BA Craft Brewer Definition Revised
Boston Beer to Remain "Craft Brewer"

FILED JANUARY 4, 2011

Dear Client:

The board of the Brewers Association voted last week to change the BA's designation of "small" in its official definition of a "craft brewer," changing the 2 million barrel volume cap to 6 million barrels. Recall that Boston Beer Co. is poised to blow past the 2 million barrel per year mark soon, which would have excluded Boston from falling under the BA's definition of a craft brewer, and thus reducing the size and market share of the craft brewing industry, as defined by the BA.

In the Brewers Association's bylaws, two classes of membership (Professional Packaging Brewers and Associate membership) have been redefined with a qualifying barrelage of 6 million barrels versus 2 million barrels. The BA said that that "small" is a "descriptive term relative to the overall size of the industry."

"Thirty-four years have passed since the original small brewers tax differential defined small brewers as producing less than 2 million barrels," said BA chairman Nick Matt of F.X. Matt Brewing Company. "A lot has changed since 1976. The largest brewer in the U.S. has grown from 45 million barrels to 300 million barrels of global beer production."

Likewise on the legislative front in 2010, the Brewers Association supported H.R. 4278/S. 3339, which sought to update the cap on an excise tax differential for small brewers to 6 million barrels per year in production for their first 2 million barrels.

"With this change to the craft brewer definition and BA bylaws, statistics will continue to accurately reflect the 30-year growth of market share for craft brewed beer," said Matt. "Brewers Association statistics on craft brewers will continue to keep pace with the growth of the industry....Rather than removing members due to their success, the craft brewing industry should be celebrating our growth."

PHUSION TO ROLL OUT SEASONALS: FOUR LOKO XXX LIMITED EDITION

Undaunted by the recent hit from the Feds, Phusion Projects told BBD that it is planning the roll out of a new product, Four Loko XXX Limited Edition, which will rotate flavors every four months, "allowing distributors and retailers to provide a variety of exciting new flavors to customers on an ongoing basis," said the company. Phusion will start with Green Apple this month. And yes, all flavors will have only one UPC code to reduce stress during the changeouts; and no, the products don't contain caffeine or other stimulants.

"Seasonal or Limited Edition packages consistently rank as the best selling products in segments such as craft beers, but distributors are simultaneously overloaded with new packages, cans and universal product codes (UPCs). Four Loko XXX Limited Edition reconciles these trends by allowing distributors and retailers to offer consumers the latest Four Loko flavors while using the same UPCs throughout the year," said the company in a release.

Four Loko XXX Limited Edition is being shipped to select markets now, and will be rolled out to all Phusion Projects' markets over the next several weeks. Following Green Apple, the next flavor, Blueberry Lemonade, will be rolled out in May.


GAME DAY BEER NOT SO HOT AT 7-ELEVEN

A Las Vegas 7-Eleven chain is discontinuing the brand's private label premium beer, Game Day, produced under contract by City Brewing in LaCrosse, Wisc., according to Convenience Store Decisions' John Lofstock.

Bob Staffieri, general manager for Yost Family 7-Elevens in Las Vegas, chalked the failure to exising premium beer brand loyalty and the store brand's mismarketing:

"If they had done something with it as a generic beer, which I really believe it is after sampling it myself--it's not up to the standard of a premium beer--I think they would have done well with it," Staffieri was quoted.

The general manager continued that consumers didn't respond well to discounts lobbed on this generic-purported-premium -- before admitting they are slashing prices to $5.99 per 12 pack to liquidate before it went out of code.

It's unclear whether franchisee had the franchisor's blessing to discontinue the months-old experiment, or how its introduction has fared in other markets, although we've heard it has had a tough time across the country. Higher end private label craft beers at supermarket chains, however, have been selling very well.


WHY ASK WHY? A-B DISCONTINUES BUD DRY

Speaking of D/C-ing, A-B quietly discontinued Bud Dry in late November, the line extension that exploded onto the scene in the early 1990s with the slogan, "Why ask why? Try Bud Dry." The brand has been in decline for years and was down 24.3% in SIG all channel data going into late November. While the brand was still larger than such A-B brands like Landshark, Michelob, and Tilt, A-B likely didn't like having its flagship brand name on a declining line extension that served no strategic purpose other than confusing consumers, most of whom were children when "dry" beers were briefly all the rage.

"For some time, Bud Dry served a strategic and competitive need within our sub-premium portfolio," wrote Juan Torres, senior director of value brands. But now the "responsibility for protecting and growing our share within the sub-premium category falls primarily within our Busch and Natural brand families."

Bud we hasten to note that Bud Ice is still out there and still quite big (it's A-B's eighth largest brand in SIG scans), but having tough trends lately due to pricing actions. We're still watching you, Bud Ice.


