IT’S A BAD YEAR FOR BEER . . . SO FAR

So says the mainstream media, the economic analysts, the industry analysts; for a change, even the raw numbers bear them out. Overall US beer sales were down 2.2% in 2OO9, and it’s not getting better in 2O1O; the Beer Institute says sales in the first five months are down 4%, and A-B InBev’s first quarter sales were down a gasp-inducing 6.8%. “I’ve never seen so much red ink on a spreadsheet in all my years in this business,” Harry Schuhmacher, publisher of beer business daily, was quoted in advertising age.
He’s not exaggerating; it’s the biggest drop in US beer sales in over fifty years (though it still pales beside the 25% that wine dropped in the late 198Os). If you do want a bit of exaggeration, the atlantic  ran a piece online by Clay Risen titled “The Death of Beer?”, in which he cited statistics from the DISCUS that show beer revenues and market share, relative to spirits and wine, declining over the past decade.
Beer’s hardly dying, but it is definitely staggering. When you’re in the midst of a situation like this, you have two choices as a retailer. You can try to buck the trend and promote the hell out of the brands that have been your reliable standbys for years and years; remind folks that they’re still the same as they’ve always been, point out their good points – which haven’t really changed – work the numbers and the discounts, and hang in there. That’s what I’ve been doing with my investments; solid companies are still good bets, though I am staying away from BP.
You’ll probably build your relationships with your wholesalers, and might even attract some more business; after all, people are still buying a ton of light beer, even though the numbers are down a little. There’s a direct connection between the economy and the beer market; the demographic most affected by job losses is the demographic most likely to drink mainstream beer brands. When the economy recovers, you’ll be solid.
Or if you want to take advantage of some opportunities right now, you could do all that, and start doing a little research and find out what’s hot in beer. Might as well diversify your investments, right?

BIG & LITTLE
Like the stock market, there are some segments of the beer market that are giving you a good return on an investment in time and inventory. “The entire craft brew segment is on fire,” said Steve Rubin, the owner of Huntington Wine & Spirits, then amended that. “The quality craft segment is on fire. If it’s a quality specialty import, that works too. People are willing to spend for quality. Price is not the issue when it comes to quality.”
What’s working for Rubin? “Lagunitas, Dogfish Head,and Smuttynose are off the top of my head,” he said. “The Sam Adams Barrel Room collection, the big-bottle aged beers; they’re doing very well. They’re pricey, but they are quality. Sam Adams is on top of things, that Noble Pils is a great product. Long Trail’s doing well. Anyone who has a nice blueberry beer does well; Wachusett Blueberry – we do ten cases a week.”
Tom Welton, the beer manager at Julio’s Liquors in Westborough, saw the same thing. “The whole craft segment is up double digits for us,” he reported. “ There are new people buying them every week. If they want to spend the money, they spend it on quality.”
At a big store like the Sturbridge branch of Yankee Spirits, you see a broad slice of the market. “We’re seeing the strong micros doing better,” general manager Dan Demuth said. “Wachusett is way up; Long Trail is out of this world. Harpoon is just up phenomenally – up, up, up! Sam Adams is up, some. Premium domestics are down a little, but the sub-premiums are way up: Busch, Busch Light, Genesee, Keystone, those types we’re seeing increase, probably because of the economy and the tax. It’s kind of hard to gauge the impact of the tax, because you don’t actually see the sales you lose, but it has affected sales in all three stores.”
Demuth also noted that while imports were down overall, some big imports were doing well: Heineken, Stella Artois and Beck’s. Rubin agreed that Stella was doing very well, and that tallies with the national figures. Analysts believe that’s a direct result of more attention from the company now that Stella’s parent company, InBev, has merged with Anheuser-Busch. Corona has taken a big hit, but remains strong in some markets; Welton said it still did well for him at Julio’s.
There are some bright spots to be found in the big brands, and one of the brightest is Bud Light Lime. It didn’t go away over the winter, though sales did drop – “It definitely slowed down over the winter, but so does Corona,” Demuth said – and sales are strong in summer. “It’s huge, a home run,” he added.
