Brew Talks CBC 2023: High & Dry: Exploring Craft's Contradictory Growth Areas

Speaker 1 [00:14] So joining us today, we're talking about two seemingly contradictory trends that we're seeing in beer. We have low in non-alcoholic beer that is, just keeps on growing, and then we have those more higher ABV beers. So to talk about that, we have Bill Schfeld, co-founder of Athletic Brewing. Hi, Bill.

Speaker 2 [00:36] Hey, thanks for having me. Yes,

Speaker 1 [00:38] and then from Massachusetts representing, we have Colleen Quinn, the CEO of, uh, Greater Good Imperial Brewing too. Hey there, yeah, we're getting both ends of the spectrum back to back and then crossing all levels of. We have Sam Caledoni from Dogfish Head. Welcome.

Speaker 3 [00:56] Excited to be here with you. We went to the same high school, not the same year.

Speaker 1 [01:01] We have to point that out at every Bootox. We are both Hagger alums.

Speaker 3 [01:05] It's a term of endearment, hoggers. We're hoggers. I actually went to school with a farm which you were just talking about.

Speaker 1 [01:12] It's true. I was being genuine in my support of farms. We had farms in high school. All right, we're going to kick things off and like I mentioned at the top, these trends seem to contradict themselves, but we've talked about this before and there's actually some sort of commonality that's driving these trends. I want to hear from each of you what is the through line for what's driving consumers to be drinking your products across that spectrum. Anyone is welcome to go first.

Speaker 4 [01:44] Um, well, for us, I think, uh, quality and taste is of the most importance. I think specifically quality over quantity. So we hear a lot of our consumers talking about fewer but better beers, um, and kind of treating a higher ABV beer as a little bit of an indulgence that they can get after. Um, we also hear about value, um, as part of the equation, thinking about kind of booze for your buck, um. And then you know just exploration and trying something, trying something new, um, uh, uh, those are probably the key things.

Speaker 1 [02:17] Bill, what crossover are you seeing with your consumers that are drinking non-elk and some of those higher ABV beers?

Speaker 2 [02:23] Yeah, I think athletic products probably sync up really well with that. If people are drinking fewer high alcohol beers in those very specific reward occasions, non-alcoholic beer really opens up the spectrum on other days of the week for other volume occasions and new occasions that the beer world is probably missing over the past few decades, and we're really excited to make higher quality beers than the non-alcoholic world has ever experienced at the low end of the spectrum. And also we're really committed to driving new people into the category who may not have discovered craft beer yet, who may not be beer drinkers at all, but this is a really accessible entry point for people to come into the category. So that's kind of where athletic comes into the category.

Speaker 3 [03:08] Yeah, for, for us, I did a little checking like looked at different uh sales moments in our history. So we're 28 years in it at Dogfish and right out of the gates in the nineties, we had core beers in each of the three categories that we're talking about today. So in the early years it'd be like lawnmower, light, lower than 5 ABV and then like raison dre Indian brown, mid ABV and then like 90 minute Midas and high ABV. It really was high ABV that Our little brewery in the middle of nowhere on the map, kind of in that second generation era of craft beer growing and it's interesting because the ability to get bigger format packages to market as a small brewery really aided us in the era when Imperial IPA started taking off and people were fearless to try like beer wine hybrids that were 10 to 15 bucks for 750 mL and it's like it's Coming back again maybe as we'll talk about later, it's more of a 19.2 single serve pack, but that kind of accelerated the higher ABV trend at two different moments and like for us for now our growth in the beer part of our business is more in high ABV. We have sequence, which is the best selling sour in America, low ABV but not growing, whereas 90 minute and Citrus Squall over ABV is what's growing for us.

Speaker 1 [04:35] Uh, before we go further, I want to let everyone know we do have a text line. If you wanted to send anybody questions, both in person or on the live stream, you can text 617-336-8560. That'll work throughout today so you can ask some questions to all of our panelists. Um, I want to talk about greater good for a second. You guys make all Imperial beers, those higher ABV, it's all 8% or above beers, right? What was interesting when we prepped for this was you, we also talked about how people looking for a higher ABV are also speaking to moderation. Can you talk a little bit about what it is about the higher ABV that still speaks to moderation at greater good?

