended since “intent is a massive part of craft brewing” and once craft brewer sells to big brewer, it’s no longer craft, even if beer “might still be ok (for a while).”  Blogpost singles out Goose Island and predicts that in 10 yrs the brewery will no longer exist and “all their beer [will be] made under contract with rice and corn at an InBev plant.” BrewDog founders hope definition will be recognized by Campaign for Real Ale (CAMRA) and Society of Independent Brewers (SIBA) in UK, as well as by The Brewers of Europe Assn.   Read the entire post here.

Editors’ Note: For brewers so ostensibly committed to quality products, Watt and Dickie are notably far more focused on their business interests, defending the niche they’ve built and even their pricing, than on the product itself.  While BrewDog and (at least their UK) counterparts are growing fast, gaining share of mind, stomach and attention – just like their US counterparts – there is the same whiff of fear, arrogance and even contempt for their consumers and retailers, who they don’t seem to think can be trusted to make the ‘right’ decisions.  Gotta also note that many US craft brewers wouldn’t pass muster for Watt and Dickie.  Contract brewers working in plants that make non-craft brands or that label where the company is based rather than where the liquid is produced?  No go.  Brewing purely at original gravity could get tricky for some US brewers too.  A final irony: Dickie and Watt, like the BA, would clearly toss craft segment founders Rob and Kurt Widmer, and the rest of CBA, out of the club due to AB’s ownership stake.  That lends a slightly sour taste to the congratulatory video message they recently sent to the Widmers (a very funny bit with Jim Koch, shown at CBA Vegas mtg) on their 30th anniversary.

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Beer, Craft Beer and Beverage Insights, All in 140 Characters or Less

You guessed it: Beer Marketer’s Insights has entered the Twitter-sphere.

If you’re a regular tweeter chirping away out into space, check us out for updates, links, breaking news and of course, top-notch beer business and beverage business insights from not one but 3 different BMI-operated handles.

We’ll be tweeting from @BeerInsights about topics influencing the US beer industry and anything from our flagship publication and Insights Express.  Check out @CraftInsights if you want to stay up to date with our Craft Brew News editors and the fast-changing craft beer business.  And don’t forget about @BevInsights, which began its Twitter-life late last month by helping Beverage Business Insights break its story about the end of Coca-Cola Co and Campbell Soup Co’s distribution agreement for V8.

Follow one or all three, but don’t miss out on even more exclusive coverage and commentary.

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On Bubbles and Saturation Points

Talk of a craft beer “bubble” flared up again recently.  To combat claims of that phenomenon, staff economist for the Brewers Association Bart Watson weighed in via this thoughtful BA blog post.  We discussed Bart's post in Craft Brew News last week, noting that while “it doesn’t appear that craft is overinvesting in capacity” to Bart, capacity can sometimes be difficult to track.  BA members we speak to on a regular basis are often pretty confident when sharing capacity statistics for their facilities, but also point out that capacity numbers vary based on which beers are brewed when and can therefore change.  We also acknowledged the growing number of large craft and contract-focused facilities currently being built or recently-opened as a possible complicating factor in the future.  As we concluded that article, "time will tell."

This week, we’ve already caught a couple of media outlets touching on the matter. Here, Crain’s Detroit Business wonders about a “saturation point.”  It includes thoughts from Founders co-founder Mike Stevens, Michigan Brewers Guild executive director Scott Graham, Bart himself and a few other beer industry observers and newcomers.  The primary question arises from worry for some of these folks: are too many craft brewing entrepreneurs ‘getting in’ just to make a buck?

Up in the craft-loving Pacific NW, NPR station KPLU approached the topic from the perspective of a long-time hop-growing family that has recently started brewing their own too.  The BA’s Julia Herz reprises her claim here that asking if there’s room for more breweries is “like asking the National Restaurant Association if there should [be] another restaurant down the street.  And the answer is: of course.”  As for the Smiths and their Bale Breaker Brewing Company?  “They haven’t [been] able to keep up with demand since opening in April.”

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Latest Relaunch: Drewrys Returns to Midwest Market

As 2013 continues, we keep seeing more revivals of once-lost brands.  The latest in this line is Drewrys, which closed up shop back in the early 1970s.  Chicagoland-based private investment firm Appletree Capital has relaunched Drewerys and started contract brewing in Lacrosse, Wis (likely at City Brewing, a common contract choice there and elsewhere), according to Crain’s Chicago Business.  Three brands debuted at the annual Brewfest in South Bend, Ind last month.  A spokesman for the brand explained that “retro beer is kind of coming back and there’s a lot of interest in that.”

