Brewscape: The Latest Craft Beer Brand News

Night Shift Scales Back Production in Favor of Contract Brewing

Night Shift leadership told its 12 production employees work could dry up as early as late July, as the company prepares to wind down brewing and packaging operations at its Everett, Massachusetts location.

The company will shift to contract production at Framingham-based Jack’s Abby Craft Lagers and Pawtucket, Rhode Island-based Isle Brewers Guild (IBG), which had been producing about 50% of Night Shift’s volume.

“What we’ve told the production staff is like there might not be any work after today, but we are going to guarantee everybody’s paycheck till October 1, so two months,” co-founder Rob Burns said. “Then, if they have to sit at home, that’s what’s going

to happen. After that, we’re still unsure because we’re reacting to this news and we wanted to be transparent and forthcoming to the staff and give them as much notice as soon as we knew.” If employees are still sidelined by October 1, the company will offer them severance packages, Burns said.

Burns and co-founder Michael Oxton pointed to supply chain disruptions of carbon dioxide (CO2) as a driving force behind the immediate production pivot to other locations.

“CO2 is definitely a catalyst for this, or maybe the final straw in a lot of ways,” Burns said. Since finding out in mid-July that its supply was about to be cut, Night Shift has called several other suppliers, only to be told that there is no CO2 available for purchase.

CO2 is used to move beer throughout the production process, to package it into cans and bottles and to push it through draft lines for taproom service. The beer industry dealt with a shortage during Summer 2020, when production of CO2 – often a byproduct of ethanol production – plummeted along with demand for gasoline.

This time, disruptions to other CO2 streams are causing the problem. Ammonia plants, which aid in fertilizer production and also give off CO2 to be captured, have been offline for off-season maintenance, according to Gasworld, which predicted a “long, hot summer ahead” for the U.S. CO2 market. In addition to that, a CO2 well in Mississippi is contaminated, Gasworld reported.

CO2 aside, Night Shift has struggled to mold the Everett location to meet its needs as a craft beer and hard seltzer producer, and has relied on off-site production.

“It’s been a problem-solving effort since we moved in, but really over the last three years investing dollars and ideas and schedules and all sorts of shifts to just like ‘How do we make this work?’ so that it’s optimized and it’s still not,” Oxton said.

The Everett brewery is “in a dense urban environment with limited land and small ceiling heights, and it is not designed to match the scale,” Burns said. Night Shift has expanded the facility several times since it opened in 2012. In the decade since, both Night Shift’s business and the craft beer industry have evolved at a near-breakneck pace.

“When we signed a lease here, we had brewed about 500 barrels of beer,” Burns said. “Nearly all of our beer went to 750 mL cork-and-cage or capped bottles. It was a different industry and we had a different product we were making, and now the No. 1 thing we sell is 12-packs.”

For the past few years, about half of Night Shift’s volume has been produced at other locations, and the Everett brewery is on pace to produce 22,000-25,000 barrels this year – a lot of volume to make in less-than-ideal conditions, Burns said.

“We have known for a long time that the Everett facility is not optimized as a major craft beer production plant,” he said. “Our plan to solve that was to build the Philadelphia brewery, and once that plan got canceled in spring of 2020 you could say that was the start of this snowball.

“We still, despite that, continue to spend money to make Everett more successful,” he continued. “We’ve spent $10 million in the production space since 2019 to try to increase the efficiencies and make it more capable for the scale production but despite all that, we’re just not able to get there.”

The Philadelphia brewery, announced in August 2019, would have provided 30,000 barrels of capacity immediately, with the ability to scale to 200,000 barrels over time. But the tumult the COVID-19 pandemic wrought upon the beer industry made the plan too risky, and Night Shift abandoned the plan in May 2020. Once the Philadelphia brewery was off the table, Night Shift signed a contract with Jack’s Abby to help with production.

In 2020, Night Shift’s volume only declined -2%, a loss that was recouped threefold with a +6% increase in 2021, according to the May/June issue of the Brewers Association’s (BA) New Brewer. Last year, Night Shift produced 38,840 barrels of beer, excluding its Hoot Hard Seltzer.

The company took a margin hit last September, when Night Shift Distributing shut down and Night Shift sold the rights to distribute its products in Massachusetts and Connecticut to Sheehan Family Companies.

