(Hayward, CA) – Buffalo Bill’s Brewery issued a recall today for Buffalo Bill’s Orange Blossom Cream Ale sold in six-pack bottles.

The recalled product was shipped between January and July 2011. The company has issued a nationwide recall for all Buffalo Bill’s Brewery Orange Blossom Cream Ale.

The product is being recalled because contents of several bottles have been found to be fermenting, which causes additional pressure in the bottle. This may lead to sudden popping of the cap or rupturing of the bottle, which could pose a hazard from breaking glass. Immediate and careful disposal of the product is warranted. People who have already consumed the product are not at risk of illness or bad effects. Consumers may receive a full refund for any unused product by calling toll free at 1-(855)-890-3290.

Buffalo Bill’s Brewery has taken corrective action to prevent future occurrences. The recall does not affect other bottled or draft products from Buffalo Bill’s Brewery. For more information, please call 1-(855)-890-3290.

(Portland, OR) – Profit was up big for Craft Brewers Alliance in the second quarter with the sale of its hefty stake in Goose Island but the real story is always in the barrels. Let us take a closer look…

Total shipments topped 191k barrels for the second quarter, up nearly 12% from the second quarter of 2010.

Remember when I hinted that Kona Brewing may actually pass RedHook Brewery as the second largest CBA member this year?

Well, it’s already happened. Through the first half, Kona shipped 90.6k barrels of beer to 89.5k Redhook’s barrels. Kona shipments grew 35% in the 2nd quarter and have grown 41% for the year so far. The majority of that growth is coming on the off-premise side.

Kona may even win the race to be the next small brewer to hit 200k barrels, passing Bell’s, Harpoon and Boulevard who were each around 150k barrels produced in 2010.

Solid all around for Kona once again…

How about the other two members of the Craft Brewers Alliance? The first quarter that we’d see some results from the mega re-branding efforts that launched early this past spring…

RedHook had an improved quarter, up 4.4%. Widmer Brothers was down 5.1%.

Off-premise growth for both breweries was steady, if not improved in the case of RedHook, but draft sales are declining. Widmer draft sales alarmingly sank 11% to just over 33,000 barrels. Recall that Widmer Brothers was a draft-only brewery through 1995. Draft sales are down to their lowest mark for Widmer Brothers since 1992 when it produced just shy of 30,000 barrels (Modern Brewery Age Year-in-Review 1993). Almost two decades.

All in all, some troubling numbers considering selling, general and administrative expenses rose 41% for the quarter.

On the bright side, CBA did trim cost of sales by nearly 5%.

As far as individual brands go, some recent Symphony IRI data (courtesy of Modern Brewery Age) breaks things down even a bit further.

Year-to-date through June 12, Kona Longboard Lager emerged as one of the nation’s top 100 brands in the food channel with 53% growth. Long Hammer IPA has been doing well for RedHook, up 5% in the same channel. On the flip side, sales of Widmer Brothers’ flagship brand, Hefeweizen, are down nearly 8% across all channels for the four weeks ending July 10.

The next plotline? It is not a matter of if but when does Kona overtake Widmer Brothers as the largest member of the Craft Brewers Alliance. If these second quarter numbers are any indication, 2012 isn’t out of the realm of possibility.

(Leuven, BELGIUM) – AB InBev has released its second quarter earnings results.

The full 25-page press release is available here (pdf). I’ve grabbed management’s comments on the U.S. market and pasted below…

• Volumes: Industry volumes in 2Q11 were impacted by poor weather, especially in the center of the country, and high gas prices. However, gas prices have moderated in recent weeks and the industry has benefited from good volumes during the Fourth of July holiday period, with IRI reporting industry beer volumes up 1.4% in the combined food/drug/mass/convenience channels in the four weeks ending 10 July. Own beer shipments in the quarter declined 1.7% and sales-to-retailers (STRs) fell 3.4%, while in HY11 own beer shipments were down 2.5% with STRs declining 2.9%

• Bud Light growth: Bud Light gained market share in 2Q11 and HY11. Key brand health indicators continue to improve, and accelerated growth remains our number one priority in the United States. Share growth was supported by the “Here We Go” campaign, innovative packaging (“My Bud Light” label) and a strong digital program. Looking ahead, we are pleased that the NFL owners and players have reached an agreement for the coming season. Our plans are in place and we are excited by the first year of Bud Light sponsorship of the league

• Budweiser stabilization: As we have previously said, we are taking a systematic, long term approach to stabilizing the brand in the United States and are pleased to report that we continue making solid and steady progress:

• Share declines continue to decelerate. According to IRI grocery and convenience store data, Budweiser cut its market share decline to 0.3 pp for the month of June
2011 from 0.8 pp in June 2010, on a rolling 12 month basis. More significantly, Budweiser share has been flat on a rolling 12 month basis since January 2011

• Brand health continues to improve and in June 2011, Budweiser brand volumes grew in 23 of the 50 states. This resulted in the best half year volume performance for the brand in 11 years

These strong results have been driven by a series of initiatives which began in 3Q10, including, most recently, a system-wide execution focus from Memorial Day through the Fourth of July holiday. During this period, Budweiser’s innovative limited edition patriot can, “Here’s to the Heroes” Home Run Program and national happy hour on Flag Day (14 June) encouraged consumer sampling, awareness and re-connection with the brand, as well as raising funds for the Folds of Honor Foundation. Building upon this momentum, we have recently announced a new visual brand identity for Budweiser in the United States. This will include a packaging change for all cans, aluminum bottles and secondary packaging, although there will be no change to the iconic Budweiser glass bottle label

• High end growth: We are committed to driving aggressive growth in the high end, and have improved our share of this segment by 100 bp since December 2010, adding over a quarter million additional points of distribution during this period. Our high end shipment volumes increased 19.5% in 2Q11 and 19.8% in HY11. STRs were up 18.7% in 2Q11 and 16.5% in HY11. All of our major brands in this segment saw growth in HY11, with Stella
Artois and Shock Top continuing to lead the way with STRs increasing 22.0% and 76.5%,
respectively. In addition, we are encouraged by the Goose Island integration process and the valuable insights we are gaining into this highly profitable segment

• Revenue management: We are committed to improving our brand mix and remain disciplined in implementing our strategy to narrow the price gap between our sub-premium and premium brands which we started in 4Q10. Beer-only revenue per hl grew 3.6% in HY11, with brand mix benefiting the result by 49 bp

UPDATE I: Idle Hands Craft Brewery reports being the first to suffer the consequences of these new rules.

UPDATE II: According to Brewbound‘s Chris Furnari, the cost difference between the two licenses is nearly $4,500.

The Alcoholic Beverages Control Commission (“the Commission”) endeavors to support and enhance the agricultural community, ensure the long-term viability of agriculture, and support farms that protect the common good in many ways including maintaining open spaces in communities. Through the issuance of Farmer-Brewery licenses, the Commission proudly encourages the development of domestic farming and the people who help it thrive.

Each Farmer-Brewer license exists for the specific public purpose of “encouraging the development of domestic farms.” To advance this public purpose, the law requires that a Farmer-Brewer grow cereal grains or hops for the purpose of producing malt beverages. While a licensed Farmer Brewer may import malt, cereal grains fermentable, sugars and hops, this does not eliminate the basic growing requirement. The Commission recently issued a decision relative to Farmer-Brewery licenses. A Farmer-Brewer is any person who grows cereal grains or hops for the purpose of producing malt beverages and who is licensed to operate a Farmer-Brewery.

In its decision, the Commission held that each applicant for a Farmer-Brewery license must document that it grows cereal grains or hops of at least 50%, in the aggregate, of the quantity of cereal grains and hops needed to produce the gallonage of malt beverages estimated to be produced by the applicant during the license term. The Commission also held that when that applicant contracts exclusively for the rights to the yield of cereal grains or hops produced from acreage of domestic farmland that applicant will also be considered to grow “cereal grains or hops for the purpose of producing malt beverages” as required by this law.

For example, if an applicant estimates it will produce “X” barrels of malt beverages in calendar year 2012, and that to produce this volume of malt beverages it will require 200 bushels of cereal grains and 4 bushels of hops, the applicant is required to produce evidence that it grows at least 102 bushels of cereal grains and/or hops used to produce the malt beverages, or that the applicant has exclusive contracts rights to the yield of cereal grains or hops produced from acreage of domestic farmland, or some combination thereof that reaches the “at least 50%” required amount.

The decision dictates compliance with the letter as well as the spirit of Massachusetts General Laws chapter 138, §19C. The Commission put the industry on notice that it will apply this ruling prospectively and, specifically, during the next annual renewal cycle to ensure that every applicant for a Farmer-Brewer license meets the state law definition of farmer-brewer.

Moreover, applicants that do not meet the criteria for a Farmer-Brewer license are welcome to apply for a manufacturer’s license. If you have questions concerning this Advisory or would like more information, please call Executive Director Ralph Sacramone at 617-727-3040.

UPDATE I: Here is Massachusetts’ official advisory that the press release below references.

UPDATE II: According to Brewbound‘s Chris Furnari, the cost difference between the two licenses is nearly $4,500.

(Everett, MA) – Idle Hands Craft Ales LLC announced that the Massachusetts Alcoholic Beverages Control Commission (ABCC) denied the brewery’s Commonwealth of Massachusetts Farmer-Brewery license, a move that could have wide-spread implications for the brewing industry in the state.

According to the ABCC, to qualify for the Farmer-Brewery license, a farmer-brewer must “grow at least 50 percent, in the aggregate, of the quantity of cereal grains and hops needed to produce the anticipated volume of malt beverages.” Idle Hands has conceded to this decision as their plans to farm, while in support of domestic agriculture and in line with the spirit of the Section 19C licensing guidelines, will not meet this newly specified 50 percent threshold.
This decision redefines a long-standing license that a vast majority of production breweries in the state hold. The ABCC explicitly stated in its decision to Idle Hands that, “the industry is put on notice that the Commission will be applying this ruling prospectively and, specifically, during the next annual renewal cycle to ensure that every applicant for a farmer-brewer license meets the state law definition of farmer-brewer by growing at least 50 percent…” Given the ABCC’s statement, all farmer-brewery licenses will come under the same scrutiny during the renewal time period (effective fall 2011 for 2012 licenses).

“While we are in the process of re-evaluating our business plan for the brewery, we are equally concerned with the potentially devastating financial impact this decision has on the entire brewing industry in the Commonwealth of Massachusetts,” said Chris Tkach, founder and head brewer of Idle Hands.

“A decision by the ABCC to force our farm to grow and malt grain will put our farm, and any farmer in the Commonwealth, out of the farm-brewing business,” said Bill Russell of Just Beer @ Buzzards Bay Brewing in Westport, MA.

If Massachusetts state breweries are unable to meet the 50 percent hurdle of the Farmer-Brewery license, they will need to acquire the only alternative, a Manufacturer of Wine and Malt Beverages License. The Manufacturer license, however, does not allow breweries to sell beer at retail or do tastings on site – one of the unique draws of the burgeoning craft beer market. It also forces breweries to utilize wholesale distribution channels which will result in potentially lower margins for the brewery (or higher costs to the consumer) and limited product distribution. Many small breweries rely on already tight margins and self-distribution in order to survive in an industry that favors more established and larger players.

Though this decision helps clarify a license that has been on the book for years, it sets a precedent that creates far-reaching effects on breweries, bars, restaurants, retailers and ultimately consumers. There are cost implications and more important issues relate to economic growth, industry innovation, and consumer access to a greater variety of local beers. These effects are further amplified as the brewing industry is one of a few growing industries in an otherwise struggling economy. Existing breweries of all sizes will have to adapt to the 50 percent requirements or apply for alternate licensing, and local entrepreneurs will have to determine whether they can invest in an industry that no longer supports growth and innovation.

About Idle Hands Craft Ales
Founded in 2010, Idle Hands Craft Ales LLC is a privately owned, artisan nano-brewery based in Everett, Massachusetts. Husband and wife team, Chris and Grace Tkach, lovingly hand craft their food-friendly, Belgian-inspired beers in small batches for consumption in the local Boston market. Information about Idle Hands Craft Ales is available at http://www.idlehandscraftales.com

(Minneapolis, MN) – The wild, wild Midwest…

Update: Per the Star Tribune, MillerCoors sent a check in time but it was returned because they paid too much money. I guess a state in a budget crunch has no interest in keeping money and issuing partial refunds?

Minnesota is currently in day 13 of a statewide government shutdown after a budget proposal impasse.

According to local affiliate, KSTP, MillerCoors alleges that it submitted payment and paperwork for brand registration/renewal prior to the July 1st shutdown. However, the state did not process the paperwork in time so the company’s 39 brands are now on shelves without proper registration. The fee per brand is a mere $30 every three years.

According to reports, the brewing company must come up with a way to remove the product from shelves. Meanwhile, retailers are asserting that they own the product outright and that what was purchased while the brands were properly registered should not be affected. For now, it looks like MillerCoors cannot sell anymore product to its Minnesota wholesale partners until the government shutdown ends and the liquor board approves those brands for renewal. Whether product needs to be pulled should be known soon enough.

MillerCoors is obviously disputing it.

…But it gets worse.

Several hundred Minnesota liquor establishments were unable to renew their buyers’ cards meaning that they cannot order more liquor until the shutdown is over and agencies get back to issuing renewals.

Startup breweries like Steel Toe Brewing cannot open with the shutdown. Steel Toe needs a signature providing clearance for them to be able to use their boiler.

On a local but unrelated note, Lift Bridge Brewing is crying foul over Cold Spring Brewery not honoring its production contract. Cold Spring says that it gave Lift Bridge plenty of warning that it was facing capacity issues while Lift Bridge says that it got extremely short notice.

As previously noted, 21st Amendment Brewery demand is through the roof, one of the primary reasons cited for what’s happening at Cold Spring.

…And now for a slight change of pace and some content that is a bit more behind the scenes and industry-related…

Bella Vista Beer Distributors has been around in Philadelphia for over 25 years. Brand Manager, Jordan Fetfatzes, answers a dozen questions on how one of the largest beer markets in the country works and what it’s like being the little guy among AB and MillerCoors distributors.

1) Give me the Bella Vista Beverage story in one paragraph. [or in Jordan's case, several...]

Bella Vista to Eastern Pennsylvania means an unabashedly and ferociously independent wholesaler who refuses to accept anything less than unbeatable service with great beer. Bella Vista Beer Distributors is a family run company built from the ground up in 1984 by Mario and Olimpia Fetfatzes that started out as a retail mom and pop operation. Over time, Bella Vista became a craft beer wholesaler due to three major reasons.

a) The current wholesale system was filled with holes regarding brands WE wanted to see in the market.

b) Our favorite and most recognized wholesaler had been bought out (Edward Friedland Co. We miss you!) and created a void in Philadelphia Proper for an Independent, craft-ONLY beer wholesaler.

c) Passion – the love of craft beer has led us down the path as a wholesaler for the world’s best brewers and importers.