Bud Select 55 had a very successful launch, and is in direct competition with MGD 64 – and presumably, inevitably, its stablemate, Michelob Ultra – but there is some concern that the success of these ultra-lights may be behind the unprecedented simultaneous drop in sales of all three major brands of light beer. Cannibalization is not a topic anyone wants to discuss.
Miller Lite is trying package innovation with their new Vortex bottle, which has spiral grooves on the inside of the neck, kind of like rifling in a gun barrel. What the grooves actually do – or are even supposed to do – is a bit of a mystery that the advertising and Miller reps are not passing on just yet; agitate the beer to release more aroma? Get the beer out of the bottle faster? It’s not clear.
But customers like innovation, said Demuth. “The Vortex thing is still fairly new,” he said, “so it’s hard to get a read on that, but the Coors Light color-cold cans, they like that. [The cans have a thermo-sensitive ink that changes color to blue when they are at optimum drinking temperature, ie, really cold.] It used to be a person drank what they drank and that was it: the beer didn’t change, the package didn’t change. But now they want the new packages. The Miller Lite aluminum pint bottle, they love that. They demand new items, even when it’s just a new package.”

NEW, NEWER, NEWEST
It won’t come as any surprise that “new items” is a strong driver behind the surge in craft beer. It’s not just that craft brewers are smaller, more nimble in the business arena because of shorter decision cycles, or can clear much smaller batches more quickly than their giant mainstream counterparts. There are just so many of them!
“People are all over the board trying new stuff,” said Marc Kadish, owner of the Sunset Grill & Tap in Allston. “As soon as something new comes in, they want to try that. I’m not seeing a lot of brand loyalty. Much as they might like a beer, there are so many new ones they want to try them – time to move on, keep looking. You’d almost feel remiss if you didn’t try them, especially the limited ones.
“Harpoon has the 1OO Barrel series,” he said, “and their seasonals, plus they dry-hop the IPA in special editions, put it on cask: you could have a whole bar with just Harpoon beers, and I’m sure they’d love that! Sam Adams is doing that too, putting out one-offs in the local market. If you’re starving for new beers, now’s the time, there’s nothing like it. Every brewery has a new beer. We have to pick and choose to make sure we bring in ones that will move. It’s a challenge.”
It’s not just the bars, even ones famous for as many taps as Sunset. “We have at least 4OO different beers in bombers at all time,” said Kurt Hainey, store manager and craft beer buyer at the Gordon’s Fine Wines on Main Street in Waltham. “Crafts are changing constantly, and people want the new stuff. That’s been growing in the past three years. I started with only three feet of bombers four years ago, and now there’s about 54 feet. People come from all over to shop those.”
If you like slice-of-life, stream of consciousness stuff, John McCusick’s enthusiastic answer to my simple question (“So, what’s moving in your store lately?”) plots the zaniness of small-label beer sales pretty well. (He’s the beer buyer at Groton Market in Groton, MA.) Here it is, unedited; I apologize, I tried to get as much of it as I could:
“Pretty Things is very, very hot right now. They’re picking up; Field Mouse’s Farewell was very popular. I worked the American Craft Brewers Festival, and their line was across the floor. Anderson Valley Summer Solstice, you know that one, it is always popular, and Goose Island’s Belgian series – the Matilda, Juliet – are selling very well. I’m pushing real Belgians as well: the La Resistance portfolio, the Belgians from Shelton Brothers, have been doing very well; it’s easy to sell them because they’re amazing. You have to fight to get the specialty items. You have to make sure you’re getting your share instead of all of it going to the bigger stores. I don’t think big hoppy beers have gone away. The Belgian IPAs give you best of both worlds; you get an interesting, creamy mid-palate and a dry finish. A lot of brewers are doing single-hop varietals. Mikeller has a lot; they’re not just trying to be the biggest or the hoppiest. Hey, how about the most balanced? I have seen a trend moving away from British ales. Sam Smith can still sell a lot of beer. But Fuller’s just can’t get any traction, it’s not right. They’re the classic styles! When a new brewer imitates them, you notice it when they get it right.” Yes, you do.
“It’s exciting,” Steve Rubin said. “In a normal week, we bring in eight to twelve new products. I can’t believe some of the pricing, some of it seems out of whack, but it’s selling. They’ve done a great job, the industry, getting the money for it.”