 

Back on June 26, the following article appeared in Insights Express to catch readers up on similar brand re-introductions.

 

Legacy Brand Relaunches and Regional Brewery Revamps

 

Investors seem to be increasingly banking on historical and local cachet of a host of regional brands and old brewery buildings recently.  Narragansett ceo Mark Hellendrung expects to sell a million cases of ‘Gansett in 2013, he told the Boston Globe.  Other brands are turning to a craft-like “reinvention,” like Berghoff, which announced a lineup of newly-formulated beers including a seasonal Belgian wit and hoppier red ale that it’s peddling in Ill, Wisc, Mich and Ind and brewing at Stevens Point in Wisc.  If a brand isn’t getting a face-lift, the building that housed it just might be.  Recall that a new Christian Moerlein Brewing set up shop in one of the brand’s old Cincy buildings in 2010.  Another spot in the brewery complex is now occupied by brand-new Rhinegeist Brewing and a third company is also brewing in the area, according to AP.  In the late 1800s, that area of Cincy, called Over-the-Rhine, was home to 18 brewing cos.  A century later it was named America’s most dangerous neighborhood.  This month, Cincy City Council approved a plan that seeks to help solve OTR’s problems by making it a brewery district, hoping to attract other brewing cos.  Elsewhere, possible resurrection of old Oly brewery in Wash also in the news this week because a requirement barring production of alcoholic beverages at the site, instituted when Miller vacated the spot in 2003, has been lifted, according to Olympian.  Current landowners are hoping a new tenant will come in, use some of the space to brew, and the rest to build out retail, office-space and perhaps residential space too.  And startup Flat Earth Brewing moving into the old Hamm’s site in St Paul, Minn, earlier this mo.

 

(This article originally appeared in Insights Express vol 15, no 80 on June 26, 2013.  Subscribers with active Archives access can view and search previously published material at their leisure.)

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The Future of Crown: Especial, Draft, Piedras Negras

Insights Express vol 15, no 115 just went out to subscribers.  In it we examine two very different outlooks on the US beer industry: AdAge’s take on the “grim, but not irreversible” situation for big brewers and Santander’s big expectations for AB Inbev earnings in 2014.

Readers will also find notes on Crown Imports’ “Past, Present and Future,” based on Tom Wyness’ presentation at the Supply Chain and Operations Leadership Conference last week, held by Tamarron Consulting.  During the presentation, Tom reminded the audience of a number of factors impacting Crown’s future that we’ve written up in our various beer business publications before.  Among them:

- Modelo Especial: “Next year could be a big, big year” for the brand, Tom said, as he expects it to hit 50 mil cases “very, very shortly” and believes it’s on its way to being the 2nd-largest import brand in the US.

- Draft: a “wonderful tool for sampling,” Crown plans to pay more attention to its draft business, still just a tiny segment of its overall volume.

- Piedras Negras: over the next 3 years (as the supply-agreement with AB Inbev runs out for US shipments of Modelo brands) Crown will spend $500-600 mil to expand the already-enormous brewery on the Mexico-US border from being able to produce 10 mil hl to 20 mil hl (over 17 mil bbls) every year.  The brewery was originally constructed as easily-expandable up to 30 mil hl.

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Introducing Our Contributors

While everything here is still new and shiny, some introductions are in order.  Posts here will generally come from one of 6 experienced staff writers that all contribute to our beer publications.

Publisher Benj Steinman and exec editor Eric Shepard are each into their 4th decade as beer journalists.  Benj of course is the son of BMI founder Jerry Steinman, now runs the family business and has the best contacts in the beer industry.  Eric came in to the business back in 1977 and has covered most of the major beer biz legal scuffles and regulatory shifts in the time since.

Another veteran biz journalist, Gerry Khermouch focuses mostly on our non-alc bev letter, Beverage Business INSIGHTS, but contributes in-depth features to Craft Brew News from time to time.  Jim Sullivan is a 20-yr vet with BMI and works on all of our pubs, runs the state stats and keeps one eye on the wires at all times.

Newbie Christopher Shepard is Eric’s son, adding a new dimension to this family biz.  He came on when we launched Craft Brew News in 2010 and brings with him a healthy dose of beer geekery and home brewing chops to our shop.  Also expect to see Benj’s son David Steinman posting here.  After spending a couple years working in marketing for a craft brewer, he’s joined the BMI Team and made us a 3rd generation family business.

 

And if you’re just getting to know us, we’ve got some other friendly folks for you to meet too.

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