Our first brand was Boulder Beer Co, and we have them to thank for us being in this game. It was down to the big Coors House or little ass Bella Vista Beer… four years later, we are Boulder Beer’s #5 wholesaler in the country out of over 30 markets covered by that brewer. We knew nothing about the wholesale aspect but, boy, did we learn fast!

Today Bella Vista is known nationally for having a truly highly regarded portfolio of beer from brewers and suppliers we call friends, share joy and tears with throughout the year. We bust on each other about sports and weather but we also feel their pain when we hear from them firsthand of devastating occurrences we see on TV. To have a familiar voice on the phone echoing what we just saw on the news in their area- fires, landslides, earthquakes- this craft beer business sure makes the world a much smaller place.

Bella Vista is the true David in a Goliath world of beer wholesale! We go out of our way to work with our brewer-friends. For example, we will grab cast iron tubs from North Philly for Sixpoint and get Apple Brandy barrels for the likes of Voodoo and Cigar City. Those are the things that makes Bella Vista who we are. We give a damn!

2) Pennsylvania is known to have some unusual liquor laws. Can you briefly describe how Bella Vista acts as both a wholesaler and a retailer and why that is?

Unusual? At least we don’t have crazy ABV caps or package size bans. However, we do have the case only law on the beer store front, and a maximum volume allowed sold by deli’s, bars, and restaurants.

As a wholesaler, imagine trying to get across to a potential supplier that what the mother carton looks like matters! They look at us like we have three heads sometimes. Then when we say, think of Pennsylvania with a bunch of mini Costcos or Sams Clubs. Then the light bulb goes on. “OH!!–then the puzzled response, “Really? you mean my beer will be sold in the original container it was packaged in? Even a case of 22oz Bombers?” That response never gets old, Then we get the, “Well how do you buy a single? And then we state, bottle shops, which are basically restaurants by definition that must have seating for 30 people and food ready for the same amount. They must then have an addition to their license which is primarily for consumption on premise first and foremost. All in all, it is confusing but it has worked for a long time. As far as we know, it won’t change any time soon. Hey, you out of state brewers eyeing up Pennsylvania, polish up that mother carton!

Another confusing word is “distributor.” In Pennsylvania, that is a catch-all phrase for both wholesaler and retail case stores. The only differentiation is whether or not they are an “ID” (importing distributor), a “D” (distributor) or BOTH! Many of us wholesalers in Pennsylvania are both, some only offering our brands at the retail venue and others offering beer they buy from other ID’s to bolster their overall selection. We are both an ID and a D.

Prior to the craft beer boom, there had always been some sort of movement to at least allow “D” distributors to sell 12-pks which has never come to fruition. Now with craft beer and smaller Pennsylvania brewers, the MBDA is making a push for 6-pack sales in the D’s so they can offer these products at a much more consumer-friendly and economically less-challenging package. We don’t have an opinion on the matter and all we can say to that is, “Whatever the law of PA is, is how we will run our business both as an ID and a D.” We do feel that some changes are needed to be more current with today’s way of life, both on the eating establishment licensee and the “D” level that is fair to both operations and works for the consumer. We all know that never ends up working.

3) Of the 100 or so beer brands in the Bella Vista portfolio, only five are based in Pennsylvania. What challenges come with carrying a largely non-local, niche portfolio filled with small breweries like AleSmith and Cigar City?

Hmmm…seems like you are asking us the hard questions!

Well, first off, we love our locals. We support them in our retail store. In fact, we have a PA-only designated aisle. We carry more local brands than most other local retailers believe it or not. If we didn’t, we wouldn’t be all that credible. Our retail floor manager makes an emphasis on weekly samplings of local beers, working closely with brewery reps from the likes of Victory, Stoudts and others to make sure that we show them the love they deserve.

The main reason we dont rep that many locals is simple; we got in the game a little later than most. The bigger locals had established their wholesaler partners a few years prior to us getting in the game but it is never too late to add local credibility to your repertoire, something which we are working on now. We signed with Jeremy Myers of up-and-coming Neshaminy Creek Brewing Co. out of Croyden (35 minutes from Philly!). Lavery out of Erie is an upstart but they make phenomenal beer and, in this crowded market, you better make good beer or you better get out of the way.

We have been approached by a few brewers in Pennsylvania that we’ve had to respectfully turn away due to our more discerning palates here at Bella Vista, and though they may not work for us, we wish them the most success and will help them by carrying their beer in our retail showroom. We also don’t leave them high and dry. We will usually send them a few more contacts for other wholesalers who may be interested in carrying their beer.

Some may call many of our brands niche, but we know other wholesalers would die to have the brands we have, and to be honest, there is a waiting list for lots of the niche beers, and allocations set forth for the brands like AleSmith and Cigar City. There just isn’t enough of this to go around, and we are happy they choose to send their beer to our region. Us being their voice, as an extended family member, is icing on the cake for us. Sometimes, we pinch ourselves when we start spouting off the brands we represent in one of the greatest beer centric regions of the world! Just an an FYI, if you pay attention to those beer rating websites, we distribute Voodoo Brewery, and Matt Allyn’s beers are some of the highest rated in all of Pennsylvania.

(Madison, WI) – Today a bipartisan group of legislators led by Senators Glenn Grothman (R-West Bend) and Pam Galloway (R-Wausau) asked Governor Walker to veto a controversial provision in the state budget that restricts craft brewers’ ability to wholesale other brewers’ beer, own taverns, and creates uncertainty among contract brewers.

“Wisconsin is known for its breweries, and allowing small craft brewers to own their own taverns will highlight their product,” Grothman said. “This is the type of provision that should have been dealt with in a separate bill. It was complicated and the thriving craft brew industry did not participate in drafting this provision.”

“This sends the wrong message to nascent businesses like Big Bull Falls Brewery of Wausau in that it restricts possible avenues of growth. It was particularly disturbing in that it came out of the blue with no time for craft brewers to respond,” said Galloway.

Senator Robert Jauch (D-Poplar) stated: “As a member of the Joint Finance committee, I can assure the Governor we were not given adequate information before we were forced to vote on this provision.”

Representative Evan Wynn (R-Whitewater) said: “Small businesses are the leaders of Wisconsin’s economic recovery, and micro-breweries are no different. They employ many Wisconsinites directly, and many more through their purchase of quality Wisconsin ingredients. Wisconsin should be moving in a business-friendly direction and not legislating more needless government regulation.”

“I am concerned that at this time of economic uncertainty we are sending the wrong message to these small growing businesses,” Representative Brett Hulsey (D-Madison) added.

(Woodridge, IL) – As pressure mounts, Pabst considers making changes to its new Blast by Colt 45 product line.

In late April, 19 Attorneys General collectively asked that Pabst stop selling that they referred to as “binge in a can.” The fruit-flavored malt beverage comes in at a weighty 12% ABV and is sold in 23.5 oz. cans. That is nearly 3x the alcoholic content as Bud Light and some of the nation’s other top sellers.

The other problem the AG saw was in the marketing which they alleged was aimed at underage drinkers. Snoop Dogg is the chief celebrity endorser of the products.

This past week, Pabst received label approval for new versions of the Blast by Colt 45 beverage line with one notable difference: the ABV. The ABVs shown on the new labels are 6%, 8% and 10%, indicating that the company is considering reformulating the controversial beverage. The company has not announced any final decisions on reformulation.

The Wall Street Journal reported in May that AB InBev was changing the alcohol content in Tilt, a Blast competitor, in order to enhance the brand’s public image. New cans of Tilt will contain only 8% ABV instead of 12% ABV sometime this summer.

Blast by Colt 45 was just launched this past April.

(Photo Credit: vgm8383 on Flickr)

(Washington D.C.) – About three dozen representatives of small breweries are in the nation’s capitol tonight.

According to a press release sent out today by Sprecher Brewing, small brewery reps have descended on Washington D.C. to flex some political muscle. Earlier today, I posted a summary of the political beer battles going on across the country in just the past couple weeks. The timing of the trip couldn’t be better.

Among the chief topics of discussion will be the Brewer’s Employment and Excise Relief (BEER) Act which will reduce excise taxes for small breweries.

Jeff Hamilton, President of the Wisconsin Brewers Guild and Sprecher Brewing Company, travels to Capitol Hill for two days of meetings with 34 other guild presidents, the House Small Brewers Caucus, and members of Congress June 2 and 3. Hamilton has a meeting scheduled with Congressman Paul Ryan during which he plans to discuss small brewer concerns and job creation opportunities.

The press release continues…

Sponsored by the Brewers Association, whose purpose is to “promote and protect small and independent American brewers, their craft beers and the community of brewing enthusiasts,” the trip will allow guild presidents to advocate for small breweries in their states as well as legislation affecting the craft brewing industry. Hamilton is, “proud to be a member of craft beer industry, which is defined more by camaraderie than antagonism. We are businesspeople in a creative industry; we are passionate about our products, our workforce and our customers.”

(Photo: Brock Wagner of Saint Arnold Brewing, involved in helping latest TX small brewery bill before it was squashed – Credit: Dave77459 on Flickr)

A summary of some of the legislative happenings around the country…

Illinois: The Illinois House (nearly) unanimously passed a bill to help small production breweries self-distribute. Brewpubs appear to be getting a raw deal though.

Per the Guys Drinking Beer Blog, “If a production brewery wants to self-distribute they would have to get a ‘Craft Brewer’ license. To qualify for the license they must brew less than 15,000 barrels of beer a year. If they qualify for the license they would then be able to self-distribute up to 7,500 barrels of beer a year. The language is a bit different for brewpubs, though. They would also have to meet the barrel limit requirements for the ‘Craft Brewer’ license but they would also have to build a second production facility in order to self-distribute. The last requirement is what has caused the Illinois Craft Brewers Guild, the original authors of the legislation, to remain ‘reluctantly opposed’ to the measure.”

Texas: Small breweries recently found themselves in the crossfire between AB-InBev and local wholesalers.

The Houston Chronicle reports, “The latest effort by Texas’ small craft brewers to bolster their business by letting people leave tours with a six-pack or two is dead. The final, unresolvable conflict was a last-minute objection by Anheuser-Busch InBev, the world’s largest beer company. The Belgium-based conglomerate, which brews Budweiser, Bud Light, Michelob and other high-volume beers in breweries in Houston and elsewhere, opposed a provision in the bill that would have denied large manufacturers the ability to offer the take-home beers.”

Per The Dallas Observer, “But the Wholesale Beer Distributors of Texas (WBDT) perceived this as a threat to the three-tier system and demanded an amendment so that the bill would only apply to breweries producing a maximum of 75,000 barrels annually, which excluded Anheuser-Busch InBev. Never mind that Anheuser-Busch does not offer tours.”

Wisconsin: The Journal-Sentinel reported last week about a potential change that could affect small breweries…

“Pending legislation that would prohibit brewers from buying wholesale beer distributors in Wisconsin is raising concerns among the state’s smaller craft brewers. [...]

Under current state law, a brewer that wants to sell beer directly to retailers without using wholesale distributors must obtain a wholesale license. The proposed legislation would create just one permit for brewing and selling beer, which would streamline the licensing process, Roby said.

The proposal also would prohibit brewers from buying wholesale distributorships, while allowing brewers to do their own wholesale distribution of up to 300,000 barrels annually, said Roby and Pete Marino, a spokesman for Chicago-based MillerCoors. The current law allows brewers to self-distribute up to 50,000 barrels annually, Marino said.”

Also see BBLodge and Madison Beer Review coverage.

Alabama: Remember the fiasco that took place back in late April? Well, one of the bills that Free the Hops was fighting for, the Brewery Modernization Act, passed in the Senate yesterday.

Per the Aleheads blog, “The bill allows breweries to have taprooms on premises and for brewpubs to sell beer off-premises (through a licensed distributor). It’s another step towards craft beer freedom in Alabama and we have Free the Hops to thank for the bill’s passage.”

See Free the Hops coverage.

Ohio: The state may consider lifting the ABV cap up to 18%.

Tennessee: Some overhauls have been made to the state’s liquor laws. Chief among them is properly defining high alcohol content beer. The changes clear the way for Sierra Nevada to look into a location near Knoxville that it has been eyeing.

An update on the latest legal briefs around the U.S.A. will be available from The Brewers Association in mid-late June. Until then, here is the May update from a couple weeks ago.

(Brooklyn, NY) – This week’s brewery event featuring The Tonic didn’t quite go as originally planned for The Brooklyn Brewery.

The brewery announced on Monday that the TTB denied the label for The Tonic. The TTB, the short name for an agency called the Federal Alcohol Tobacco Tax and Trade Bureau, governs product labels for beer (bottles, cans and kegs), wine and liquor year-round.

This came not only after doing up all the artwork as The Tonic but running advertisements under the old name as well. Fortunately, this is a draft only beer so the cost of re-packaging is virtually nil aside from any point-of-sale materials like posters. In 100 years, those actually might fetch a pretty penny.

The new name for the beer, which was inspired by a cocktail called The Penicillin, is The Concoction. For what it’s worth, The Penicillin was also denied by the TTB, putting Brooklyn Brewery in rare company.

So why all the fuss over the old names?

They could mislead or persuade a prospective buyer into thinking there are health benefits into drinking the alcoholic product. The concept is far-fetched but could hypothetically prompt someone into abusing alcohol due to perceived health benefits.

The Concoction still has yet to be approved as well and the beer isn’t expected to be released until mid-June.

(Milton, DE) – Dogfish Head is the latest to throw its hat in the ring of big investment announcements.

(Photo Credit: mattohara on Flickr – creative commons)

The industry was abuzz late last week with the news that Dogfish Head plans to invest $45 million over the course of three years. The project could help push the brewery closer to a half million barrels annually. All that the brewery has said for now is that the expansion is part of The Brewers Association’s plan to achieve 10% market share. Expect to see more about both of these ‘plans’ in the coming weeks and months.

How is Dogfish getting there?

In a video interview with Eater Magazine this past March, Founder and President, Sam Calagione, championed growing independently without the aid of big brewers. The company has been a thriving example of such growth.

Revenue has grown from $3.6 million in 2003 to $12 million in 2006 to $28 million in 2008. As of December, revenue projections were $41 million for 2010 and $52 million for 2011.

Dogfish Head’s growth plan is only one of several in the works for the nation’s top regional craft brewers…

Stone Brewing announced a $26.6 million project just last week. A portion of that investment will push annual capacity to around 500k barrels.

Last fall, Bell’s Brewery announced a $52 million project that will take place over the course of several years.

Lagunitas Brewing is undergoing a $9.5 million expansion that will increase capacity to 600k barrels.

With Minnesota’s governor signing off on law changes this week, Surly Brewing can now pursue building its $20 million dream brewery.

Sierra Nevada Brewing is searching for an east location that, according to the brewery’s Bill Manley, could lead to around $70-75 million in investment.

New Belgium Brewing is also looking for an east location though it hasn’t made any formal statements on the search.

