In terms of opportunities gained for breweries or lost for liquor stores, Colorado’s new beer sales laws have clearly had an impact on businesses’ strategies as explored in part one and two of this series. But what about styles and brands?
Until this year, chain stores were only allowed to have one designated location in the state where beer above 3.2% ABV could be sold, but things have since opened up in beer aisles across Colorado for both macro and craft companies. Some of the biggest breweries in the state (and the country) have used these new locations to boost sales, amidst declining figures in other areas.
The big—and unsurprising—story, when looking at sales of various beer styles this year, is that everything is down in Colorado liquor stores tracked by IRI, a market research firm that compiles scan data from grocery, convenience, and a variety of other outlets.
When comparing the first nine months of 2018 and 2019, declines range from almost flat, with variety packs having lost 2.3% of volume in liquor stores, to steep drop-offs like Pale Ale, down 25.5%. Other notables include Porter/Stout (-10.6%), Wheat (-12.5%), and Seasonal (-24.7%).
A higher-ABV style like IPA (-6.3% in 2019) is holding on a bit better, perhaps aided by the fact it's long been sold in liquor stores and ubiquitous among brewery lineups. These two things are helpful from a perspective of staying power (even if volume is declining). Along with the fact that IPAs have been responsible for much of craft growth in recent years, until 2019 breweries had the chance for a direct relationship with each liquor store owner, essentially by law—there was one beer license for one location. That meant brewery reps selling the country's most popular craft style had the opportunity to highlight their version for the person making buying decisions. Moving forward, these connections may mean more for stores looking to keep popular brands (and styles of IPA) in stock to keep customers coming back.
Cause for declines in all styles didn't necessarily come from any one brand, as some of the country's best-selling beers have mostly minimized losses in 2019. Pale Ale (the style), which had a drop of about 18,000 barrel-equivalents in 2019, losing 640 BBLs from Sierra Nevada Pale Ale, the best-selling brand in that style. However, 2,600 fewer barrels-worth came from Colorado's own Oskar Blues' Dale's Pale Ale, accounting for roughly 14% of the category decline in liquor stores.
One big addition to Colorado's IPA sales has been Founders’ All Day IPA, which has helped liquor store sales stay closer to flat. Now brewed in the state, thanks to an ownership agreement between the Michigan brewery and Avery Brewing Company in Boulder, the brand wasn't available until 2019, and sold nearly 2,800 BBLs through the first nine months of the year.
One significant change in liquor store sales has been a 20.5% decline in American Lager, which can be tied to shifts among the country's most popular beer brands. Bud Light (-26.9%), Coors Light (-22.1%), and Miller Lite (-20%) have had lower sales in those outlets than in grocery and convenience stores, as full-strength stock can be shifted into other locations, now with prime shelf space. Within the full array of grocery and convenience stores statewide, Bud Light (+59,821 BBLs), Coors Light (+48,382 BBLs), and Miller Lite (+15,975 BBLs) have moved big numbers in the first nine months of 2019 vs. last year.
A lone bright spot for liquor stores? Flavored malt beverages, which are up 50% in 2019 thanks to boosts from hard seltzers, which have played a key role in helping some retailers make up for losses in beer sales. The same can’t be said for Michelob Ultra, well suited to what’s consistently regarded as one of the healthiest states in the country. The rocket-ship brand gave up 20% of its liquor store sales in the first nine months of 2019 (about 5,100 BBLs), while selling just over 18,000 BBLs in grocery and convenience chains in the same timeframe.
Part of the difficulty moving forward in chain grocery and convenience stores may be finding a niche within shelf sets that are already in place. For some companies like The Post Brewing Company, which exclusively packages its American Lager, Howdy, there is an opportunity to sell a local, craft version of the country’s most-popular style, which is otherwise dominated by macro brands. Jason zumBrunnen, co-founder and brewmaster at Denver’s Ratio Beerworks, says that his brewery may follow that path with a similar beer, Domestica, and an IPA. One way to stand out would be with Dear You, a Citra dry-hopped French Saison that is the top-selling beer at Ratio's taproom.
"A niche is a niche for a reason, and we don't want to get stuck with it," he says. "But if there's an area where we could break in, it's with that one, when our number-one beer is already a niche beer."
