Cemented on Top
The Brewers Association just released their annual list of the Top 50 craft brewers by volume for 2019. What used to be an exciting read each Spring has become a little less interesting as the years go by. Protecting one’s home turf, focusing on direct-to-consumer, and honing in on long-term profitability have replaced dreams of going national, or even regional in some cases. With industry growth teetering toward flat, these strategies have little to do with volume anymore. They’re what remains for smaller craft breweries, as far as opportunity and ambition. The breweries on the Top 50 list own the retail space where most shopping is done and the industry’s long tail is mostly content to let it stay that way. Couple this with the COVID-19 virus which is creating havoc in the US and eliminating the majority of draft beer sales for what I believe will be the majority of 2020. The upcoming year will see major shakeouts, but for the Top 50 who sell 90-99% of their volume through major wholesalers, they’ll remain even further:
In May, the Brewers Association will release the actual production data within that month’s issue of The New Brewer magazine. Until then, we’re just talking about rankings. Given the challenges the industry already faced pre-virus, it’s conceivable that there are breweries who moved up in the rankings in 2019 while producing the same or even less volume than in 2018, depending on how their neighbors fared. Join me as I run through the list, compare to 2018, and explain a couple things that jumped out at me:
#1 - #14: The USUAL SUSPECTS
The only movement taking place in this tier of OGs is Artisanal Brewing Ventures (ABV), a family office collective including Southern Tier, Sixpoint, and Victory, moving up one slot from #11 into Deschutes’ #10 spot. Both breweries produced over 300,000 BBLs in 2018 and were less than 3,000 BBLs apart, so this change doesn’t mean a whole lot with “ABV” having three different breweries/brands at their disposal. Otherwise, 2019 was a mirror image compared to 2018, for the top 14.
Worth mentioning is that Delaware-based Dogfish Head, which was announced to be merging with Boston Beer in May 2019 and closed in July 2019, remains in the #13 spot. When this list is released next year, Dogfish Head’s volume will be combined with Boston Beer (currently #2). Does this push Boston Beer into the #1 spot? Probably not, with Boston Beer trailing Yuengling by about 760,000 BBLs in 2018 and Dogfish Head making up only 276,000 BBLs. Though this is using outdated 2018 numbers and Dogfish Head has been growing with a lot of open runway created by the merger. With the disruption happening in 2020 as a result of the virus, all bets are off and it’s conceivable that Boston Beer makes a big leap closer to #1 in 2020.
Additionally, New Belgium’s sale to Japan-based Kirin was announced in November of 2019 and voted into place the following month. Unlike Dogfish Head, New Belgium’s volume won’t be combined with another craft brewery. Its new owner doesn't fit the BA’s definition of craft and thus, just under one million barrels will fall off the list completely.
So when the Top 50 is released next year, every craft brewery will theoretically move up two spots. Or will they? Read on…
#15 - 24: The Silent Assassins
There’s not a lot of action to report in the next tier down either, but a few that peaked my personal interest. It’s a tradition to never mention the Top 50 without bringing up how scrappy New Glarus continues to be. The entirety of their sales remain exclusively in the state of Wisconsin, which totaled nearly 232,000 BBLs in 2018, all while facing a barrage of new regional competition entering the state. New Glarus not only maintained their position in 2019, they inched up another spot to #15. Did they grow? We’ll have to wait until May to find out for sure.
While some breweries slipped a few spots, Fort Collins, CO based Odell Brewing climbed from #23 to #19. Having opened in 1989, which is a time period that you often see breweries struggling to stay relevant in 2020, Odell has done a nice job of going slow and steady while staying fresh, yet true to their identity. In 2015, the original owners sold 70% of the company to their management team and employees, then officially retired from daily operations this past January, per Brewbound. This type of long-term planning and slow transition is how you make a big change without missing a beat.
