Brewbound Podcast: A State of Craft Update with Bart Watson and Katie Marisic of the Brewers Association

[00:00:00] Justin Kendall: Heading to CBC? Kick things off the day before at Brewbound's meetup at Love City Brewing in Philly, Sunday, April 19th from 5 to 7 p.m. Connect with beer industry leaders, grab a drink, and catch up with the Brewbound team. It's free to attend and walking distance from the convention center. Head to Brewbound.com slash lovecity.rsvp. And don't forget to catch the Brewbound team at booth 956 during CBC. Next on the Brewbound Podcast, a double dose Craft Brewers Association chats featuring Bart Watson and Katie Marisic. Hello and welcome to the Brewbound Podcast. I'm Justin Kendall.

[00:00:50] Zoe Licata: And I'm Zoe Licata.

[00:00:52] Justin Kendall: And this week, as I mentioned, we have a pair of guests from the Brewers Association. First we'll chat with Bart Watson, the BA's Chief Economist and VP of Strategy. And then we'll be joined by Katie Marisic, Senior Director of Federal Affairs. Those conversations were recorded at the Craft Brewers Conference just a couple of weeks ago. So looking forward to chatting with both of them. Hello, Zoe.

[00:01:18] Zoe Licata: Hello. This is our first banter without Jess. It makes me a little sad.

[00:01:24] Justin Kendall: I'm getting misty-eyed just thinking about it.

[00:01:28] Zoe Licata: She's not gone forever, if you didn't hear. She's just temporarily gone right now to finish out her maternity leave. So don't stress.

[00:01:37] Justin Kendall: She's going to be appearing in some of these conversations. She's definitely in the Bart conversation. She was in the Katie conversation. You'll be hearing from Jess in these conversations from CBC, but as far as banter, it's just the Justin and Zoe's show.

[00:01:53] Zoe Licata: Stuck with us.

[00:01:54] Justin Kendall: More like the Zoe And Justin show.

[00:01:57] Zoe Licata: Thank you.

[00:01:57] Justin Kendall: So Zoe, you made a trip to the Alamo draft house in Boston last weekend. What's your review? Because I used to live by an Alamo draft house. So big fan. What do you think?

[00:02:11] Zoe Licata: I was a very big fan and I'm disappointed in myself that I didn't go sooner because this has been open in Boston since last year. Located in the seaport, which is gorgeous as always, but without the seaport prices, really, like food and drinks and everything were a little bit cheaper than you typically expect. And the draft list was excellent, like the amount of local Craft Brewers that they had was great. I started off with a Notch Pilsner, which was, as we know, it's a Jess favorite, and it was absolutely delicious. I feel a little bit bad that they don't get more hype, at least in Boston, because I feel like no one I know really goes and it wasn't super busy, so I hope it stays in business longer. I know the company itself, like overall Alamo Drafthouse is seeking a sale. They just figured that out last month, I think is when a report started coming out, but I'm a big fan of the overall experience.

[00:03:08] Justin Kendall: Yeah, it's very cool. Uh, longtime brew bound followers will remember that we actually did a brew talks in Austin at an Alamo draft house, which was a very cool experience. And then I used to live next to one or very close to one in Kansas city. I love the experience. I love the giant bowls of popcorn. And I remember Craft Brewers playing just such a huge role on the menu.

[00:03:34] Zoe Licata: Yeah, it's a massive list and it's like pretty affordable prices. And yeah, that free the free popcorn and soda refills are major, especially like you're paying, I don't know, like 15 to 18 dollars for a large popcorn in any other theater in Boston. And these were like ten dollars and you got unlimited refills. That's pretty nuts.

[00:03:57] Justin Kendall: That's a hell of a deal.

[00:03:59] Zoe Licata: Mm hmm.

[00:03:59] Justin Kendall: Well, December is Brewbound Live. We've announced our first round of speakers. We have Natalie Cirluzzo from Russian River giving a keynote on day one. We have Lester Jones from the NBWA and Jennifer Hawk from DraftLine giving an on-premise update. And then we're going to have Deschutes CEO, Peter Skrback there as well. So we're just beginning to put this program together.

[00:04:26] Zoe Licata: Yeah, already some really great names. I mean, Natalie is amazing, and we just saw her at CBC. Super excited that she's going to be our keynote speaker. She's just an amazing person and speaker, so it's going to be a great way to kick off the conference.

[00:04:44] Justin Kendall: Definitely. Let's get into some news of the week, and I don't know about you, but I am I'm not dated out, but I'm very close to being data out because we have been doing data stories after data stories after data stories, and it just keeps rolling in. The one big overarching theme is April was a rough month.

[00:05:11] Zoe Licata: Yeah, I think this is, I feel slightly overwhelmed because it's a mix of we have all the Q1 reports coming in and we have a lot of Q1 earnings results coming in. And we heard, I think it was from Molson Coors first, who was like, hey, this April was pretty choppy. And then we started to see the numbers really roll in and it wasn't looking too great for beer.

[00:05:35] Justin Kendall: Definitely not. And Kraft is struggling in Circana scans down 3% in the latest four week period that's ending April 21st that covers multi outlet and convenience. So. Not, not a great period. Volume also was down 4.7% in that four week period. So very rough start and even convenience, I think was a little rougher for craft in that period.

[00:06:07] Zoe Licata: Yeah, convenience has been the spot where craft can typically find growth. It's been the one area or one channel in the green for craft for a while now and it was not spared in April.