If all of these projects go through as planned (and when tallying these with other projects by Shipyard, Smuttynose, etc.), we are looking at more than $250 million in investment by the nation’s top craft breweries in a relatively short timeframe.

That kind of investment may be the best argument that breweries can make as they lobby for a reduction in excise taxes, an effort that is ongoing.

On the flip side, what does this mean for the future of startup breweries and small microbreweries? As has been brought up before, some distributors face obstacles in handling the proliferation of brands. It’s certainly more manageable to handle a smaller portfolio of established brands, each of which can consistently provide a lot of product to sell.

Meanwhile, Mercury Brewing President, Rob Martin, predicts a shakeout of some of the smaller breweries, citing the perceived need (and challenge) to reach 10,000 barrels production annually. Whether or not you agree with that assessment, as larger craft breweries spread their distribution further across the U.S. and deeper into existing markets, it will likely expedite the inevitable shakeout.

That said, we could still be a ways away from that point. Though there are some ‘mature’ markets where craft’s share of beer sales is already well above the 5% national average, there are many more under that marker. Smaller crafts may have some difficulty gaining traction in these mature markets in the future but under-served areas like the Southeast provide a lot of potential.

(Nashville, TN) – BountyBev President and Better Beer Guy, Kurt Strickmaker, dishes on the Tennessee beer scene, the nutty local laws with which he has to work and the latest developments with Sierra Nevada and Senate Bill 1224.

1)      Give me the Bounty Beverage story in one paragraph.

BountyBev is Tennessee’s American Craft-only distributor and it’s our passion to educate consumers and help them in the discovery of U.S. independent or family-owned breweries. Quality is of the utmost importance to our team and our retail relationships afford greater choice and selection as a result of our commitment to better beer.

2)      What brands do you carry?

As true brand builders, we have been blessed with a growing and balanced portfolio mix. From the oldest micro-breweries in PA and WI, we’re lucky to distribute Stoudts and Sprecher in Tennessee. BountyBev represents brands from Oregon to New York including (but not limited to!)  Caldera and Butternuts Beer and Ale. We also service our local and regional brewery partners like French Broad, Moerlein, Chattanooga Brewing and Jackalope. Other fantastic and award winning breweries include Fort Collins Brewery, Lucky Bucket, Buckbean, and Ruckus.

3)      How do you pitch a craft brewery to come to Tennessee over another state?

The Southeast is the fastest growing Craft market in the U.S. and Nashville specifically is a thriving city. The main reason for these happenings points to us as being slightly behind neighboring states because of the fewer number of breweries and brand offerings. Now is the perfect time for us to strategically partner with the right breweries before the market hits any form of saturation, which is years away. Our consumers are hungry and savvy and therefore support the cause. We operate out of Nashville and service both the Knoxville and Chattanooga markets which in turn builds brands in the music industry, several major universities, and with the outdoor recreational enthusiasts. It is our sole mission and purpose to advance our state and position us as a reputable Craft market leader in the growing Southeastern quadrant.

4)      How do you pitch a craft brewery to go with you over one of the bigger TN distributors?

All the big boys want to get into Craft nowadays. I always chuckle at the many blue blazers during the annual Craft Beer Conference while I meet and greet in my flip flops and better beer guy shirt! We’re different; in more ways than one. At BountyBev, we don’t just believe in our suppliers or retail partners. We see the system all the way through and consider the consumer the most important component of our model. If the end-consumer isn’t satisfied, neither is the retailer or brewery. Quality is critical and we clean our draft lines every two weeks.

We build OUR brand (the Better Beer Brigade) using the brands of our supplier partners to engage the consumer in a credible relationship. We utilize social media and other means to create a one to one connection that the large distributors won’t tackle. We tweet, create viral videos, post on BA, and generally go above just delivering and rotating stackers. We’re swift and mighty and operate with little red tape. We are not the Wal Mart of distributors and we don’t want to be anything other than specialists in our category. People thank us for bringing better beer to Tennessee and in turn lean to us for what’s next.

5) Jackalope Brewing is the first new start-up brewery that you’ve added to your portfolio. Who approached who and how did that partnership come about/what did you like about them?

Thankfully we’re in the business of people and as all good things in life go, the stars were aligned on this one. Through a mutual connection named Jack (kind of ironic!) he introduced me to the Jackalope gals a year before they even found a physical brewery location. They are Nashville’s newest entrant and will be brewing on a 15 bbl system and launching draft only. But the coolest thing about them is they are Tennessee’s first female-duo to operate and own a brewery in our home state. Robyn and Bailey are amazing spirits and bring such light to the world around us. I know they’ll do the same with their beer and all while having fun. We are huge advocates for women in this business (insert shout-out to Denise Jones here!) and hope more female brewers expose their brewing talents in the near term.

6) What are some of the more common mistakes that you see young craft brands making in your market or elsewhere?

It’s no secret that a distributor can make or break your brand. The most common mistake a brewery can make is selecting the wrong partner to grow their brands locally. In fact, I know an award winning brewery who selected a distributor without proper due diligence. They awarded their draft beer brands to the entire state and the distributor didn’t even have refrigeration or at the very least, a temperature controlled warehouse. My unsolicited advice, you say? This is a marriage, people! Spend the money and take the time to survey the market. Ask the top 20 Craft or specialty stores both on and off-premise who the best distributor is for the category. Only then can you make a truly confident decision. Also, it wouldn’t hurt to know the distributor’s portfolio so as a brewery you can understand where you will fit in and if there are competing brands that might take the top spot over your own.

7) My understanding of Title 57 is that a brewery is allowed to self-distribute in Tennessee but only within its own county. In general, do you think that a brewery should be allowed to self-distribute to wherever it wants?

We believe in a marketplace where consumers dictate available offerings and Tennessee is growing wildly in Craft. I’m sure most distributors would not agree with me, but I believe small brewers should be allowed to self-distribute wherever it makes sense for THEIR business. I’m a realist and understand a small brewer deserves to control their brand from the get-go and make as much margin as possible to reinvest in their business. But again, as a realist, it only makes sense to partner with the RIGHT distributor so the brewer can focus on their core competency; brewing. Distribution is controlled chaos and can detract from the most vital aspects of a small brewery’s business.

8- Does TN have a lock-in rule between breweries and distributors or are breweries able to leave if not happy with a distributor?

We are a franchise state but BountyBev is different. We truly want to bring a fresh perspective to the second tier and demonstrate the integrity of our country’s strong distribution system. Too often I’ve seen ‘squatters’ on brands, ‘land-grabbers’ if you will. We believe that if a brewery chooses to partner with a distributor and they aren’t getting the job done, they should be able to easily find a partner who can. If we are ever in a situation where our supplier partners aren’t happy with our performance we will gladly let them choose an alternative partner with fair compensation. We exist to add-value to the American beer business and limiting its growth by tying down brands just so another distributor can’t represent a particular brewery is criminal.

9) How does the law (and the taxes) work with any beer over 5% alc. by weight being considered either a wine or a spirit?

Well let me first say that Tennessee does not have an income tax. But we do have some of the highest wholesale taxes in the country. I pay 17% of the actual wholesale price to the local city where that beer is sold and delivered. For instance, if BountyBev sells a keg for $100 to a licensed permit holder in Franklin, TN, I would cut a check to the City of Franklin for $17 the following month. Ouchie, as that comes right off the top!

We also have an interesting law where BountyBev can only sell beer up to 5% by weight (roughly 6.3% by volume). Therefore, in order to best serve our supplier’s brand portfolios we had to form a second company, BonusBev. With the addition of Bonus, we can now sell beer over 6.4% abv but they operate as two totally separate companies. Bonus leases space from Bounty in the warehouse even. In fact, we are required to separate all high and low-alc beer in our warehouse with a fence and we do the same on our trucks. Apparently, the big and little beer tend to fight at night or cross pollinate when no one’s watching. Oh, and it’s interesting to note that the TN Alcoholic Beverage Commission treats big beer as a distilled spirit and the TN Department of Revenue treats it as wine! We’ll get there one day…

10) What are your thoughts on all the talk around SB 1224 and Sierra Nevada considering Tennessee as a possible location for its east headquarters?

We discovered last Thursday that a bill had been passed in the House allowing only 3 permits in all of TN to brew beer over 5% by weight. Our position is that we felt it was anti-competitive, unfair, self-serving, and monopolistic. I’m proud to say that over 400 emails and letters were sent to the Governor and many people contacted their Senators as this bill would soon be proposed and voted on Tuesday (today). This legislation had taken everyone by surprise but now, as I write this, the bill has been referred back to committee. Although this bill had some harmful language which would limit small business in the Tennessee brewing industry, there are some very positive strides being taken in this legislation.

The bill proposes treating high alcohol beer (over 5% by weight) as BEER (novel concept) whereas now it’s treated as a spirit (yet it’s not distilled and it’s a naturally occurring fermentable malt beverage…of moderation!).

The speculation that surrounded this bill was that Sierra Nevada Brewing Company is considering building a facility in East TN which would be AMAZING for us and our craft beer culture. I simply want the following on the record and I speak on behalf of the craft beer community: We hope and pray that SNBC will have the ability to brew beer over 5% by weight and will select our state to form a working relationship, all while giving small brewers the same ability to purchase a license of equal stature. SNBC is a true pioneer in craft and we as Tennessee residents can’t fathom the good that would come out of them selecting a site to do business in our State.

Thanks, Kurt.

You can follow the tribes and tribulations of Kurt and Bounty Beverage on both Facebook, Twitter and Youtube. For the recently-started Bonus Beverage side of the business, here is a fresh link for the new Twitter account.

(Chico, CA) – Here is Sierra Nevada Brewing‘s response to the legislative limbo in Tennessee.

….as sent by Communications Coordinator, Bill Manley:

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It is true we are looking for a new facility in the East, although, no final decisions have been made as to whether we ARE in fact going to build. Nevertheless, we’ve narrowed our search down to a handful of locations and we are doing our due diligence in finding the best spot for our company moving forward.

That said, one of the requirements for us in any site is to be able to brew and sell the full lineup of our beers. All of the states on our final lists either A) Have laws that would already allow us to do what we are doing here in Chico or B) Are working on amendments to state laws that would allow us to brew and sell our beer.

Sierra Nevada does not employ lobbyists in any of the states we are considering for a potential eastern location, and have had little-to-no input on any of these potential bills moving through state governments. We are in the business of brewing beer, not writing legislation. We have no interest in excluding craft brewers, nor limiting the favorable business environments that allow the craft brewing community to thrive. At the end of the day, we have very little control or involvement over the legislation in question.

As it currently stands, Tennessee state laws would make it impossible for us to brew beer above 5% ABW (6.25% by volume) and it would also be impossible for us to sell beer out of a potential gift shop at a future site located within the state.

When we were first considering sites to locate a potential brewery, we had “The ability to brew our full lineup of beers” on our list of requirements before any considerations could be made. We assume this current Tennessee law was designed to accommodate this requirement and to make that state a more attractive candidate for us in our search for a new brewery. This bill is an attempt to make that state more attractive as a potential site for our Eastern facility.

The bill itself is very fluid, and a current “work in progress.” It has come to light that as the bill currently stands, it could potentially harm the craft brewing community in Tennessee. We have communicated to Tennessee officials encouraging them to take a “do no harm” tactic in allowing craft brewers across the state, wherever they may be, to brew whatever type of beer they see fit. Sierra Nevada has always supported the notion that what’s good for craft brewing is good for us all. We want to ensure the craft brewing environment across the country is healthy, vibrant and strong.

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Photo Credit: Buy the ticket, take the ride. (Creative Commons)

(Alcoa, TN) – Sierra Nevada Brewing has selected a site in the Volunteer State as a potential location in its search for a new facility.

Tennessee isn’t normally the center of attention on these pages though it finds itself on the front page today with the news that Sierra Nevada is looking at a location in the eastern part of the state. More specifically, the small town of Alcoa with a population of less than 8,000 people (2000 Census).

…but not without lots of complications…

In February, State Senator, Ken Yager introduced Bill 1224, a harmless one-pager reducing residency requirements for liquor store applicants as regulated by Title 57. An amendment was later added that makes some administrative changes with respect to fees, etc.

The second amendment to SB 1224, introduced last week, is what is creating so much buzz.

Beer Law Blog lays out a few of the nutty liquor laws in Tennessee including one that requires a brewery to also hold a second license as a distillery in order to produce beer greater than 5% alcohol by weight. Nashville-based Yazoo Brewing, which got its license last summer, is the only brewery to hold a distillery license and City Brewing, which just purchased the old Coors plant in Memphis, is rumored to be another candidate for the license.

Amendment 2 both re-defines beer (“high alcohol content beer”) as having an ABW cap of 20% and introduces a pilot program in which a brewery wouldn’t be required to hold a distillery license to produce these beers. The crux of the argument among locals is that only one brewery will be allowed to participate in this proposed program in each of the state’s three grand divisions. Here is a copy of the amendment which perversely establishes the rules in each division. One brewery will be in Memphis, one will be in Nashville and another in that tiny town of Alcoa.

Why Alcoa? Senator Yager answered that question in his comments on the new amendment.

This is where it gets good.

I certainly appreciate the patience of the members of the committee as we have worked our way through these amendments. [They] are admittedly very technical and frankly somewhat confusing and that is probably because we had twenty lawyers and as many lobbyists working on these.

Let me try to put it in perspective as I ask for your support on this. We have a very serious industrial prospect for the city of Alcoa and Blount County which Senator Overbey brought to my attention which resulted in amendment two. We discovered that there was an unintended consequence that might have an adverse effect on a concern in both Memphis and in Nashville hence these amendments to make sure that existing activities in those communities were, in no way, harmed.

The thrust of the amendment and the intent originally was to ensure the city of Alcoa’s competitive place in securing a very significant industrial prospect and I certainly appreciate the committee’s patience in going through all of these technical amendments but that is what it is all about.

After news of the amendment spread, Yazoo Brewing was questioned as to whether it was part of a lobbying effort for getting this proposed exclusivity around “high-gravity” brewing rights. Yazoo Brewmaster, Linus Hall, responded to the questions on his blog on Friday.

[...] I got a call last Friday afternoon from a lawyer who helped us get our TN ABC distillery license last year. He told me that there is a certain nationally distributed brewery who was looking to set up another brewery location in either eastern TN, Virginia, or North Carolina. They want assurances from TN that, if they chose TN for their new brewery, they would be able to brew high-gravity beer, and to serve it at an on-site restaurant. So an amendment was added to an unrelated bill, that would create a new definition of “high alcohol content beer” and authorize the ABC to issue licenses to brew it. But then the state-wide definition was narrowed to only allow this particular brewery to qualify. Why, I don’t know.

At the same time, the group who purchased the old Coors brewery in Memphis got wind of the amendment. We were going to join with them, to lobby for the bill to include all breweries in TN, but then found out they wanted to go it alone.