HOW MUCH FOR THAT BEER!
People love a sale – try taking a dollar off all large-format bottles; better stand back or you’ll be trampled – but there’s not been a lot of pushback on price increases. “We put the line in the sand over keg prices,” said O’Brien Tomlin, owner of the Sierra Grille in Northampton, then paused, and laughed. “And then we just left it there! We’re getting into the world of $1O glasses of beer. It’s going to be more common in the future; supply and demand. But they pay it.”
As limited editions of beers become even more common – there’s a paradox for you – there’s more shifting on margins as businesses use these beers as customer rewards. “They sent five cases of Founders Breakfast Stout for the whole state last year,” Tomlin said. “I got one. You can’t buy it in any stores; I thought, what would I like to see happen as a beer lover? Share it! So I sold a $6 bottle for $1O. It’s not the usual margin, but you do what you can.”
Still, how do you keep up with that kind of rush of new beers, especially when that’s clearly what the customer’s looking for, and has been for at least three years? How do you get those limited release beers? It takes some work, and sometimes you have to go outside the usual chain of command.
“That’s where the interesting stuff is happening,” said McKusick. “There’s more buzz about these things. You have to follow the brewers on Twitter and Facebook; when you find something interesting, you want to grab it. If you’re a beer geek, it’s fun to ride that wave.”
You better be doing that; your customers are, because the brewers are pushing the information to them. “We do a lot of under the radar stuff: Facebook, Twitter,” said Mark Hellendrung, the guy behind the resurrection of Narragansett. “We’re selling a lot of beer to a small group of people. I love having a group of raving fans! We interact with them every day. We’ll get a message, ‘I love your beer, but I can’t get it in my local packie.’ It’ll be there tomorrow! It’s a better way to sell beer than jamming it down the retailer’s throat.”

SCRATCHING A NICHE
There are some niches you don’t want to overlook. Cans are still a niche for craft, but one that’s really starting to take off, especially in the summer months. Blue Moon is newly out in cans; kind of a bold step for a Coors-brewed craft-type beer, but the beer’s origin is pretty much an open secret at this point. In any case, the cans are working for Demuth at Yankee Spirits.
“Blue Moon is doing great,” he said, “and the cans took off from day one. I was skeptical, but they flew. I was skeptical about the Harpoon cans, too, they did a limited amount of IPA and Summer. Finally they said to me, “Throw 6O cases on the floor and see what happens.” I’ve replenished three times, and I’m looking to get some more. Cans in general do well in the summer.”
McKusick’s not completely sold. “We’re dabbling in it a little,” he said. “I don’t find the carbonation in the cans to match up with the bottle. But we’re selling a lot of Harpoon Summer; people want that for boating. We’re doing pretty well with the light fruit beers in cans: 21st Amendment Hell or High Watermelon, the Leinenkugel Summer Shandy. Beer can still be fun!”
Chad Melis is the director of Marketing for Oskar Blues, the Colorado brewery whose Dale’s Pale Ale broke the craft brewing canning barrier. The brewery was just named a “breakout brand” by beverage world in May. “We’re selling enough with sustained growth that’s not seen that often,” Melis said. “The package plays a role with its uniqueness, and what that brings for a marketing perspective. What that means to the craft brewing industry is important, too. The can’s a great package: light, low air, more portable, good for Mother Nature. More and more craft beer goes into cans every day. We’re leading the way, changing the industry.”
There’s more to it than just a growing number of breweries jumping on the canwagon. “We’re also changing the perception of the consumer that cheap beer comes in can,” said Melis. “We’ve been on this warpath for eight years. I went to SAVOR, the beer industry’s highest-end event. People saw us there, and went, ‘You’re pouring your beer out of cans?! Holy shit! That’s out of a can!’ It’s great to change minds one can at a time. It’s fun.”
