How Much is Too Much?

FILED AUGUST 13, 2014

Dear Client:

"There may be no prettier place to discuss a battle than Block Island." So starts a Bon Appetit piece on craft beer as the author has a beer with Dogfish Head's Sam Calagione, who predicts a future bottleneck and "bloodbath". (Update: Sam says his quote was taken out of context). Well, that may be so. But as we've said many times here, this time is different.

But how different? That remains to be seen. Craft is growing like gangbusters, and as we and many others have noted, there's lots of room for many local brewers, particularly when 90% of the beer industry is still up for grabs.

"I'm onboard with America abandoning middle-of-the-road beer and exploring flavorful new directions," writes Bon Appetit. They continue unabashed:

"The highway, however, is getting mighty crowded. Hundreds of different beers debut weekly, creating a scrum of session IPAs, spiced witbiers, and barrel-aged stouts scuffling for shelf space. For consumers, the situation is doubly confusing. How can you pick a pint on a 100-brew tap list? Moreover, beer shops are chockablock with pale this and imperial that, each one boasting a different hop pun. When buying beer, I can't count how many times I've assisted overwhelmed shoppers, playing the benevolent Sherpa in the wilds of modern brewing."

This paragraph is alarming. Scaring the consumer with too much variety is the classic mistake that the wine industry made in the 90s.

The old school craft brewers -- and by the way I can't believe I've been working in this industry long enough to call some craft brewers 'old school' -- are relying on their flagships to fund a crazy amount of esoteric brews. And now they're even changing their packaging. "'We've looked at our packaging for 20-plus years, and we felt that we needed to see something new,'" says New Belgium PR director Bryan Simpson to the magazine.

Continues Bon Appetit: "In California, Firestone Walker, Ballast Point, and Green Flash have freshened their face. Same goes double for Utah's Uinta, Pennsylvania's Weyerbacher, Indiana's Upland, and Scotland's BrewDog. In North Carolina, Lonerider and Natty Greene's have followed suit, while Minnesota's Summit recently altered its packaging for the third time in 28 years."

It is increasingly sounding like the mature light beer wars of the 80s and 90s. Remember? Create crazy line extensions like dry and ice, change the labels, up the alcohol content, then lower it again when you realize people drink less, and then try to be cool like Fonzie trying to waterski over a shark. Then when all of that fails, discount. Or build hotels. Or build a brewery in Berlin.

PBR is starting to get young drinker backlash. Is craft far behind? I actually don't think so, because I've never met a millennial who says, "Ya know, I've been a Sierra Nevada drinker for five years, but I'm going back to Miller Lite." No, craft beer, or at least flavorful beer, seems to be here to stay and growing indefinitely.

But it doesn't matter how fast the craft pie grows if the number of breweries and the beer they produce exceeds demand. And the only way to do that is to destroy wine and spirits. But mainly spirits. And a little wine.

The big question is who will control the market? A-B and MillerCoors are trying, Guinness is addressing it, Heineken and Crown too. Everybody has their craft competitor. But younger drinkers don't give a flip for mass media ads or big companies. Small and local is the new scale. And wholesalers benefit from selling more high margin beers, so the industry is, as A-B would put it in another context, pretty well aligned.

Proponents of endless craft growth point out that there are thousands of more boutique wineries that are solvent and presumably doing fine so why not several thousand more breweries. There are a few problems I see with this analogy: 1. small wineries sell their wine generally for much higher prices per bottle than the average small brewer, 2. small wineries are generally owned by super-rich doctors who invented the heart stent, so aren't really concerned about turning a profit, 3. Wine doesn't have a shelf life like beer, 4. Most small wineries are selling their product directly to the consumer via onsite sales and internet purchases, capturing the double margin.

Many small brewers have caught on to these last winery strategies and are selling beer through their onsite beer gardens and online. That's fine. But let us not forget that beer is heavy relative to its price, so internet shipping can eat into margins. Plus, local retailers really resent that a craft brewer has somehow skirted three-tier laws and is brewing, distributing, and retailing their beers.

The bottom line is that the beer industry is dynamic right now, which means fortunes will be gained and lost. Staying on the sidelines of the craft beer revolution is a death sentence. Craft and imports are the future of this industry, and are fast becoming the new thing. As I've said, Mexican imports are the new light beer, craft beer is the new domestic premium beer, FMBs are the new malt liquor, cider is the new cooler, and nothing replaces non-alc beer because nobody cares, least of all me.

Are there too many brewers? That's not for me or you to decide, but the market. But at some point people will gravitate back to their trusted brands -- and trust me those brands by no means have to be in existence right now -- but a few of those light beers will survive and will be looked upon fondly and may even become hip again. Just a wild prediction.


BATTLE TESTED BEERS

Kent "Battle" Martin is the equivalent of a big, burly bouncer to the beer industry. He stands in front of the TTB's proverbial door of approvals, eyeing an endless line of labels trying to pass muster. In fact, he has singlehandedly approved more than 29,950 beer labels this year, per report by Daily Beast. "Among brewers, he's a tyrant, a legend." DB writes. A legend.If you think the comparison isn't apt: Imagine a bouncer denying you access into a club because your shirt has a guitar on it. He thinks people could confuse you as being part of the band. That's what brewers are dealing with.

"It gets a little perverted sometimes in that it goes too far when [he's] looking to see if there's any possible way for the label to [mislead]... it's resulting in some perfectly good labels being rejected," Shelton Brothers chief Dan Shelton told the outlet.

