During the more than two years since the merger of Dogfish Head Brewery and Boston Beer Company, it’s the latter that’s hogged the spotlight with news of strategic partnerships with global beverage companies including Beam Suntory and PepsiCo. Meanwhile, the craft brewery from Milton, Delaware has been quietly aligning distribution with Boston Beer’s network while treading water for years in sales at grocery stores and other chain retail.
Since a national high-water mark of $77 million in chain retail stores tracked by market research company IRI in 2017, Dogfish Head’s sales have been down or flat year-to-year. In seeking to break that streak, the brewery is doubling down on its East Coast focus, delivering consumers more ABV bang for their buck on its core portfolio, and leaning heavily into canned cocktails to deliver stronger margins. The brewery is also rethinking some of its long-time tenets: namely, its above-mainstream-craft pricing and its wide lineup of one-off and seasonal beers.
For almost all of the company’s history, co-founder Sam Calagione promoted Dogfish’s high-end pricing strategy, which was to purposefully forgo discounts and maintain an average price above the brewery’s craft peers. But as Dogfish has been squeezed by competitors, that approach has started to change for the first time.
It’s a necessary adjustment. The summer represents the biggest time of year for beer sales, but Dogfish Head has been mostly flat off-premise for four straight Julys. Meanwhile, Boston Beer has cemented its future in non-beer products including flavored malt beverages (FMBs) and hard seltzers such as Truly and Twisted Tea. With Boston Beer’s Samuel Adams beers in decline—they make up less than 10% of the company’s portfolio in terms of dollar share—Dogfish Head faces a crossroads. It could become Boston Beer’s focal beer brand, or it could take a page from the parent company’s playbook and go all-in on its line of canned cocktails and other potential non-beer products.
In the most recent 52-week sales period ending Aug. 8, Dogfish Head’s portfolio was -6% in IRI-tracked retail while the craft category as a whole was +1.4 in those stores. Growth was negative for flagship 60 Minute IPA (-1%) and SeaQuench Session Sour Ale (-6.8%).
Dogfish Head co-founder and president Sam Calagione says moving forward, the brewery plans to focus on all options to regain growth. But what lies ahead will be a balancing act familiar to other legacy craft breweries: Become a more nimble, strategic national brand while maintaining relevance in an increasingly crowded alcohol market.
Though it’s a nationally distributed brewery, Dogfish Head sells 80% of its beer on the East Coast, Calagione says. The brewery plans to double down where its sales are strongest, a “Maine to Miami” territory that’s now physically bookended by the Calagiones’ cabin in Maine and a Dogfish Head brewpub in Miami that opened in May. The East Coast receives the full Dogfish Head portfolio, including seasonals and specialty beers, whereas markets west of the Mississippi River have begun to see a more limited range of beers, primarily 60 Minute IPA, SeaQuench Ale, Slightly Mighty IPA, Hazy-O! IPA, and a variety pack.
Given the competition for drinkers’ dollars on retail shelves, Calagione says Dogfish Head has to be “realistic” about where it can enjoy the biggest return on investment.
“We have to be more methodical and surgical and focus on further priority [brands] when we go west of Chicago,” Calagione says. “We can’t go west of Chicago the same way we can in our Maine to Miami footprint.”
Calagione says this reduction in the number of individual brands sold in western markets has been partially responsible for a dip in off-premise sales this July compared to last year. In July 2021, Dogfish Head sold $6.2 million in IRI-tracked grocery stores and other chain retail, compared to $6.3 million in July 2020 and $6.5 million in July 2019. But Calagione says the national figures don’t reflect strong sales at home: In July, he says Dogfish Head’s total sales (draft and packaged) were up +5.7% year-over-year on the East Coast, while overall craft category sales were negative during the same period. Given that a beer sold close to the brewery’s base in Delaware offers better margins than one sold in California—thanks to lower shipping costs and other inputs—Dogfish Head now looks to the East Coast not only as the company’s spiritual home, but as its core sales engine.
In this sense, Dogfish Head faces a damned-if-you-do, damned-if-you-don’t scenario: Reducing brands sold outside the East Coast has led to a dip in off-premise sales, but the brewery believes this streamlining is necessary to set up future success. Overall sales numbers for the rest of the year will deliver the verdict.
Dogfish Head is pivoting from its niche, craft past to seek mass-market appeal: It’s betting that lower prices on its core products will drive higher sales volumes. As late as 2018, Calagione warned of just this, telling Brewbound that pricing craft beer just a dollar or two more than mass-market beers could lead to the “commodification” and “homogenization” of craft beer.
So while Dogfish Head’s new pricing is counter to the brewery’s decades-long strategy, it may be necessary to drive the growth expected of a craft brewery within the Boston Beer Company.
Dogfish Head has historically had a pricing strategy that placed its products two or more dollars above other national craft brands like Deschutes Brewery or New Belgium Brewing. No more.
In an effort to pump up sales of its core beers and draw new drinkers to Dogfish Head, the company has, over the past few years, dropped the pricing on its mainstream offerings. In IRI-tracked chain retail, per-case average sales for the brewery declined from $49.65 in July 2018 to $40.69 this July.
That’s mostly a reflection of reductions in core beer pricing. While Hazy-O!, 60 Minute, Slightly Mighty, and SeaQuench are intended to price-align with other nationally available beers, Calagione says specialty Dogfish Head seasonals like Punkin Ale will continue to be priced at a premium. Additionally, some specialty offerings, like 120 Minute IPA, will keep commanding outlier-level prices: A four-pack of the 18% ABV IPA is priced at $41.99 on Drizly and $39.96 at Total Wine.