Monster Reveals Plans for 6% ABV FMB Beast Unleashed

Monster Beverage Company confirmed its long-rumored entrance into beverage alcohol during its Q2 2022 earnings call, announcing that Monster Beast Unleashed, a four-SKU line of flavored malt beverages (6% ABV) will launch in late Q4 2022 with the goal of being nationally distributed by the end of 2023. It will be the energy drink maker’s first major alcoholic beverage launch since acquiring the CANarchy Craft Brewery Collective in early 2022.

Beast Unleashed will come in a 16 oz. single-serve can, as well as a 12-can variety pack in 12 oz. cans. The four flavors will be based on some of the brand’s “most well-known and popular flavors,” Monster CEO and chairman Rodney Sacks said during the call.

“Beast Unleashed will leverage Monster’s brand equity while carving out its own unique space in the beverage-alcohol sector, and will be distinguishable from the many hot seltzer brands that have become so ubiquitous over the last several years.”

Sacks said the company’s alcohol innovation pipeline is “robust with a number of additional innovative product lines currently under development.”

Allagash Adds First IPA ‘Hop Reach’ to Year-Round Lineup

Allagash Brewing Company has resisted the urge to add an IPA trend for quite some time – at least within its core lineup – with growth driven by the success of its flagship Allagash White Belgian-style witbier. But next year, the Portland, Maine-based brewery is getting hoppy with the addition of Hop Reach IPA to its year-round offerings.

Hop Reach IPA – a 6.8% ABV “balanced, citrusy and tropical IPA, with a snap of bitterness,” – was developed over seven months by Allagash’s pilot team, and received more than 400 employee reviews. The offering is meant to be a “classic, timeless beer,” for both IPA lovers and consumers familiar with the Allagash brand.

Hop Reach will begin rolling out in January, with Allagash’s full footprint covered by mid-March, in time for spring retail resets. The IPA will be available in 16 oz. 4-packs, 12 oz. 6-packs and 12 oz. 12-packs of cans, varying by territory, as well as draft.

“We’ve designed it to complement Allagash White,” Naomi Neville, Allagash director of sales, said during a virtual tasting event with media members. “Allagash White is still by far our flagship beer, It’s the beer that we started our business…this beer isn’t designed to take any focus or emphasis off the Allagash White brand. This is to sit next to it, to complement it, [and] give us a strong second brand in a very approachable style that a lot of people are familiar with.”

Allagash White is up +9% year-to-date in IRI-tracked channels, with draft up +27%, Neville said. In 2019, Allagash increased
off-premise accounts for the brand by +35%, and increased “off-premise effective placements” by +74% compared to 2019, founder Rob Tod said in a November press briefing.

Allagash decided to add an IPA to its core lineup partially due to wholesalers asking for an IPA offering “for years,” Neville said.
Last year, Allagash released Swiftly IPA as its spring seasonal, however, IPA remained a year-round gap in the company’s portfolio. A year later, Allagash expects Hop Reach to fill that gap and become the company’s No. 2 offering after Allagash White, passing Tripel, a Belgian-style golden ale.

“It is pretty much the first question you get when people walk up is ‘What’s your hoppiest beer?’ or ‘Do you have an IPA?’” Neville said. “Finally we will be able to say ‘Yes, we’ve got this beer right here.’”

IPA is the best-selling style in the craft beer segment, accounting for 45.1% of all craft dollars at off-premise chain retailers year-to-date through July 10, according to IRI. In that period, IPA has earned $1.13 billion. Although the style’s dollar sales have declined -4.3% compared to last year, its dollar share has increased +1.3%, far more than any other style in the segment. The next largest craft style is, coincidentally, Belgian wits.

Hop Reach is not a hazy IPA, despite the subsegment driving IPA sales in IRI-tracked channels. The decision was made to prioritize aroma and flavor over appearance, as Allagash made sure to make an IPA entrant that was still inherently an “Allagash beer,” Allagash brewmaster Jason Perkins said.

“It’s based on not blindly ignoring what’s happening in the trade, but very much based on things that we want to do,” Perkins said. “We wanted to make a beer that we hope resonated for many years to come. Something you could see yourself drinking a few years from now.”