[00:06:22] Justin Kendall: Yes, down one and a half percent in that four-week period. One of the things that I wanted to dig into and I completely went down the rabbit hole and went missing yesterday as I was working on this was, the price increases. And I know that there are a lot of factors that go into price increases and timing and this and that. But it was kind of staggering the amount of price like some of these brands are taking and it hasn't swung their their dollar sales into the green for, for a lot of these brands, they're, they're still having a rough go of it, but man, like there were some standouts and one of them like in particular inconvenience was. Logonitas taking some hefty price increases, Logonitas, little something, something up $3 and 10 cents to $44 and 34 cents. per an average case price. And then Logonitas IPA was up $2 and 29 cents to $43 and 51 cents.

[00:07:29] Zoe Licata: Yeah, that's pretty steep. And we've heard when it comes to craft, consumers are pretty okay with dealing with price sometimes because they know they're buying for luxury. And it seems like it's not having too big of an effect, like you said, on sales yet. But we have seen a couple, I think it was the last Circona report, the top brands, at least in grocery, the ones with the most growth were the ones that had actual price declines.

[00:07:59] Justin Kendall: Well, on that flip side, athletic brewing has taken its average case price down $1.27 and it's, it's getting high double-digit dollar sales growth that we've seen in basically all recent periods for them. I think it was in the, at least in the, the seventies and maybe in the eighties.

[00:08:24] Zoe Licata: I wonder if part of that is due to the amount of increased competition, not just from craft players, but basically, I don't know, I feel like every major domestic brand or import brand has a non-elk version now, and those tend to be a little cheaper, so maybe they're trying to still stay price competitive in that space.

[00:08:45] Justin Kendall: Yeah, and I would figure that there's some promotional activity that was around dry January that went into that. Maybe we'll see this tick up a little bit, but you're right. You know, the brands that haven't taken as much price are the ones that still seem to be chugging along. But yeah, I mean, it's, it's, it's sort of a mixed bag. I mean, one of the, the noticeable swings in the, the four week period was stone delicious in grocery going up $4 and 19 cents. Didn't see that one coming. And that was one of the ones, like we had talked to Maria Stipp, the former CEO, a while back, a couple of years back now about how she sort of, you know, tweak the price down. on that brand and saw saw some gains and you see it sort of coming back around.

[00:09:37] Zoe Licata: Yeah, Stone Delicious, I feel like is it's going to be interesting to see what they do with that brand, because it seems to be having a lot of difficulties in scans. It comes up again and again that they're they are maintaining like a spot within the what is it, top 30 still, but consistently in the red.

[00:09:56] Justin Kendall: And then another thing that, uh, I think I'd like to hit on real quick is that. While Voodoo Ranger, the Imperial IPA and juice force are just continuing to chug along their number one and two in convenience, their number two and three overall. But the offshoot that they launched last year, fruit force is beginning to hit a rough patch in year two. And I think that that's probably attributable to the introduction of Tropic Force, the third brand there, just because it's already cracked the top 30. It's doing fairly well. And I imagine that there's some cannibalization. I mean, that just seems obvious.

[00:10:43] Zoe Licata: Yeah. I mean, it's bound to happen. There's so many Voodoo Ranger variations now. It would be a miracle if there wasn't some cannibalization happening.

[00:10:56] Justin Kendall: So should we get into some of the Beer Institute data that they put out because they've put out all their economic reports?

[00:11:03] Zoe Licata: And this might also shed some light on why there was down numbers for April, because these are the BI's reports for March numbers. And they noted that domestic tax rate shipments were down, and this is an estimation, 13.6%, which is a massive change from previous reports which were positive, let alone down double digits. And like I said, these are just estimates from the TTB, so they could be adjusted. The previous months were adjusted and there was actually more shipments than they thought there were originally. So it could be and is most likely less of a decline than it's marked right now, but still a pretty big shift. I mean, that's down to 12.7 million barrels. It's a loss of nearly 2 million barrels versus March 2023. And that is following some of the strongest shipment growth in years in the previous reports. So a bit of a hit and kind of a doozy to when we were really having these super positive BI reports for a couple of months. But Andrew Heritage, who is the chief economist for the BI, kind of emphasized in his added commentary for these is There's still time. Don't panic yet. March and April are usually pretty tough, so they can kind of upswing again once we get into the summer selling season.

[00:12:34] Justin Kendall: Memorial Day can't get here faster.

[00:12:38] Zoe Licata: Yes, exactly. So we have the import numbers in there as well, which were also down surprisingly. I think it was down 4.5% year over year for March and 5.1% year to date now. And even Mexican imports, which have been this driving force for just beer overall, but also for specifically imports to the biggest import country. they were down 5.6%. So it's no surprise if Mexican imports are down, overall imports are likely going to be down as well.

[00:13:12] Justin Kendall: Well, Brevard Insiders have access to all of these reports and more, including our insider exclusive Around With Q&A series. The latest features Kraft Ohana's Scott Metzger, so You can go hit that up if you're a Brewbound insider and also look out for the latest one hitting this Friday featuring Urban South's Jacob Landry. A lot of cool insights in there about operating in New Orleans. Shall we play Another Round or Tabbing Out? He said, pensively, hesitantly.

[00:13:50] Zoe Licata: Slightly scared.

[00:13:51] Justin Kendall: I am slightly scared because this is a one-person or Another Round or Tabbing Out. I have in my possession one single can of Voodoo Ranger I Pizza A. It's collaboration with Tombstone. You can see the can here. It is beautiful. I love the can. I love the art. I hope that I love the beer as much as I love both of those things. I think that this is a very cool look, but I did not pay $49.99 for this one. All right. I am opening it and pouring it. I'm pouring more than I'm actually going to drink. You can see I plan on actually working the rest of this afternoon. I don't know how much I'll be able to do.

[00:14:43] Zoe Licata: So far, it does not look like pizza sauce, which is great.

