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Heady stuff

13 Nov 2014 By Rob Cox

John Kimmich sparked a Twitter mini-sensation last month when he posted a picture someone had sent him of a four-pack of Heady Topper, the unfiltered double IPA he produces at his Vermont brewery, The Alchemist. The photo showed four 16-ounce cans sitting unrefrigerated, with a $42 price tag. “Shameful,” he tweeted.

Kimmich, who operates The Alchemist with his wife, followed up in a subsequent tweet: “P.S. Everyone. It’s not the price so much, it’s the warm factor. At the very least, handle it properly.”

But the price does matter for Big Beer. Brews like Heady Topper represent both the biggest threat to, and a potential opportunity for, mega-brewers like Anheuser-Busch InBev, Heineken, SABMiller and Molson Coors. Consumers in the United States, and increasingly Western Europe and Japan, are seeking out local, flavorful alternatives to the sudsy stuff mass-produced by the global giants. And they’re willing to pay for it.

After all, U.S. beer consumption has been flat at around 200 million barrels annually in recent years. The dollar value of sales, though, has risen, largely because drinkers are trading up. That’s a trend that benefits premium craft producers.

Heady Topper is a case in point. Kimmich produces just 9,000 barrels a year. And The Alchemist only distributes the beer in a 30-mile radius around Waterbury, which has become something of a Northeast foodie destination. The Alchemist’s brewing facility is midway between the headquarters of Keurig Green Mountain and the Ben & Jerry’s ice cream factory.

When I told friends I was headed up here, a half dozen of them asked me to fill up my trunk with Heady Topper. I’d stopped off at The Alchemist a couple of years ago and picked up a few cases, so I happily agreed. No luck this time, though. Because of traffic and crowds, the brewery is closed to the public.

Heady Topper aficionados now have to line up at one of the few dozen locations that receive shipments during the week. The delivery days are posted on The Alchemist’s website and religiously followed by Topper adherents. It’s all gone by the weekend, as I found to my dismay.

This has created a black market for the potent brew. Last December, a 28-year old Burlington attorney faced criminal charges for unlawfully selling Heady Topper over the internet. According to the Burlington Free Press, Stephanie Hoffman was caught in a sting operation conducted by the Vermont Department of Liquor Control. Undercover agents snagged her for selling them 120 cans for $825, or nearly $7 a beer.

Heady Topper, which Popular Mechanics called “the best beer in the country” in an October article about its canning process, is a special case. But its popularity is illustrative of the challenge the big brewers face.

Consider that $42 four-pack of Heady Topper. While it’s far above the $10 that Kimmich charges retailers – a reflection more of scarcity than anything else – it suggests there are discerning drinkers willing to splash out for something special. At 66 cents an ounce, that’s around six times the price an ounce of Budweiser fetches in a six-pack.

Bart Watson, staff economist at the Brewers Association, estimates craft beer will make up just around 11 percent of total beer volume in the United States this year. That’s a big jump from 2013, though, when it filled up just 7.8 percent. Ounce for ounce, it will punch well above its weight: the segment will account for 17 percent of retail dollar sales, up from 14.3 percent, says Watson.

There’s still a lot to play for. Watson makes the comparison with coffee. Decades ago, Folgers and Maxwell House dominated the market. Then Starbucks and its rivals came along and changed consumer expectations for quality and flavor. Today, specialty coffees account for 37 percent of U.S. volume, says Watson, but half of all the dollars spent on java.

Big Beer isn’t blind to all of this. Last week AB InBev acquired Oregon’s 10 Barrel Brewing, which produces about 40,000 barrels a year. It will join Blue Point and Goose Island among AB’s craft portfolio. The Belgian-Brazilian company can more widely distribute, market and promote these brands than independent brewers. Meanwhile, new stand-alone producers are cropping up all over the country – 300 last year alone. It has all the ingredients for a hyper-competitive market.

“We are all fighting harder and harder for the buzz we counted on in the past,” says Warren Dibble, chief financial officer of Boston’s Harpoon Brewery, which at 200,000 barrels a year is among the country’s top craft producers. “That forces us to constantly innovate and think of new products. For consumers, though, it means this is the best place in the world right now to drink beer.”


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