Here are some arguments Battle has cited as reason for rejections:

He turned away "Adnams Broadside" beer because the brewer regarded it as a "heartwarming ale" and this implied a medical claim.

He prevented Ridgeway Brewing's Pickled Santa from receiving a label because Santa's eyes were too "googly." Obviously beer labels cannot advertise the effects of the product. A more sober-looking Santa later received approval.

He shot down a Danish beer label that contained a hamburger because the image implied there was a meat additive in the beer.

He said no to a brew that was promoted as an "India Dark Ale" because of the implication that the brew was produced in India. The beer clearly stated it was a "Product of Denmark."

The notorious nitpicker has become synonymous with the more anonymous TTB: If brewer's labels are denied they know their failure came from one man. Some curse his name under their breath; others realize how difficult his job truly is. "Being the nation's beer label reviewer is probably a hard job," said Robert Lehrman, a specialized lawyer in issues surrounding beverages. "Many of [the label approvals] raise difficult and inherently subjective issues about what is misleading, confusing, or obscene. He does not have the luxury of taking a pass, or saying the label is in the middle somewhere."

EVOLUTION OF BEER AT BALLPARKS

The Washington Post has issued a report on the options of beer at ballparks. The average Major League team this season is offering 50 different beers from nearly 25 breweries. New York's Yankee Stadium considered the worst by The Post carries only one BA defined craft brew, Yuengling.

Then there's the Seattle Mariners craft haven at Safeco Field. "70% of the field's 700 beer handles" are dedicated to "good, quality craft beer," said Steve Dominguez, the general manager of Centerplate's operations at Safeco Field. He added, "sales of craft-style products crush those of domestic-style mass-market beers, by a ratio of about 4-1."

Seattle's ballpark has even gone as far as investing in three cask engines this year so fans can purchase cask-conditioned ales throughout the stadium. Also available to Mariner fans are 22-ounce craft bombers from breweries like Pyramid, Oskar Blues, No-Li and Rogue. "At the end of the day, we have to put out a product our guests want," Steve said. "They want quality, they want flavor, they know what they want and they're going to get it."

Safeco also leads in amount of local beer. The ballpark offers beers from 20 breweries based in the state of Washington, the highest number of in-state offerings in MLB, according to The Post's data.

Other team's assortments of craft are up-and-coming likes the Cincinnati Reds' Great American Ballpark. From 2011-2012, (craft???) sales increased by 20%. From 2012-2013, they were up 47%. This spring the club opened the Red Brewery District, which houses an 84-foot-long bar with 50 plus taps, 20 of which are craft offerings. The District showcases local beers from Cincinnati brewers like Christian Moerlein, MadTree, Blank Slate, Fifty West, Rhinegeist, Mt. Carmel, and Rivertown and national options from breweries like Founders, Bell's, West Sixth and Great Lakes.

On single-day offerings, the Reds' selection of "distinct beers" went from 42 to more than 130, the most in the MLB. Craft sales skyrocketed, jumping up 363%. Despite the impressive entrance by craft, Bud Light is still the "biggest-selling" beer at the Brewery District. Stadium officials believe that Bud Light isn't losing sales to craft but rather craft enthusiasts are creating their own category.

"It's not the same people that are drinking Bud, Bud Light, Miller Lite," said Don Dierig, district manger for Delaware North Sportservice at Great American Ball Park. "It's more of a younger demographic, and that's what that younger demographic is looking for - things that aren't necessarily what they saw their parents drinking growing up, but more what's popular in the bars and restaurants they hang out in."

This season, both the Nats and Orioles presented 16-ounce cans of brewer Flying Dog's Snake Dog IPA. The nearby brewery produced the cans exclusively for the two ball clubs. Flying Dog also has a dedicated kiosk at Baltimore's Camden Yards. Flying Dog VP of Sales John Stolins said "the stadiums are now two of the brewery's top accounts, generating substantial volume... With people coming here from all over the Mid-Atlantic and even the whole country, it's definitely a chance to showcase your beer," John said.

New Belgium certainly recognizes the platform. They are present in half of all Major League parks. It's "a great sampling opportunity - a chance to reach thousands of fans in one swoop and put a beer in their hand," Jason Oziel, the brewery's director of national accounts, penned in an e-mail to The Post.

But even as New Belgium effectively penetrates the market. The titans of the beer industry remain in the limelight. Nationals Park holds the Miller Lite Scoreboard Walk, Arizona incorporates the Coors Light Strike Zone, and Milwaukee and Colorado play in fields named after Miller and Coors.

Those partnerships are "by far the biggest challenge in getting into any major sporting venue," Jason wrote. "That said, I think now it is easier than ever to penetrate those spaces simply because of the sheer amount of craft drinkers in the world today and the demand for craft beer. The consumers, in effect, are doing the work for us by demanding, and expecting, a better beer experience."

Nonetheless, most ballparks resemble the Nats Park where the majority of beer drinkers "definitely still want a Miller Lite or a full-calorie [domestic] beer," according to Jonathan Stahl, senior director of guest experience and hospitality operations. "I think we've found a great balance, to be honest," he said. "Those who want [specialty beer] know where to go to get it and are happy with it. And for everyone else, there are regular beers out there as well."

Until tomorrow, Harry

"To me, old age is always 15 years older than I am."
- Bernard M. Baruch

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