[00:14:48] Justin Kendall: No. it smells a little bit like a tombstone pizza i'm not gonna lie to you like there's there's a scent to a tombstone pizza when you put it in in the the oven and you're getting ready to take it out you get like this I don't know, like a crackery, cheesy smell. You know what I'm talking about?

[00:15:14] Zoe Licata: I've never had a Tombstone pizza, so I can't confirm or deny. You have never lived. I think we're more DiGiorno folks or Red Baron, but... That makes sense.

[00:15:28] Justin Kendall: All right. Well, here we go. I don't hate it. I don't love it. Um, yeah, there's like, I honestly, it is a little bit like drinking a tombstone pizza. Yeah.

[00:15:48] Zoe Licata: I mean, if that was the goal or a pepperoni or it's, it's a little bit both.

[00:15:53] Justin Kendall: Yeah. There's a little bit of a, uh, like Parmesan cheese. There's a little bit of that pepperoni on the back end. I don't know, man. That's some alchemy.

[00:16:04] Zoe Licata: I'm very happy that you're testing this out and I'm not because I would not take multiple sips like you are right now.

[00:16:13] Justin Kendall: It is not for the faint of heart. It is not. I don't know that I recommend this. I would not. I'm not going to finish it.

[00:16:25] Zoe Licata: If you had to pair it with something, what would it go with? I mean, other than, of course, a tombstone pizza, but

[00:16:33] Justin Kendall: Well, my two-year-old daughter, Sophie, she eats Parmesan by the fistful. And so that's probably what I would pair it with.

[00:16:46] Zoe Licata: A nice block of Parmesan.

[00:16:49] Justin Kendall: Yeah. Try not to be as messy as her, but I mean, she's like the Tony Montana of Parmesan.

[00:16:59] Zoe Licata: You could get some other classic frozen foods And Justin have a feast, get some mozzarella sticks in there.

[00:17:07] Justin Kendall: How about some, what is it, Gordon's fish sticks?

[00:17:12] Zoe Licata: I don't know about all that.

[00:17:15] Justin Kendall: I am Tabbing Out on this. I appreciate them sharing this, but I don't know, maybe I should have had a pizza with it.

[00:17:23] Zoe Licata: Next time.

[00:17:25] Justin Kendall: I don't know that there's going to be a next time, but beautiful can, beer.

[00:17:30] Zoe Licata: Well, thank you for doing that for us. I am Tabbing Out just on principle.

[00:17:36] Justin Kendall: I don't even have to try. Fair enough. I guess with that, we should get to our featured interview with Bart Watson and Katie Marisic. This is Justin Kendall from the Craft Brewers Conference. I'm joined by my colleagues, Jessica Infante.

[00:17:53] Katie Marisic: Hello, how are you?

[00:17:54] Justin Kendall: And Zoe Licata.

[00:17:56] Katie Marisic: Hello.

[00:17:56] Justin Kendall: I'm doing well. And first question I've got for our guest, Bart Watson, the VP of Strategy and Chief Economist for the Brewers Association is a vibe check. How are you feeling about this year's CBC?

[00:18:09] Senior Director: I feel great. It happened. We got people here, you know, walking around the trade show expo floor. Vendors seem really excited with the traffic. You know, brewers I've talked to are excited to be here, have the community. I've heard really good things about the seminars. You know, we'll see what the final scores come back, but a lot of positivity there. So it's, it's always just so great to have so many of our members, so much of the community in one place. And I get a lot of energy from CBC, so five checks positive.

[00:18:34] Katie Marisic: Well, you heard it here first. The vibes are good. Bart, I think you did a great job in your state of the industry talk yesterday at keeping the vibes on the level. It's been a rough year. Craft volume was down for the first time other than 2020, which I think we have all agreed to completely throw out. But there is reason for optimism. There's reason for positivity. What are a couple of the bright spots that you think our audience should know about?

[00:18:58] Senior Director: Yeah. And, you know, I mean, you're right. You know, I tried to lay out the challenges as well. I mean, you can't discard those. That's a part of the environment right now. But, you know, some of the positivity that I tried to inject was A, that there are a lot of growth stories out there. You know, it's not universal. The category as a whole is down, but Kraft's made up of so many individual companies and many of them are finding success. I think one of the other things is a lot of companies are doing the hard work they need to to set themselves up for business success. I remember reading Jim Cook's book years ago, and he talks about how you can grow without growing. And in periods of slow product growth, that's a great time to invest in company growth. So that gives me some optimism. And then finally, I tried to do a lot of putting the numbers in context. It's a challenging time to be a small business. It's a challenging time for a lot of parts of beverage and beverage alcohol. And, you know, Craft Brewers aren't, the numbers aren't, as I said yesterday, the numbers aren't necessarily good, but they're what I call bad either. Once you take all that context into account, I think a lot Craft Brewers are, you know, or the categories general is actually holding up surprisingly well.

[00:20:03] Justin Kendall: So the BA recently promoted you, they added to your title, VP of Strategy. What does that entail? Sounds really fancy, doesn't it? It does.

[00:20:11] Senior Director: We brought also Matt on board, super excited to have Matt Gasiok on as staff economist, which, you know, just frees my time to think a little bit more broadly. So we're still defining some of that, what it means, but I think it's looking at, you know, where the BA moves relative to our members. You know, I talked about this a little bit in the talk yesterday as well, but we're thinking about how we support our members, holistic businesses right now. And I think that's a little more complex than it used to be because that's evolving so much. You know, we didn't have members producing a cross beverage alcohol. We didn't have members who were doing all these different things. And so, you know, I think that strategy is what is our strategy in relation to what we offer? that help our members succeed. And so it's evolved from, I was the stats and data guy. So I think I'm thinking of a little bit more holistically and having those conversations too, you know, with other industry associations or their partners about how can we deliver insights, resources, and value to our members. Cause that's, that's a core of what we do. And that needs to change as our members change.