Another thing people aren’t used to is gluten-free beer. This is a small but growing niche as more and more people are diagnosed as celiacs, cursed with an inability to digest gluten. “Gluten-free beers are steady, more and more people coming in with it,” said Demuth. “My biggest seller is Redbridge, my distributor tells me I’m one of the biggest accounts. I also have the Green’s Belgian ales from Merchant du Vin, and the Bard’s Tale.” I told him about another brand, a new beer from Spanish brewer Damm, called Daura, which is made with real barley that undergoes a proprietary deglutenizing process in the kettle. It tastes astonishingly like a regular European pilsner.
“And of course the cider category is gluten-free,” Demuth adds, something Steve Rubin had also mentioned. “Woodchuck has been a steady pull. Their summer seasonal is a blueberry, and from day one that’s been amazing. This blueberry – I personally don’t drink ciders, but this Woodchuck Summer is really good. I also do very well with Sam Smith cider. And you know, the Smirnoff PMDs, the Pre-Mixed Drinks, they’re doing very well, especially the Blueberry Lemonade. Mike’s came out with these margaritas, and the Traditional Lime is flying.”
A small niche that’s potentially large as more people get good draft equipment is home keg sales. “I’m doing well with Opa Opa Watermelon,” Demuth said. “I’ve even sold a few 1/6 kegs, the logs. That size is getting very popular, we’re selling a lot of them.”
One of the things almost everyone mentioned was “local,” a trend that seems to be spreading across beverages, food and even entertainment. “They want the local stuff, and they’re willing to pay,” said Welton. “It’s bigger than organic. We can’t get rid of an organic beer, but the locals are flying, it’s dominating. Berkshire, Smuttynose, Pretty Things: can’t keep them on the shelves.”
Hainey keeps a separate local section. “I separate the local beers from Massachusetts, New Hampshire and Vermont so people can find them,” he said, “and people like that. I like to help out. We do a lot of local stuff in bombers, and people try it and buy it. There’s a strong craft beer crowd in Massachusetts.”
Welton thinks local is a good antidote to the “When can we get [insert tiny brewery from 12OO miles away here] at your store?!” problem. “You know, there’s a ton of breweries I’d love to see here . . . ,” he said. “But there are tons of brands here now, and there’s a lot of opportunities for the locals. Let’s focus on them. There’s a lot to be said for traveling to get a beer you can’t anywhere else; why not do that? We don’t need another beer of the week; get it in, sell it once, and on to the next beer next week.”
Well, maybe. There are plenty of opportunities even without a beer of the week, and there are always bright spots in the beer market, just like in the stock market. The only thing sure is change. “It’s an ever-changing business,” said Dan Demuth, looking back over 25 years in the business. “And the last five years, it’s been crazy.” Sure does keep it interesting.

GRAND-DAD’S BEER
PABST AND ’GANSETT POUR STRONG
The Pabst Phenomenon has been rolling for almost ten years now.  This unmarketed, unadvertised heritage brand was in a glide path to non-existence; declining at a fair pace but still racking up solid national numbers, kind of like Canadian whisky.  Then some bike messengers and other fringy types in Portland, Oregon, and other places latched onto it, apparently drawn by the low price, but equally drawn by the feeling that this was a brand they had discovered, not one that had been aimed at them, sold to them, marketed to them. 
Pabst became a retro brand, one that the owners, a trust set up after the death of the scrap magnate who’d bought the beer intending to ride it profitably into the ground, were very careful not to push too hard, for fear of upsetting the bizarre balance that had resulted in its growth.  They worked the alternate music and sports scenes, sponsoring small bands and skateboarding events, developed a ‘faux graffiti’ mural advertising technique, and deliberately did not develop a broadcast media program. 
It worked, and Pabst continues to grow.  The brand accounted for 2.7% of American beer sales last year, and was one of only four of the top 3O brands that grew (the others, according to numbers published in advertising age, were Keystone Light, Modelo Especial and Yuengling).  It is an anomaly in the beer market: a growing brand without a huge advertising budget, a full-calorie beer that is growing while a light spin-off brand languishes, and, until very recently, a brand that was owned by a non-profit corporation.  Pabst and a stable of other brands from the past – Colt 45, Lone Star, Schlitz, and others – was just bought by C. Dean Metropoulos, an investor who’s made a name for himself by buying beat-up brands and reviving them: Vlasic pickles, Chef Boyardee, Bumble Bee tuna. 
