Regional Brewers Hardest Hit

Is there a formal (e.g., Brewers Association) definition for a brewery to be termed as “Regional”? @jesskidden

A brewery local to me of Yards Brewing distributes to 5 states (PA, NJ, DE, MD and VA). They have experienced consistent increases in demand for their beers so this year they are expanding into a new brewery (scheduled to open Oct. 2017). I have attended their annual Real Ale Invitational beer event over the past few years and every year you saw more and more fermenters in their brewery and apparently they have run out of room for installing more tanks.

At a recent German Beer event I spoke to a Yards brewer and asked if they intended to expand distribution to other surrounding states when the new brewery comes on line. He responded “no” to that question with a follow-up with “we can’t fulfill the existing demand in the states we currently distribute our beers”.

I enjoy drinking their beers and apparently they are doing something ‘right’ to have such consistent, sustained demand for their beers.

Here is an article discussing the opening of their new brewery: http://www.philly.com/philly/busine...s-year-after-closing-on-19M-loan.html?photo_2

Cheers!

 

I'm sure it's not as black and white as we'd like it to be, but I'll take a stab at it:

1. Redhook/Widmer/Craft Brew Alliance is now publicly traded. I suspect that making sweeping changes to product lines are viewed as risk. This risk is not within the shareholders appetite. Maybe they would rather try and keep the train moving at a declining speed vs trying a new train.
2. Maybe they see adding these other brands as reasonable moves to increase their product line depth. Plus they are getting 'sure things' that already have brand awareness vs trying out new concepts/styles/branding.

Just my opinion of course.

 

"Redhook" doesn't contract-brew brands like Widmer and Kona - it's all just one company, as noted on the link you posted:

"Join" a typical business-speak euphemism, CBA took full control of Kona - called its "wholly-owned subsidiary" below- in 2010.

http://craftbrew.com/2010/08/03/cra...-strengthen-partnership-by-agreeing-to-merge/

 

Most of the Regionals started as small local breweries. I think they can respect that. I think their views of the impact of ABI and its acquured craft breweries (and Blue Moon from MC) on taps and shelf space may be different.

 

I mean to put it another way, many people here are up in arms when local preference harms a regional - see a long thread of outrage about one mountain biker turning down SN - yet tend to downplay the threat to the Regionals from ABI''s moves.

 

From the linked article by the OP:

 

Agree, the excellent locals will either expand into regional (and then have target on their backs) or stay as a niche specialty beer maker for the long haul). Local guys pumping out inferior product at a premium price compared to most regional/national brewers will thin themselves over time out as well. Eventually over time, inexperienced craft drinkers will realize there is better beers at a cheaper price out there than what most of their trendy local brewers are offering.

 

I think we are witnessing the shakeout we all predicted would happen. To me shakeout is different than a bubble bursting/segment failing, as I see it as a natural process of beer consumers deciding what beers they like, where they like to drink and buy them, and how much they are willing to pay. I don't think American craft beer segment of the overall American beer market will ever be more than 15-20% of total beer volume, so we are rapidly approaching that capacity as craft brewers expand and open daily. Every segment from ABI to the 7 barrel brewpub is competing in this market and like any market, especially one that overall is contracting, not everyone will succeed. Those who over reach or fail to produce beer of quality or popularity will inevitably fail. It seems so far that every segment has acted in its own best interest with marketing geared to their budget and customer,and succeeded No matter how you look at it all is good for the craft beer drinker, and so far also for the craft beer producers, big, small, and in between.

Vinnie Cilurzo I think was prophetic and wise when he gave his reasons for not wanting to expand Russian River. It remains to be seen whether the big regionals, and the bigger than that independents who gambled on wide distro, will also be proven wise in the long run. My sense from the article is no, but the consumer is a fickle beast, as has been well pointed out.

 

I agree with most of this. In the rest of the world, top fermented beers top out at ~30% in the U.K. and Belgium. The US still has a ways to go. Over the years there have been times that the regionals in the U.K. and Germany have struggled, and some have closed (in the U.K. they will become pub companies, as that is more profitable than producing beer).

One strategy that I have noticed is what Oskar Blues is doing. They now have the base operation in CO, and have added breweries in NC and Austin TX. They have bought Cigar City in FL and Perrin in MI. Brewers have been traveling to run batches at different locations. This is the mini-Budweiser model, with breweries around the country to assure fresh beer.

Vinnie stated in a talk I was at that he wants the beer to be fresh. He also said he was debt adverse.

 

All of this.