[00:21:08] Katie Marisic: And something that's jumped out to me just walking the trade show floor is there's a lot of stills. That's really interesting. Is this new?

[00:21:17] Senior Director: They've been here, so we've allowed those suppliers to bring those products, but I think you are seeing it level up. And I referenced the 600 breweries holding distilled spirits permits yesterday. I mean, that's been growing pretty rapidly. We've actually looked at this before, and it hasn't ever been high enough for me to call out. The suppliers are evolving, too, with the needs of our members as they, some of them become, it's not everyone, but some of them become total beverage companies. And that's gonna be interesting to watch, interesting to think about how we support that, because we're there for our members.

[00:21:47] Zoe Licata: I really liked when you brought up yesterday in the vein of like kind of redefining what growth is, that story of someone who came up to you and they weren't saying like, oh, we expanded to all these new places. They're talking about other developments in their business. Can you talk more of just like about what those conversations, how they've evolved?

[00:22:04] Senior Director: Yeah, you know, and some members always did this, right? There's always been members who really geeked out, not on the beer side, but on the like manufacturing and operations side. But I've just noticed that a lot more that, you know, having conversations with members, which I always try in the run up to this, and as their stats are coming in, to get some of that context, right? You can see the numbers, but a plus 3% can mean really different things for different members. And so getting into, you know, what does that mean for individual businesses? And this year when I did that, you know, members, members know what the landscape looks like. They know it's competitive. And instead of just immediately being like, well, here's the brand that grew for us, a lot of them just turned to business stuff really quickly. Like, hey, we had huge grain costs. So I mean, you know, this member talked about the co-op they had formed with another brewery. And I found that really interesting. And I saw it repeated over and over and over that, you know, you get members on the horn and I do call some of the ones who had, you know, plus 30% years and they're talking about brands and what they did there. But a lot of the ones who are kind of more, you know, up a little bit, down a little bit, it was really a business focus that they brought. And that's awesome. I mean, that's, you know, and that's a place too, that we're thinking about what are the business resources? How can we up, you know, we had the financial workshop again this year for the second year in a row. How can we up to some of that financial and business literacy? That's going to make a huge difference for companies going forward is just how do you manage your resources more effectively in a market that's not going to grow. So you can't just grow your way out of it like you could five years ago.

[00:23:27] Justin Kendall: One of the things that I've heard you talk about a couple of times now, at least, is the need for reinvention. You know, you can't just have an industrial space, throw out, you know, some kegs and, you know, hard-ass chairs and all that. That model has been done. And I think we all sort of look at, like, Thallea is an example that has done that well, but I throw it back to you. Like, who else do you think is offering an experience out there right now that has really impressed you?

[00:23:55] Senior Director: That's a great question. Maybe that's a piece I need to get on the road a little bit more and check out some of the new things that that people are doing. You know, I'll say with our local breweries, you know, I mean, I see them going in a bunch of different directions. So it's hard to to nail down one. But I think the diversity of the models, that hospitality piece in particular, has really gone up in the last couple of years as you know, breweries have realized, oh, if I'm doing the same thing as every other brewery, you know, in front range of Colorado, where I visit the most breweries, a lot of them did look alike five or 10 years ago. And I think they figured out that's a recipe for getting the same customers and, you know, splitting the pie too many ways to actually be successful. So, I'll call it just one super crazy fun one. There's a brewery in Denver called The Arms. I know those guys well. They do a great job. And a couple of years back, they brought in something that apparently people do on the East Coast, where they just decorated their tap room super crazy for Christmas. You know, literally pink Christmas trees hanging from the ceiling. I don't think anybody in Denver had ever seen it before. And it just, you know, it was a gangbusters for them. And they were getting the people who this is a tradition, I guess, on the East Coast. I see people nodding, you know, coming in and, you know, making it feel like home. And I mean, those are the kind of things where we took for granted the beer was enough to get people through the doors. And that's not always the case anymore. Or, you know, it is if you really, really stand up. But there's so many people who stand out that it's hard for that to be a differentiator. So you just see people doing more interesting stuff over time. And that's great to see.

[00:25:24] Katie Marisic: Yeah, I mean, the overly decorating for various holidays, that's like just a byproduct of everything has to happen on Instagram or else it didn't happen at all, which is depressing. But also if it gets people in the door, hey, like do it. You know, I think something that breweries are really great at is being like a community center and hosting events. Like I recently joined a book club. Joey did too. You know, I joined a book club that's mostly, you know, new moms in my area and we visit a different brewery every month and read a book.

[00:25:50] Zoe Licata: And you're hanging out at the... Like Castle Island, South Boston location once a month with a bunch of random, like 20 something year old women mainly just hanging out. I would go to Castle Island maybe once every three, four months if I wasn't doing that. So it brings me to the taproom a lot more.

[00:26:09] Katie Marisic: They're comfortable environments where you feel okay hanging out for a while. Yeah. So it doesn't have to be a book club, but like get creative, be a venue for your community, right?

[00:26:19] Senior Director: Yeah, you know, one of my local brewers, I mean, they have a night every night, you know, it's, you know, Bluegrass Tuesdays and Trivia Wednesdays. And, you know, and I think breweries, too, are increasingly thinking about those and in very strategic ways of, you know, who are parts of the community that we're not bringing in that we could bring in through this night. And then hopefully they're going to be there on Saturday when the whole community is there. And we don't need a theme night because because everybody's out drinking.

[00:26:42] Katie Marisic: Yeah, exactly. So, I mean, that covers tavern brewers. But what else are you seeing in like large regionals?