We don’t have the resources to hire lobbyists. I started calling and emailing our senators. I talked to our distributor, asking them to try to contact the legislators and lobbyists crafting the bill. We have had ZERO input into the wording of this bill.

If Virginia and North Carolina sound familiar in that (underlined) context, it is because those two states were already rumored to be among the east HQ candidates for Sierra Nevada.

On a phone call this afternoon, Sierra Nevada Communications Coordinator, Bill Manley, confirmed that Alcoa, TN, was among a short list of locations that the company was considering for its East Coast headquarters.

Sierra Nevada has received dozens of emails and phone calls since the Tennessee situation erupted late last week. While the company does provide a list of criteria to interested East HQ locations, Manley said that the company does not hire lobbyists and has had no input in the drafting of this bill. This has caught everyone at the brewery by surprise.

He noted that Sierra Nevada has heard that the amendment is going to be re-worked later this afternoon.

It is slated to be voted on this Tuesday though that may be up in the air.

Alcoa is an attractive site for a number of reasons. Manley mentioned Alcoa’s similarity to Chico, the quality of life, the town being a relatively convenient location for shipping and the community’s green focus. On that note, the town announced the birth of Pellissippi Place late last year, a business development park that sits at the entrance of a major highway, is only a few miles from a commercial airport and requires all businesses that develop there to be LEED-certified.

Manley could not confirm the site within Alcoa at which they were looking.

As for Senate Bill 1224, we should have a clearer picture of what is happening over the next 24-36 hours.

Update I: Via Art Whitaker on Facebook…”I received an email from Senator Bill Ketron this morning saying he will move in committee to remove amendment 2 from the bill calling it ‘a terrible amendment.’”

Update II: Via Nashville Beer Geek‘s Sean Smith…”Email from Senator Johnson: ‘I have spoken with Sen. Yager regarding your concerns. He has assured me that he will remove any language that is harmful to current or prospective brewers. I will continue to monitor the legislation to be sure. Thanks for the email.’”

Update III: Via Marble City Brewing Co-Owner, Johnathan Borsodi, on Facebook…”Per Mark Cate, Special Assistant and Policy Advisor to Gov. Haslam, ‘We agree that the amendment as written will not work and are working to find a better solution.’”

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Photo credit: naslrgoues on flickr (creative commons)

(Boston, MA) – Hot off the wire, Boston Beer Co. just announced its settlement with the glass manufacturer responsible for the massive recall of the company’s bottled beer back in 2008.

According to the brewery’s Q3 2008 financial statements, the recall cost the company approximately $22 million. It was the company’s first recall since it started in 1984.

Below is the press release announcing the settlement:

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The Boston Beer Company, Inc. (NYSE: SAM) and its former glass bottle supplier have today entered into an agreement to settle all claims regarding the recall implemented by the Boston Beer Company in 2008. The Boston Beer Company will receive payment of $20.5 million and all parties will release each other on any claims as they relate to this matter.

Today, the Boston Beer Company brews more than 21 styles of beer. The Company uses the traditional four vessel brewing process and often takes extra steps like dry-hopping and a secondary fermentation known as krausening. It passionately pursues the development of new styles and the perfection of its classic beers by constantly searching for the world’s finest ingredients. While resurrecting traditional brewing methods, the Company has earned a reputation as a pioneer in another revolution, the “extreme beer” movement, where it seeks to challenge drinkers’ perceptions of what beer can be. The Boston Beer Company strives to elevate the image of American craft beer by entering festivals and competitions the world over, and in the past five years it has won more awards in international beer competitions than any other brewery in the world. The Company remains independent, and brewing quality beer remains its single focus. While the Company is the country’s largest-selling craft beer, it accounts for only about nine-tenths of one percent of the U.S. beer market. For more information, please visit www.samueladams.com.

(Warrenville, IL) – Two Brothers Brewing Company is pleased to announce the acquisition of America’s Historic Roundhouse in Aurora, Illinois. This historic 70,000 square foot facility houses a restaurant, brewery, music venue, banquet facilities and beautiful outdoor courtyard.

The Roundhouse is an addition to the Two Brothers family, both the Brewery and Tap House restaurant will continue to grow in Warrenville. Co-Founder Jason Ebel says ”This opportunity allows us to continue to expand our passion for beer, love of food and appreciation for great architecture”

“We are very excited to be a part of the revitalization of downtown Aurora and are looking forward to working with the City of Aurora and it’s residents to make this a great success” said Co-Founder Jim Ebel. “My brother Jason and I also want to reassure everyone that all currently scheduled wedding and banquet facility events will be held according to schedule.“
“We are delighted that Two Brothers Brewing Company is the new owner of the Roundhouse” said Aurora Mayor Tom Weisner. “It is a beautiful, historic site and I believe Two Brothers Brewing Company will make history themselves, as the owner and operator.”

The unique structure was originally constructed in 1856 as a roundhouse for the Chicago and Aurora Railroad and served in this capacity until 1974. It was abandoned until 1995, when a group of investors led by Walter Payton purchased it and converted the building to an entertainment complex. The building is the oldest limestone roundhouse in the United States and is listed on the National Register of Historic Places.

About Two Brothers Brewing Company
After living in France, brothers Jim and Jason Ebel developed a passion for flavorful specialty beer. After returning to the states, they had trouble finding that type of beer in Chicago so they opened Two Brothers Brewing Company in 1996. Currently, the brewery resides in a 40,000 square foot facility 30 miles west of Chicago. Adjacent to the brewery, Two Brothers Tap House opened in 2008 as a restaurant, which serves elevated, seasonal, and organic American pub fare. Two Brothers Brewing Company’s award winning products are currently available in Illinois, Minnesota, Ohio, Indiana, and New York.

(Boston, MA) – Boston Beer Co. reports first quarter earnings.

I’ve attached the written part of the 8-K below. A few additional notes from the company’s 10-Q…

1) Boston Beer Co. won a $1.3 million award from Rochester Brewery/High Falls in January for breach of a contract brewing agreement.

2) There is no mention of possible litigation of SanTan for that similar glassware though they are considering “pursuing a claim against the manufacturer of the glass bottles that were subject to a product recall in 2008.”

3) Outstanding advertising contracts as of the end of Q1 are $9.1 million. Outstanding hops contracts are $39.1 million. That is a lot of moolah.

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The Boston Beer Company, Inc. (NYSE: SAM) reported first quarter 2011 net revenue of $102.2 million, an increase of $8.1 million, over the same period last year, mainly due to shipment volume gains. Net income for the first quarter was $4.0 million, or $0.28 per diluted share, a decrease of $2.3 million, or $0.16 per diluted share, from the first quarter of 2010. This decrease was primarily due to increased investments in advertising, promotional and selling expenses.

Highlights of this release include:

Jim Koch, Chairman and Founder of the Company, commented, “We achieved record total depletions in the first quarter. We believe that our depletions growth is attributable to our strong sales execution and support from our wholesalers and retailers, and is an excellent result when measured against our very strong first quarter of 2010. We are still seeing expanded distribution of domestic specialty brands and craft brands, but even so, we grew both our flagship Samuel Adams Boston Lager^® and our Samuel Adams^® Seasonals during the quarter. We are also proud to have developed several exciting new beer styles and packages, such as Samuel Adams^® Latitude 48 Deconstructed, Samuel Adams^® Rustic Saison and Samuel Adams^® East-West Kolsch which are being well received. We are happy with the health of our brand portfolio and remain positive about the future of craft beer.”

Commenting on the Freshest Beer Program, Mr. Koch continued, “I have always wanted every Samuel Adams beer to reach our drinkers with the same flavor and fresh taste that I enjoy when I have a beer at one of our breweries. Our ‘Freshest Beer Program’ is building on many of our past investments to help us reach that standard. We are pleased with the results so far, and currently have ten wholesalers signed up and at various stages of inventory reduction. We believe that in the long term this program will deliver better, fresher beer to our drinkers and should reduce costs and improve efficiency throughout the supply chain and we are still targeting that 50% of our volume will be on our Freshest Beer Program by the end of 2011.”

1^st Quarter 2011 Summary of Results

Depletions grew 7% for the quarter, primarily due to increases in Twisted Tea^®, Samuel Adams^® Brewmaster’s Collection, Samuel Adams Boston Lager^® and Samuel Adams^® Seasonals, partially offset by declines in Sam Adams Light^®.

Core shipment volume was approximately 498,000 barrels, a 10% increase over the same period in 2010. The increase in shipments for the quarter is due primarily to increases in Twisted Tea®, Samuel Adams Boston Lager®, Samuel Adams® Brewmaster’s Collection and Samuel Adams® Seasonals, partially offset by declines in Sam Adams Light®.

Gross margin of 51% equaled our first quarter 2010 gross margin. Minor pricing increases were offset by a slight change in our core product mix, the negative impact of volume seasonality and some quarter specific operational costs.

Advertising, promotional and selling expenses were $6.4 million higher than those incurred in the prior year, primarily as a result of increased investments in point of sale materials, higher costs for additional sales personnel and increased advertising, as well as increased costs of freight to wholesalers.

General and administrative expenses increased $1.8 million compared to the first quarter of 2010, due to increases in salary and benefit costs and consulting expenses, and also due to the fact that in the first quarter of 2010 there was a $0.9 million reversal of a 2009 expense for an option that did not vest.

The Company’s effective tax rate for the first quarter of 2011 was 40%.

Cash and cash equivalents as of the end of the first quarter totaled $45.3 million.

During the first quarter, the Company repurchased 17,000 shares of its Class A Common Stock at a cost of approximately $1.5 million and repurchased an additional 30,000 shares during the period March 27, 2011 through April 29, 2011 at an approximate cost of $2.7 million. As of April 29, 2011 the Company had approximately $31.7 million remaining on the $225.0 million share buyback expenditure limit set by the Board of Directors.

As of April 29, 2011, the Freshest Beer Program is now active at ten wholesalers representing approximately 15% of the Company’s business. The Company estimates that inventory levels at participating wholesalers at the end of the first quarter were approximately 56,000 cases lower than would otherwise been anticipated.

Depletion and Shipment estimates:

• Year-to-date depletions through April 2011 are estimated by the Company to be up approximately 5% from the same period in 2010.

• Shipments and orders in-hand suggest that core shipments year-to-date through May 2011 will be up approximately 8% compared to the same period in 2010.

• The Company believes that inventory levels at those wholesalers who are not participating in the Freshest Beer Program at the end of the first quarter were similar to the levels in previous years.

Fiscal 2011 Outlook
The Company has left unchanged its projection of 2011 earnings per diluted share of between $3.45 and $3.95. While the Company is currently concerned about significant cost pressure from fuel price increases and their impact on freight costs, package material and brewery operating costs, it believes that it is too early in the year to assess the extent to which the increased fuel costs may be offset by operating efficiencies, pricing or volume growth, or the possibility that these pressures may subside. At the current fuel prices the Company believes that freight costs could negatively impact 2011 earnings per diluted share by approximately $0.20, but this could be offset by a slightly lower negative impact of the Freshest Beer Program and other Company initiatives. Accordingly, the Company’s actual 2011 earnings per diluted share could vary significantly from the current projection.

Underlying the Company’s current projection are the following estimates and targets:

• Depletions growth of 9% and shipment growth of 7% to 8%, reflecting an estimated aggregate inventory reduction at Freshest Beer Program participating wholesalers of between 300 thousand and 500 thousand case equivalents.

• Revenue per barrel increases of approximately 1%.

• Full-year 2011 gross margins of between 54% and 56%, which could be negatively impacted by further increases in energy cost.

• Increased investment in brand support by between $12.0 million and $18.0 million for the full year 2011, not including any increases in freight costs for the shipment of beer products to the Company’s wholesalers.

• Full year 2011 effective tax rate of approximately 39%.

• Full year capital expenditures of between $15.0 million and $25.0 million, most of which relate to continued investments in the Company’s breweries and additional keg purchases.

About the Company
The Boston Beer Company began in 1984 with a generations-old family recipe that Founder and Brewer Jim Koch uncovered in his father’s attic. After bringing the recipe to life in his kitchen, Jim brought it to bars in Boston with the belief that drinkers would appreciate a complex, full-flavored beer, brewed fresh in America. That beer was Samuel Adams Boston Lager®, and it helped catalyze what became known as the American craft beer revolution.

Today, the Company brews over 25 styles of beer. The Company uses the traditional four vessel brewing process and often takes extra steps like dry-hopping and a secondary fermentation known as krausening. It passionately pursues the development of new styles and the perfection of its classic beers by constantly searching for the world’s finest ingredients. While resurrecting traditional brewing methods, the Company has earned a reputation as a pioneer in another revolution, the “extreme beer” movement, where it seeks to challenge drinkers’ perceptions of what beer can be. The Boston Beer Company strives to elevate the image of American craft beer by entering festivals and competitions the world over, and in the past five years it has won more awards in international beer competitions than any other brewery in the world. The Company remains independent, and brewing quality beer remains its single focus. While the Company is the country’s largest-selling craft beer, it accounts for only approximately one percent of the U.S. beer market. For more information, please visit www.samueladams.com.

Forward-Looking Statements
Statements made in this press release that state the Company’s or management’s intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements. It is important to note that the Company’s actual results could differ materially from those projected in such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company’s SEC filings, including, but not limited to, the Company’s report on Form 10-K for the years ended December 25, 2010 and December 26, 2009. Copies of these documents may be found on the Company’s website, www.bostonbeer.com, or obtained by contacting the Company or the SEC.

Wednesday, May 4, 2011

(Brussels, BELGIUM) – AB-InBev reported its Q1 earnings on Wednesday.

Reuters reports that AB-InBev’s global sales decline of 0.4% is the first sales decline for the company since Q3 2009. That said, revenues continue to rise for the company as it increases prices across its portfolio. Profit and EPS increases were around 30% showing that the company continues to improve its operating efficiency.

Below is an excerpt of management’s comments on performance in the United States. The full earnings press release can be found here.

