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

Gina Miller            and                Bill Keeper
GINA-

Hey Bill,  - I don't know if you feel the same about this as I do but when I heard it I got angry -
and you know I'm always so calm.  Here's the story. When asked whether or not the U.S. craft
market was reaching an “inflection point,” Anheuser-Busch InBev CEO Carlos Brito responded
by speculating that consumers might one day “get a bit tired of so much choice.” What?!?!

That sound bite — which was part of a two-minute long response about the growth of craft,
A-B’s activity in the segment and thoughts on how the category is continuing to evolve
eventually got picked up by beverage industry websites  igniting a hailstorm of hot takes in the
process.  And that didn't even include the steam coming out of my ears.

I would have been much more forceful but as you can guess I agree with  Brewers Association
CEO Bob Pease, who responded to the suggestion that consumers are inundated with too
many craft brands with a column titled “Big Beer Doesn’t Think Choice Matters. They’re
Wrong.”  Straight and to the point. Pease went on to characterized Brito’s statement as “a
hypothesis being willed into existence for the greater good of one brewery.” Now he's talking
like I would   However Mr. Pease neglected to mention some of Mr. Brito's other comments.

The notion that consumers are overwhelmed with too many choices really wasn’t the point in
the rest of Brito's comments.  What he was also trying to drive home were things about   
wholesaler and retailer pushback on the amount of craft SKU’s they are able to carry.  And
that's important because  now were talking sales that enable a craft brewer to survive.  Brito
said that “Customers began to realize some time ago that there’s a large assortment; there is
only so much shelf space that you can share and cold box that you can split,”  He went on to
add: “In terms of craft, I think it is too early to call, What we are seeing in some customers is
that there is some kind of thinking, at this point, about how much more of an assortment can
you carry.”

That part does sound dangerous, doesn't it Bill?  Even more so when you realize that Brito isn’
t the first beer executive to call attention to the overwhelming amount of craft products flooding
the market which to me is a good thing for we drinkers but maybe not for brewers.  Just last
month, Jim Koch, the founder of the second largest BA-defined craft brewery, Boston Beer,
responded to a similar question saying the craft beer market was “confused.”

I'm a simple person.  I like choice.  I like trying new beers.  Choice in anything is good.  As I see
it the only danger in too many craft beers in the marketplace is that the bad ones will fall by the
wayside and there's nothing wrong with that. Competition brings quality and that's what craft
beer is all about.  I can't say the same for Mr. Brito's products.

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

Hello Gina -  Really interesting topic you picked this month.  I can appreciate that some even in
the craft community believe we consumers have enough variet and that adding more craft
products first, won’t increase anyone's total sales and secondly, may decrease them by creating
a more difficult choices for the consumer which might mean losers all around.  Like it or not the
fact is that both on-premise and off-premise retailers are cutting SKUs in an attempt to rationalize
the category and make it more shoppable (is that a word, Gina?)

By the way for readers who are unfamiliar with "SKU" in the consumer goods industry, it's an
abbreviation for stock keeping unit, which is just a very basic way of referring to a specific brand
and package combination. In the beer industry, a brand would be Sand City IPA. A package
would be a six-pack. A SKU would be a Sand City IPA six-pack, and it is assigned a specific bar
code for scanning at the supermarket.   There were over 11,800 SKUs in the beer marketplace in
2015. That is a lot by any standard.

In that light I can understand if some distributors don’t really want to take on anymore brands.
Even some of the most acclaimed breweries are having a tough time getting a position in a
distributorship. You can philosophically blame the three tier system all you want but that's the
playing field we're dealing with.

And the vast acceleration of SKUs is not the only change. We have seen it go from an industry of
4,000 distributors and 100 breweries selling 100 million barrels a year to an industry of 1,000
distributors and over 2,500 breweries selling over 200 million barrels (a barrel is the equivalent of
two kegs, or 31 gallons). The top five brewers and importers currently sell over 90 percent of
industry volume. The remaining 2,500-plus brewers share 10 percent. We have gone from a very
limited number of SKUs to over 8,400. Meanwhile, as large grocery chains and big-box centers
like Wal-Mart and Costco gain more and more of the nation’s grocery sales, we’re seeing a
reduction in the number of independent outlets as well as a reduction in the number of bars.

Another of the major bottlenecks in getting all those delicious brews you and I love into the
consumers’ hands is the limited refrigerated shelf space in supermarkets and convenience
stores. And remember, keeping all the beer on the shelf fresh and rotated is an additional
challenge.

And think about this, Gina - It’s not just the explosion of new brewers and brands coming down
the pike to watch out for, but also the amount of brewing capacity that is being built.  In the long
term, it might mean many breweries will start losing money. The result then will be a  flood of bad
or old beer showing up in the market. It happened in 1998. Will it happen again? It all depends
on whether beer demand keeps up with the fast pace of supply.  But on the bright side, the facts
as they are today suggest that,consumer demand for local, tasty, hand-crafted beer will meet or
exceed supply. So far, so good.


Here's looking at you Gina
Round 62
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