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Prediction Time

Craft Business Daily:

It’s almost Craft Brewers Conference, AKA prediction and perspective time. You may know J.B. Shireman, VP of Craft Services for beverage consultants and bankers First Beverage Group. Or maybe you know him from his 13-year tenure as “Guru of Goodwill” with New Belgium (he was really the Executive VP of Sales and Marketing and former BOD member). Certainly you’ll see him on the craft conference circuit at some point, spitting knowledge on the future of our humble segment. So what does he think about:

HOW CRAFT SHARE WILL GROW? WHAT OF A SHAKEOUT? Maybe there won’t be a shakeout so much as a “a serious reshuffling of the deck” in terms of the craft players who will garner the share growth, believes J.B. He points to the mayor of San Francisco talking up Anchor’s importance to the city, and New Glarus’ Deb Carey sitting at the State of the Union address with Michelle Obama.  He believes we have “passed the tipping point” and this is the new reality, one in which a doubling of craft consumption and dollars is “pretty much a layup.”

“How big can it get? I have no idea, but craft brewers are operating in something like 96% of the congressional districts around the country. They are building breweries, hiring people and helping breathe life back into small local economies. This would a be very hard trend to reverse, yet it is also going to get real competitive, so for certain individuals, that ‘layup’ just turned into multiple 3-point jumpers.” Mid-to-regional size breweries are probably the most vulnerable and are going to feel that squeeze play between large brewers and local nanobreweries.

That said, he believes the top 50 craft brewers might look quite different in short order. And nobody’s going to have it easy.

WHO IS AT RISK OF A FALLOUT? You can’t be a one-trick pony: If you have a disproportionately high amount of revenue tied up in a flagship, that’s dangerous, J.B. thinks. “Or if you become overly reliant on geographical expansion to meet your barrel and revenue projections, I think that’s a slippery slope more than in the past – you have to have more feet on the street, be prepared to invest much more against marketing, branding than ever and at the same time, core markets are harder and harder to maintain.”

On the other hand, this era of consumer experimentation is making operations across all channels much harder to manage. “This new product shift causes enormous complexities across supply chain like increased malt and hop bills for brewers. It also presents operational challenges in terms of capacity issues, varying tank and changeover times -all these things affect profitability, efficiencies of a brewery.” The challenges are not just limited to brewers either. We have published several stories this year of distributors giving their portfolios a trim as inventory and multiple SKUs deter efficiencies.

Part II on Monday.