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In the United States:

• Volumes: High levels of unemployment, especially amongst core consumers, continue to affect overall beer industry volumes. We continue to believe that a recovery in the US economy is a question of when and not if. In the meantime we will remain focused on building the health of our brands and driving forward with all our major initiatives. Own beer shipments in the quarter declined by 3.3% while sales-to-retailers (STRs) declined at a slower rate of 2.2%

• Bud Light growth: The brand health of the Bud Light mega brand continues to improve and the gap to competitors is widening. We estimate that the market share of the mega brand grew by 11 bp in 1Q11, driven by the core 21-27 year-old consumer group. The Bud Light brand led the market share gain, with sales-to-retailers growing in the quarter, driven by the successful “Here We Go” campaign, and further supported by our sponsorship of the Super Bowl and UFC. Our digital campaign is also becoming a more important part of our marketing mix. Looking forward, we will leverage the brand’s sponsorship of the NFL, which started on 1 April and was activated with the NFL Player Draft on 28 April 2011

• Budweiser stabilization: The brand showed more encouraging indicators in the first quarter following the implementation of the new marketing strategy, including the launch of the “Grab Some Buds” campaign and the Concentration Week in September 2010. The brand was also helped by our price strategy to narrow the gap between our sub-premium and premium brands. Brand health continued to show signs of improvement and share declines continued to decelerate, from 60 bp during 1Q10 to 40 bp in 1Q11. Our long term commitment to stabilizing the brand in the US remains

• High end growth: Our share of this segment grew in the quarter. Our shipment volumes increased by 22.1% with sales-to-retailers (STRs) up 13.3%. Stella Artois and Shock Top led the way with STR growth of 19.4% and 58.2%, respectively. In March, we announced the acquisition of Goose Island, reinforcing our commitment to grow our share of this profitable and attractive segment

• Price segmentation: In 4Q10, we started to narrow the price gap between our subpremium and premium brands. However, the gap is still larger than we see in other consumer goods categories and we will continue to work on reducing it as appropriate. Optimizing price positioning across our whole portfolio remains an area of focus

(Birmingham, AL) – A grassroots non-profit organization lobbying for legislation that will help craft breweries in Alabama is drawing both support and criticism today for its introduction of a boycott of over fifteen breweries.

Free the Hops has been working on two bills that it feels will greatly improve the craft beer scene in Alabama: 1) a bill that will allow the sale of beer on-premise like a brewpub “and/or to wholesalers” and 2) a bill that will allow for the sale of beer in bottles greater than 16 ounces.

Today, the group made allegations that Anheuser–Busch has stepped up lobbying efforts to prevent passage of the Free the Hops bills. With those allegations comes an announced boycott of Alabama AB wholesalers, including Huntsville-based Turner Beverage and Birmingham Bud, and all brands carried by the AB wholesalers.

That list includes the brands of at least ten craft breweries.

Local beer drinkers have been largely supportive of the group’s mission and today’s announced boycott says Free the Hops VP of Legislative Support, Dan Roberts.

Further away, the reaction has been mixed, especially in Colorado where a number of the listed craft breweries operate.

Free the Hops VP of Media Relations, Stuart Carter, clarified that the organization supports the craft breweries named in the boycott. “Our gripe is with the wholesalers that are working against the bill that are profiting from these craft breweries.”

Roberts said that this is mainly about the brewery modernization act (part 1 above). That bill recently passed in the Senate but is currently sitting in committee in the House while Free the Hops works with those opposing specific points of the bill. He expressed frustration in a new blog post about negotiations with local wholesalers.

One of the breweries named in the boycott, Great Divide Brewing, has spent much of the day defending itself on Twitter. The brewery claims to have not been contacted prior to the boycott.

Free the Hops President, Gabe Harris, said that there was an attempt to contact all breweries mentioned on the list and that connections were made in most cases.

Great Divide is one of a handful of brands that is represented by an Alabama-based agency called Craft Corner Consulting. Companies like CCC are generally referred to as “brokers” among those in the industry. They work as a liaison between breweries and wholesalers within a given region, ensuring that the brand is supported where it may not have a local dedicated sales representative.

Harris said that he talked to CCC President, Alexander Bustamante, last week about the possibility of a boycott and asked him to get support of the legislation from the breweries he represents. Harris said that FTH was trying to get Bustamante’s help in putting pressure on opposing wholesalers but that he didn’t provide a timeline.

Bustamante acknowledged the conversation but said he was unaware that negotiations were at a point where a boycott would actually take place.

Earlier today, he said, “We’re a few hours into this and just trying to figure out what happened.”

Bustamante noted that the companies he works with support both bills that Free the Hops is working on and that they will be issuing a joint statement clarifying their stance on the matter.

Turner Beverage Sales Manager, George Burgess, deferred official comment over to Vice President, Tod Taylor, who was away at a charity fundraiser. Burgess did say, “We have absolutely nothing against Free the Hops. I wish everyone would read the actual legislation over for themselves before jumping to any conclusions off of just sound bytes.”

Management at Budweiser-Busch could not be reached for comment.

Free the Hops continues to update its blog with additional comments and clarifications on the boycott.

(Allentown, PA) – Troegs Brewery is requesting that the USPTO cancel The Brew Works’ registration for TBW’s Rude Elf’s Reserve beer due to similarity to its own registered Mad Elf beer. This morning, The Brew Works sent out a press release regarding the case.

The latest development in this case is that the two parties have requested confidentiality as it proceeds in its upcoming phases so this press release comes as a bit of a surprise. Here’s the statement followed by my new disclaimer/summary regarding trademarks disputes…

Due to the overwhelming number of requests for comments about our Trademark of Rude Elf’s Reserve, The Brew Works is offering the following Statement:

Five years after the registration for Fegley’s Brew Works RUDE ELF’S RESERVE issued, Troegs is trying to take the registration away, asking the US Trademark Office to invalidate it.

In so doing, Troegs seeks to monopolize the word elf in advertising its beer. We do not think the law recognizes such exclusivity and believe other brewers who have used elves longer than Troegs and have not complained about each others’ or Fegley’s use will also take part in preserving their rights.

Troegs must prove a likelihood of consumer confusion, that is, that consumers believe Fegley’s products are associated with, endorsed by or originate with Troegs. Under the trademark law, likelihood of confusion depends on many factors including the similarity of the marks in appearance and overall commercial impression and the strength of the complainant’s mark. A mark’s strength in turn depends on the number of third parties in the marketplace using the same or similar designations as those in dispute. Here the parties’ brands have only a single term in common, “elf” . There is a long tradition in this country of using the terms “elf” or “elves” in connection with holiday beers, ales and lagers. In addition to the parties in this litigation there are at least one dozen beers produced by other parties including Shelton Brothers and La Chouffe that use the term elf and/or elf imagery. Of the (at least) one dozen parties offering beers, a single producer, Shelton, sells six of them under the mark BAD ELF and variations thereof.

Under the circumstances, we believe consumers are readily able to differentiate among different “elf” beers and do not associate the term “elf” with any single beer producer. Therefore we think consumers are not likely to believe any party’s beer including the term elf, is related to any other beer that includes this term. Moreover on the labels and cases for their respective products, both parties use their house names (Fegley’s Brew Works and Troegs), Troegs uses additional words to describe the flavor of its beer, and Fegley also uses the word “Reserve”; also the parties’ illustrations of elves simply look different. These factors further support that there is not likely to be consumer confusion.

Moreover the marks on the labels and cases for their respective products are very different. Fegley’s filed an application for the Trade Mark of “Rude Elf’s Reserve” on June 21st 2004 with the following elf image (shown below), on all of their beer labels for sale.

At same time of Fegley’s original filing in 2004, the only Troeg’s mark of Record was the image (shown above) and the name…

“THE MAD ELF TROEGS HOLIDAY ALE BREWED WITH HONEY, CHERRIES & CHOCOLATE MALTS“.

As these images make clear, both parties use their house names (Fegley’s Brew Works and Troegs), Troegs uses additional words to describe the flavor of its beer, and Fegley also uses the word “Reserve”; and the parties’ illustrations of elves simply look different. These factors further support that there is not likely to be consumer confusion.

For additional information please visit these links of public record with the US Patent and Trade office

1. Rude Elf’s Reserve Mark filed June 21st 2004: http://tarr.uspto.gov/servlet/tarr?regser=registration&entry=3047757

2. Other Elf mark: http://tarr.uspto.gov/servlet/tarr?regser=registration&entry=2887242

3. Official Petition information: http://ttabvue.uspto.gov/ttabvue/v?qt=adv&procstatus=All&pno=&propno=&qs=&propnameop=&propname=Rude+Elf&pop=&pn=&pop2=&pn2=&cop=&cn=

Two examples (of more than a dozen) other Elf beers

http://beeradvocate.com/beer/profile/7944/14422

http://www.ratebeer.com/beer/rinkuskiai-missing-elf/114945/

——————————————————————————————————————

A note about trademark law:

The point of this summary is to provide some context around stories like this one. Please take a moment to educate yourself about the basics of trademarks and trademark disputes (like visiting the USPTO website for instance) before making snap judgments on either side. Here’s my best shot at a back-of-the-napkin summary:

To clear up a couple common misconceptions that I’ve seen with respect to these trademark disputes:

A) these stories have nothing to do with copyrights,

B) sending a cease and desist letter is NOT the same thing as suing someone and

C) a trademark application requires that the filer identify a “class of goods” for which they are registering a mark.

That last one is a little less straightforward so I will explain. In the example of Troegs vs. The Brew Works, Troegs is not claiming to own the rights to the “Mad Elf” mark as it pertains to computers or automobiles or other goods. The brewery is only claiming rights to the mark as it pertains to beers. With the case of The Lost Abbey vs. Moylan’s, Lost Abbey is only claiming to own rights to the Celtic Cross mark as it pertains to tap handles (IIRC). This is why, for example, you see the name, “Monster,” on a number of goods including energy drinks, beers, electronics, etc. and it is usually within the boundaries of the law. Companies may still oppose similar marks of other companies across classes of goods.

Trademark law says that companies either protect these marks or risk losing them. The more common the incidence of a mark in a class of goods, the more likely it is that the mark could be seen as too generic. I suspect that the reason that Brooklyn Brewery abandoned its application to trademark the name, “Monster Ale,” several years ago is because there are many beers out there donning the name, “Monster,” so Brooklyn didn’t have a valid filing basis (I could be wrong).

That said, those who respond to these disputes by using blanket arguments such as, “breweries don’t sue each other,” or “breweries must defend their trademarks” are ignoring the unique circumstances that surround each case. Some warrant legal action and some do not. It is rarely as black and white as many make it out to be which is partly why lawyers are paid lots of money to handle these matters.

I don’t know of a single brewery that trademarks all of its beers and I know of dozens of breweries that don’t bother trademarking even their flagship beers. Why? There are costs and benefits to registering a mark. Production at Brooklyn Brewery has nearly doubled since 2005 and Brooklyn is still firmly planted among the top 25 regional breweries in the country in terms of size. You would have to ask Brewery President, Steve Hindy, what value his company has lost for not having a trademark for Monster Ale. Like I said…it’s debatable.

While we’re at it, here’s a good discussion on the circumstances around the Bell’s/Northern Brewer situation.

(Pittsburgh, PA) – Here’s the follow-up from last week’s rumor. Press release below…

Uni-World Capital, L.P., a private equity firm, has acquired the brands and assets related to the beer business of the Iron City Brewing Company. The brewery’s headquarters will remain in Pittsburgh and beer production will continue in Latrobe, Penn. The purchase is entirely funded by equity capital from Uni-World and its affiliates. Edwin R. Lozano, 43, will serve as the new president and chief executive officer of Iron City Brewing Co. Tim Hickman, president since 2007, will be retained as a consultant during the transition period.

“Iron City Brewing Company’s rich heritage, diverse product portfolio and strong reputation as a high-quality Pittsburgh beer resonated with our team,” said Christopher P. Fuller, managing partner, Uni-World Capital. “This transaction is about restoring the brewery’s legacy and to drive future growth, and we intend to reinvest future cash flows back into the business. Our new management team, led by Ed Lozano, brings extensive beer and beverage industry experience, and a commitment to keeping the business in Pittsburgh.”

Lozano brings 15 years of extensive sales, marketing and operations experience to the position. Most recently he spent seven years with PepsiCo International as Director of Foodservice. In this role Lozano led a global sales organization spanning 190 countries, which represented more than $3 billion in retail sales. Before joining PepsiCo, Lozano spent six years with the Miller Brewing Co. where he led a sales team in New York City, built brands in the United States and drove growth in international regions from Asia Pacific to Latin America. Lozano was the youngest Director in the International Division and was responsible for dramatic share gains in Asia Pacific and a turnaround in Latin America. Prior to Miller he spent two years with the Coca-Cola Company.

“Iron City Brewing Company’s portfolio of brands are icons in Western Pennsylvania and beyond,” said Lozano. “My priorities are to concentrate on the core brands, Iron City and IC Light; to better support our wholesalers and to aggressively grow the business. Part of that growth means a personal commitment to adding jobs in Pittsburgh. I’m honored to be at the helm of a business that’s a Pittsburgh institution. I firmly believe Iron City has tremendous potential, and I look forward to helping write the next chapter in the brewery’s history.”

About Uni-World Capital, L.P.
Uni-World Capital, L.P. is a private equity firm focused on making leveraged buyout and growth equity investments in lower-middle market companies. We seek to partner with management teams where we can leverage our team’s collective business experience, corporate relationships and strategic and financial expertise in order to help enhance a company’s strategic positioning and drive profitable growth. More information can be found at http://www.uniworldcapital.com.

About Iron City Brewing Company
ICB’s brands are iconic in the Western Pennsylvania region, and its core products, Iron City Beer, IC Light, and Augustiner Amber Lager, enjoy a loyal following around the world, wherever “Pittsburgh Nation” beer drinkers congregate. During the brewery’s 150-year history it has introduced many innovations, including the twist-off cap and the snap top can, and in 1976, Iron City Brewing was the first brewery in the United States to produce a light beer.

Photo Credit: jongela 19 on Flickr (creative commons)

(Memphis, TN) – One of the nation’s largest contract breweries is buying the same old Coors Brewing plant that Yuengling was going after last year.

Wisconsin-based City Brewing Company, LLC, is known for pumping out large volumes of suds for a number of companies. The La Crosse facility is capable of brewing seven million barrels of beer a year and the Latrobe facility up to 1.5 million barrels. With the announcement of plans to buy the Hardy bottling plant in Memphis, the contract brewer will be able to add a few more million barrels.

Here is the breakdown of the deal as first reported by The Memphis Commercial-Appeal:

— Blues City Brewery LLC will buy the Memphis brewery from Hardy Bottling Co. for $30 million.

— It is seeking a 15-year property tax freeze from the Memphis-Shelby County Industrial Development Board.

City’s largest contracts include high-octane malternatives such as Four Loko and Joose.

————-

Photo Credit: Jongela 19 on Flickr (creative commons)

Some sleuthwork by a Pittsburgh Tribune-Review reporter reveals that a once-iconic brand is expected to be sold. The brewery confirms that there will be an announcement soon.

Iron City Brewing is likely to be sold to a NYC-based private equity firm according to Jeremy Boren’s piece:

Porter [one of the partners] declined to comment on the pending sale. He e-mailed a statement that said Uni-World “does not comment on rumor or speculation” and referred questions to public relations firm Ketchum. A spokesman for Ketchum declined to comment.

If the sale goes through as expected, it would be the second time ownership changed since 2005, when previous ownership group Pittsburgh Brewing Co. filed for bankruptcy protection because it owed $2.6 million in unpaid sewer and water bills to the Pittsburgh Water & Sewer Authority.

The Iron City brand, which was renamed as part of a merger of a dozen breweries to Pittsburgh Brewing back in 1899, was re-launched after bankruptcy in 2007. In 2009, Iron City struck a deal with City Brewing to produce beer at their former Latrobe Brewing Company plant. Production was estimated to be around 170,000 barrels that year.