Speaker 4 [05:16] Yeah, for sure. I, I think, you know, it might seem non-intuitive like to think about high ABB beers as part of a moderation story, but I do think it's quality over quantity, fewer and better, um, you know, I might not be drinking as much, but when I, when I am drinking, I want it to, you know, get me there faster or be, you know, more flavorful, uh, than, than another alcoholic beverage that I. A drink and so we certainly see a lot of people, whether it's in our taproom or buying our beers that, you know, they might have an athletic beer, you know, a few days a week, but they're, you know, indulging themselves with a greater good beer as well.

Speaker 1 [05:53] Yeah, you talk about that a lot though when you guys are talking about athletic is that balance of you're not just drinking non-alcohol alcoholic beers sometimes your consumers are also drinking alcoholic beers.

Speaker 2 [06:05] For sure. I, I think the common thread runs through all of our breweries for sure. Different flavors and everything, uh. But we, we do have data both from our own proprietary data and supported by Nielsen that over 80% of our customers do drink alcoholic beer on other occasions during the week, whether that's 1 or 2 days a week, one day a month. It is giving people more occasions and like more beer for our partners to deliver both in the middle and the third tier. Um, we are seeing new people come into the category too and then go to other parts of craft as well. So athletic can really be a discovery point for the craft beer world. Um, some of those data points are where the beer world tends to be closer to like 60, 40 or 70/30 male female. Athletics customer base, the non-alcoholic drinker is much closer to 50/50. It's about 15% points closer to down the middle, um. Prior to say 2017, the average non-alcoholic beer drinker, it was something like 75% of non-alcoholic beer drinkers were over age 45 as of only 5 or 6 years ago, and now 75% are under age 42. So where the craft audience, I heard, I heard Bart um. At a conference, I think it was in January, referenced the craft beer drinker has aged a bit over the past five years, like 1.5 years. I think this is a way to pressure that age lower, get new legal drinking age consumers into the category, have them explore a wide range of flavors where non-alcoholic beer used to be just lagers, so they could start with anything. I mean, even like a rattler and then go anywhere throughout anyone's portfolio in the craft world.

Speaker 1 [07:54] We are almost in the busy summer selling season. I want to hear from each of you. We can start with you, Sam. What are you hearing from wholesalers? What are they looking for to put on the shelf this year?

Speaker 3 [08:05] And, and so as you think about the trends across these three kind of ABV categories that we're chatting about for this session, I think it's like a tale of two cities, like what's happening in tasting room breweries, which is the majority of the craft brewers of America, and what's happening in three-tier distribution because the consolidation of all three tiers is very real and is a brewery that proudly has our own tasting rooms, uh, where we're doing tons of innovation and serving. Super wide breadth of beer, spirits, foolproof, canned cocktails, everything we make. What we are seeing now more than ever is our distributors are like, go deeper with fewer concepts. You can be as creative as possible. In fact, we want you to be well differentiated in this moment when there's a lot of sameness of chasing trends or just recognizing that IPA is now half essentially of all the beers out there, but they're like good. With something that's easy within a sentence and Jen and Zach can speak to this of being easy for our distributor salesperson to describe why it deserves its place on a shelf, frankly, that's that's being marginalized, whether it's seltzer or spirits-based RTD that we're still in the business of. You got to be really clear and you know I think I love your guys' breweries' names because that's a great example of a quick few syllables. describing your points of differentiation and so we try to do that with our innovations as well, whether it's citrus squalls, it's like a perfect storm between a cocktail and a beer, or 90 minute, 9% ABV 90 IBUs. So we're asking for fewer, deeper innovations in terms of three-tiered distro, but we're having fun throwing shit at the wall in our own locations.

Speaker 1 [09:53] Colleen, what are you hearing? What do people want?

Speaker 4 [09:55] Yeah, I mean, I, I agree with a lot of what Sam's saying. I would boil it down to probably focus and proven successes. So similar to what you're saying, Sam, like we do a lot of innovation in our taproom. We experiment a lot. We don't take all of that to the market. We like to test things in our taproom and then, you know, bring it and also just focus in terms of managing our portfolio proactively and not getting that push. Back from the wholesaler or the retailer so when we are bringing new innovation contextualizing it within what series it's in or what seasonal it's in or what is it replacing and just being really clear and focused about those brand priorities because shelf space is shrinking and unless we guide and kind of prioritize what we're trying to push, um, somebody else will do it for us and so better to be proactive with that.

