Lagunitas Files Against Sierra for Hop Hunter Mark

FILED JANUARY 13, 2015

Dear Client:

Kumbaya, nothin'. Twitter is showing excerpts of a suit Lagunitas has apparently filed against Sierra Nevada for the latter's "IPA" mark in its new Hop Hunter package.

"Lagunitas alleges @SierraNevada's #BeerCamp collabos could cause ppl to think Hop Hunter is a collaboration," New York trademark attorney Brendan Palfreyman tweeted. The brewery is reportedly seeking a temporary restraining order to prevent Sierra from selling the brand. They're claiming infringement, "unjust enrichment, and a claim for unfair business practices under California law #beerlaw." Tony apparently reached out to Sierra chief Ken Grossman before filing the suit.

Brendan posted pictures from a document filed yesterday with Lagunitas founder Tony Magee's name, claiming that "The all capital, large, bold, black "IPA" lettering in the Hop Hunter IPA design is the central and most prominent feature of the new design -- just like the iconic Lagunitas family of IPA trademarks." It addressed kerning similarities, too. Suit also mentions "an immeasurable blow to Lagunitas' reputation as a market leader." Document said distributors had expressed concern over the similarities, too.

Curiously, nothing on the @LagunitasT feed. Stay tuned.

EUGENE KASHPER ON THE NEW PABST ERA

Eugene Kashper definitely brings some nuance to the U.S. beer industry. He spoke with your editor yesterday at the Beer Summit (12th annual!) about his past, and the way forward for Pabst.

The new regime will be about organic growth which will require strengthening their sales organization and giving these brands some love. "We're the only top 20 brand that's just one brew," Eugene said. "I think we have an opportunity with Pabst to look at what was done pre-Prohibition, and make some great, authentic products," Eugene said.

"We want to enhance and premiumize our portfolio. We want to grow -- we're not looking for 2% growth. That's not going to be exciting." Strong words for an iconic brand.

EUGENE'S BACKGROUND. After college, Stroh's hired him in Eastern Europe. "When you're 23, getting into beer seems like the perfect business. I have to say I've never had any regrets. It's been 20 years. I love brands, I love selling beer." Eugene eventually founded and ran Oasis, which built 6 breweries and 23 distribution companies.

Fast forward: By the mid-late 2000s, they morphed into private equity with a focus on beer and beverage.. But in 2008, after three years of that, "I decided I don't want to spend my time turning into a private equity person - no offense to that industry," he said. "I wanted to just focus on the beer and beverage business that I love, and try to create something that will last for the long term."

Oasis is 7 years old and with the import component is the continuation of a business he started in 1995. "It might take 10, 15, 20 more years before one can really run ones business without fear of drastic regulatory or other changes in those [other] countries but I'm committed to sticking it out as long as we can perform. Pabst is no different."

SECURING PABST. Securing Pabst was a "pretty competitive process" Eugene tipped his hat to Dean M: "certainly he made the business more efficient and made a fantastic return." He also "did a great job of hiring people.").

"The goal was to purchase the company myself initially," Eugene said. "But then had a chance to meet people from TSG ... heard about their track record: Vitaminwater, Yard House, SweetWater. our partner Brian is here today, and I think that was a great fit. They have a history of partnering with entrepreneurs, where I'd have the opportunity in 5,6 years time to buy them out if the business is performing really well... and I think they added a lot of credibility to negotiate, work on financing, etc."

"WE'LL SUPPORT OUR DISTRIBUTORS." Having worked for Stroh's and his small import business in Russia (they did Heineken, Carlsberg, Corona, Red Bull), "our DNA is really importer/distributor," Eugene said, who praised the 3-tier system.

"We don't plan any major changes but we will always consider opportunities to strengthen and consolidate our network as the company has been doing in recent years." (That's how they went from 615 to 475 under previous ownership).

He pointed out Pabst has had four CEOs in 3.5 years, and none for past year. "My new colleagues tell me, 'just show up.'"

One distrib sent up a question during Q&A: Will inventory and logistical issues be solved? "Yes," said Eugene. "We can be different, think long-term, make sure our people aren't motivated to force you to take more beers, that nonsense. Our goal is to have the freshest possible beer, the least amount of beer on floor - involves us on IT front, [working ] with distributors ... might take a year or two but we aim to get there."

PABST BLUE RIBBON? EXPECT FOCUS, INNOVATION. "The first big change I'm focused on - we didn't have people focused on Pabst Blue Ribbon brand enough from a marketing standpoint. We really need to focus on that -- our core opportunity is gigantic. We're the beer of choice for craft consumers ... we're differentiated in how we market ... look at Pac NW, Williamsburg, Austin ... in certain geographies we're bigger than red Bud."