Iron City may not be a household name to younger drinkers but (as Pittsburgh Brewing) it reached peak production of around 1 million barrels at one point and was a publicly traded company. The Pittsburgh City Paper featured an epic piece on the brewery’s downfall in late 2009.

(Frederick, MD) – The Kalamabrew blog broke the news today that Flying Dog Brewery is suing the Michigan Liquor Control Commission.

Over what?

The brewery’s Raging Bitch beer.

Both Michigan and New Hampshire outlawed the beer from sale in their respective states because of the branding back when Flying Dog first applied for licensing.

Per Kalamabrew:

In a complaint filed Friday, the brewery asks a federal judge to issue an injunction overriding the board’s decision and allow it to advertise and sell the beer here.

The commission, which regulates alcohol sales and advertising, deemed language on the bottle to be “detrimental to the health, safety, or welfare of the general public,” according to the lawsuit, which also names five commissioners as defendants.

This isn’t just a symbolic move for Flying Dog though. Raging Bitch has quickly taken over as the brewery’s top-selling brand after its introduction as the 20th anniversary beer in late 2009/early 2010.

Let that sink in for a minute.

Despite Raging Bitch’s financial success, which helped lift Flying Dog to 40% growth last year, the brewery’s media campaign is focusing around the idea of “free choice.” Per the brewery blog:

When informed of the Michigan Liquor Control Commission’s apparent distaste for his art, Steadman said, “Freedom of speech and artistic expression is as fundamental to our being as the alphabet itself. I thought censorship went out with D.H. Lawrence’s ‘Lady Chatterley’s Lover’ about 50 years ago! So if you are feeling a strong itch to drink Raging Bitch, just do it and get on with life.”

Alan Gottlieb, president of the Center for the Defense of Free Enterprise, said that his organization “has joined this important legal case because the issues raised have a profound impact on the right to freely engage in the marketplace.”

It will be interesting to see if the case has any impact on the other brands that Flying Dog has successfully put on shelves in Michigan.

As for New Hampshire, perhaps this is a sign of things to come. The brewery wrote one year ago:

It is an outrage that one person can arbitrarily over-rule the rights of wholesalers, retailers, and beer lovers throughout an entire state. We are proud to have Chad in the People’s Republic of Flying Dog and wholeheartedly support his quest for the Bitch.

Mr. Edwards [NH Chief of Liquor Enforcement], if you’re reading this, our CEO Jim Caruso has called you a few times to discuss this with you. He would very much appreciate a call back.

(Chicago, IL) – Chicago-based Goose Island, one of the nation’s mostrespected and fastest-growing small brewers with sales concentrated throughout the Midwest, today announced it had agreed to be acquired by AnheuserBusch, its current distribution partner, in a move that will bring additional capital into Goose Island’s operations to meet growing consumer demand for its brands and deepen its Chicago and Midwest distribution.

Goose Island’s legal name is Fulton Street Brewery LLC (FSB). Anheuser-Busch reached an agreement to purchase the majority (58 percent) equity stake in FSB from its founders and investors, held in Goose Holdings Inc. (GHI), for $22.5 million. Craft Brewers Alliance Inc. (CBA), an independent, publicly traded brewer based in Portland, Ore., that operates Widmer Brothers, Redhook and Kona breweries, owns the remaining 42 percent of FSB and reached an agreement in principle to sell its stake in FSB to Anheuser-Busch for $16.3 million in cash. AnheuserBusch holds a minority stake (32.25 percent) in CBA.

Goose Island sold approximately 127,000 barrels of Honkers Ale, 312 Urban Wheat Ale, Matilda and other brands in 2010. To help meet immediate demand, an additional $1.3 million will be invested to increase Goose Island’s Chicago Fulton Street brewery’s production as early as this summer.

“Demand for our beers has grown beyond our capacity to serve our wholesale partners, retailers, and beer lovers,” said Goose Island founder and president John Hall, who will continue as Goose Island chief executive officer. “This partnership between our extraordinary artisanal brewing team and one of the best brewers in the world in Anheuser-Busch will bring resources to brew more beer here in Chicago to reach more beer drinkers, while continuing our development of new beer styles. This agreement helps us achieve our goals with an ideal partner who helped fuel our growth, appreciates our products and supports their success.”

Hall will continue to be responsible for Goose Island beer production and the expansion of Goose Island’s Chicago brewery, where production will continue and its business will still be based.

“The new structure will preserve the qualities that make Goose Island’s beers unique, strictly maintain our recipes and brewing processes,” Hall said. “We had several options, but we decided to go with AnheuserBusch because it was the best. The transaction is good for our stakeholders, employees and customers.”

Anheuser-Busch has distributed Goose Island brands since 2006 as part of an agreement with Widmer Brothers Brewing Co. of Portland, Ore., a co-founder of CBA, that provides Goose Island access to the network of independent wholesalers that distribute Anheuser-Busch beers. AnheuserBusch also provides logistical support to all AnheuserBusch wholesalers distributing Goose Island and CBA beers as part of that agreement.

Wholesalers currently servicing retailers with Goose Island beers will continue to do so with no disruption in service.
“These critically acclaimed beers are the hometown pride of Chicagoans,” said Dave Peacock, president of Anheuser-Busch, Inc. “We are very committed to expanding in the highend beer segment, and this deal expands our portfolio of brands with high-quality, regional beers. As we share ideas and bring our different strengths and experiences together, we can accelerate the growth of these brands.”

Anheuser-Busch’s purchase of FSB is subject to customary closing conditions, including obtaining required regulatory approvals. The transaction is expected to close in the second quarter of 2011.

The two Goose Island brew pubs are not part of the deal, but will continue in operation, offering consumers an opportunity to sample Goose Island’s award-winning specialty beers and food selections.

As part of CBA’s agreement to sell its 42 percent block in FSB to Anheuser-Busch, in addition to cash, Anheuser-Busch will provide enhanced retail selling support for CBA brands, will reduce distribution fees payable by CBA to AnheuserBusch and will provide CBA additional flexibility with respect to future acquisitions and divestitures.

Founded by John Hall in 1988, Goose Island Beer Company is one of the Midwest’s first small breweries. Located at 1800 W. Fulton St., Chicago, 312-226-1119, www.gooseisland.com, Goose Island is acclaimed for creating world-class ales, including 312 Urban Wheat Ale, Honkers Ale, India Pale Ale, Matilda, Pere Jacques, Sofie and a wide variety of seasonal draft only and barrel-aged releases, including Bourbon County Stout, the original bourbon barrel-aged beer.

Based in St. Louis, Anheuser-Busch is the leading American brewer, holding a 48.3 percent share of U.S. beer sales to retailers. The company brews the world’s largest-selling beers, Budweiser and Bud Light. Anheuser-Busch also owns a 50 percent share in Grupo Modelo, Mexico’s leading brewer. Anheuser-Busch is a major manufacturer of aluminum cans and has been a leading aluminum recycler for more than 30 years. The company is a wholly-owned subsidiary of Anheuser-Busch InBev, the leading global brewer, and continues to operate under the Anheuser-Busch name and logo. For more information, visit www.anheuserbusch.com.

SOURCE Anheuser-Busch

(Chicago, IL) – In what will likely be the largest acquisition of the year for small breweries, Anheuser-Busch, Inc. announced that it will buy 16 year-old Goose Island Beer Co..

[Update 1: Chicago Breaking Business reports that Brewmaster, Greg Hall, is stepping down.]

[Update 2: According to a press release, a) John Hall will stay on as CEO, b) the two breweries brewpubs will not be part of the deal and will remain open, C) AB is going to put $1.3 million into the Fulton Street facility as early as this summer to help it expand and D) No disruption to supply in current markets or with current wholesaler contracts.]

[Update 3: Goose Island has added the announcement to its website.]

[Update 4: Kate Bernot, Contributing Editor at The Feast Chicago, says Head Brewer, Brett Porter, (currently at GI, formerly at Deschutes) will take over Greg Hall's duties as Brewmaster.]

[Update 5: HOOK (Craft Brewers Alliance) stock is up over 6% in morning trading. The stock price was only $2.50/share just one year ago and is at $8.75 today.]

[Update 6: Per Beernet, "Just spoke with A-B ceo Dave Peacock: A-B will NOT brew Goose Island beers in St. Louis. Will expand capacity in Chicago and brew there."]

[Update 7: Here is the official press release on Anheuser-Busch naming Brett Porter as the new brewmaster at Goose Island.]

[Update 8: Timeout Chicago Magazine interviewed Brewmaster, Greg Hall, who is stepping down from his role. He will stay in a brewmaster capacity until April 30 and then will be on the board as an advisor on beers, branding and strategy.]

[Update 9: HOOK stock (Craft Brewers Alliance) closes the day up 12.4% to $9.26/share according to Yahoo Finance. It's lost in the shuffle that the group has an additional $16 million to use in competing with other small brewers now.]

[Update 10: Re-reading that Timeout interview with Greg Hall, I realize that I glossed over this: "It gives me money to start something new and a little bit of flexibility. I can’t really talk about what I’ll be doing for another month or so but it won’t be beer."]

[Update 11: Goose Island Brand Ambassador, Ken Hunnemeder, said on Twitter, "The beers will not change." When asked what the deal meant for the future, he responded, "I think it was inevitable and will allow us to make great beers that got bumped from the lineup."]

[Update 12: From Dave Kesmodel of the Wall Street Journal, Dave Peacock, president of [Anheuser-Busch's] U.S. division, said Monday: “We really needed to radically change our position in the high end.”]

[Update 13: A well-formed and unique response (given much of today's negative reaction) to the news by author of multiple craft beer books, Andy Crouch...]

Original post:

What a turn of events. The deal is for $38.8 million split up between AB buying 58% for $22.5 million and Craft Brewers Alliance selling its 42% stake in the company for $16.3 million. AB has been handling distribution for Goose Island for the past five years.

Crain’s Chicago reported in early February:

“Goose Island Beer Co. has hired an investment banker to find financing to help it spread its wings.

The Chicago craft brewer is working with Chicago-based Livingstone Partners LLC to line up backers to expand its brewing capacity, which is maxed out, says John Hall, Goose Island’s founder and president.

Mr. Hall, 68, hopes to find venture capitalists willing to take a stake in the fast- growing business but leave his family in control.”

Looks like they found a better deal than venture-backed funding….

Here’s an excerpt of the beneficial ownership report, released within the past hour:

On March 27, 2011, Anheuser-Busch, Incorporated (“ABI”), a subsidiary of Anheuser-Busch Companies, Inc., and Craft Brewers Alliance, Inc. (“CBA”) entered into a binding term sheet by which ABI will purchase the 42% interest in Fulton Street Brewery, LLC (“FSB”) owned by CBA (the “CBA Interest”) for a purchase price of $16,300,000 in cash, reductions in the distribution fees to be paid by CBA to ABI under the existing distribution arrangements between the parties, amendments to the minority rights held by ABI and additional commercial considerations described below. FSB is a Chicago-based brewer of malt beverage products under the “Goose Island” brand.

ABI had previously entered into an equity purchase agreement (the “GHI Proposal”) with Goose Holdings, Inc. (“GHI”) to purchase GHI’s 58% interest (the “GHI Interest”) in FSB for a purchase price of $22,500,000. Pursuant to the FSB operating agreement between GHI and CBA, GHI notified CBA that CBA was required either (i) to match the GHI Proposal on the same terms provided in the equity purchase agreement or (ii) to sell the CBA Interest in FSB to ABI for a purchase price of $16,300,000 (being 42% of the aggregate price that would be paid by ABI for all of FSB). The GHI Proposal conditioned the obligations of each of GHI and ABI to consummate the transaction on CBA’s agreement to sell the CBA Interest to ABI. Although the exchange and recapitalization agreement between ABI and CBA (“Exchange and Recapitalization Agreement”) prohibited CBA from acquiring the GHI Interest without the consent of ABI or the waiver by ABI of certain provisions of that agreement, ABI advised CBA on March 25, 2011 that should the CBA board of directors determine to purchase the GHI Interest, ABI would provide the necessary waiver.

(Bethlehem, PA) – Another trademark dispute bubbles to the surface, this time between two Pennsylvania-based breweries…

[See updates below]

[Update II: I've removed "may go to court over" from the headline after receiving the following comment to this post. (I still have a lot to learn as well (clearly). Helpful summary of trademark law here).

This isn’t a lawsuit in the traditional sense. This is a cancellation proceeding before the Trademark Trial and Appeal Board in the US Patent and Trademark Office to get the Bethlehem’s mark canceled. The outcome of this proceeding in and of itself will not stop Bethlehem from continuing to use the mark. They just will not have the rights granted to a federally registered trademark holder. Troegs would have to file a a lawsuit in a court to force Bethlehem to stop using the mark.

It is worth noting for your readers that it isn’t about confusion as it relates to the actual products itself but the origin of the products.

Also, it should be noted that the standard for likelihood of confusion is not “whether Rude Elf has created confusion among Mad Elf customers over the last several years.” Actual confusion does not have to be shown. Even if actual confusion is shown, it still may not be sufficient for a finding of likelihood of confusion.]

[Update I: Before comments get out of hand again here or elsewhere, please take the time to educate yourself about trademark basics (like visiting the USPTO website for instance). To clear up a couple common misconceptions:

A) this has nothing to do with copyrights
B) sending a cease and desist is NOT the same thing as suing someone and
C) a trademark application requires that the filer identify a "class of goods" for which they are registering. Tröegs is not claiming to own "Mad Elf" as it pertains to computers or automobiles or other goods. The brewery is only claiming rights to the name as it pertains to beers. This is why, for example, you see the name, "Monster," on a number of goods including energy drinks, beers, electronics, etc.

In addition, trademark law dictates that companies protect these marks when infringed upon or risk losing them. That said, these situations are obviously not black and white which is what makes them interesting to debate in the first place.

Hope that helps...thanks!]

Original post:

A press release came over the wire late this afternoon from BBW Press Relations Manager, Mike Fegley:

Bethlehem Brew Works, received a cease and desist letter just before Christmas, from the law offices of McNees Wallace & Nurick, representing Tröegs Brewing Company of Harrisburg Pa, concerning Fegley’s Rude Elf’s Reserve seasonal beer offering.

Tröegs claims Fegley’s trade mark for “Rude Elf’s Reserve” is a violation of Troeg’s mark “The Mad Elf Tröegs Holiday Ale brewed with Honey, Cherries & Chocolate Malt.” Further, Tröegs claims they own the rights to the word Elf and the image of an Elf in relation to all beer, ales and lager. Fegley disputes these charges and will vigorously defend the case.

