Blog Entries by Jeff Cioletti

Reverse Consolidation?

Category: General Blogs  |  Tags: beer, brewing, craft beer, brew

In the course of putting together our annual Forecast issue (the fun begins with the rather foreboding cover item on energy drinks on page 32), it’s often a tricky task to put a fresh spin on certain categories that, year after year, seem to have been performing more or less the same, give or take a volume percentage point here or there. And when the outlook for the coming year is for more of the same, it’s a mixed blessing: It’s a good thing because those doing the forecasting have a smaller chance of being wrong when performance has been so consistent and bad because those of us tasked with writing about such projections have to figure out a way to not keep repeating ourselves.

The category of which I speak, of course, is beer. To borrow a phrase from Led Zeppelin, the song remains the same: Beer’s going to keep losing alcohol share to wine and spirits, the overall market’s going to be flat or, at best, grow at a dying snail’s pace, but the craft segment’s going to continue to enjoy low double-digit growth in both volume and dollar sales.

However, a potential new twist on what’s happening in the market is that a strange dichotomy has emerged. At the top of the market, where the large multinational brewers roam (and on the distribution tier, for that matter— but that’s another story), consolidation is the driving dynamic. AB InBev is buying Modelo—a handful of years after InBev bought Anheuser-Busch to form the gargantuan entity we’ve come to know and love—Heineken’s expected to take control of Asia Pacific Breweries and there are always rumors and rumblings that AB InBev might even merge with SABMiller to give new meaning to the word ‘formidable.’

But on the small brewer side, domain of the crafts, you’ve got the reverse happening. There are already more than 2,100 small, independent brewers in the country, up several hundred from just a year ago. With more than 1,300 breweries in planning at last tally, that number could hit 2,500 in 2013. Sure there’s some consolidation happening with a couple of brewers here and there merging or giants scooping them up—à la AB InBev-Goose Island—but, relative to the number of newbies popping up, those instances are few and far between, the exceptions rather than the rule. It’s almost as if the market as a whole has gotten so consolidated that the pendulum has swung toward the exact opposite of consolidation, as far as craft brewing is concerned.

It’s a phenomenon that’s carrying over into spirits, as our November 2012 cover story could attest. It’s also happening in the non-alcohol realm among segments like artisanal sodas.

Will this reverse consolidation eventually slow down and become the reverse of reverse consolidation (aka ‘consolidation’)? Of course, that’s ultimately the market trajectory that history favors. However, 100 or so years from now, couldn’t the cycle start anew yet again? Even more recent history favors that scenario. It’s a pendulum effect and, pendula are, after all, controlled by gravity—a force not unlike consumer demand.

Sandy’s Big Miss

Category: General Blogs  |  Tags: water, bottled water

Unless you’ve been hibernating under your favorite rock, you’ll know the New York/New Jersey area—where our entire edit and art team resides—was hit pretty hard by Hurricane Sandy. I count myself among the extremely lucky. While many in my immediate neighborhood experienced catastrophic flooding and lost power for nearly two weeks, my home suffered little more than a 36-hour blackout (I was stranded in Chicago, as all New York-area airports were closed, so I ended up missing the whole thing). I was struck by the image of relief volunteers all over town lending a helping hand to those who needed it most. But you want to know what was almost as striking? The pallet loads of bottled water being distributed to those without potable running water. My parents and grandmother, who live about an hour away from me near the Jersey Shore, informed me they were living on—not to mention bathing in—bottled water for a good 11 or 12 days after the media-dubbed “Superstorm.”  

Why do I bring this up? Think about it. If the anti-bottled-water movement got its ultimate wish, the relief effort would be much more challenging, if not virtually impossible. The Red Cross and local volunteers may not have been able to do much for the power and heat situation, but they had the tools to tackle the water issue pretty quickly, with millions of bottles at the ready from the industry’s top producers. Now imagine a world without bottled water and the impact it would have on the victims of the storm. I’d rather not think about.

Look, I know what some people are thinking. Here’s a shameless PR statement from just another shill for the industry. But guess what. I’m a passionate environmentalist. The fact that we had such a storm is directly related to climate change, which many, for the sake of blind ideological purity, continue to deny. In my mind climate change, global warming, whatever you want to call it, is an undisputable fact. When you try to challenge science with spin, science will always win.