Speaker 1 [10:43] Bill, non-alcoholic beer is one of the segments that's actually gaining shelf space in a lot of places. What, how is that conversation changed with wholesalers? What are they looking for from that segment now?

Speaker 2 [10:53] Yeah, um, and just touching on what both of you also said that definitely echo the focus and the authenticity and, um, The past few years has definitely had hyper innovation and trend chasing, as Sam said, and retailers and distributors alike want to see really focused, authentic efforts, um, so definitely don't want to repeat anything you guys said, but they want to see people really put marketing behind the beers that people are famous for, what they're most well known for, what their consumers know and are going to the store for, um. And so people want to hear marketing commitments and that you're going to be out in the world talking about. So no matter what tier of brewery you are, if you're a small local brewery, be driving people to your taproom. If you're a regional brewery with distribution, have a really thoughtful distribution plan and a good local marketing plan, and then same for national breweries. Um, I've taken a lot of learnings from Sam over the years. He's such a thoughtful leader in the craft beer world for so long. Um, I read somewhere sometime. You have to tell people over and over again and be far more consistent than you think because people just need to hear it over and over again. And I think the craft beer world needs to get back to building brands really consistently rather than the hypervelocity of innovation. Um, and I think that non-alcoholic beer category, it's People want authentic brands that people are really excited to make. Um, for non-alcoholic beer to sell well, it has to be different than it was call it 5+ years ago. It has to be a better quality, better marketed beer than what used to be on the shelf for it to sell, and, um, but in that there's a lot of opportunity if it's high quality, if it's well focused, and just like anywhere in the craft beer world, there is a lot of opportunity out there, um.

Speaker 1 [12:45] Colleen, I think some people might be surprised by the range of beers that you have at Greater Good while still sticking to Imperial. How much education do you have to do about the Imperial style and its range?

Speaker 4 [13:00] Yeah, I mean, I think for us it starts with just educating on what imperial beers are. We did some consumer research last year and found uh that the vast majority of people that we surveyed didn't know what the word imperial meant in the context of, of beer. So first and foremost, it's, you know, educating on that as a, as a concept. Um, and then within the, the segment of imperial beers, you know, people mostly associate with Imperial IPAs or Imperial Stout. Right? You get, you know, and, and that's because that's what the most, you know, majority of Imperial beers are. You can either hide that booze behind a lot of hops or you can hide that booze behind a lot of malt, um, and you don't see a lot of, um, kind of, we'd say traditionally lower ABB styles getting imperialized, um, but for us, we do Imperial beers exclusively day in and day out and candidly, it would just get a little bit boring for my brewers if they were only for. Imperial IPAs, so we do a lot to innovate. We just launched an Imperial Blonde as a new year-round offering. Uh, we just released a little bit before Cinco de Mayo an Imperial Mexican lager, uh, which I think when, uh, I asked my brewers to have a go at that, they looked at me like I had 3 heads, um, but you know, we're, we're having a lot of fun with it, and, you know, it's really great in the taproom, and then we're able to kind of scale some of those out into, uh, into distribution as well.

Speaker 1 [14:21] Bill, now that the non-AC category has become a lot bigger than it was a few years ago, how much education are you still having to do now?

Speaker 2 [14:30] Still a, a really highly surprising amount of education. If you ask someone to draw on a blank line. One non-alcoholic brand in the country that's not one of the famous legacy brands, it's really hard to do. So I think Athletic Brewing awareness is still under 20% nationally, and so we have a lot of work to do, but we find that exciting, and there are a lot of great regional breweries starting to make non-alcoholic beer and build it up in their area too, which we're super excited about and the category looks so different than it. 5 years ago we've got 5 amazing teammates in the audience here, including our co-founder John, but it's like a total dedication to a differentiated level of quality that there ever has been and really just getting it up to where the rest of the craft beer world has been for a while.

Speaker 3 [15:15] I got a question, Bill, when you mentioned that 80% of your customers also drink beers with alcohol, do your breweries in Cali Connecticut has the same TTB like regulatory environment as the rest of us that make uh alk, and if so or not, do you, do you choose to choose, could you serve beers that have alcohol so that when you think of those 80% of people, there's something for everyone? How do you guys decide that part of what you're doing?