[00:26:48] Senior Director: Yeah, I mean, the regionals, I think a lot of them are really thinking about their footprint, you know, and where they can really lean in and where they just don't make any money selling beer anymore and it's not worth the time and effort. Obviously, we're seeing more of them look at groups and think about both that production piece, you know, does it make sense for me to have my own brewery or could I be partnering with somebody And Justin their capacity? You know, we're seeing more of those announcements like, hey, we're just going to produce Another Round know, we're going to go toward more of a contract brand. That was one of the kind of cases and stories that we had heard when we changed our bylaws recently to allow contractors to be voting members. And some of that is because we have longstanding members who are probably going to look at that model in the next couple of years of, it doesn't make sense for me to have this space, but I think my brand still has relevance in the market. So I want to keep doing it that way. So that's another thing I think we're seeing is just regionals thinking strategically around, am I better alone? Am I better in a group? Am I better producing? Where does this brand actually resonate? And what is the business operation model that works best with that?

[00:27:48] Zoe Licata: When you were talking about regionals yesterday, you brought up that if you took out the top three, and the numbers for regionals would look a lot different. When you have some companies that can skew that data so much, what do you look at to still kind of see real trends?

[00:28:03] Senior Director: Yeah, I mean, and I think you pull out some of that, right? You can look at, I mean, there's lots of ways to slice stats, right? You look at median growth, you look at, you know, here's what, you know, people in different places. And as I kind of joked yesterday, I mean, you still want those breweries in, right? They're part of the category and, you know, you take the good numbers out, they get worse. You take the bad numbers out, they get better. But I think, you know, You stress test it in a variety of ways. So this is pretty common in stats, right? What happens if we remove outliers? Does this relationship still hold? Does it look different? And I do think this year there were a little bit more kind of extreme good cases than extreme bad cases. So that's why I said it that way as opposed to the other way around. You know, but we're kind of pushing and prodding to really understand, you know, is this is this individual company versus demand? And there's lots of places we've done this for years. I mean, style was the one for years like Is there really double IPA growth right now or is there just Voodoo Ranger growth? You know, that kind of stuff. And so I've always, always have that mindset of stress testing because you don't want to give a story about a category if it's really a story about a company. And like NA is a place, for example, I've been fairly clear about this, like I'm not sure there's huge opportunities in NA for a lot of individual companies. The category is growing, but it's being captured by a few firms, and it's still important for our members to understand that trend, what motivates it, what the consumers are doing. That doesn't mean I'm telling them they should make an NA, because there's a very few number of companies who are accumulating the vast majority of that growth.

[00:29:24] Justin Kendall: And Justin the amount of money that it takes to play in that space and do everything you need to do is just a wild amount.

[00:29:32] Senior Director: Yeah. Yeah. I mean, producing NA beers is, you know, it's just more challenging. And so you need more equipment, you can do it different ways. And that's another place we're seeing the kind of co-packer, who can I work with, you know, model evolve, which is interesting to watch that, you know, brewers are figuring out what works for their brands and then they're figuring out how to make those beers in the way that works.

[00:29:52] Justin Kendall: One of the things that you've brought up recently, not even recently, I mean, the last couple of years has been just the health of draft and the need to twist those trends around. Are you seeing sort of the coalition form around that to sort of approach that in the way that it needs to be approached?

[00:30:11] Senior Director: I definitely think there's a coalition of the willing who wants to work on this. I think the challenge is understanding what to do. You know, the challenges with draft are so multifaceted. It's consumers changed, retailers changed, distributors changed. All of these add up to a place where, you know, draft is not back to where it was. I think more brewers are starting to realize that they can lean in here and make a difference in their local market, which is great to see. And that was one thing I called out on stage that, you know, I was talking Craft Brewers who said, yeah, our draft numbers actually were really good in distribution and we were able to lean. You know, some of this is, again, winners and losers with the team yesterday. I'm hearing from brewers. kind of pulls, if a distributor picks you as one of their draft horses, I think you can have a lot more success, because distributors look to simplify there, and if you're not, then it can be really challenging still, so this isn't necessarily an option for everyone, but I think there's a lot of people who are interested in working on this. I actually, in the walk here, in the expo, somebody stopped me, asked me about draft, said it was great that we were talking about it, they want to help regrow it, so it's on people's minds, and And now I think we just need to figure out as a group, as an industry, what are the top couple of things we could do? You know, is it talking to retailers about the profitability that exists there? Is it, you know, on the government affairs level, you know, we're working on Cheers Act to try to, you know, do things that we can do there. But what are the kind of top three levers we can pull? And I think once we all agree on what those are and figure those out, I think you'll see more action.

[00:31:39] Katie Marisic: Awesome. One thing you mentioned, I'm not going to ask you specifics because I know cone of silence, but now that Craft Brewers are voting members, did you see a good amount of attendance from that group in the voting members meeting yesterday?

[00:31:49] Senior Director: We saw some, you know, I mean, that's not the highest percentage of our members, partly because of historical reasons. And so we're going to have to do outreach to that community, find out more of their needs, build more specific resources. I will say we did. There was a lot of discussion of Craft Brewers and some of those things like, hey, what should we be doing differently? What are the resources we need? What are the One of the new kind of ways that we could put out business resources to help members explore those models and what opportunities exist. So there's going to be a learning curve there for us, and it's going to take time, but, you know, excited to, you know, more fully welcome them into the association as voting members.

[00:32:22] Zoe Licata: You touched on innovation yesterday and you pulled out a quote, but I think it was really cool that we talk about innovation a lot. And I think we think instantly like maybe canned cocktails or beyond beer or something. New product. Yes. But innovation can be the same product if it looks new to a consumer, right?

