In part one of this series, we looked at some newly released sales data from market research firm IRI—which covers the entire first half of 2019—and examined the growth and impact of a variety of beer brands. In this portion, it’s time to focus on the breweries themselves.
These analyses of industry sales data are never complete without an appearance by Boston Beer, one of the most fascinating businesses in the game. It wasn't long ago that its flagship Samuel Adams collection of beers gave credence to the company name—but Boston Beer is quickly turning into Boston Anything Else.
Sam Adams has incredible on-premise reach through tap handles found all over the country, from dive bars to airports to movie theaters. However, IRI (which tracks sales in grocery, convenience, and other stores, like Walmart) does not record those on-premise sales. But as a percentage of IRI sales volume for Boston Beer, Sam Adams has fallen precipitously, and halfway through 2019 sold the smallest amount across the company’s four main families of alcoholic beverages (which also include Twisted Tea, Truly Hard Seltzer, and Angry Orchard Cider).
Now, as beer enters its biggest-selling season, Sam Adams is bound to see an uptick. Credit for that goes to Sam Adams Summer Ale, the best-selling seasonal brand for the company whose flagship "brand" is its seasonal SKU. In the five-year period from 2014–2018, Sam Adams' seasonal collection, as tracked by IRI, sold about 545,000 more barrels of beer in IRI stores than Boston Lager. Summer Ale also received a boost in 2019 thanks to new packaging and an updated recipe.
But the fall of Sam Adams highlights just how poorly Boston Beer has done with pretty much every product launch in recent years. Rebel IPA—the biggest (Brewers Association-defined) craft beer launch ever!—has largely been abandoned as sales have crashed following a peak in 2015. There's still hope for Sam '76, although, compared to last year’s debut, its current IRI sales are projected at flat or low gains for the year. When looking at the difference between sales in January–March vs. April–June (the latter of which is when numbers should really pick up), Sam '76 grew almost 8% in volume. By comparison, seasonal brands jumped 47% and variety packs were up 28%. Sam '76 was closer to Boston Lager, which increased sales by 5.2% from Q1 to Q2. (Despite these gains, Sam Adams is still on track to shrink in IRI sales this year.)
The only carry-over success right now seems to be Sam Adams New England IPA, which grew its quarter-to-quarter sales by 66% in 2019, and almost surpassed all of last year's IRI volume sales in just the first half of 2019. It’s going to be a big win for Boston Beer, but given the company’s past troubles, this success may be more built off pure inertia of its wide distribution footprint and significant placement, as well as more mainstream interest in the style.
Meanwhile, in pure dollar sales, Twisted Tea ($177 million), Truly Hard Seltzer ($125 million), and Angry Orchard ($109 million) all broke the nine-figure mark through June 30, while Sam Adams comparatively lagged behind with $99 million in sales.
All this may make Boston Beer’s purchase of Dogfish Head seem like an even better idea, thanks to the business acumen of Dogfish co-founders Sam and Mariah Calagione. Boston Beer's problem in recent years has been creating innovative products and maintaining customer interest: two things at which Dogfish Head excels.
If you're looking for another brewery that has fallen from grace, Constellation Brands' Ballast Point has had a hard impact. As covered on GBH in the past year, the closure of facilities and a brain drain of long-tenured staff have both plagued the California brewery, and its continued sales slide put a quantitative exclamation point on the situation.
As Ballast has tried to reinvigorate its lineup, a handful of brands have disappeared in a matter of two years. Big Eye IPA, Even Keel Session IPA, Grunion Pale Ale, Dorado Double IPA, and Sea Rose Tart Cherry Wheat Ale were all phased out last year: in total, a loss of about 7,000 BBLs of product from IRI grocery, convenience, and other stores. That's equivalent to the total production of Chicago's Off Color Brewing or Nashville's Bearded Iris Brewing.
With production and sales declining, the brewery is relying on Sculpin IPA (-5.2% in IRI volume in 2018) and Grapefruit Sculpin IPA (-5.6%) to lead the charge. Fathom IPA (a reformulation of Fathom India Pale Lager, which debuted last year), is #3 in IRI, and has arguably been the lone bright spot for Ballast Point. It sold almost as much in IRI stores through the end of June as the entire Allagash portfolio of beers.
But overall, problems continue to mount for Ballast Point, especially when the brewery is compared with Constellation's other two craft players: Funky Buddha Brewery and Four Corners Brewing.
Florida's Funky Buddha, which Constellation bought in 2017, only grew total production volume by 1% in 2018, to reach 32,000 BBLs. The company's IRI sales, however, jumped 55.2% thanks to the wild success of Hop Gun IPA, which doubled in sales, and record years for Floridian Hefeweizen and Pineapple Beach Blonde Ale. Those three brands continue to lead the brewery in 2019, with Hop Gun and Floridian Hefeweizen moving about two-thirds of their entire 2018 volume in the first six months of 2019.
There's even more excitement behind Dallas’ Four Corners, although the news of its sale to Constellation last year may have been greeted with a collective “who?” The brewery, which embraces Hispanic and American cultures, has shown strong growth since its purchase in July 2018.
Four Corners made 12,000 BBLs in 2018, but has a current brewhouse capacity of 25,000. By the end of 2019, the brewery is likely to at least double its IRI sales from just two years ago. Led by its Local Buzz Honey-Rye Golden Ale and El Chingón IPA, the company shows lots of promise for Constellation, which needs it after its $1-billion Ballast Point quagmire. Recently, the parent company was very open about why it eyed Four Corners in the first place.
“It’s a compelling opportunity for Constellation because Four Corners’ bicultural inspired flavors and branding capitalize on one of the hottest trends in beer—Hispanic influenced products,” Constellation president and COO Bill Newlands said in a release announcing the buyout last year, adding that Four Corners “embraces and reflects the diversity of its people.”