Speaker 2 [15:50] I'm sure I'm going to say something that Zoey, who runs Quality and regulatory for Athletic is gonna frown at me for. Um, in general, there is a lot that's looser about non-alcoholic beer. Um, we can sample anywhere for the most part outside of like 6 states nationally. We can send it across any state borders. We can do 3-tier or not in a lot of places. We just made the judgment that 3-tier distributors are great at what they do, um. But there are a lot of things we do have to stay on the right side of the law, and everything about labeling still applies. Um, everything about what we can put on the cans. There's a lot we can't do on the cans that alcohol brands can do on the cans, can't use a lot of very basic words, can't put the nutrition facts on it. Um, so there's, it is state by state in some places, but um. I do think we, we have opted in further to the TTB than we have to, like we got a brewer's notice and stuff, so I do believe our taprooms technically could if we got the local licenses, um. Yeah.

Speaker 1 [16:51] Sam, I wanna hear from you because I know Dogfish had frayed in non-au for a little bit. What did you learn from trying to get into that category?

Speaker 3 [17:00] Yeah, so we like, as we were doing our merger at Dogfish and BBC, we had this little sweet little skid system to do de-alkalizing and low gravity fermentation, play with the ratios of both to come up with great recipes, and Jim Cook, myself and a few others said, all right, well let's kind of play with this very new fast-growing category with both brands. Let's really lean. It's Especially hard at Off Center for Dogfish to get those learnings. So ours was LemonQuest. It was intentionally way out like kind of a rattler meets a Gatorade, and talking about the sea salts, etc. walking that TTB line that we know we walk, and then let's use our sambra to go hard at the German styles that the sambra's known at and that. as we were bringing both forward, a learning was wow, as young craft drinkers are getting into this space that weren't the drinkers of, I won't say what old school, you know, industrial light lager, non-elk brands, they they they were like, I'll take the leap to non-elk, but I want a recognizable style. And so as we saw that coming out of the gates, we're like, all right, we only have so many resources. So many bets to make with our distributors. We're growing the shit out of Dogfish can cocktails. Let's go that lane and elk beers for Dogfish, but let's let the Sam Adams brand blossom with non-ellk. And so, you know, we got the gold medal at the last GABF for just the hayes, and we just launched our gold. I think I see my pal Garrett. You back there, Garrett? So Garrett does a beautiful non-elk bail in Brooklyn. Uh, so as Bill said, it's super cool that are rising tide's floating all ships, and right now of the 15 top, uh, you know, IRI defined non-elks, only 2 are in BA-defined craft, which is us, and it's so cool to see giant billboards in, in Brooklyn all about non-elk and what you guys are doing because it's a category our, our, our company believes in and we'll keep making bets in.

Speaker 2 [19:06] I actually just had to say I'm non-alcoholic IPA with my lunch today and like that is the dream to be able to go open up a menu anywhere and be able to get a great version of what you may have drank alcoholic, non-alcoholic, and be able to rotate through those choices. Um, I should have also said about the breweries. Um, I think there's over 500 breweries nationally that do serve Athletic beers. So it is super easy to get it at the local breweries and um, That way, if a brewery is committed to other styles, other ABBs, stuff like that, they don't have to invest in the technology, the quality, everything that is specific about that. You can get another brewery's beer and serve it over the counter. So that's been a nice learning also.

Speaker 1 [19:53] Now let's switch to the other end of the spectrum and talk about those, those high ABV beers and Sam, you mentioned it a little bit earlier where there's this trend of there being a bit of a price and value play. How much are the two of you seeing consumers doing the beer math and calculating maybe this higher ABV larger package is a better play for me?

Speaker 4 [20:16] Yeah, I mean Hello. Um, I, I think some people are doing it. I mean, it's, it's not the only reason that people are drinking Imperial beers, but there's a subset of people that are drinking Imperial beers that are drinking for the, the value or the boost for the buck. Um, you know, how many of them are doing the detailed math, I think it's probably a pretty small, uh, number, but when you think about the ABD levels of, you know, 89, 10% beers, that can be, you know, 70% to 100% above the ADV of kind of uh an average 5, uh, 5.5% beer. And so the prices aren't double. And so I think that in broad strokes is kind of the level of math that somebody's doing on it. Uh, but again, I think it's still um just one subset of the, uh, you know, consumer and the, the behavior that's driving Imperial beer growth.