The press release appears to be a move to put public pressure on Tröegs to drop the case before it moves into the discovery case the first week of April. What is the discovery phase, you ask? Courtesy of the Minnesota Judicial Branch:

“Discovery” is the process each party can use to learn what evidence the other side has about the dispute. The discovery process takes time, and can be expensive, intrusive and frustrating, especially if you do not have the help of an attorney. Discovery may not be needed in very simple cases, but both parties have a right to use discovery to get relevant information that the other party has about the facts of the case.

Earlier this month, BBW filed a formal response to Tröegs’ filing from January (you can read all of the filings which are attached below as PDFs).

Rude Elf’s Reserve has a checkered history dating back to 1999 according to BBW’s website. In 2003, a separate case forced the brewery to change the name from Rudolph’s Reserve to Rude Elf’s Reserve.

Tröegs’ filing indicates that the brewery filed a trademark application relating to Mad Elf on November 27, 2002, and alleges first use in December. Tröegs filed a label registration application with the TTB on November 19, 2002.

As an aside, for any young breweries or brewery hopefuls wondering what they can learn from this, always register your labels with the TTB and/or state where it is required (which BBW/Fegley’s did in 2004) as it helps prove date of first use in the event that allegations such as these arise. A lot of breweries don’t file these at all due to the red tape involved.

I’m obviously no legal expert but it looks like this case will come down to whether Rude Elf has created confusion among Mad Elf customers over the last several years.

Both Fegley and Brewery President, Jeff Fegley, declined to comment. A phone call to Tröegs management was not immediately returned.

Tröegs filing

Notice to BBW and schedule of future proceedings

BBW’s filing/response

(Milwaukee, WI) – Northern Brewer has now blogged about the situation with Bell’s.

[ed. note: if you missed it, Bell's Brewery's response is here.]

It is a candid post that describes how Northern Brewer felt “affronted” at first but quickly came around to support Bell’s in its action.

If anything, what happened yesterday sheds an interesting light on the homebrewing industry practice of using the names of commercial beers on products. Should permission be sought before selling these products?

I sent over a few additional questions to Northern Brewer Marketing Manager, Jake Keeler…

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1) For kits that are marketed as clones of commercial beers, do you ask the brewery’s permission to sell those?

No – only for the Pro Series kits where the brewers has signed off on the recipe and we are allowed to use the actual name, logo, etc

2) Is asking permission an industry-wide practice?

I can only really speak for us, but generally, I don’t think anyone is seeking permission unless it falls into the “pro” series. It’s a wide spread practice in Homebrewing.

3) I’m guessing that permission wasn’t sought in the case of Three Hearted Ale?

Permission was not sought

4) For Pro Kits, do you license these recipes from breweries for a fee? [ed. note: Pro kits include ingredients that form the actual recipe that are provided by the brewery]

No. These are collaborative projects without exchange of a fee. Should anyone currently working with us, or anyone we partner with in the future, want to license the name/logo etc and charge a fee, then we will happily comply. But right now, we are working with friends and keeping it between a handshake.

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Hopefully breweries and businesses following this story can take something away from it. As you’ve seen recently, grievances over trademark disputes are increasingly being aired out in the public eye. Those initiating the disputes are usually not viewed favorably. The letter of the law states that a business holding a trademark must defend it but the circumstances around how this is done is often what determines how the public views it (more than the action itself).

(Kalamazoo, MI) – Here’s the response from Bell’s Brewery.

To all interested:
Yesterday, Northern Brewer posted on their Facebook page about a cease and desist letter that they received from Bell’s Brewery, Inc. I apologize that Bell’s has taken so long to respond to this issue, but all members of management were travelling to the Craft Brewers Conference yesterday and could not get a response posted.

On March 18, 2011, representatives of Bell’s Brewery, Inc. sent a letter to Northern Brewer regarding that company’s use of Three Hearted Ale for a homebrewing kit. This letter was sent out at a time when Bell’s is having to defend it’s trademarks(including Two Hearted) on several fronts. Because we are finding ourselves in this situation, we believe that is necessary to correspond in writing to those we feel are infringing on our marks. We do not know the owners of Northern Brewer nor were we familiar with the products they offered until recently. From a legal perspective a phone call was not going to provide the documented defense that we need as we try to defend this trademark now and in the future.

Here is a partial extract of the letter we sent:

“As a result of the extensive business investment by Bell’s Brewery, significant goodwill has inured in the TWO HEARTED trademark.”

“While Bell’s Brewery encourage the development of independent brewers and homebrewing, Bell’s Brewery are concerned with your use of THREE HEARTED ALE Extract kit.”

“Bell’s Brewery are of the opinion that there is a likelihood of confusion between your mark and the trademarks for TWO HEARTED owned by Bell’s Brewery. The marks create the same overall commercial impression. Furthermore, the goods associated with your mark and the trademark for Two Hearted are identical.”

“Consequently, your use of THREE HEARTED is likely to create confusion, deception, or mistake among purchasers as to the origin or source of the goods/services, or convey to the purchasing public that the goods/services are approved by Bell’s Brewery or that there is an affiliation or connection between you and Bell’s Brewery.”

We have no issue with Northern Brewer other than this trademark infringement. We are flattered that they want to clone our beer-we have no problem with that. In fact, our staff recently agreed to work with Zymurgy magazine on a Two Hearted clone. Clones are not the issue.

Neither do we have a problem with homebrewers. Bell’s was founded as a homebrew shop in 1983 and has been in that business ever since. We are great supporters of the homebrew community and have underwritten many competitions, donated prizes to clubs, conducted tours with homebrew clubs, provided beer for certain AHA conventions, spoken at AHA convention, held an AHA membership rally, etc. etc. We have no problem with homebrewing or homebrewers. We love homebrewers.

Bell’s has worked long and hard to develop and market Two Hearted Ale. It is a very valuable asset for our company. As president of Bell’s it is my job to protect those types of assets. That is my responsibility to my employees and their families, and to the shareholders of the company. Never were we contacted by Northern Brewer asking permission to use Three Hearted. Upon learning of Three Hearted we moved to defend an asset that we own and have owned for many years. This is our right and duty. A trademark that is not defended becomes worthless. And while some of you may think that this was harmless flattery, by not defending against this we would be opening the door for further challenges against our mark.

At this time it would appear that Northern Brewer plans to respect and acknowledge our right to this trademark, as I understand that they are renaming their product. For this, we thank them. This is all we are asking for.

As regards Third Street, we filed for an extension to oppose, not an opposition. The use of the extension is often used so that two companies can sit down and see what each others marks are, and if they can co-exist. Often an agreement is drawn up between the two companies for this co-existence. We are currently in that discovery phase with Third Street.

I know many of you think that Bell’s was heavy handed in our actions. I’m sorry you feel this way. Bell’s has been on both sides of trademark issues-sometimes a winner and sometimes a loser. Twice in the history of Two Hearted we have been sent cease and desist letters regarding the labels. Additionally, we acquired the label by written permission of it’s former owner who gave it up many years ago. When these actions arise we try to respect others intellectual property and conduct ourselves with a modicum of decency. Trademark law is part of being in the consumer products business.

I hope this letter explains our position and that you will understand that we are just trying to protect what is ours. We are sorry if some of you feel offended by our action, but for us we felt it was the most professional and legally necessary means to an end. We hold no malice towards Northern Brewer, their employees or their customers.

Sincerely,

Larry J. Bell
President
Bell’s Brewery, Inc.

Copyright Bell's Brewery - provided for context under fair use

(Kalamazoo, MI) – Northern Brewer confirms that Bell’s Brewery has sent them a cease and desist letter.

[3/23 Update II: Here's the official response from Bell's.]

[3/23 Update: This is a story that has brought a lot of passionate responses so I'm digging a bit deeper. I hope to get more from Bell's as to how this came about if they are able to discuss it (may take a while where they are out at the Craft Brewers Conference which just started). I also have an email out to Northern Brewer to see if they typically get permission from brewers before designing/marketing kits that clone a brewery's commercial beer. Is this a homebrewing industry-wide practice or not?]

Northern Brewer posted the following message on Facebook an hour ago:

So … we just received a letter from an attorney representing one of our favorite craft breweries; this letter informed us that we need to change the name of our Three Hearted Ale kit in a hurry. We’d love to hear your suggestions!

A Northern Brewer representative later confirmed that Bell’s Brewery sent a cease and desist letter. It’s a peculiar decision because Northern Brewer hasn’t filed a trademark application for the name, “Three Hearted Ale.” [Update: The kit has been around for ten years according to NB Marketing Director Jake Keeler.] It begs the question of how a homebrewing store can effectively communicate that a brewing kit can be used to create a clone of an existing commercial beer without using the name of that beer.

Regardless of the merit of the C&D, the Facebook thread is on fire with over 100 comments over the past hour. Some suggestions include, “triple middle fingers IPA,” “Cold Hearted Ale,” and “Cease and Desist Ale.” Northern Brewer is the fourth largest beer community on the internet with dozens tens of thousands of users. Did the lawyers poke a stick at the wrong beehive this time?

Oakshire Brewing even went so far as to create a commercially available “Three Hearted Ale” this past fall though it was a Single Batch release.

A USPTO search also shows that Bell’s requested an extension last week to oppose a trademark application for “Third Street,” an unreleased beer from Cold Spring Brewing in Minnesota. One of Bell’s longtime staples is a beer called, “Third Coast.” Perhaps the thought is that the word, “third,” as well as a location of some kind could cause confusion among consumers.

Bell’s Brewery’s spokesman was unavailable for comment.

Copyright Brewers Association (click to zoom in)

Total U.S. brewery count climbs to its highest level since 1900

(Boulder, CO) — The Brewers Association, the trade association representing the majority of U.S. brewing companies, today released 2010 data on the U.S. craft brewing industry. Small and independent craft brewers1 saw volume2 increase 11 percent and retail sales dollars increase 12 percent over 2009, representing a growth of over 1 million barrels (31 gallons per U.S. barrel), equal to more than 14 million new craft cases.

“Beer lovers increased their appreciation for American craft brewers and their beers in 2010,” said Paul Gatza, director, Brewers Association. “Craft brewers’ stories resonate with Americans who are choosing small, independent companies making delicious beers in more than 100 different styles.”

The Association also reported a growth in the number of U.S. breweries, with eight percent more breweries than the previous year. In 2010, there were 1,759 operating breweries. Craft brewers produced 9,951,956 barrels, up from an adjusted3 8,934,446 barrels in 2009.

“Prohibition caused a dramatic decline in the number of breweries in the United States, but the number of breweries is now at an all-time high,” added Gatza. “With well over 100 new brewery openings in 2010, plus 618 breweries in planning stages, all signs point to continued growth for the industry.”

In 2010, craft brewers represented 4.9 percent of volume and 7.6 percent of retail dollars of the total U.S. beer category. The Brewers Association estimates the actual dollar sales figure from craft brewers in 2010 was $7.6 billion, up from $7 billion in 2009.

Overall, the U.S. beer industry represented an estimated retail dollar value of $101 billion. U.S. beer sales were down approximately one percent, or 2 million barrels, in 2010 compared to being down 2.2 percent in 2009. Total beer industry barrels dropped to 203.6 million, down from 205.7 million barrels in 2009. Imports were up five percent in 2010, compared to being down 9.8 percent in 2009. (Note: the Brewers Association does not count flavored malt beverages as beer.)

Gatza added, “We also found that three percent of craft brewer barrels, by volume, are distributed in cans, confirming a growing trend.”

A more extensive analysis will be released on March 24 during the Craft Brewers Conference in San Francisco. The Association’s full 2010 industry analysis, which shows regional trends and sales by individual brewery, will be published in the May/June 2011 issue of The New Brewer.

1 The definition of a craft brewer as stated by the Brewers Association: An American craft brewer is small, independent, and traditional. Small: Annual production of beer less than 6 million barrels. Beer production is attributed to a brewer according to the rules of alternating proprietorships. Flavored malt beverages are not considered beer for purposes of this definition. Independent: Less than 25 percent of the craft brewery is owned or controlled (or equivalent economic interest) by an alcoholic beverage industry member who is not themselves a craft brewer. Traditional: A brewer who has either an all malt flagship (the beer which represents the greatest volume among that brewers brands) or has at least 50 percent of its volume in either all malt beers or in beers which use adjuncts to enhance rather than lighten flavor.

2 Volume by craft brewers represent total taxable production.

3 Previous year’s total adjusted due to increased 2009 data points received.

Based in Boulder, Colorado, USA, the Brewers Association (BA) is the not-for-profit trade and education association dedicated to small and independent American brewers, their craft beers and the community of brewing enthusiasts. Visit BrewersAssociation.org to learn more. The association’s activities include events and publishing: CraftBeer.com, World Beer Cup®; Great American Beer Festival®; Craft Brewers Conference and BrewExpo America®; National Homebrewers Conference; National Homebrew Competition; SAVOR: An American Craft Beer & Food Experience; American Craft Beer Week; Zymurgy magazine; The New Brewer magazine; and books on beer and brewing. The Brewers Association has an additional membership division of 25,000+ homebrewers: American Homebrewers Association.

Beer lovers are invited to learn more about the dynamic world of craft beer at CraftBeer.com.

SOURCE: Brewer’s Association

(Washington, DC) – A lot of breweries are involved in fighting this one.

Sam Calagione of Dogfish Head was reportedly among those lobbying against the CARE Act according to Beernet. Check out the PR below.

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Beer, Wine, Spirits Producer and Importer Associations Oppose Bill Allowing States to Discriminate Against Consumers

The Brewers Association, WineAmerica, Distilled Spirits Council of the United States, Wine Institute, Beer Institute and the National Association of Beverage Importers, associations representing virtually all alcohol beverages sold in the 50 states, today called on Members of Congress to reject the CARE Act (H.R. 1161), legislation backed by the wholesale tier of the alcohol beverage industry.

The producer groups stated: “We strongly oppose H.R. 1161, which, like its predecessor in the last Congress, is unnecessary. Its provisions would harm consumers and the marketplace, limit consumer choice, and allow states to enact protectionist and anti-competitive laws. If this bill became law, it would make it much harder for brewers, vintners, distillers and importers to get their products to market.

“Since Prohibition’s repeal, a balanced system of state and federal regulation has evolved to maintain a well-regulated and orderly market for the sale and distribution of alcohol beverages. Nothing has changed to warrant upsetting this careful balance, and we do not believe that Congress should spend valuable time wading into an intra-industry squabble, nor should it favor one segment of an industry at the expense of other industry members and American consumers.

“On March 7, 2011, the United States Supreme Court declined to review a challenge to a Texas state law, effectively ending litigation that the wholesalers say justifies their legislation. The wholesalers’ praise of this Supreme Court action is inconsistent with wholesaler support for H.R. 1161, which strips courts of their power to make precisely these kinds of balancing judgments.

“We urge Congress not to unravel a successful regulatory structure to the detriment of consumers, the industry, and the federal interest in a fair, competitive, and orderly marketplace for alcohol beverages.”

(Salt Lake City, UT and Aurora, CO) – The more breweries and beers, the merrier? Not always.

