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Friday, August 17, 2007

Craft Brewing Sales Booming

The Brewers Association, which promotes the craft segment of the domestic beer industry, is singing a happy tune these days. They put out a press release and held a conference call for journalists yesterday to highlight the 11 percent growth rate during the first half of 2007 for the craft segment. There is plenty to celebrate.

Several companies are leading the charge for the craft segment. Boston Beer Co. is setting a torrid pace, up 24.1 percent, while the Craft Brands Alliance (Widmer Bros., Redhook, Kona and Goose Island) is up 11.8 percent and Sierra Nevada Brewing is up 10.3 percent. It is indeed a great time to be a craft brewer.

However, it is also a good idea to look around and see that with the growth are hints of consolidation among craft brewers, not just in terms of mergers, but also in the form of marketing and distribution clout. The big brewers are not satisfied to sit on the sidelines while small brewers tap the consumer trend for craft brews. The Craft Brand Alliance is an alliance because of Anheuser-Busch's investments in each brewery. Also, shelf space for smaller craft brands is under pressure from specialty brands from the major brewers.

The Brewers Association has a narrow definition of craft beer. They don't count Blue Moon Belgian White Ale (up 69.8 percent) or Leinenkugel Sunset Wheat (up 269.7 percent) because these brands come from large brewers whose core brands fall into the domestic premium category. Most consumers really don't look at it the same way. Some of the newly released brand from the breweries that are growing like gang busters, like Miller Chill and Landshark Lager, also fall outside the craft beer rankings. These are hot brands right now.

While it looks by all measures to be a record setting year for craft beer, the success of some brands may change the overall look of the market. Samuel Adams' success comes at the expense of others in the category. It is not necessarily bad that a brand like Blue Moon from Molson Coors is growing like a wild fire. It helps bring new consumers into the craft beer world. It also means that every six pack sold is a lost sales opportunity for a smaller company fighting for a place in a grocery store cold box or a tap at a local ale house.

Craft brewers are just going to have to do a better job at what they have been successful at during the last quarter century -- and they will have to do it with more competitors trying to do the same thing.

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