Speaker 3 [21:15] I, I totally agree. I think we got to be really careful with that at this moment because we all know scale-wise, you know, you know. The average American lives within 9 miles of one of the 10,000 local breweries, and yet 3 or 4, you know, you know, big companies still have over 75% of our country's beer market, and they can make stuff in volume really well. So if it just becomes about the ABV per dollar equation, that's going to be a challenging steel reservey world for us. To navigate, so talking about our brands, the quality, the ingredients, the integrity has to stay part of the equation, even though in three-tier distribution, particularly where higher ABV IRI defined craft is growing, see stores, grocery 19.2, we've got to keep talking about our brands and what makes them distinct versus just the ABV per dollar ratio. Jenny and I both have Faux tats on our arms. Show yours proudly, Jenny. We just did an event in Delaware, Dogfish yesterday called Weekend of Compelling Ales and Spirits, where we paired all these different beers and cocktails across all of our properties, and the first thing to be totally sold out was liqueur de malt, which is French for malt liquor, and we did a beautiful heirloom corn, lime juice, and tajin. Infused malt liquor and it came with a hand stamped post recycled brown bag that we would put it in for you, but you're going to pay $13 for this 40 ounce thing and we talked about everything that went into it. So yes, alcohol per dollar is more of a conversation than it's ever been, and that's scary, and that's up to us as makers to talk about the quality, as that we have to navigate that right now.

Speaker 1 [23:13] Bill, how are you navigating that on the non-alk side? Because there's, there's some debate that, oh, if there's no alcohol in it, then I should be paying less for it. But you guys just got on JetBlue and it's, the prices are pretty in line with the alcoholic beer.

Speaker 2 [23:27] Yeah, the spreadsheet in that formula doesn't work if you divide by 0, so we really have to mark it for sure, um, but it It really is that it's the experience and how does your beer make people feel when it's in their hand and when they tell their friends what they're drinking or is it the most interesting thing they drank that week or on a trip somewhere? What experience did you offer them and it could be the flavor, it could be the environment in your taproom. It could be something about your marketing that lets them escape from their daily day to day, but it has to deliver every element of that, um. For Athletic to offer a different price than a mass market non-alcoholic lager, uh, we do have to have a higher quality, more consistent beer, better ingredients, better flavors, um, and a story in marketing that people are really proud of. So, you know, when you look at the can and you're like, oh, what's 2 for the trails. Everything as they peel back the onion of athletic brewing, they've got to love and want to tell their friends about and it's not that first case of your beer they drink. It's the 500th case and like that they fall in love with. So, um, yeah, that's what we're always, we, but it definitely is, we get priced a lot and it is, uh, alcohol is a very functional ingredient. So it's, it's definitely an added marketing hurdle for sure.

Speaker 3 [24:48] Dad, uh, top 3, when you say alcohol is a very functional ingredient, what are the top 3, definitions of functional?

Speaker 2 [24:56] Yeah. Um There are a lot of them. I mean, you see a lot of them out there.

Speaker 1 [25:07] I'm just gonna I was gonna say I was gonna, you're, you're gonna put the pressure on everybody. It's great. Um, we have an audience question actually, and I'm going to paraphrase it, but it's for you, Bill, talking about that quality standard. Um, and they mentioned that a few years ago at CBC there was talk of how a few breweries screwing up non-alcoholic beer could actually be a detriment to craft. Is, uh, are you, is there any concern for that happening as the segment has become even larger than it was?

Speaker 2 [25:41] Oh, absolutely. So we've heard the leaders of craft beer talk about for years how important it is for every craft beer experience of consumers to be excellent, that they want to tell their friends about, and that's what helps keep craft growing is word of mouth and pride in the segment for non-alcoholic beer in particular, we Don't have ethanol as a preservative in the products, and there's an extremely tough set of standards that come with that to protect our consumers from pathogens, bacteria, re-fermentation, and the risks are enormous and at Athletic we've invested in food safety and quality probably more than any other vertical and the equipment that goes along with that. Uh, Zoey and Russ on our team will be making a presentation on Wednesday, diving into that topic, uh, which they're much more advanced than I am. And we're trying to be leaders out in front. We're happy to talk to anyone about those food safety challenges. Um, the risks are very real because sensitive populations are drinking non-alcoholic beer also. So it's not only, you know, if a 7% ABV beer is off by 0.5%, it's not the end of the world, but if a 0.5% ABV beer is off by 2 or 3%, which It could be that is a real PR problem for the category and, and a whole another set of educational challenges for a category that already has some really hard educational challenges.