“We’ve never been trend followers per-se here,” he continued. “This was no exception. We were focused on trying to make the best beer we could, and not necessarily following what trend was out there.”

Ball to Close 2 Can Manufacturing Plants; Delays Construction of a 3rd

Ball Corp. plans to permanently close can manufacturing facilities in Phoenix, Arizona, and St. Paul, Minnesota, and delay construction of a new plant in North Las Vegas, Nevada, the Westminster, Colorado-headquartered company announced during its second quarter financial results.

Ball, the world’s largest manufacturer of can packaging, said the plans to cease operations at the two facilities and delay building a third were “in response to the deceleration in customer demand late in the second quarter” and “to address localized
supply-demand imbalances.”

The company did not indicate how many employees would be affected by the closures.

According to Ball president and CEO Daniel Fisher, the two landlocked, three-line facilities were built in the late 1960s and mid-1970s and had a net capacity of about 4 billion units.

Ball CFO Scott Morrison indicated that one of the facilities will likely close in the back half of 2022, while the other would close “early next year.”

Ball operates 15 other can manufacturing and can end production plants in the U.S., according to its website. The move to shutter two facilities follows actions taken by the company to rightsize its customer base by increasing the order quantity for printed cans to 1 million per SKU.

Ball leaders seemed to put the decision to close the plants at the feet of its customers, who they said have taken price increases over the last year in excess of inflationary cost pressures. Fisher said the pricing behavior of its customers has occurred each quarter over the last four quarters, with its customers raising prices by 7% on average.

“So you’re getting to a point now where year over year, you’re looking at 20%, almost 30% price increases in some of these products,” Fisher said. “That absolutely has an impact on discretionary and consumer buying. And we’re looking at that and we’re making adjustments, we’re optimizing our footprint. This is a near-term balance for us.”

Fisher highlighted that total alcohol was down -3% in the second quarter, “mostly driven by domestic beer.” Non-alcoholic beverages were “a bit more resilient,” he said, with carbonated soft drinks and energy drinks growing and total non-alc beverages up +1%.

Morrison said Ball was “building inventories for what we thought would be a more robust season here in North America that didn’t show up.”

Fisher, in his prepared remarks, stressed that “cans continue to win in the fastest growing beverage categories and underlying demand for aluminum packaging continues to be resilient, despite retail shelf price increases by our customers ranging as high as 20%.”

“Early indications are that North American customers will continue to emphasize price over volume during the second half of 2022,” he added.

Fisher called on Ball’s customers “to return to a semblance of pricing strategy, which they’ve implied and implored over decades,” instead of “pushing forth price in excess of inflationary costs” and “margining on that.”

“If there’s a modicum of return to a different pricing strategy, we will benefit from that in terms of an uptick in volume in North America,” he added.

Decisions by Ball’s customers to increase price has led the company to back away from double-digit growth projections in North America, Fisher added. In spite of “economic challenges” this year, he said Ball globally would deliver 5% growth in 2022.

Asked about the North American can market which had been sold out, Fisher said “a confluence of events” are happening and in the near term, “there could be slack capacity for the near term” due to Ball ramping up “large asset bases” in Pittston, Pennsylvania, and Glendale, Arizona, and investments in canning lines that have increased efficiency.

Judge Affirms $56 Million Jury Verdict in Stone Brewing Trademark Infringement Case

A federal judge has denied Molson Coors’ attempt to toss a $56 million jury award to Stone Brewing in the San Diego craft brewery’s trademark infringement lawsuit over the 2017 refresh of Keystone Light packaging.

Judge Roger T. Benitez wrote that although he disagreed with several of the jury’s findings, he would “not second guess” their March 25 decision. As such, Benitez denied Molson Coors’ motions for judgment as a matter of law, affirmative defenses and declaratory judgments.

Throughout his order, Benitez made a point of agreeing with several of Molson Coors’ positions. Nevertheless, he concluded that “this court’s disagreement with the jury’s ultimate conclusion cannot give rise to a judgment as a matter of law against Stone.”

Although the judge noted that Molson Coors’ attorney “presented strong evidence,” including “testimony that showed the structural flaws” of Stone’s surveys, Benitez wrote that the jury found the survey evidence “convincing enough to find a likelihood of confusion.”

“The court will not second guess this determination,” he wrote.