Beverage Dynamics

Beverage Dynamics - March/April 2017

Beverage Dynamics is the largest national business magazine devoted exclusively to the needs of off-premise beverage alcohol retailers, from single liquor stores to big box chains, through coverage of the latest trends in wine, beer and spirits.

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Craft Beer 72 Beverage Dynamics • March/April 2017 keting and distribution muscle of an AB InBev or a MillerCoors, these acquired brands can reach new audiences, something that many consumers welcome. On the other hand, retailers may be tempted to rely on a one-stop shop, buying an entire portfolio of beers and styles from a single source and squeezing out competitors. Sales fi gures for The High End, the new craft and imports division at AB InBev, give credence to the fears of independent brands. The group of eight former craft breweries (excluding newly purchased Karbach) grew by 32% in 2016. This growth is not merely a consequence of the transition from independence to AB InBev ownership: Goose Island, acquired in 2011, grew by 28%, whereas Breckenridge, acquired in 2015, grew by only 6%. The standout is Golden Road, which was tarred by some with the suggestion that it was built purely for acquisition: its growth last year was 97%. By contrast, growth in the craft sector, as reported by the BA, has dropped to single digits for only the second time in a decade, at 8% for the fi rst half of 2016. (It is worth noting that The High End fi gures are based on IRI multi-outlet and convenience data, and BA fi gures are reported by member breweries. The latter include taproom and specialty store data, where much craft beer is sold; the IRI fi gure for craft is 6.3%.) WHAT DO CONSUMERS WANT? Given these different perspectives, what approach can retailers take that gives customers the wide choice they seem to want, and the authentic, local angle they also seem to want? The fi rst point is that craft beers—or beers brewed in the craft vein—are still the fastest-growing brands at a time when mainstream beers remain stalled. In 2003, Kim Jordan, founder of New Belgium and then-president of the Brewers Association, optimistically told an audience of craft brewers to aspire to 10% of market share, an impossible-sounding gain of seven points over that year's actual volume. By 2015, craft brewers' share was 13%. Can craft ever own a quarter of the market? That, of course, depends on the defi nition of craft. "Yes, we can get there in a prag- matic sense, but in a statistical sense, maybe we don't get there," Ryan says, "because by the time a lot of these guys get to a half million or a million barrels, they go the Lagunitas route or the Elysian route and they sell to a big guy. As far as what was once considered craft beer getting to 25%? Absolutely." Herz, Browning and Ryan all agree that passing off the craft- ish beers brewed by the biggest companies as true craft beers risks alienating customers. "Blue Moon is the beer where most people draw the line," according to Browning. "You couldn't get a more nationally pro- duced, mutually acceptable fl avor than Blue Moon until Budweiser came out with Shock Top, which is even less of a Belgian white ale." He sees a role for these brands, but mainly as an alternative for consumers who are adjusting to stronger fl avors or fuller-bod- ied beer. Herz recommends that retailers make an effort to stock a diver- sifi ed selection, accepting that consumer tastes vary. "Stores that order from whichever distributor provides them a large portfolio of brands from a single beverage alcohol company are not going to be as much of a beer destination as beer providers that prioritize an even mix of beers from the local breweries, beers from regional breweries, beers from national breweries and imported brands." With the confusion over who's legitimate craft and who's not, shelving all the small, independent craft brewers together, and la- beling them as such, could be effective. Ryan advocates transparency. "In the long run, the most edu- cated consumers that are interested in craft are going to fi gure it out. If you want to be perceived by those high-end craft customers as knowing what you're doing, you have to keep an eye on what's independent and what's not, because they're going to know." And as the maxim tells us, the customers is always right. BD JULIE JOHNSON was for many years the co-owner and editor of All About Beer Magazine. She has been writing about craft beer for over twenty years. She lives in North Carolina, where she was instrumental in the Pop the Cap campaign that modernized the state's beer laws. SMALL Annual production of 6 million barrels of beer or less. INDEPENDENT Less than 25 percent of the craft brewery is owned or con- trolled by a beverage alcohol industry member that is not itself a craft brewer. TRADITIONAL A brewer that has a majority of its total bev- erage alcohol volume in beers whose flavor derives from traditional or innovative brewing ingredients and their fermentation. DEFINING CRAFT The Brewers Association defines an American craft brewer based on size, ownership, and practices as:

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