Speaker 1 [27:09] We have about 10 minutes left here. I wanna know from Bill and from Colleen, you both are dealing with kind of one core ABV style, but for Sam, you're dealing with them across the spectrum. Have you found a right balance in what that range should be and how many of different offerings you should have out there for people?

Speaker 3 [27:30] I, I'd say, you know, we, we, we go into, we're very lucky that we have a number of tasting rooms, small breweries. So we have a 1 barrel, a 5 barrel, a 7 barrel, a 100 barrel, and a 2 200 barrel brew house. And so Jenny, every couple of weeks is, is running our, our beverage calendar meeting and we go into that knowing again we have to make big deep bets for distribution plays. Frankly, now more than ever, not only the. Contributors asking for fewer deeper plays, but since we merged with BBC, we're a portfolio company, so we make our bets. We're making them in concert with other four national brands. So we try to never put the pressure on our 1 barrel, 5 and 7 to come up with the next 90 minute citrus squall. We let our brewers, our makers, our distillers, our cocktail experts throw shit at the wall, but then we do work hard social media. We have 1.3 million followers, events like we did this weekend, listening to the things where they think there's excitement and white space, and then we kind of coddle those towards presenting to our distributors to go, to go deeper with fewer bets, but that's a way of, uh, I don't know if I'm answering your question, but it's describing kind of our process there

Speaker 1 [28:53] for sure. All right. The last question I want to hear from each of you. We can start with Bill and run down the line, but I think, uh, it's fair to say that for most people here and watching online, their ABV style is more in that middle range. It's not in one of these two extremes like you all, but are there still any learnings that people can take away from these trends that they can apply to try to market those middle range beers?

Speaker 2 [29:21] Yeah, I think as I said before, I think there's real opportunity in every, every stage of the ABV spectrum, and it's all about how you focus, you act consistently, make consistently great products and market those products. So I, I think there's an opportunity. All over the ABV spectrum and as Sam said, whatever direct customer data points you have, take full advantage of those and for everything positive, lean into that ask them why, how it makes them feel. Oh, what part of that did you love? Great, and then amplify that and get more people like that on the other end of the spectrum, you know. As a rule of thumb, you only hear from 1 out of 9 people who has a bad experience with their products, but that average person tells 11 people about it. So for any bad experience, there's also 100 reverberations of that out in the world, so you definitely have to listen to both ends of the spectrum.

Speaker 4 [30:13] Yeah, I think building off of that, you know, I would say. You know, for me it's about like focus and clarity of your brand identity, um, and then staying really disciplined and true to that. Um, I think it's tempting, uh, to see trends and think, oh, we've got to chase what's going on, and I think it's really important regardless of kind of the, the ABD focus that you have to ask yourself like does this trend fit for us or how would we do it in a way that is authentic to our brand, you know, yeah, I look at. Numbers all the time and I see headlines all the time of non-alcoholic beers growing. I'm not about to jump into that because that's not who we are and what we're all about. And I think the same is true for, for any brewery, not just a purely non-al brewery or purely imperial brewery, is you really have to know who you are and stay disciplined at staying who you are, because otherwise you'll end up diluting yourself more, you know, before the market will dilute you.

Speaker 3 [31:11] Well said. I, I, I would, I would say I asked our co-worker Todd Bullock before we went into this to just look at those four categories sub 0.5 ABV 0.5 to 5. Our company defines mid-range at like 5 to 8 and then 8 and over. And if you look at the whole beer category, IRI defined beer, it's still 75%, you know, 5 to 8% ABV. I'm preaching to the choir here, but we know there's trends, trends, moments that are going to be long lived and become facts of what, what we are doing in those other categories, but we also know as VA defined craft, we got to keep bringing the excitement for that wheelhouse of mid-ABV beers, which is, you know, exciting for sure across all those spectrum of ABV levels.

Speaker 1 [32:08] Well, I think that is a perfect spot for us to end. Thank you guys. Give a round of applause for our panelists, everybody. Thank you.