Back in February, I posed the question on Instagram of who would be the first national or regional brewery to distribute a Milkshake IPA. The divisive style is typically a fast seller for small, contemporary breweries, but caters toward a niche audience. I was quickly corrected by a few bottle shop employees that Odell was already widely distributing an approachable example called Cloud Catcher and to a strong reception. While I may want little do with the style myself, I always tip my cap to the brewers who aren’t afraid to go first in bringing an “underground” style to their wide audience.
Well that about does it for this tier…wait a minute. Who shut off the lights? Oh my gawd! That’s Ballast Point’s entrance music! Good gawd almighty!
That’s right. With the King’s and Convicts purchase of Ballast Point from Constellation having closed in early March, we can expect to see the San Diego-based operation back from the dead. The creators of Sculpin IPA will return to the Top 50 List next year joining 13 other California breweries. Their volume is the biggest mystery of them all, having peaked in 2016 at 431,000 BBLs but has been in free fall ever since, leading up to the sale. I’d expect them to land in this tier of brewers if they can stay north of about 90,000 BBLs in 2020, given all the draft beer losses that everyone will experience in 2020. The cut-off using 2018 numbers would have been 117,000 BBLs.
#25 - 50: Where the Action Is
This last tier is where the most jockeying for position takes place, but still not a lot of movement on and off the list entirely. These breweries vary greatly in their life cycle, but most if not all have zero expectations of ever growing toward that Top 15 level. At this point in craft beer’s evolution, pre-virus at least, advancing within this group typically comes down to how many levers you have left to pull.
Note: There was a change after the 2018 list was published that affected 45-50. These rankings reflect the corrected spots according to the data on the Brewers Association website.
An example of a brewery who pulled a few levers in 2019 was industry darling Allagash, who jumped modestly from #30 to #28. Moving up two spots in 2019 without an IPA is no easy feat. Aside from the endless list of things this Portland, ME brewery does well, they launched cans in 2019. With the rollout happening in stages across 2019, beginning in their Northeast footprint, the lift from cans will theoretically continue on into 2020 as the first full year of sales is registered.
More recently, Allagash doubled down by pulling the 12-pack lever, perhaps the greatest lever of them all for a craft brewery going for volume. A full year of 16oz cans and the addition of 12-packs should put Allagash in a strong position in the off-premise this year. I should point out though that Allagash may have the biggest keg (vs. package) disparity (as a %) of all of the Top 50 which means the bar/restaurant shutdowns could affect them more than anyone. Again, speaking in percentages only. So, go buy some Allagash White.
The last and probably most impressive upward trajectory that I saw on the Top 50 list is Three Floyds out of nearby Munster, IN. Since opening in 1996, until the last few years, their beer was mostly found in independent stores. Long-awaited expansions eventually got online and now their core offerings are becoming ubiquitous around Chicago leap-frogging them from #39 up to #31.
A move to cans in 2019 and entry into ballparks and venues, lead to the acceleration of stalwart brands like Gumball Head and continued dominance of Zombie Dust. With a modest 7 state footprint, Three Floyds has many levers remaining at their disposal with the coveted 12-pack still in their back pocket. What impresses me most though is how they’ve achieved the biggest leap on the Top 50 list with the most premium pricing in the Top 50. Their six-packs tend to land in the $13.99 - $14.99 range, so to pull that off without a volume pack, all I can do is 👏👏👏.
Wrap-Up
This year was set to be the most challenging that the industry has faced, even before the pandemic struck. The limited methods of selling beer now, which I expect to continue at least through Summer, will create a further separation between the Top 50 and the long tail, as each focuses in on their strengths. The large breweries will continue leaning on the power of their distribution partners and achieving volume by servicing their big box retailers. The small breweries will continue being nimble and creative, with laws evolving in their favor, helping drive margin over volume. While a more diversified business plan is preferred, focus is more important than ever right now. The real March Madness is upon us, but the strategy remains the same as always…Survive and Advance.