Sep 282017

In the summer of 2012, these pages ran a post on the coming tsunami regarding the number of projected new SKUs and craft breweries being constructed.  Now, five years later, it appears that the tsunami has blown itself out.

Last week, Brett Cooper, of Consumer Edge Reports, stated that SKUs have dropped from a high of 13,238 to 12,786, down -3.4%.  That is the overall number of all beer products being produced, and when one looks at the number of craft products produced, that translates to 9,021, this too a negative trend, down -5.7%, from a high of 9,537 SKUs.

Brett calls this drop “a period of rationalization” in beer SKUs which seems to be occurring across the board. The only exception is the economy segment, in which new SKUs are driving this division.

These recent reports verify what many industry pundits have been saying for some time, that the industry is on track for consolidation or even contraction.  More and more, crafts are not selling out, but closing down.  Many are actively seeking buyers.  Just this past week, the 29-year-old taproom, Pacific Coast Brewing, in Oakland, announced it was shutting down, citing uncertainty on future leases.

So the question is, when, or at what point, does a craft brewer call it quits?  Much, if not all, of the PE or even JV money has dried up.  This situation makes it even harder for even an established brewery to find an exit.

In last week’s post, we highlighted a market in Florida in which there are five craft breweries and taprooms, all five are unable to expand, and now actively looking to sell.  If the five breweries were to consolidate into one operation, that operation would be very successful.  Unfortunately, that scenario most likely will not come to fruition as the surviving brewery would not be able to handle the debt incurred in the purchase of all four breweries.

Consider how or what the buyer might do with their taprooms?  The revenue would disappear if the taprooms were closed; the equipment could be sold, but the building leases, if not leased, would have to be addressed.  There are simply too many moving parts.

This is not to say that if one or two of these operations were at the point of no return, perhaps some type of deal could be reached, but would that just be a short term remedy?  Two sick operations combined does not make a one healthy operation.

After decades of ownership, when a family-owned distributorship is sold, the selling family must deal with their emotions.  The same can be said of these brewery owners.  Investors want a return and are simply not willing to continue to reinvest in a craft that has hit a wall.  Many of these investors want out, and are willing to limit their losses in order to accomplish the exit.

The industry’s current situation has been forecasted for some time, and it appears this forecast is coming into fruition. Many now will say, enough is enough, now is the time to close the door.  The end for many crafts is inevitable.

The best way to guarantee a loss is to quit.



 Posted by at 1:15 pm
Sep 282017

To all BBUP readers:   I have experienced an unexpected technical problem with our site.  Unfortunately it will have to be rebuilt which means I will not be able to send out weekly blogs for about a month.  I am sorry this happened and ask all to be understanding until it is fixed.  You can still access all current and past blogs by just logging on.

Again, I want to thank all readers who have so kind to send messages and comments on BBUP posts.  Thank you,

Until later,


 Posted by at 7:30 am
Sep 192017

The stories coming out of Florida and the deep southeast following the devastation that Hurricane Irma caused, are similar to those from Texas and Louisiana following Hurricane Harvey.  Help is pouring in from all over the world and stories of people helping each other are populating the news.

What you are not going to hear about in the main stream media, however, is how the beer industry continues to do what it does best, help their local community in any way possible.  One such beer distributor, who will remain nameless for the purpose of this blog, exemplifies this philosophy of helping.

A distributor in a mid-size Florida market had, some years ago, built a hurricane-resistant warehouse that could withstand 150 mph winds complete with windows built to withstand 125 mph winds.  When Irma hit, he had approximately 100 people and 20 pets (dogs, cats, etc.) sheltered in his building. A building which did not sustained any damage, with the exception of minor damage to the fence around the building’s perimeter and some trees being affected.

And this is where the story becomes even more interesting. In this particular distributor’s market, there are five small, local crafts, all struggling to survive by dividing between themselves; the volume lost from the major crafts.  These little breweries could not expand their footprint without the resources necessary.  During the hurricane, one brewery, who lost all power, called our hero distributor, desperate for help.  It seems this small craft brewery had $15K worth of keg inventory which would go bad without refrigeration.  Our hero agreed to store the keg inventory for this small brewer, and even sent trucks to pick up the beer, virtually saving the brewery from the potential ruin that Harvey would have caused.

Another local brewer, who also lost power, had $300K of beer in their tanks and no generator.  They called the same distributor who, fortunately, had a commercial generator, and again, asked our hero distributor for help.  The generator was sent, on the distributor’s truck, complete with the distributor’s own electrician, to set up the generator and ensure this small brewer was going to be ok.  The owner walked out of the brewery with a set of jumper cables!  I bet that was a sight!  The electrician was able to set up the generator and save the liquid.

Not too far from this Florida town is another very successful brewer who self distributes.  This brewer, long known for its dislike of distributors, was also able to shelter a number of people in his building, but this brewer ran out of fresh water.  Knowing that our hero distributor had an inventory of bottled fresh water, the brewer called asking for help.  Without hesitation our man again saved the day and sent over his truck with four pallets of water.

Finally, the most amazing event is that in the city where this distributor is located, the city morgue called him asking for aid!  The city had no power and needed refrigeration for their corpuses.  The distributor sent over an old, but workable, draft truck which the city used to store the recently deceased!  Once the power was restored, the distributor thought it would be best to sell the truck.