After Pabst they'll focus on their "local legends" brands: Rainier, Lone Star, Old Style, etc. "And there's the dormant ones. ... Our portfolio, not that long ago, if you took these brands together at one point of time was 45% of the U.S. market. So the awareness, connection is there."

WE'VE GOT CRAFT BRANDS, WILL BREW SOME "AT HOME." "I'd say my DNA is organic growth," Eugene said. "But these brands, the biggest thing is, we need to be a craft company. We're an independent, honest brewer, that's who we must be. We've got a lot of craft brands, we just need to prove it to people, by making some of the beer all these brands that we own made 30, 40, 50, 100, 150 years ago... we've got so much to work with there."

They're "very happy" with their brewing relationship with MillerCoors. "We have an efficient supply chain," Eugene said. "But as we start doing more innovative things, MillerCoors brewery is probably not the best place to do a tiny run of a Russian Imperial Stout." They'll still look to work with other people but also "plan to make our own beer, have some pilot breweries... ... go back to old the brewery in Milwaukee, make some beer. Go back to the old Jax brewery in New Orleans, make some interesting beer."

Any changes in distribution partners? "No, not at all," he said.

MORE ACQUISITIONS? "Right now so much work to do with our core brand, and with our existing portfolio," Eugene said. "But what I'd say is, certainly we're in a unique position, having 475 good partners... certainly we have a lot of relationships internationally with brands who I think would be very interested in working with us in the U.S. ..."

But when it comes to craft "we want to partner with local craft brewers. That's what Pabst is about. Being that 12th tap handle next to local and regional interesting craft. We don't necessarily have to buy something to work with people and help them develop their business further, enhance our portfolio ... we certainly would be open to such partnership."

TAX BILL? They're under the 6 million barrel mark, but don't expect them to join the Brewers Association. "I personally don't believe in subsidies for things that aren't absolutely essential for the citizens," Eugene said. "With all due respect to Steve [Hindy] who made a lot of good points yesterday - for my taxpayer dollars to go to subsidizing more guys having fun brewing as opposed to some other job, that doesn't make sense to me."

GUESTMETRICS: TRAFFIC UP IN DECEMBER, BEER PRICE/MIX TOPS, CRAFT AND PREMIUM LIGHT SHARE TRENDS MEETING IN MIDDLE

Traffic to the on-premise channel was up a strong 1% in the final 4 weeks of 2014, per GuestMetrics' latest. That vs. 0.7% for full year, with sequential improvements throughout the year. Casual dining traffic trends were best, up 1.7%; but even the embattled bar/club scene traffic rose, too, up 0.8% after declining 1.9% for the full year.

Chief Bill Pecoriello told the Beer Summit audience he expects Q4 gains to continue. "This is the best single month we've seen in years," he said of December. Easy comps, low gas prices and consumer confidence should carry it into Q1.

Beer volume was down 1.9% in the final 4 weeks, better than the full -3.4% trend. Price/mix was up 3.1% in the latest 4 weeks, vs. 2.5% for wine and 2.5% for spirits.

"For full year 2014, beer lost 0.7% share of units, wine was flattish at up 0.1% share and spirits gained 0.6% share of volume," company wrote. "On a dollar basis, beer sales lost only 0.3% share, wine lost 0.1% share and spirits gained 0.4% share."

CRAFT SHARE IS UP BUT PREMIUM LIGHTS MORE EFFICIENT. Craft share is still up, but mitigated as year went on: Craft gained 1.2% share in the last four weeks of the year, "much lower" than the full-year 1.9% share gain.

Premium light lost 1.5% share points vs. 1.9% for the year. Still: In casual dining and bar channels, premium lights are 5 to 8 times more efficient than imports and crafts.

Imports lost 0.3%, and cider gained 0.4% share in December.

BEER'S GOTTA WIN BACK DINNER. Dinner is about half of beer volume. But beers volume growth worsens as the day progresses, with volumes down 8% after 10 p.m. It's worst for premium lights, "with a concerning decline in dinner and late night."

Premium light has the highest share at late night, and craft has its highest share at dinner. Late night is where craft share falls off, and that's where spirits come in.

ANGRY ORCHARD'S GREAT SHARE GAINS. Speaking of cider, Angry Orchard's share gains last year equaled that of the next three brands combined.

Until tomorrow, Harry

"Formula for success: Rise early, work hard, strike oil." -- John Paul Getty


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