ST. ARNOLDS GETS TO 30K BARRELS THROUGH GUERILLA MARKETING

St. Arnold's Brewing in Houston sold about 30k barrels in 2010 in their new brewhouse, and their growth run rate is about 50%, although founder Brock Wagner prefers growth to be slower than that. "We grew 13% in 2009 and are running at close to 50% for the second half of this year, but I prefer to grow in the 15% to 25% range. Uncontrolled rapid growth is difficult to manage and can be catastrophic if not done well," he told Forbes.

So how did he grow from zero in 1992 to 30k barrels last year? He explains:

"Guerrilla marketing and doing things we enjoy. We don't advertise. We did run a radio ad around 1998 on a couple of rock stations. It boosted sales .0001%. It would have been more productive to burn a pile of 50,000 $1 bills. If we were to do an ad today, I would place it on NPR, that's what I listen to. I believe the best marketing is to make your customers feel like you don't market. People want to discover craft beer and to feel like they found it. You have to create the opportunities for them to do so. Like our brewery tours. People come week after week , bring food, play dominoes . They also bring stacks of cardboard 6-pack holders for us to reuse. Each one saves a quarter. Bring 200,000 and I'll give you the official Saint Arnold's 1957 Bentley."

"BITTER, BLOATING, AND BUCKETS"; MOLSON COORS UK CHIEF FIGHTING BEER STEREOTYPES WITH NEW BEER

The less-than-PC UK has decided that women are the answer to slipping beer sales -- not as pinups, but as consumers. Molson Coors UK CEO Mark Hunter has spent more than 1m (over $1.5 million USD) on a 30,000-strong study of women's perception of beer, with a new, unisex beer brand rollout being the imminent result, ThisIsMoney reports.

"Beer desperately needs to start bringing new users back in and make it more relevant to a wider user base, and this seems like a big opportunity if we can get it right," Mark said, who therein also summarized women's response to beer as "bitter, bloating and served in buckets."

Cracking that stereotype is clearly of interest to producers on this side of the pond as well; a recent Morgan Stanley report counted only 31% of "weekly beer drinkers" as women (and 37% of the pertinent craft beer pool). As for the exec's question of "getting it right," the proof may be in his new product -- likely a new Carling variety -- slated to debut overseas in the middle of the year. Mark hinted at outside-the-box packaging and a strongly unisex name as two lynchpins of the new brand's hopeful relevance.

And speaking of relevance, some resonant craft U.S. brands are debuting in the UK. With the voiced goal of a broadened portfolio, Molson Coors is introducing Blue Moon and has just opened a cask-ale centric brewery, Worthington's, among other additions.

"We want to ensure we have a brand for every occasion, connecting with all beer drinkers ... " Mark said in the article.


ABIV BREAKS SILENCE ON GIRLFRIEND'S TRAGEDY

In a sad interview with the St. Louis Post-Dispatch, August Busch IV reveals details about his close relationship with Adrienne Martin, his girlfriend who was found dead in his house recently. August was taking her breakfast in bed when he found her unresponsive, and said his employee called 911 immediately (countering earlier reports of a 45 minute delay). August told the P-D he "loved this girl with every ounce of my heart", and said frankly that "she was the only girl I've ever been with that I didn't want to have someone on the side. You know, I'm this notorious bachelor who always wanted someone on the side, but I didn't with Adrienne." He said that he didn't know the cause of death, but speculated that it may be related to a sleeping medication she was taking.

August also added that he had been battling depression and "my other issues" since the sale of A-B to InBev, but says ABI has been "wonderful" to him and "they're helping me through this." He has spoken to his father, August Busch III. "Dad and I are talking, which is good. 'I love you,' that's what I told him. I love you from the bottom of my heart." He says his dad told him, "I love you, too." He added that his father told him to get counseling to help cope with the grief of Martin's death. "I don't know if individual counseling is the way to go or something else," he said. "I've got to figure something out. I can't let this take me down." A very sad ordeal.

The entire interview can be found here: http://www.stltoday.com/news/local/metro/article_44d6e75c-a2ea-5bb7-94da-ea131ca86d46.html



BEERNET POWER 20; CAST YOUR VOTE TODAY
It's been awhile since we've done this, but back by popular demand is the BeerNet Power 20: The Most Powerful People in the U.S. Beer Business, as voted on by BBD readers. To vote for the most powerful people in the beer biz, just click this link and fill out the form. We'll tally them up and announce the results in a few days.

Link: http://tinyurl.com/3xreyfj


Until tomorrow, Harry

"My country is the world, and my religion is to do good."

-Thomas Paine



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