Of course it's not all doom and gloom for breweries around the country. Hell, there are even a few successful brands that aren’t IPAs, which are helping a variety of regional breweries navigate a time of transition and challenge for the industry. (But let’s be honest, IPA is still a big part of overall growth.)
In the Northeast, there's Rhode Island’s Narragansett Brewing Company, which has hovered close to 100,000 BBLs of production in recent years, but is set to take a step forward in 2020 with a new production facility and beer hall. Known for its price-friendly brands, the brewery grew 21% in the latest 52-week period that ended in mid-June, compared to a year prior. That growth has mostly come from its Lager, which increased its IRI sales 19% in that timeframe, and has accounted for 83.5% of the company's sales in grocery, convenience, and other stores through the end of June.
In Florida, Craft Brew Alliance's investment into Wynwood Brewing Company is paying off for both companies. After first selling almost a quarter of its business to CBA in 2016, Wynwood shifted production of its La Rubia Blonde Ale and Pop's Porter to CBA's New Hampshire production facility, in order to take advantage of its efficiency of scale. While the Porter is losing traction in IRI sales (it's on track to sell about half of 2018's volume), La Rubia has been a force, growing 53% from Q1 to Q2 in 2019, and setting a pace to double its IRI sales from 2018–2019. CBA bought out the rest of Wynwood last year, opening up the potential for even greater expansion, in addition to potential for eventual ownership by Anheuser-Busch InBev, thanks to an exclusive negotiating window which could result in the multinational’s purchase of CBA.
If you're looking for growth out west, pFriem Family Brewers is one to keep an eye on. The company almost doubled its total output from 2016–2018 while selling 75% of its product in its home state of Oregon. After edging close to 20,000 BBLs last year, pFriem will have a new facility opening next year that will increase its max capacity to 60,000 BBLs. IRI sales of its beer have already trended upward fast, more than doubling pFriem's total volume in the 52-week period from mid-June 2018–2019 vs. the prior year. Quarter-to-quarter growth in 2019 is up 186%, with big jumps from its top IRI brand, an IPA, and #2, a Pilsner. In the first six months of 2019, both have already far surpassed last year's entire sales output, with Pilsner (2.5 times more than 2018) and IPA (almost twice as much) flying off shelves.
Lastly, in an example of how evolving state laws can lead to real industry change, Oklahoma’s COOP Ale Works is picking up speed as it moves along on a $20-million expansion project in Oklahoma City. After own-premise sales of full-strength beer were made legal in 2016, the brewery saw an immediate 300% increase in on-site sales following the first three months of the new law’s implementation, and grew almost 33% in volume last year. The brewery's IRI sales made a "modest" 21% increase 2017–2018. Through the first six months of this year, its sales have already bested all of 2018's IRI output by 35%. COOP is on pace to more than triple its sales in grocery, convenience, and other stores alone. A big part of that is—you guessed it—the brewery's F5 IPA, which has long been among the best-selling, non-macro beers in the state.
Curious about what some of the most successful breweries’ sales look like right now? Here’s a look at some of the dollar sales figures from the collection of IRI-defined "craft" breweries which includes brands owned by larger corporations like Blue Moon (owned by MillerCoors) and Lagunitas (owned by Heineken).
Combined, these top-10 companies sold $987.5 million worth of beer through the first half of 2019. That sounds really impressive—until it’s mentioned that that tally isn't even as much as Michelob Ultra sold in the same time period. In fact, to match the $1.04 billion sold by Ultra in IRI stores only, you'd need all 10 of the brands in that chart, plus Elysian, plus another $12.5 million.
To put a bow on how much money that is, Michelob Ultra is on pace to surpass the $2-billion mark in IRI sales for the first time in 2019. Only three beer brands did that last year: Miller Lite ($2.01 billion), Coors Light ($2.3 billion), and Bud Light ($5.4 billion). Regular Budweiser, which last made more than $2 billion in 2016, is likely to miss that target again this year as it continues a downward trend in dollar sales.
This goes to show how important Michelob Ultra has become for AB InBev, and it also highlights the value of the company’s growing craft brands (even if it’s minimal when comparing dollar figures).
Of IRI's top-20 craft breweries, only half sold more than 50% of their 2018 IRI volume through the first half of 2019. (Caveat: July and August are two of the most valuable months for beer sales.) However, 10 also showed positive gains in the most recent 52-weeks sales period compared to the previous year:
Cigar City (60.9%)
Elysian (31.2%)
Founders (22.8%)
Karbach (20.7%)
Firestone Walker (20.6%)
Kona (11.4%)
New Glarus (10.3%)
Dogfish Head (9.2%)
Stone (5.6%)
Bell's (4.7%)
For AB InBev, Elysian and Karbach are clearly gems among the broader craft portfolio, which only grew a combined 1% in production volume last year, but that was because of the continued collapse of Shock Top brands. If you remove that family of beers, and average only the company’s 10 acquired craft breweries, 2018 total volume growth was 10.2%. Elysian has been driven by fast growth of its Dayglow IPA (57.5% growth during the above timeframe) and Space Dust IPA (up 37.8%). Karbach is led by its Love Street Kölsch (26.6%) and Hopadillo IPA (14.6%).
Part one of this series reinforced the literal value the IPA has brought to breweries. In this follow-up analysis, it was hard to get away from the idea that the style is the driving force behind the U.S. beer scene. While there are plenty of examples of non-hop-forward brands helping breweries grow, the power of the IPA is clearly pivotal to the industry, offering the country’s insatiable hop heads some exciting summer nights in 2019.
Part 1 — IPA—and Little Else—Stays Hot at 2019’s Halfway Sales Point
Words by Bryan Roth