[00:32:40] Senior Director: Yeah. Any beer isn't new.

[00:32:41] Zoe Licata: Yeah.

[00:32:42] Senior Director: Any beer had a higher share back in the day and, you know, athletics doing it in a way that's totally different. You know, some of the fastest growing brands out there, they're not doing much different in terms of products, but they are marketing it, branding it very differently and finding ways to connect with consumers. You know, I was just, some of these products were different. I was just on a panel on regenerative grains, talking about, you know, Fonio, Kernza, things like that. And I think that's a great example of like, you're still making a pale ale. You know, the beer is not hugely different, but you're, using these ingredients to talk about it in a very different way and the way beer plays a role in agriculture and people's lives and farmers. And I mean, that's the kind of stuff where I think brewers can spend a little bit more time. And that's not to say that the product innovation isn't important as well, but I mean, Brewers are crazy innovators, and we figured out lots of beer innovation. And I think we have the beers we need to go out and grow in the marketplace. And now it's about how do we show the customer that this beer is the right beer for them and that occasion? How do we communicate that to distributors, to retailers? And that's the kind of place I think brewers can do a little bit more and also solve just some of the craft demographics are still fairly limited. you know, and I threw out some numbers on that, you know, specifically, but there's, I think there's still huge potential to take craft that next, that next S curve for craft is going to be even more truly into the mainstream where craft is the everyday beer for more Americans. And that's going to mean marketing in a different way. That's Another Round, you know, some of the past things that have worked for craft.

[00:34:09] Justin Kendall: Is anyone's marketing out there right now Tabbing Out to you as sort of hitting some of those notes?

[00:34:14] Senior Director: That's a great question that, you know, I'm not a marketer, so I'm maybe not the best person to ask on this. But, I mean, I think you do see people who are, they understand who they are and they really then, you know, they think about a product and they think about the customer and they try to marry those two well. You know, I'm lucky I get to sit, you know, occasionally attend like sales meetings for companies and, you know, got to do that for a company a couple of years back where they were rolling out a double IPA in 19.2s and, you know, following kind of the new Belgium path. It was not new Belgium and they just really made it their own. It's been a successful launch. And, you know, they knew, again, they knew who the customer was. They were differentiating it from who was going to buy their existing one. They thought about it differently. So, I think there's lots of people who are doing this and I think we're seeing people get more sophisticated on it pretty quickly as well.

[00:35:05] Katie Marisic: How many weeks a year are you not on an airplane?

[00:35:08] Senior Director: So this year I got on airplanes a lot less. It's amazing what you can just do still with a phone, you know, and did a lot more of just picking up the phone and calling members and talking to them that way. You know, I still like to get out there. There's nothing like walking into a brewery tap room and getting to really experience what the brewery is in a different way. So I'm spending a few more weeks at home than I did in the past, but I've still got pretty good airline status.

[00:35:31] Katie Marisic: You deserve it.

[00:35:33] Zoe Licata: We're going to Indianapolis next year for this next CBC. What are you looking forward to for that?

[00:35:38] Senior Director: First, I'm excited for people to see that as a beer city. You know, when you think of beer cities, I don't think Indy jumps into people's heads, but there's a lot of awesome breweries there and they make a lot of awesome beer. On a personal note, my parents live in South Bend and South Bend's also got a beer scene, but it's not quite as good as Indy. And I've been suggesting we meet up there a lot when I go to visit them, like, Hey, I'll fly into Indy. It's a direct flight. You can drive down and we do a weekend there. So I've gotten a few weeks in Indy in the last couple of years and a lot of great beer bars, a lot of Craft Brewers. So I'm excited about that. I'm also excited. I think it's one of those Las Vegas has been awesome. It's been super fun. It's been fun to watch brewers. You know, I did a run the other day and you're still seeing brewers out on the strip, but you know, early in the morning, let's just say. But I think he's going to be one of those places where you're just going to go around town and you're going to see kind of CBC take over that downtown a little bit more. And so I'm really excited to see that, whereas here we're just lost amidst the sea that Las Vegas.

[00:36:33] Justin Kendall: I'm not sure that you have much to do with the site selection, but what goes into figuring out a good host city for this event?

[00:36:41] Senior Director: Yeah, I mean, you know, some of it's just real logistical stuff. So, you know, does it have a convention center that's big enough to house this amazing expo? You know, one of the other things we're increasingly looking at is cost and price. You know, what are the hotel rooms? Do they have enough hotel rooms? Can we get them at a price Craft Brewers want? So that's another piece. We try to vary it geographically. We now have a scorecard that we are using for selection cities too, around making sure attendees are going to feel safe there. And then finally, and I think this has gotten de-emphasized a little bit, but for years, one of the things we were thinking about, and I think this is part of why we selected Vegas is, where is a place in its beer development and can CBC give that a little push? And maybe we were naive to think you could influence Vegas in any particular way. But, you know, we heard some criticisms around Vegas in the last year of like, well, it's not a great city for Craft Brewers. And our response is, well, that's part of why we're going there. We want to show them what we can bring. We want to show you know, what Craft Brewers is and maybe change that narrative a little bit and maybe make Vegas a slightly better place for Craft Brewers. So I think that was part of why Indy was selected as well. Like, you know, we're picking these things five years out. So it was not as good a beer city five years ago. And we were hoping that CBC could be part that gives it a push up. Do you have the map after Indy? I can't remember.

[00:37:47] Katie Marisic: Philly. I'm so excited for Philly.

[00:37:49] Senior Director: Oh, yeah. So since it's out there already, Philly, 250 years, you know, it'll be a great time to be in Philadelphia that year. And we had a great conference there when I'm blanking on the year, but when it was maybe 2015, 16, 17, sometime.