“We do look at: So what is New Belgium and Sierra Nevada selling at? … If we want to be a national brand, we have to allow our core to play in that competitive field,” Calagione says. “What we’re proud of is we’re able to play in that realm but bring exotic recipes into that national field.”
In terms of “exotic” recipes, he points to beers like Hazy-O!, an IPA made with oat milk, and SeaQuench, a Sour Ale brewed with black limes and sea salt. (Other breweries do make beers with similar, though not identical, ingredients.)
Among a wide field of local and national competitors, ingredients are an area in which Dogfish Head continues to stand out, says Jeffrey Karbow, district wine and beer manager for Brown’s Super Stores, which owns a dozen ShopRite and Fresh Grocer stores in the Philadelphia area.
“Dogfish Head has always paid really strong attention to the ingredients they use, so from a quality standpoint, they still have that perception among the casual drinker and the more mindful consumer,” Karbow says.
There’s another ingredient, though, that is becoming increasingly important to the beer shoppers Karbow talks to: the alcohol itself. That mirrors national trends in which higher-ABV beers are driving much of the growth for craft beer, even as some consumers say they’re more aware of calories and beer’s intoxicating effects.
Karbow says that in the Philadelphia area, 60 Minute IPA, which is 6% ABV, is priced at $10.99 per six-pack, just a couple dollars more than Bud Lite or Coors Light, which are 4.2% ABV. Craft beer drinkers he talks to are “absolutely” shopping based on alcohol content per dollar.
“If people are ABV shoppers, that trade-up of a dollar or two dollars isn’t as steep, so I think price-point wise, [Dogfish Head] is extremely competitive as a whole,” Karbow says. “If [breweries] look at the numbers and what’s going on in our market, the best SKUs are the 7% and above offerings.”
Dogfish Head has in fact looked at the numbers and reached the same conclusions about ABV and its influence on shoppers.
“[Hazy-O!] is 7.1% alcohol but it’s line-priced with our Slightly Mighty IPA at 4% ABV. So Hazy-O! really represents the best alcohol-to-dollars-spent to the consumer in the 26-year history of Dogfish Head,” Calagione says. A press release announcing Hazy-O!’s launch notes that it “drink[s] like a 5% ABV session sipper, instead of the 7.1% ABV powerhouse that it is.”
This straightforward discussion of the importance of ABV to consumers feels quite new coming from Calagione, who has historically touted Dogfish Head’s “better for you” ingredients and active lifestyle bona fides. In early 2019, Calagione told GBH that, “Right now, our goal is to be recognized as the number-one active, lifestyle-oriented craft beer brand.” But there’s no denying that for many beer drinkers, ABV is a priority, and Dogfish Head is introducing new packages to deliver elevated ABV in more affordable formats.
For example, Dogfish Head will in October launch $2.99, 19.2oz cans of 90 Minute IPA (9% ABV), which are targeted for sale at convenience stores and which Dogfish Head intends to price in line with 19.2oz cans of 60 Minute IPA (6% ABV). That’s the same price and package size as the country’s top-selling IPA, Voodoo Ranger Imperial IPA, which can be found on the same shelves and convenience store coolers.
The ABV bang-for-your-buck strategy carries over to Dogfish Head’s ready-to-drink (RTD), spirits-based canned cocktails, which launched across select Dogfish Head markets in February.
At 7% ABV, they’re higher in alcohol than category leader High Noon, which is 4.5% ABV. High Noon markets itself as a vodka-based hard seltzer, whereas Calagione says Dogfish Head canned cocktails aim to present “a mixology approach” to RTDs, with flavors including Blueberry Shrub Vodka Soda and Cherry Bergamot Whiskey Sour.
He sees the RTD cocktail category fragmenting the way the IPA category did years ago, into subcategories and ABV strengths for different occasions. Dogfish Head’s canned cocktails, at $11.99-$12.99 per four-pack, have a higher price per package than High Noon, but as with beer, Calagione bets drinkers will be willing to pay the premium for a higher alcohol content.
“Relative to the trade-up in alcohol per serving, they’re still a great value,” he says of Dogfish Head’s canned cocktails.
Priced at a premium for consumers, canned cocktails are also expected to deliver a shot in the arm to Dogfish Head’s overall sales. Calagione notes that Dogfish Head’s canned cocktails net 50% more revenue per case equivalent than its core beers, so the continued rollout of those spirits-based products represents “a strong growth moment” for the company. It also reflects the realities of today’s alcohol market and Calagione’s new take on premiumization, where cost, ABV, and popularity are increasingly interconnected.
Given Boston Beer’s prowess in non-beer beverages such as seltzers, FMBs, and soon, RTD cocktails, Dogfish Head should have strong support in expanding the reach for its canned cocktails. The two companies are still in the process of completely achieving efficiencies; Calagione notes that Dogfish Head is now 90% aligned with Boston Beer distributors nationally, up from 50% at the time of the merger. Yet that alignment has yet to pay off in the form of stronger sales.
Calagione says it takes time for a new distributor to cycle through the brewery’s year-round lineup and for those alignments to begin to show sales growth.
“It does take really a full year to feel like, alright, we’re family now and speaking the same language,” Calagione says. “It’s a massive sea change that we know is going to bear fruit in terms of our abilities to grow.”
But it’s been more than two years since the alignment process began, and Dogfish Head is still trying to find sure footing in terms of pricing and distributor network strength. Boston Beer is one of the most important craft breweries for many of its distributors (and likely the one with the longest relationship to those distributors), yet that influence failed to deliver a boost to Dogfish Head’s sales. A package redesign and a $2 million social media campaign last summer also failed to do the trick. Now, Dogfish Head will push one of its remaining levers: pricing.
Words by Kate Bernot