Other ways to succeed could come from power in distribution. A company to watch is Breckenridge Brewery, which sold to Anheuser-Busch InBev in 2015 and has increased its production levels since that time by 37%, selling 95,000 BBLs last year. It grew its IRI sales in Colorado liquor stores by 22% in that same timeframe, and with access to in-state grocers and AB InBev's distribution network, netted 7,700 BBLs’ worth of grocery and convenience-store sales in the first nine months of 2019. Its Avalanche Ale (an Amber Ale) has led the way in those chain grocery and convenience stores, accounting for about a quarter of IRI-tracked sales.
At the same time, Breckenridge has also increased its sales in liquor stores this year by 6.4%, including significant gains for its Hop Peak IPA and Nitro Irish Stout, which also represent higher-selling brands in chains.
On the Brewers Association-defined “craft” side, Odell Brewing Company’s total production may have stayed flat from 2017-2018, but the brewery has since added just over 10,000 BBLs in chain-store sales through the end of September, while shifting/losing nearly 19,000 BBLs from liquor stores. It’s only behind New Belgium for the most sales in Colorado grocery, convenience, and other chain stores by in-state producers, and its 90 Shilling Ale and IPA are among the best-selling brands, too. Of note is that the brewery's flagship 90 Shilling Ale (a Scotch Ale) was outselling its #2 brand, Odell IPA, by a little more than 1,000 BBLs in liquor stores through the end of September. In grocery and convenience sales, the two were basically neck-and-neck.
“It’s fresh eyes looking at our brands,” says JR Wheeler, director of sales and a co-owner at Odell. “I don’t think we’re gaining a ton of new drinkers in Colorado, but the beer is being put in front of drinkers that maybe forgot about certain brands.”
Shoppers at liquor stores—before and after the new law went into effect—have an eye for the “hottest, newest thing,” he adds. Having dedicated shelf space at grocery and other chain stores with day-in, day-out restocking helps drinkers pay attention to Odell among a variety of options that have existed over the years.
“But we’re having a little better trend than competition in Colorado because we’ve been dedicated in both channels,” Wheeler says. “We want to make sure everybody can sell our beer well.”
Individually, four brands in particular stand out due to sales jumps from liquor to chain stores. Through the end of September, the four biggest discrepancies between IRI-tracked volume sales in liquor and chain grocery/convenience stores from in-state producers were:
New Belgium’s Voodoo Ranger IPA (#9 in liquor, #2 in grocery/convenience)
Breckenridge’s Avalanche Ale (#14/#6)
New Belgium’s Dayblazer Easygoing Ale (#17/#12)
Oskar Blues’ Can-O-Bliss Tropical IPA (#19/#11)
A variety of conversations with GBH prompted similar reactions from industry pros: even close to a year with the new laws, there’s still a lot to be seen. Talked about in terms as a “Wild West” or “novelty phase,” it became clear that more answers are likely in 2020 than 2019.
“There are people who are mobile canning, doing less than 1,000 barrels, and trying to get on shelves even though they once thought it was impossible,” zumBrunnen says. “My gut feeling is that long-term, this is just like anything else and it’ll sort out soon.”
That wait-and-see sentiment may only be relevant to breweries, however, as numerous liquor-store retailers in the state are already feeling the impact. Bruce Dierking, owner of Boulder’s Hazel’s Beverage World, is afraid that newly opened grocery store shelves will be biased towards AB InBev, MillerCoors, and their collection of craft brands—and that local breweries may be squeezed out and end up back in the liquor stores that got them to the point of retail sales in the first place. And when that time comes, there will likely be fewer locations due to loss of beer sales and closures, he adds.
“The market is going to come to rest over the next year or two,” he says, unsure of what the final shakeout may be.
There’s still certainty in the uncertainty, with breweries big and small finding new ways to think about one of the biggest and more progressive beer markets in the country. What that means for sales—and survival—is yet to be determined, and is evidence of an industry in flux, and in search of new and loyal drinkers.
A Mile High and Wide, Pt. 1 — Colorado Craft Finds New Sales in Chains, But Liquor Stores Suffer
Words by Bryan Roth