But my argument for bottled water has been one of convenience and, as Sandy has proved, sometimes of necessity. I have a Brita filter at home. I love my Brita filter. But when I’m not home I really don’t want to carry a thermos—the contents of which would be depleted pretty quickly, leaving me to find an acceptable water source with which to refill it. Anyone who’s ever used an airport water fountain or public restroom sink knows that’s not an easy thing to do. That’s when I’m buying bottled water. A lot of it.

I strongly believe that we need to reduce the amount of petroleum-based material in our bottles. I long for the day—hopefully just a few years down the road—when plant-based packaging becomes a mainstream, commercially viable option. But in the interim, bottled water companies have been among the first to innovate with lightweighting. More can be done, but it should tide us all over until bio-alternatives are the norm.

So when a storm, earthquake, mudslide, tornado or any natural or man-made disaster strikes, those advocating against bottled water must ask themselves this: What good is your Brita, now?

The Teacher Has Become the Student

Category: General Blogs  |  Tags: beer, brewing, craft beer, hops, beverage, alcohol, brew

My wife and I just went on what was quite possibly the best brewery tour we'd ever been on (and believe me, we've been on a lot of them). It was at London's Meantime Brewing Company, a 13-year-old craft operation that takes its name from the fact that it's situated in the chronological capital of the world, Greenwich.

When tour leader Alex (a quite dynamic guide) learned we were from the States he couldn't stop gushing about the U.S. craft beer scene and how the U.K. is about 15 years behind the American movement. Wait a minute. BEHIND? A great deal of American craft brewers took a cue from classic styles from Britain (as well as, of course, Belgium, Germany and the Czech Republic) when developing their own products. Beer travelers from the U.S. trek across the pond to drink cask-conditioned Real Ale. And a lot of the U.S. craft brewers offer cask versions of their own products, again a nod to the classic British tradition.

But now there are breweries like Meantime whose offerings are heavily influenced by the styles popularized by American craft brewers—those same styles whose ancestors were European and tweaked and reinvented over time. American pale ale is of course a descendant of English pale ale. The same goes, of course for American IPAs, which evolved from British India Pale Ales, which were more aggressively hopped and had a higher ABV to preserve them for the 18,000-mile pre-canal-era voyage from England to thirsty colonial troops in India.

The walls of Meantime's tasting room were filled with bottles from around the world with a disproportionately large section devoted to U.S. craft brews. Others visiting the brewery were eager to tell us how much they loved beers from the likes Brooklyn Brewery or Stone.

And it's not just the U.K. The brewing boomerang has flown back to Belgium as well, with U.S.-influenced styles like Belgian IPA emerging.

It's hard to believe that not too long ago Europeans considered American beers a total joke. But who's laughing now?

Fighting Words

Category: General Blogs  |  Tags: beer, beverage, alcohol, festivals

It’s time to tone down the language a bit. No, I’m not suggesting everyone’s got to keep their daily discourse airplane-friendly by filtering out expletives. I’ve been known to use a colorful metaphor or three from time to time (just ask anyone who works with me). What I’m proposing is that we take the inter-category smack-talk down a notch.

Last month at the National Beer Wholesalers Association’s 75th annual convention in San Diego, the usual hand-wringing over wine and spirits grabbing more and more of beer’s alcohol market share took place, but it seems like the verbiage being used in such discussions has been amped up quite a bit (and I’ve gone to every one of these conventions in the past decade, so I’ve got a pretty good personal history to draw upon). 

It was one of many topics of conversation on the panel of beer executives including Bill Hackett of Crown Imports, Luiz Edmond of Anheuser-Busch, Tom Long of MillerCoors, Dolf van den Brink of Heineken USA and, from the craft realm, Sam Calagione of Dogfish Head. 

During the course of the panel, I heard terms like “threats” and “adversaries,” being used to describe the wine and spirits categories. Pledges to “kick” wine and spirits’ “rear”—and less euphemistic terms—were hurled around. 

