Joe Whitney: There's A Lot of Good Beer Out There for $8.99

FILED MAY 10, 2017

Dear Client:

Continuing our chat with Sierra CCO, Joe Whitney from yesterday: Of course, we had to ask about pricing.

They've had a really tough year, due to the recall we covered yesterday. But they're not slashing prices to help them get back up. That bucks the trend: Almost every craft brewer that's up double digits among the top 25 beer vendors in the largest IRI channel universe YTD has seriously negative price per volume vs. YA trends. AKA, they're going down, in price or pack mix.

"We're definitely not thinking of going backwards," said Joe. He points to the phenom of craft 15-packs: Founders ushered in their popularity with All Day IPA. By now we've seen a rush of craft entrants, from New Belgium's hot, easy-drinker, Dayblazer, to even smaller brewers like Shipyard, Terrapin, Bronx Brewery and more springing the pack size. (Some craft brewers are going into even larger packs like Revolution [see CBD 05-08-2017], a phenom which we'll continue to cover.)

They're seeing significant reductions in price in their Cali Backyard. There's "a lot of good beer out there for $8.99 in 6-packs, and there's starting to be a lot of good beer for $7.99," said Joe. "The 15, 16 packs are literally going in -- in one day, [they're] taking 12-packs and making them into 15s." As we'll report elsewhere, there are something like 15 craft producers in 15-packs now, from virtually none about four years ago.

"I think with craft, the whole idea is you have better beer, and it's worth more," said Joe. "That's the whole idea of high-end beer. Trying to compete at a lower price is a vicious cycle. So we're holding, and we plan to hold."

Still: "If the whole industry goes down a couple bucks, we'll look. But our intention is not to go down." Still, the environment limits their ability to take price up.

ON-PREMISE: ROTATING IPAS Speaking of industry pressure points: The on-premise has been difficult for Sierra, too. Pale is being replaced a bit on- premise by a stable of their IPAs.

"Pale is our lead horse, [but] everyone wants to try IPAs. So distributors are replacing Pale with Torpedo or Tropical Torpedo, or our seasonal IPA, whatever. So we're doing more draft business, a bigger percentage, as rotational IPAs. The whole on premise for us is down, but a lot of our pale business has shifted to 'rotational' IPAs."

IPAs are still hot. Here's the scariest thing Joe's heard lately: He asked a beer drinker what their favorite beer was, and they said, "new IPAs."

Of course, another trendy style in craft is sour.

SO: WHAT ABOUT OTRA VEZ? With all the buzz around sours recently, Sierra had big projections for this brand a couple of years ago; the (really) optimistic projection at one point was that it could be a million case brand.

Well: It didn't hit initial targets. It's got a "great name," but they might have put the wrong beer in the bottle, Joe says. They're actually creating a new beer for that brand.

"We're gonna relaunch that with a new flavor," Joe said. "It's such an approachable, fun beer that many people tried it." But the gose style was a bit confusing for some.

"The most common negative feedback we received here was, 'That's the worst IPA we ever had,'" Joe said.

SKA UPS ITS BREWING CAPACITY BY 20%

Ska Brewing recently announced the expansion of their Durango facilities, for a 20% increase in brewing capacity. Total capacity is now 42,000 barrels. They're currently producing about 35,000 barrels a year.

"The new additions will allow Ska to expand offerings from their Mod Project brewery, the birthplace and mecca of its award-winning small batch beer creations, previously only available to craft beer lovers at Ska's World Headquarters," per communication.

GROWTH IN BACKYARD; SOFTNESS ELSEWHERE. We wondered if they were still growing in this difficult craft climate. A spokesperson told us they're still seeing growth in their immediate Southwest Colorado backyard. "But overall we've taken a bit of a dip YTD," she said. "That said, April is trending up - it'll be interesting to see how the summer goes."

MODUS HOPERANDI STRONG AT HOME BUT DOWN 15%. And what about their IPA flagship, Modus Hoperandi? "YTD it's down about 15% across the board, but once again it's staying strong and seeing growth close to home.

Until tomorrow,

Harry, Jenn, and Jordan

"Make friends first, make sales second, make love third. In no particular order." - Michael Scott

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