[00:38:00] Katie Marisic: I feel like pre, like between 2010 and 2014.

[00:38:03] Senior Director: Yeah, I'm ready for my Denix roast pork and broccoli rabe already. It is time. Yeah.

[00:38:08] Katie Marisic: I mean, I personally am pushing for an after party on the Jersey Shore, but, you know, we got time. We can make it happen. We can.

[00:38:15] Justin Kendall: Definitely. Party at my house. Bart, this is always awesome. Thanks for doing this. Yeah, thanks for having me. Great to see all three of you.

[00:38:24] Katie Marisic: Hey, we are here at the Craft Brewers Conference at Brew Expo America. And I am so excited for our guest, one of my favorite people and absolutely somebody that you need to know if you brew Craft Brewers in the United States. So Joining me And Justin right now is Katie Marisic, the BA's Senior Director of Federal Affairs. Katie. Hi. Hi.

[00:38:46] Federal Affairs: That is such a nice intro. Thank you. Oh, you're so welcome. I really appreciate it.

[00:38:49] Katie Marisic: Well, I mean all of that. Thanks for having me. I'm excited to be here. Well, thanks for joining us because I know you're busy. I was in the audience for your talk yesterday.

[00:38:58] Federal Affairs: Me and Mark. Oh my God. So much. It's kind of surreal too, because like Mark has been doing this for so long and he's such a wealth of knowledge. So he's like, well, let's present together. I'm like, okay, great. Let's do that.

[00:39:12] Katie Marisic: And if you're not in the loop, Katie is talking about the BA's general counsel, Mark Cerini. But to me, my friend, it sounds like you're having a little bit of imposter syndrome and I would like you to not.

[00:39:23] Federal Affairs: Thank you. You're welcome. Yeah. I've been doing this for nine years. I've been lobbying for much longer though. I'm very young for, Oh no, we are being recorded. Okay. We are being recorded. But I don't think I have imposter syndrome, but sometimes like I still get a little bit of that buzz when you're like around people who have been in the industry for so long and he's smart. He's brought a ton. a ton to our government affairs team. And I think it's really helped because I think it's elevated the Brewers Association's political and government affairs work overall. So could not be happier.

[00:39:57] Katie Marisic: So important. Well, you guys knocked through a bunch of topics yesterday. I do think the federal level, you've got a few priorities. The first is being the United States Shipping Equity Act. United States Postal Service Shipping Equity Act.

[00:40:09] Federal Affairs: Yes, which I always have to say, but it is the USPS, Shipping Equity Act. It's much easier to say. Much easier. And yeah, that's the legislation that would allow the Postal Service to ship alcohol in states where shipping of alcohol is legal. So for those of you who are unaware, if you can ship, whether it's beer, wine or spirits in your state, you can only do it with private carriers. And we'd really like to see the USPS. Now I'm doing it. Well, I mean, they have the same letters. So we'd like to see the Postal Service be able to ship alcohol as well. We think it's beneficial to them, but also they're built to ship door to door. The Postal Service was made so everyone could have access to mail. And the private carriers do amazing work. But we, you know, with what, 9500 breweries in the country, with everybody who lives in the country, people live in rural areas. They don't necessarily live in those routes. And we think it could bring good competition.

[00:41:04] Katie Marisic: Yeah. I mean, and the private carriers don't deliver everywhere, right? There are certain places in the country that are completely left out.

[00:41:11] Federal Affairs: Yeah. So we are going to continue to advocate for that. We work with Wine and Spirits as well. And all the postal labor unions are very supportive of it. From the postal services side, they see it as a way that they could raise revenue. And they already do things like ID verification. You can get prescription drugs shipped through the mail. There's no reason you shouldn't be able to get a beer that you love shipped to you through the mail. where it's legal. It doesn't supersede state legislation, so we're still working on state shipping laws as well.

[00:41:39] Justin Kendall: Let's also talk about the CHEERS Act, because it's no secret draft is challenged. Tell us a little bit about this bill. I'm going to just abbreviate it and keep it to the CHEERS Act, but tell us a little bit about what this would do and how much support you're seeing for it.

[00:41:56] Federal Affairs: Yeah, no, happy to. So it's really nice when you have a positive piece of legislation to advocate for. I mean, obviously the USPS bill is that for us too, but this is a beer bill and we're the Brewers Association. So we're working with the National Beer Wholesalers Association, the Beer Institute, then groups like the National Restaurant Association, Independent Restaurant Coalition and Steel Keg Association. on legislation that would, what we hope, incentivize the creation of new draft lines when you're building restaurants and bars. And it gets technical, and if you're not an accountant, it might be a little bit boring, but it would increase the deduction that they're allowed to take from Section 179 of the tax code. So we're happy. We're going to be supporting this during our hill climb. And we think that it is the type of thing that can incentivize one of the areas where beer is really the strongest. And I say strongest in, if you're drinking a draft drink, 99% of the time, it's going to be beer. And that's something that we want to continue to encourage.

[00:42:59] Katie Marisic: And you have a really nice industry coalition supporting this bill, right?

[00:43:02] Federal Affairs: Yes, we really do. And I just, it's for us, it's really nice to be able to work with the Beer Institute and those other groups like we used to with the Craft Beverage Modernization and Tax Reform Act. So the band's back together. The band is back together.

[00:43:16] Justin Kendall: So does this essentially take the place of that spoiled beer tax credit that you were chasing for a while?

[00:43:22] Federal Affairs: No, I wouldn't think that it takes the place. It's it's a little different, but there are similarities to it. But what we really are trying to do is one. I mean, there's environmental aspects to it. You're going to have to meet certain requirements if you would qualify for this tax credit. But it's incentivizing what I would say is like new draft lines in some ways. The people who are selling the product. to the consumers directly, the people who are putting in those draft systems, are going to benefit from being able to take that bigger depreciation. So, similar, not a replacement, but definitely a priority.

