Yard House on Craft Trends

Dear Client:

Couple of weeks ago, we checked in with Yard House beverage director Greg Howard. As with many retailers, they’re seeing a slowdown in beer, too. Not so much with craft. Still, beer pricing is hurting all segments.

“Traffic is a bit slower and we’re a little down but we’re very optimistic about the remainder of our fiscal year,” said Greg of their overall outlook. “Beer is certainly a part of the downturn although it’s still a very healthy contributors to overall sales.” he said.

Still, they’re “seeing growing trends in certain categories,” he said, including IPAs, though he feels like “at some point we’re going to see retraction” there. The velocity of some brands, in fact, has been hurt by new SKUs.

But overall, their IPAs, wheat beer and imports — driven by Mexican lagers — are growing.

Asked how beer can put itself on better footing to compete with wine and spirits — particularly, spirits, which seems to be eating beer’s lunch — Greg has a clear answer.

“Price has been, in my opinion, the no. 1 driver of slowing beer sales,” he says. “Beer is supposed to be that approachable beverage from a pricing standpoint – but when some half-barrels can range up to $350 each, we can’t just charge $5 a pint. The guest ends up paying more, and drinking less beer in my opinion.

But Greg gets it: If you, as a supplier, don’t take price on your brand, your distributor may still decide to do so. That can be for your brand only, or for entire segments of their book — and that’s problematic, too.

Or: “If you’re a large distributor you may decide to take price on everyone’s brands across the board ” because one or more larger supplier partners did, as often happens, “that ends up hurting the supplier partners that didn’t want to take price and lose competitive advantage.” That’s part of the reason retailers end up paying $250 for, say, a half keg of double IPA, which “was not the case when innovators were first loading in those brands,” says Greg.

“I get it, labor is a constant challenge for everyone… but the prices we’ve seen go up over the last decade aren’t reflective simply of increases in the cost of doing businesses. A lot of retailers feel the same way. We’ve been pretty vocal with all of our partners about our concerns.” (Ed. note: The Albertsons guy expressed similar concerns last week at NBWA, for beer pricing in general, and we’ve heard other on-premise operators sound this alarm, too.)

And, he asks: At what point does a retailer simply stop buying some of the craft staples? If one of the top craft flagships, for example, gets up to $180 a keg … and 15 years ago that keg was $99 dollars, it’s gone up 80% over 15 years.

“That’s not just inflation,” Greg says.

YARDS OPENING 70,000 SQUARE FOOT BREWERY AND TAPROOM, COMPLETE WITH BREWERY’S FIRST KITCHEN AND CANS

This November, Yards Brewing Company will open Yards Brewery and Taproom at 500 Spring Garden Street in Philadelphia’s Northern Liberties neighborhood, a few blocks from the famous Liberty Bell.

The move represents a lot of firsts for the Philly-based brand, including their first foray into a full-blown taproom, which can hold almost 300 people. Yards’ current tasting room on Delaware Avenue hosts local food trucks, but there was never a kitchen.

The new brewery will have the capacity to brew 100,000 barrels. But Yards, currently producing about 42,000 barrels annually, won’t come close to putting out that number anytime in the future, Yards reps tell CBD.

NEW CAN OPERATIONS. According to the officially company announcement, this expansion and move from their “cozy” current tasting room “provides them with a new 70,000-square-foot facility to produce their approachable ales and lagers, with a canning line slated to arrive in early 2018.” That will be the first time they can their beers: Early next year, Philadelphia Pale Ale, IPA and Brawler will be available in 12-oz. and 16-oz. cans.

YARD’S FIRST KITCHEN. Chef James Burke, a James Beard Award semifinalist and prominent face in the city’s culinary scene, will helm the first kitchen in the brewery’s 23-year history. The bar will feature 20 total (Yards only) taps, including their Yards signature beers and a number of limited releases special to the taproom.

TAPROOM/BREWERS LOUNGE A GAMING CENTER DESTINATION. The new Yards Taproom and Brewery will offer 360 views of the entire brewing operation, from the new canning line to the state-of-the-art brewhouse, per official release. Adjacent to the taproom, the Brewer’s Lounge will feature a pool table, TV, dart board and shuffleboard.

AND BEER TO GO. At the forefront of the taproom stands a main bar, constructed from repurposed wooden bowling lanes. At the entrance, guests will be able to purchase Yards beer to-go and merchandise.

“At my age, if I make it up, it’s still an old saying.” -Robert Jordan