And it's mildly ironic that whenever a beer is rated highly but hard to get, many beer nerds cum economists scream "expand", "increase production" because "capitalism" and "supply and demand", but now it's those breweries that did expand that are suffering at the hands of those same (fickle as you point out) people.

 

And those Oskar Blues breweries are in especially cool locations.

 

Correct, thank you for clarifying that they aren't 'contracting' for Kona and Widmer as they are all part of the same family. They are indeed contract brewing for other breweries not in the CBA, but they don't publicize those agreements that I can find. Not that there's anything wrong with that.

 

But you didn't mention the other non-CBA brewers' brands - you only mentioned "Widmer" and then linked to CBA's own page of their brands. I agree, CBA has contract-brewed beer for Pabst (Rainier branded), BJ's and Laurelwood (maybe others?). They also brewed some Goose Island brands when they were a partial owner of GI, before selling their share to AB when it bought the brewery from Hall.

CBA has also made use of contract-brewery, City's Memphis facility, for their own brands.

After the deal to sell the Woodinville brewery to Pabst fell through, CBA also announced they'd be moving their contracts out of City/Memphis and have part-owner Anheuser-Busch brew more of the CBA brands (as noted, they're already doing a few Kona-labeled beers).

From Brewbound, earlier this month:

 

New Belgium did not distribute in NJ, NY, or New England until last year. Metro NYC it over 20,000.000 people by itself. Now they are in all 50 states so their growth should slow down or stop now.

 

Yeah, I think they are doing well here in the Mid Hudson Valley, NY. Very well-oiled roll out, lots of hoopla and tastings, with a great price point into an area that has a rapidly growing fan base. The move into northeast opened a huuuuuge market. I am one who predicted they wouldn't do well here, too.

 

FWIW, CBA's Kona Brewery beers have had explosive growth over the last 5 years and that's where their focus is. Kona beers sell very well across the country and recently had successful tests in overseas markets (South America, principally). Production of Kona beers are taking up a very large portion of their brewing capacity in their WA, NH, and of course HI breweries.

 

Just to clarify, according to the Brewers Association the term Regional is defined by volume (vs. a region served)?

Cheers!

 

Mid-size regional breweries are definitely feeling the pinch as others described. I have little to add that hasn't been said already in the article or others here.

The only thing I will add is one could argue that the growth projections many companies made several years ago was overly ambitious, and some of these brewers probably should have been more cautious with investments, expansions, and taking on debt. Projections for overall craft beer market accurately predicted big growth (i.e. no industry-wide "bubble" some predicted), but I suspect many mid-size brewing companies incorrectly assumed there would be little to no shifting within that market. Several years ago many mid-size brewers had a lot of positive talk about "the rising tide that raises all ships," but clearly some ships are struggling to stay afloat. Any industry that consistently has double-digit growth percentages year after year is ripe for upset either by investments from big players or little guys. It's a little ironic too, that many of those mid-size craft brewers got their their start by upsetting the beer business in their own way, but failed to see or under-estimated the industry upset this time. In fairness, this is all with heavy benefit of hindsight and it's very easy to play the Monday morning quarterback here. I can't say I would have done anything different had I been in their shoes, it's just my amatuer observations.

 

The only thing I would add to the points already made is that I could see a number of small, "local" breweries being the next group to feel the heat. The "regionals" are feeling it now -- in many cases due to irrational exuberance and excessive debt -- but many locals are sitting on a similar combination. Not debt from expansion, but from startup...and exuberance not from overall industry growth projections but from entering into more and more local markets and distributor agreements and basing their projections on initial orders (which are typically large due to continuing interest in the new and shiny). Just think that the same deadly combination could have a similar effect on a smaller level. Many "local" industry folks I talk with find themselves in this situation and are already feeling the pinch.

 

Yeah, the Brewers Association just can't win. They screw up (and update) the "Craft Brewer" term, they stop trying to define "craft beer" and when they do borrow a traditional US industry term, like "Regional Brewer" they ignore the actual meaning of "regional":

So, New Glarus sells beer in the "region" of Wisconsin, while brewers like BBC and SN sell beer in the "region" of Maine to California - Washington to Florida +AK HI.

Here's one of my favorite stats from the immediate pre-craft era. In 1976 when there were only around 53 brewing companies left, Schlitz claimed there were only 9 domestic beer brands sold nationally and they had the most - 4 (Schlitz,Schlitz Light, Schlitz Malt Liquor and Old Milwaukee).

I figure the other 5 were Budweiser, Michelob (Busch Bavarian still regional), Miller High Life, Miller Lite and Pabst Blue Ribbon.

(Seems Carling Black Label would have been near national but there might have been some states they didn't ship to).