Earlier this month, I tipped off that Dry Dock Brewing was removing the name, “Seven Seas,” from its IPA, mentioning that 7 Seas Brewing was established in Washington and that it may not be a coincidence. It turns out there is actually a story there. Westword reports:

Delange, who opened Dry Dock in 2005, said he asked 7 Seas owner Mike Runion if they could work something out along the lines of Avery Brewing of Boulder and California’s Russian River Brewing; those two breweries famously teamed up in 2004 on a brew called Collaboration Not Litigation Ale after discovering that they were both making Belgian-style beers with the name Salvation.

​Runion declined to talk about it, saying he was in the middle of making deliveries.

Also surfacing this past week was an NY arts group’s beef with Epic Brewing in Utah. The Salt Lake Tribune reports:

A New York-based arts foundation that preserves the legacy of artist Robert Smithson has threatened legal action against a Salt Lake City brewery for using an image of his iconic Spiral Jetty on a beer label.

“It’s not like we used a sketch that [Smithson] made,” says David Cole, co-owner of Epic Brewing. “We used a photographer and bought the rights to the photograph. This is perfectly legal. They have been very slow to act because I think they are trying to figure out what to do.”

(Washington, D.C.) – Senators Mike Crapo (R-Idaho) and John Kerry (D-Massachusetts) today introduced legislation to reduce the beer excise tax for America’s small brewers. The Brewer’s Employment and Excise Relief (BEER) Act will help create jobs at more than 1,600 small breweries nationwide, which collectively employ nearly 100,000 people. Idaho and Massachusetts are home to dozens of small breweries.

“Like any private business, craft brewing is all about supply and demand,” said Crapo. “In touring Idaho last year, I met with many craft brewers who are seeking to expand their business because they are seeing increased demand for their product. In addition, this legislation will expand the ready markets for our barley, wheat and hops producers in Idaho. I remain optimistic this bill will pass this year to create new jobs and new markets.”

“The craft beer revolution started right here in Massachusetts and they’ve been going toe to toe with multi-national beer companies ever since,” said Kerry. “This bill will help ensure that these small businesses keep people on the payroll and create jobs even during tight economic times.”

Because of differences in economies of scale, small brewers have higher costs for production, raw materials, packaging and market entry than larger, well-established multi-national competitors. The BEER Act also helps states that produce barley, hops and other ingredients used by these small brewers. In addition to Senators Crapo and Kerry, the legislation is co-sponsored by a bipartisan coalition of 16 additional Senators.

Currently, a small brewer that produces less than two million barrels of beer per year is eligible to pay $7.00 per barrel on the first 60,000 barrels produced each year. This legislation will reduce this rate to $3.50 per barrel, giving our nation’s smallest brewers approximately $19.9 million per year to expand and generate jobs. This change helps approximately 1,525 breweries nationwide.

Currently, once production exceeds 60,000 barrels, a small brewer must pay the same $18 per barrel excise tax rate that the largest brewer pays while producing more than 100 million barrels. This legislation will lower the tax rate to $16 per barrel on beer production above 60,000 barrels, up to two million barrels, providing small brewers with an additional $27.1 million per year that can be used to support significant long-term investments and create jobs by growing their businesses on a regional or national scale.

The small brewer tax rate was established in 1976 and has never been updated. This legislation would update the ceiling defining small breweries by increasing it from two million barrels to six million barrels. Raising the ceiling to six million barrels more accurately reflects the intent of the original differentiation between large and small brewers in the U.S.

(Boston, MA) – More craft beer legal battles…

Boston Beer Co. is going after SanTan Brewing for allegedly copying the design of its special glass.

Boston Beer Corp. says Peter Sciacca, a glass importer, and Anthony Canecchia, owner of SanTan Brewing Co., are infringing on its patents.

Boston Beer has asked the International Trade Commission in Washington, D.C., to halt the importation and sale of the di Sciacca heavy-base Pilsner glass, saying it’s too similar to the Samuel Adams Boston lager glass.

Though the glasses appear to look pretty similar, Sciacca’s attorney says that BBC’s patents protect the functionality, not the design.

Michael Gerity of Phoenix, Sciacca’s intellectual-property attorney, said Samuel Adams has only design patents, not a utility patent. He said its design patents, which cover only ornamental features, are invalid.

The ads show the glass is thinner to keep the beer cooler, and the lip is designed to release the aroma, for example.

According to a Facebook post from SanTan, the brewery received its first shipment of the glassware in May 2007 after several prototypes. Boston Beer first marketed its glass in February 2007.

Beer drinkers seem to be split on the matter.

You can view the patents here and here.

(Knoxville, TN) – The other side of the story.

On Thursday, I posted about a trademark infringement lawsuit between two breweries, Marble Brewery and Marble City Brewing. Marble Brewery (plaintiff) President and Owner, Jeff Jinnett, originally declined to comment on the litigation, “citing company policy,” according to Metro Pulse. He’s since changed his mind. Below is a letter from Jinnett written to the Knoxville beer community (courtesy the Knox Beer Snobs blog).

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To The Beer Lovers of Knoxville:

The Marble Brewery, located in Albuquerque, New Mexico, is a small independent microbrewery producing, packaging and distributing our handcrafted ales. The unfortunate conflict that has arisen around using the name “Marble” in conjunction with breweries, beer and ale has obviously inflamed the passions of brewery and beer lovers in East Tennessee and warrants further explanation and clarification.

When we organized our brewery in 2007 and worked at selecting a name, the first thing we did was take our list of potential names to a trademark attorney and subject them to scrutiny to insure that they were available for our use. Some of our top choices had already been trademarked by others, which led us to scratch them off the list to avoid conflicts and confusion. We selected the name “Marble Brewery” for our new brewery and secured the federal trademark for the use of that name for our brewery and our beer. This is standard procedure for organizing a company that is building an identity and working to establish itself – having your trademark registered with the US trademark and patent office is extremely important. And once you have secured a trademark, the responsibility for monitoring unauthorized use falls on the trademark holder. If you allow the unauthorized use of your mark, it can weaken and even negate it.

Several months ago, it was brought to our attention that a brewery was planned in Knoxville with a name that was very similar to our trademark (Marble City Brewing Co.). As you can imagine, this was concerning – our business models were almost exactly the same (a packaging brewery and taproom) and our Marble Brewery was preparing for increased distribution across the country. I assumed that the name duplication was accidental and contacted Mr. Borsodi, the owner of Marble City Brewing Co. to explain that we had already trademarked the name and express my concern over the confusion that was sure to arise with two breweries having basically the same name. My suggestion was to come up with a unique name that he could trademark in order to create his own identity. My suggestions and concerns were rebuffed and Mr. Borsodi told me that changing their name was not an option. I reiterated that he was not yet producing beer, that we held the trademark for “Marble” and that is was inevitable that at some time in the near future our brands would cross and cause confusion.

There was no animosity involved – I want Mr. Borsodi’s brewery to succeed. We are both part of the community of small breweries and should have respect for each other. Unfortunately, I was informed that their brewery naming would proceed using our trademarked name. At that point I contacted a Tennessee based trademark attorney to review our options in resolving this dispute. The first step was sending a “cease and desist” letter requesting that Mr. Borsodi not use our trademarked name. This was ignored and Mr. Borsodi proceeded to attempt to trademark “Marble City Brewing Co.” The United States Patent and Trademark office rejected the trademark application due to the likelihood of confusion between our name,” Marble Brewery”, and Mr. Borsodi’s proposed name, “Marble City Brewing Co.”. Despite this fact, Mr. Borsodi, has pushed ahead to use the name “Marble City Brewing Co.” – and at this point our only recourse was to file suit in a Tennessee court to stop infringement of our trademark. His use infringes on the Marble Brewery name, whether or not we are both in the same market. This is a federal trademark. Unfortunately, if I don’t enforce our mark, I could lose my trademark rights – even here in New Mexico.

Nevertheless, I will emphatically state that this lawsuit seeks no monetary damages, nor does it seek to prevent the opening of a new brewery in Knoxville. The sole intention is to protect our federally recognized rights. This experience has not been fun for us. It is expensive, and it takes me away from my main goal here at Marble Brewery – to brew great beer and build our business. I still remain hopeful that we can resolve this issue amicably, as again, we are not attempting to keep Mr. Borsodi from opening his brewery.

As a graduate of Karns High School and the University of Tennessee – I am proud to have my beer on the shelf in my hometown of Knoxville.

Best Wishes,

Jeff Jinnett, President and Owner
Marble Brewery Inc.

(Brussels, BELGIUM) – Anheuser-Busch InBev reports fourth quarter earnings.

Below is the first page of the press release. The rest of it can be found here.

Not surprisingly, the “headlines” below ignore the company’s poor performance for Q4 and 2010. Profit dropped from $1.28 billion in Q4 2009 to $968 million in Q4 2010 and from $4.63 billion for all of 2009 to $4.07 billion for all of 2010. That said, EBITDA is up from 2009.

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The enclosed information constitutes regulated information as defined in the Belgian Royal Decree of 14 November 2007 regarding the duties of issuers of financial instruments which have been admitted for trading on a regulated market.

Anheuser-Busch InBev reports Fourth Quarter and Full Year 2010 Results
Except where otherwise stated, the comments below are based on organic figures and refer to 4Q10 and FY10 versus the same period of last year. For important disclaimers please refer to pages 2/3

HIGHLIGHTS:

• Revenue growth: Revenue rose 4.4% in FY10 and 5.9% in 4Q10, with revenue per hl up 2.3% in FY10 and 5.0% in 4Q10. On a constant geographic basis, i.e. eliminating the impact of faster growth in countries with lower revenue per hl, organic revenue growth per hl improved 3.6% in FY10 and 6.0% in 4Q10

• Volume performance: Total volumes and own beer volumes growth in FY10 was 2.1%, with non-beer volumes up 3.8%. In 4Q10, total volumes and own beer volumes increased 1.4%, and non-beer volumes grew 2.0%

• Focus Brands: FY10 Focus Brand volumes grew 4.8% led by Skol, Brahma and Antarctica in Brazil, Harbin and Budweiser in China, and Budweiser in the United Kingdom. Global Budweiser volumes increased 1.7% in FY10. In 4Q10, Focus Brand volumes grew 4.8%

• Market share gains: In FY10, we gained or maintained market share in markets representing over half of our total beer volumes

• Cost of Sales: Cost of Sales (CoS) increased 1.1% in FY10, and decreased 1.2% per hl organically. In 4Q10, CoS decreased 0.2%, and also fell 0.5% per hl. On a constant geographic basis, CoS per hl increased 0.6% in FY10 and 0.5% in 4Q10

• Synergies: FY10 synergies of 620 million USD related to the combination with Anheuser-Busch, including 170 million USD of synergies achieved in 4Q10, bringing total synergies by the end of 2010 to 1 980 million USD

• EBITDA: Normalized EBITDA in FY10 grew 10.6% to 13 869 million USD, with EBITDA margin of 38.2% compared to 35.8% in FY09, up 209 bp organically. 4Q10 EBITDA rose 21.9% to 3 895 million USD with a margin of 41.1%, an organic improvement of 520 bp, driven by EBITDA margin improvements in all operating Zones

• Profit: Normalized profit attributable to equity holders of AB InBev grew 28.3% to 5 040 million USD in FY10 from 3 927 million USD in FY09 on a reported basis, and by 39% to 1 219 million USD in 4Q10, from 877 million USD in 4Q09 on a reported basis, reflecting a strong operational performance. FY10 profit attributable to equity holders of AB InBev shareholders declined 12.7% to 4 026 million USD due to the non-recurring capital gains from asset disposals of 1 541 million USD in FY09

• Non-recurring finance costs: Normalized profit attributable to equity holders of AB InBev in FY10 excludes non-cash 192 million USD of accelerated accretion expenses and 733 million USD of negative mark-to-market adjustments for hedges no longer effective. 4Q10 normalized profit attributable to equity holders of AB InBev excludes 202 million USD of negative mark-to-market adjustments

• Net debt: Our net debt as of 31 December 2010 was 39.7 billion USD, a decrease of 5.5 billion USD from 31 December 2009, for a net debt to normalized EBITDA ratio of 2.9 versus 3.7 last year, on the Reference Base

• Dividend: The AB InBev Board proposes a dividend of 0.80 EUR per share, subject to shareholder approval. If approved, the shares will trade ex-coupon as of 27 April 2011 and dividends will be payable as from 2 May 2011. The record date will be 29 April 2011

• 2010 Annual Report and Financial Statements are available on our website at www.ab-inbev.com

(Knoxville, TN) – When the Wild Wild West meets the Southeast…

Metro Pulse published quite the interesting story yesterday:

Prior to registering as a corporation, the pair did research whether anyone else had the name. They discovered there was a Marble Brewery in Manchester, England, and a Marble Brewery in Albuquerque, N.M. Since the British beers didn’t seem to be available stateside, and since the New Mexico beers were only available in New Mexico and Arizona, and since neither had City in the name, Borsodi says he couldn’t imagine how there could be any confusion over similar-sounding names. Especially, he notes, because the Marble Brewery in Albuquerque is so named because it’s on Marble Street, and its logo uses images of glass marbles, the children’s toy, not the stone.

But in October, Borsodi received a call from Jeffery Jinnett informing him that the name Marble City Brewing Company was a problem. Jinnett is the president of Santa Fe Dining, which owns and operates a number of restaurants in Santa Fe and Albuquerque, N.M., including Marble Brewery, which is a brewpub that also sells its own beer. Borsodi says he explained that he couldn’t see any possible confusion that would arise between the two breweries and declined to change the name. In November, Marble Brewery filed a lawsuit in federal court.

Oh, but that’s not all.

Marble Brewery beers are being distributed locally by Chattanooga’s MOLO-TENN Distributors. Owner James Sherrell says he was unaware of the lawsuit and he first heard about Marble Brewery from a friend who lives in Albuquerque. Sherrell was also unaware that Marble has no distribution outside of the Southwest, as was MOLO-TENN salesman Jeff Nunes, who has been pushing Marble locally.

“I heard there was a conflict over the name, and that’s all I heard about,” Nunes says, but notes he was unaware a lawsuit had actually been filed.

To summarize this report, Marble City Brewing declined to change its name so Marble Brewery sued them (in November) due to likelihood of public confusion. Marble (NM) then went and got a distributor contract with a Tennessee distributor, far out of its distribution zone of New Mexico and Arizona, to make its beers available in Marble City’s market just weeks before they were set to launch their brand. If that’s how it went down, then Marble essentially went out of its way to create a public confusion scenario after suing Marble City. In another conspiracy theory scenario, is it possible that MOLO-Tenn orchestrated this since Marble City signed on with nearby rival, Eagle Distributing?

According to this thread on Facebook, Marble City supporters were hitting the Marble Brewery Facebook wall with negative comments before Marble Brewery had to remove it (a “wall” is a central page where the brewery can post news and people can post comments on the brewery).