I get it, it’s a very competitive market place and competition is what makes the beverage and any other market great. But what’s being lost in all of the posturing and machismo is that fact that consumers, by and large really don’t care. There are actually very few drinkers of alcohol beverages that only drink from one category. Most are cross drinkers. I myself am a cross drinker. I’ve made no secret of my partisanship toward craft beer, but I do enjoy drinking a good glass of Cabernet, a single malt Scotch or a straight bourbon pretty frequently. I’ve taken personal trips to beer-centric areas like Belgium and Asheville, N.C. But I’ve also spent multiple vacation days in Napa. And I recently figured out how to make a pretty good mint julep (if I do say so myself), which has found a spot on my growing list of go-to drinks. 

The cross-category lines have blurred in distribution as well. Beer distributors increasingly have taken on products beyond their core segment, including wine and spirits. Look at a major wine and spirits distributor like Wirtz, which does some pretty healthy beer volume. 

In my cover story on the craft distilling movement, I talk to Rick Steckler of Click Wholesale, which has made a name for itself distributing beer and wine. With the privatization of spirits sales in the state of Washington, the company saw an opportunity to use its existing distribution infrastructure to excel in the spirits segment as well. 

I hardly think companies like Click or Wirtz are pitting one segment against another with such hostile rhetoric.

The mission of the Beer Institute has been to build “Brand Beer”—as well it should be because that’s within the organization’s purview. However, as an editor of a magazine that serves all drinks categories and as a consumer who drinks a little bit of everything I’m becoming an advocate for something more radical: Brand Beverage.  

The Festive Season

Category: General Blogs  |  Tags: beer, beverage, alcohol, festivals

Since the Great American Beer Festival is going on right about now (and I am happily among the 50,000 strong at the annual Super Bowl of beer in Denver), I’ve been thinking a great deal about the festival experience. And I’m not the only one: If you tuned in last month to our webcast, “Craft Beer’s Climb: Tapping Into Profit,” you will have heard panelists Irene Firmat (Full Sail Brewing Co.) and Dale Katechis (Oskar Blues Brewing Co.) share their own festival memories, both good and bad. 

The consensus seems to be that when brands are determining which festivals to be a part of, steer clear of the ones organized by opportunistic promoters looking for nothing more than to cash in on one of the hottest trends in the beverage business. Stick with the ones that have a proven track record or, if the fest is new to the scene, are run by organizations, individuals or groups that are reputable within the craft beer world (or wine, spirits, etc., if it’s a festival for one of those sectors).

You also can get a good sense of the quality of a festival just by looking at the quality of the attendees. Are they, by and large, aficionados/curious consumers looking to sample new offerings and enhance their beer education in the process or are they fratboy binge drinkers looking to consume as much volume as is humanly possible in the space of a four-hour tasting session? If the answer is yes to the former and no to the latter than it’s a pretty safe bet to align your brands with such an event. 

The events that offer the best experiences for beer drinkers tend to be the ones that sell out quickly and are talked up incessantly across social media. 

Then there are those that, in many ways, transcend even the best of them. It’s one thing to participate in a festival and connect face-to-face with your brand’s biggest fans. It’s an entirely different scenario when your brand IS the festival. That’s what struck me about this year’s edition of Brewery Ommegang’s annual Belgium Comes to Cooperstown, presented this past August on the vast, 140-acre grounds of the Upstate New York farmhouse brewery. It was the first time I had been since 2007 (having been in 2005 and 2006 as well) and the event was bigger than ever. Tickets always sell out in minutes based on reputation alone, and this year was no exception. Craft beer lovers make the trek into the countryside, turning the brewery property into a sprawling tent city for the weekend as they camp on site following the afternoon tasting session. Imagine that the brand profile you’ve created is such that—for a weekend at least—you don’t have to reach out to where consumers are; they come to you. And it’s also a testament to the dynamic of the segment you’re in that you invite 50 or 60 other brewers—what most would call “competition”—to sample their wares alongside your own. There’s a good chance that many of those visiting products might be superior to your own, but that matters little because A.) as the cliché goes (and as I’ve heard repeatedly from craft brewing evangelists) a rising tide lifts all boats and B.) everyone there knows it’s your house and your party. 

Now that’s what I call branding.