She said.......
It's about the beer
                            He said........

Gina Miller            and                Bill Keeper

Hey Bill,  
I recently read that the folks at the Brewers Association (the craft beer industry group) are
hopping to achieve 20% share of the beer industry by 2020. Needless to say that would be
great for we who love great tasting beer.  However It's how they get to that point that should
concern us.

Now before you call me a worry wort give me a chance to state my case. As the Brewers
Association reported during its Craft Brewers Conference in Portland, Ore., craft beer now
accounts for 11% of U.S. beer sales by volume and 19.3% of beer sales by dollar value. So
when they talk about that 20% share in five years, they're looking for volume and they clearly
state there's no reason that kind of growth shouldn't be possible.

Bill, think back three years -  craft beer's market share was only 6.5% by volume.  Surprised?
That's means we've seen about a 4.5 percentage-point swing in just that short time. Ah, but
there's a rub in the statistics. It took some tweaks to the Brewery Association's definition of a
craft brewer to make that amazing number happen.  In 2010, the BA tweaked its definition to
change the production limit for a craft brewer to 6 million from 2 million to accommodate
Samuel Adams brewer Boston Beer. Then, last year following that somewhat controversial
precedent, they  it changed the definition again just to include Yuengling, August Schell,
Minhas, Strautb and other brewers once banned for brewing with corn, rice and other
forbidden adjuncts.  Are you starting to smell something too, Bill?

That said, the Brewers Association has also trimmed its ranks in recent years because of less-
flexible portions of its craft brewer definition. Widmer Brothers Brewing of Portland, Ore., and
Redhook Ale Brewery of Woodinville, Wash., were kicked out of the BA and stripped of their
craft status after forming the Craft Brew Alliance and selling a 32.2% stake to Anheuser-Busch
InBev. That exceeded the 25% stake BA deems acceptable for ownership “by an alcoholic
beverage industry member that is not itself a craft brewer.” Chicago's Goose Island lost its
craft status when it sold to ABI in 2011. It was followed by Patchogue, N.Y.-based Blue Point,
Bend, Ore.-based 10 Barrel and Seattle-based Elysian, which all sold to A-B last year.
Meanwhile, Grand Rapids, Mich.-based Founders was removed from BA membership this year
after selling a 30% stake to Spanish brewer Mahou San Miguel.

That's just the consolidation BA doesn't approve of. Within the past year, Lakewood, N.Y.-
based Southern Tier, Atlanta-based Sweetwater, Salt Lake City-based Uinta and Hood River,
Ore.-based Full Sail all sold portions or controlling stakes to private equity companies. And
more: Seattle's Pyramid Brewing, Burlington, Vt.'s Magic Hat, Bridgewater Corners, Vt.'s Long
Trail and Salt Lake City's Utah Brewers Cooperative are all owned by private equity firms.

So my question is how real is this growth and is it the type of expansion that will untimately
bring about the demiste of the true craft beer movement?

That's it from me, chug-a-lug, Bill.....see you next time.

Hello Gina, I can't believe you don't have an ulcer yet.  You worry about so many things.  At the
risk of getting you even more upset you left out a few breweries on you list of sell-outs: Seattle's
Pyramid Brewing, Burlington, Vt.'s Magic Hat, Bridgewater Corners, Vt.'s Long Trail and Salt Lake
City's Utah Brewers Cooperative are all owned by private equity firms.  And these firms have  
been taking a more active role investing in breweries, if not outright buying. Boston-based
Fireman Capital, which already owns the Utah Brewers Cooperative and its Wasatch and
Squatters breweries, teamed up with Longmont, Colo.- and Brevard, N.C.-based Oskar Blues to
buy up small breweries. They bought their first brewery — Comstock Park, Mich.-based Perrin —
just last month.  Whew.

And there's more (are you sitting downGina?) Harpoon Brewing founder Rich Doyle teamed up
with Abita Brewing and private equity firm FFL to form Enjoy Beer, which intends to buy faltering
breweries as early as this year. Enjoy Beer was the subject of some criticism at the Craft Brewers
Conference. Joe Bisacca, co-founder of Elysian Brewing, told the audience at a regular
informationall session that  part of the reason he sold his brewery to A-B was to beat the rush.

“What if 150 decide to go at once?” he said. “Anheuser-Busch is still buying breweries, but they'll
buy like eight.”

The sheer number of craft breweries, and the number that could potentially be looking to sell, is
part of the problem that we both see. It's hard to imagine that just 10 years ago, there were little
more than 1,400 permitted breweries in the U.S. That number has jumped to 3,418, with 2,000
more in the planning stages. About 90% of the breweries in existence make roughly 1,000
barrels or fewer. Still, that made overall craft beer retail sales grow  to $19.6 billion.  But before
you get to misty eyed please note that it's the larger, upper-tier brewers including Boston Beer,
Sierra Nevada, New Belgium and, now, Yuengling that account for much of those sales.

It's money from the big guys like these that's helping pay for new BA initiatives such as its
recently hired Washington, D.C., lobbyist, who'll be pushing craft beer interests such as the Small
BREW Act legislation that would provide tax cuts for craft brewers fitting BA's new definition. It's
also those brewers who may speed consolidation along, as Boston Beer did when it bought the
Angel City and Coney Island Craft Lagers brands.

While roughly 1,400 craft brewers exist as locally based brewpubs, that still leaves nearly 1,900
small brewers in the market. With more than 115,000 jobs to its credit and only 46 of its
breweries closing last year, craft beer might be loath to let its presence dwindle. Take heart Gina,
for we consumers that could mean a lot more beer brands under one roof. Still I know that craft
beer loyalists like us get a chill looking at Anheuser-Busch/InBev's  portfolio, which includes
Goose Island, Elysian, 10 Barrel and Blue Point next to Bud, Bud Light, Michelob, Shock Top,
Stella Artois, Beck's, Leffe and Hoegaarden. Yes, there's a strong chance that a big part of craft
beer's 20% market share in 2020 includes bigger craft brewers with portfolios akin to A-B's.

The ramifications of that are not good but look on the bright side, it will give us material for many
a future article.

Here's looking at you Gina
Round 45