No doubt the beer industry will continue to have its issues. If, however, there comes a time when the middle tier goes away, it will not be the beer industry that suffers, it will be the local community that will lose.  Distributors are the backbone to their community, and in a disaster; it is often the beer distributors that are the community heroes.

I say, find one true friend that will help you get through the tough times…



 Posted by at 6:00 am
Sep 122017

The University of Texas at Dallas, under the direction of Dr. Richard Harrison, is conducting a semester-long graduate study class on the Texas beer industry, with a focus on the state’s craft beers.  The class is a continuation of what many universities are providing for their students who are desirous in attaining an education and specific skill sets in the beer industry.

This graduate class is scheduled to have 11 guest speakers, three of whom are graduates of UTD and owners of local breweries.  I was honored to be Dr. Harrison’s first speaker and provided the class with the various models currently used in today’s industry, along with a history of beer and a study in how the industry arrived in its current-day state.

Over the years in the beer industry, the most frequently asked question I have receive is: “How big is the craft segment going to get?”  Since this was a class of grad students, the last question was: “If I was going into the business, what model would I chose?”

Instead of choosing the “hop-in-the-box” local brewery, I selected the role of a beer distributor.  After explaining the responsibility and function of a distributor, the class had a more clear understanding of what is required to run a distributorship.

A part of the discussion dealt with last year’s acquisition of Revolver by MolsonCoors and ABI’s acquisition of Karbach.  When comparing the two breweries, Revolver self-distributed and Karbach went with the ABI network.  Self-distribution can be very effective as the brewer recaptures the wholesale margin for themselves.  Though a self-distribution brewer can usually only go so deep into the market, Karbach, with the ABI network, had total market coverage.

When Revolver sold to MC, the first act of MC was to assign distribution rights to Andrews, the local MC distributor in DFW.  As you might expect, Revolver’s distribution and sales increased dramatically with Andrews’ assistance.

Karbach’s distribution was provided by the AB network and the results showed in the speed at which Karback reached 50K bbls. and continued to move upwards.  Revolver is now on track to have a similarly dynamic growth with the MC network.

Most of the students grasped the basic function of building a brewery.  The roll of the retailer is one that is also easy to understand and discuss, but delving into the middle tier becomes challenging in the explanation of the options a brewer has in getting product to market.

Explaining the different functions of the various distribution systems further compounds the clarification of the middle tier system.  For example, AB, MC, W&S, and indie craft function are all quite different. Once the students develop their business model and the components of their brand’s vision, then combining that with the distribution network, will aid the student in achieving their individual goals.

It will be interesting to see how the class finishes the semester and what the students learn from the various speakers.  I hope to have the opportunity to learn how they view the industry at that point and compare it to their views at the beginning of the semester.

By getting into distribution and production, I am widening my base…


 Posted by at 6:00 am
Sep 052017

In the summer of 1970, my second year as a helper at the Dallas Coors distributor during my college years, Corpus Christi and south Texas were hit by Celia, a category three hurricane.  Hurricane Celia, not unlike Hurricane Harvey, hit Corpus directly during the first week of August.  Damage, at that time, was estimated at just under one billion dollars.  All of Southeast Texas was shut down.

My fraternity big brother, who was from Corpus, had planned his wedding the second week of August in Corpus.  Earlier in the summer I had notified Willowbrook, the distributor, that I would need that weekend off to attend the wedding.  Than the hurricane hit.

The parents of the bride and groom were able to get the Holiday Inn, which was located on the beach, to open just for the wedding party.  Those in the wedding party were allowed to stay on the second floor, as the first floor of the hotel was flooded during the height of the storm.  Somehow, perhaps because of the use of a generator, we had electricity at the hotel, where the remainder of the city remained without power.

Since there was no Coors distributed in Southeast Texas, as Coors was only available in North Texas and West Texas, I loaded up my van with Coors and took off for Corpus Christi.  The National Guard were on every corner in town because the traffic signals were not functioning.  Remains of buildings and palm trees had not been pushed to the sides of some of the major streets, so we had to stop and get clearance from the National Guard at every intersection.  It took forever to get through town.

Other than those in the wedding party, the hotel and the beach were desolate. And like all hurricanes, Celia had cleaned all the trash and debris from the beach, which now was pristine.  We had the beach to ourselves, and with all that Coors beer, needless to say, the wedding went off without a hitch.  While the beer was much appreciated, finding ice to keep it chilled was another challenge.

In the wake of Hurricane Harvey, the beer industry, has mobilized on all levels, supplying everything from canned water, supplies, clothes, and even donations from all over the country.  From ABI to the small craft brewers, all are working hard to help in any way possible to provide relief for those who were caught in Harvey’s wake.

This level of commitment is not a surprise to anyone in the beer industry.  Wholesalers and breweries of all sizes have always been the corner stone of community involvement and support.  Hurricanes, tornados, earthquakes, or simply coming together to help in time of need, it is the beer people who step up again and again, without any hesitation.

When the rebuilding of Southeast Texas is well underway, and all the other groups have returned home, the beer industry will still be there, doing what is necessary to support their respective communities.  People can say what they like, but in these times of need, the beer industry steps to the plate, ready to assist.  That is what makes this such a great industry.

The hurricane flooded me out of a lot of memorability, but it can’t flood out the memories…



 Posted by at 6:00 am