It remains to be seen what Metropoulos will do with Pabst, but success like Pabst has enjoyed is not likely to be ignored.  There were a rash of retro makeovers in the past decade, most of which were flashes in the pan.  One of the successful ones is right here in New England.  Mark Hellendrung has revived Narragansett, and it’s a small-scale success story, a case study in how to do this right. 
“We’re up to about 32,OOO barrels a year,” Hellendrung said, and I recalled that when I spoke to him two years ago, sales were half that.  “We’re the fastest-growing beer in Massachusetts.  We’re a monster in Rhode Island, we’re up 3O% YTD.  And we haven’t even scratched the surface yet.”
“They’re doing well,” agreed John McKusick, the beer buyer at Groton Market.  “We sell the 12-pack bottles.  We just did the tie promotion with ’Gansett for Father’s Day, and people liked it.  We moved all the ties!”
That’s the kind of thing that Hellendrung and his team have been doing; smart, off-beat promotions with just the right touch of retro, leaning on the brand’s history but not relying on it.  “Making contacts, telling the story, grinding it out,” as he told me.  There’s a strong social media program, an ongoing ‘Gansett Girl’ contest, and a program to build a brewery (Narragansett Lager is currently brewed at Genesee in Rochester, NY). 
Narragansett is an old brand, and still resonates with an older crowd – I’m 51, and I remember buying Narragansett Porter – but it’s much more.  “Retailers might think of it as a restart of an old-man’s beer,” Hellendrung cautioned, “but about 65% of our sales are coming from the younger guys, selling in college towns like Worcester and Amherst.  This isn’t an old man’s beer.  It’s really skewing young.”
So is it a Pabst effect, hipsters drinking cheap cans that all the other hipsters are drinking?  “No!” Hellendrung said emphatically.  “I face that every day.  People aren’t drinking it because it’s the cool thing to do.  People are drinking it because it’s local, it’s the right thing to do.  It’s not brewed locally, not yet, but it is New England’s beer.  You know Yuengling?  We’re more like Yuengling than Pabst.”
Then he touched on something that does drive me nuts about craft brewers sometimes.  “I see local brands falling out because they’re not telling that story right,” he said.  “I’m right in your backyard, I’m creating jobs in your town.  Budweiser might come in with a big check, but are you going to see them three months from now?  We’re in here every week.”
Both Pabst and Narragansett do well for Dan Demuth at Yankee Spirits in Sturbridge.  “They’re up quite a bit; it’s a small base, but they’re doing really well,” he said.  “I order them every week.  A lot of people don’t want to drink their father’s beer, but then the next generation, grandfather’s beer, that’s different.  Schlitz too, that’s doing well since they started coming out in the new bottles.” He did note that the Pabst Light spin-off had been “a bomb,” and we agreed that the people who drink light beer aren’t interested in Pabst; the people who drink Pabst aren’t interested in light beer; bad marketing research.
Steve Rubin at Huntingdon says Narragansett almost sells itself.  “Narragansett is moving,” he said, “a very good, good-tasting, high-quality product.  Remember when Schlitz changed their formula?  Narragansett didn’t.  People remember that.”
Well . . . we older guys do.  The younger drinkers know they like the personal, local touch of a beer that just wants to say, “Hi, neighbor! Have a ’Gansett!”

SMALL IN MANY WAYS
We’ve been hearing about extreme beers for a while now: big hops, big ABV, big wood, big sour.  A few years ago I started a blog I called “The Session Beer Project” to talk about the opposite extreme: flavorful, lower-alcohol (4.5% and under) beers that you could enjoy in quantity without blowing out your palate or your liver, or your driver’s license.  It was really a quixotic gesture, something to tweak the extreme beer fans and extreme beer brewers, though I did hope to see more respect, more interest in these beers, and more of them on draft when I went out drinking. 
Much to my pleasure, it’s starting to happen.  “People are backing off on the alcohol,” said O’Brian Tomlin, the owner of Sierra Grille in Northampton.  “People still like the double IPAs, but I’m finding more customers paying attention to the ABV.  They’ll see the ABV and back off a little.  It’s not huge, but people are more aware of it.”  As more people realize that they can drink more than two of these flavorful lower-ABV beers without getting blitzed, it can only be good for them, and for bar business. 
A former Massachusetts brewer has returned to the industry with a brand and a concept built around delivering beers that fit right into the definition I crafted for session beers on my blog: 4.5% or less, flavorful enough to be interesting, balanced enough for multiple pints, conducive to conversation, and reasonably priced
The brewer is Chris Lohring, who you may remember as the creator of Tremont Ales.  His session beer brand is Notch, as in ‘a notch below’, an informal measurement.  “I was out of the business for a few years,” he told me, referring to the time after Tremont closed.  “I saw the high ABV beers, and they weren’t for me.  Why nothing on the lower end?  The more I thought about it, the more I realized it had been almost completely neglected.”
Lohring saw an opportunity, and after some research, and serious consideration, got back into the business, brewing up test batches of Notch at Federal Jack’s in Kennebunkport (where he brewed the first batches of Tremont in the early 199Os).  They’ve been well-received.  “It’s been pleasant and kind of surprising,” he admitted.  “The beer bars in Boston are bellwethers, and they were the first ones to take Notch.  It wasn’t ‘We want this’, it was ‘We need this’.  Customers were either one-and-done with the high-ABV beers, low sales; or they had too many, which has other problems.  I see a real trend to low-ABV beers in bars.  They’re embracing it.”
Right now, Notch is a series of one-off draft experiments.  “The intent is to go to bottles in the fall,” he said.  “I’m convincing distributors that session as a brand is viable.  I’d like to have a flagship, another year-round beer, and seasonals.  Once I get in the bottles, I’d love to continue to do seven barrel batches to experiment and innovate and trial beers in Boston.” That’s the kind of fun that keeps brewer and consumer interested. 
“There’s a lot of unexplored territory,” Lohring said.  “But you can feel it, I can feel it; it’s coming.  We’ll be having different conversations in a year: not whether it works, but which one we want.”
In the craft brewing business, “small” has more than one meaning; this used to be the “microbrewing” business, after all.  Micro apparently isn’t enough any more; we’re seeing the rise of the nanobrewery.  There’s no hard and fast rule for the size of a nanobrewery, but I tend to put a cap of three barrel batches on them.  Element Brewing in Millers Falls, Massachusetts, is one, and one that gets a lot of talk on the beer websites is White Birch, in Hooksett, New Hampshire. 
Lefty’s Brewing in Bernardston, Massachusetts, definitely makes that cut.  Bill Goldfarb, the man behind Lefty’s, makes beer in two barrel batches.  “It’s myself and my girlfriend,” he said.  “We’re doing 1OO hour weeks, but I couldn’t ask for anything better.  I have a couple draft accounts, but I mostly do bottles.  I sell out of local package stores and a couple local restaurants have it on draft.  I sell almost all of it within about 15 miles.  It’s a beautiful thing.”
Life is beautiful for Bill, you can hear how happy he is.  “I was a commercial roofer for quite a while,” he said, “but I decided to make the jump and do it.  The smaller scale makes it more attractive.  It’s a beautiful thing, a beautiful direction to be headed.  People are interested in keeping it local, going to the local market and supporting the local farmer.  Local is beautiful on so many levels.”
He’s keeping an eye on the money, though.  His sixpacks sell for about $12, and he knows that’s more than for a six of, say, Harpoon.  “It’s an expensive sixpack,” he acknowledges.  “It’s all in the cost of packaging.  You’re paying for more cardboard, more glass, more labels.  When I buy a sixpack, all I really want is what’s in it!  But to some folks, it makes sense, doesn’t matter what the price is.”  He plans to go to bigger bottles and growlers once he can afford to. 
“We have six different beers,” he said.  “Pale Ale, IPA, English Porter, Coffee Porter, Irish Stout, and Chocolate Oatmeal Stout.  Quality is the number one thing for me, and whatever it takes to maintain that, I’ll do it.  I want to stay a production place.  Wherever it takes me would be a beautiful thing.  I’d like to keep growing, but I’ll let it grow itself.”
Whether it’s alcohol levels or production size, small is beautiful.  Just ask Bill.