[00:43:57] Katie Marisic: What else should we be looking out for?

[00:43:59] Federal Affairs: Well, we are also paying attention right now to one of the tax bills that is in the Senate. Bipartisan legislation passed out of the House. It addresses things like the child tax credit, but it also has tax provisions that would impact brewers. We've heard from a few since we've been here today about a research and development credit. It was a part of the Tax Cut and Jobs Act. It expired. And what it would do is allow you to depreciate the money that you put into R&D in the year that it happens. And we have a lot of members who are taking advantage of that. And this is an impact on them. We're innovative. It's a cool industry. And I think Bart Watson talking today that we need to keep innovating and coming up with things that drive people to beer. So we want to make sure that our members are able to get benefits from that. It's probably unlikely to pass this year, though there is a coalition in the Senate that's working to try and get it done, but I'm pretty optimistic for 2025. I expect that to be a pretty big year tax-wise. Other things we are paying attention to, and I laugh a little bit about it, is the 2025 fiscal appropriations. We just finished the 2024 fiscal appropriations six months into the fiscal year, but They got it done slowly. So we work with the hop and barley growers really closely on USDA Agricultural Research Services. And here there are a bunch of different places that are brewing beer made with a Vista hop. I don't know if you've had that one before. That's one of the hops that came from that research program. It's a public varietal. It was built to be disease resistant to things like downy and powdery mildew. And having the funds so they were able to do that, it benefits public growers, private growers, and it's a super tasty hop. Would definitely check it out. And then advocating for the TTV as well.

[00:45:48] Justin Kendall: One of the things that Bob brought up yesterday and was a subject at the legislative conference was the 2025 dietary guidelines updates. So do you have any sense of where that's heading at this point as far as where the USDA and Health and Human Services may be leaning with those?

[00:46:09] Federal Affairs: I don't, but now I will test you from yesterday. Do you remember what ICPUD stands for? Oh my God, no.

[00:46:15] Katie Marisic: But Zoe had written a story where she called it out last week and I put in the comments on the Google Docs, what on earth is this acronym?

[00:46:22] Federal Affairs: It's the Interagency Coordinating Committee for the Prevention of Underage Drinking, but For the people who are really aware of the dietary guidelines process, this is something that happens every five years. It used to be for the alcohol portion covered by the USDA, but it was changed to Health and Human Services. So in 2025, they'll be releasing new dietary guidelines. Current ones say that recommended amount of drinks in a day for a man, two drinks, a woman, one drink. They are reviewing that process, a group, the National Academy of Science and Medical Engineering, and the, oh my gosh, the Substance Abuse and Mental Health Group, SAMHSA. Many, many acronyms in Washington, D.C. These are some of the longer ones. They are looking at eight specific questions that Congress appropriated funding for them to research that looks at alcohol's impact on things like cancer, breast milk, different stuff like that and what they want to see is whether or not there is an impact on two drink, one drink, no drink. We've been seeing definitely across the world some people moving more towards a no safe limit when it comes to alcohol and that's something they could potentially be deciding on this front but It is a long process. That's why it happens every five years. Currently, right now, they are in the, I would say, the research side of things. But which way it's leaning, I don't know. And I think, you know, in this particular thing, it's scientific. So there needs to be a preponderance of evidence. And that's what they're working on.

[00:48:02] Katie Marisic: Is that change from the USDA to the Health and Human Services, is that new for this go around with dietary guidelines?

[00:48:09] Federal Affairs: The way I understand it, yes. And I admit this is an issue that I've only recently been paying more attention to. It's always been in the background, but it's just something that we are monitoring and Want to know what's going to happen?

[00:48:25] Katie Marisic: Yeah, I remember the last time around, there was some noise about bringing, you know, men's limit from two to one, but that obviously got thought off and didn't happen. But, you know, when you had those eight questions that they're looking at up on the screen, I was shocked that like three of them pertain to lactation. And this is probably another conversation for another time, but it was just, to me, so like, everything about pregnancy and postpartum, for the most part, is a, oh, we don't know. So I was like, oh, cool. Somebody actually wants to study this. Like, that's good. But also, who knows?

[00:49:00] Federal Affairs: It probably is a conversation for another time. I'd like to read up a lot more on it.

[00:49:05] Katie Marisic: Because it was just so, I mean, everything was, Like, can you do this while you're a lactating American? Can you do that? Can you do this? Can you eat this? Nobody really knows. So I'm at least glad that science has taken up the cause perhaps.

[00:49:20] Bart Watson: Yes.

[00:49:21] Federal Affairs: A lot going on. There's a lot going on and we are getting ready to have our hill climb in June. So a bunch of different people will be coming to Washington DC, obviously our guild executive directors who we partner with on a lot of things. They show up, brewery CEOs, all BA members are welcome to join. It's a pretty great event and we've We've extended it a little. It's not just a one-day event anymore. It's a half-day, and we actually get a presentation from BART as well. Wow. Also, The Economist from the NBWA and the BI come and do a little bit more personal state of the industry. You get a Lester and BART show? I do. That's exciting. Yes. I just send out handwritten notes.

[00:50:01] Justin Kendall: It's a nice touch. We appreciate the time, Katie. Thanks for doing this.

[00:50:05] Federal Affairs: Thank you guys for having me. You're awesome. I'm just really happy that you're all here and hopefully you're having fun in Vegas and have been enjoying the sessions. Yeah, it's been wonderful.

[00:50:15] Justin Kendall: And that's our show for this week. Thanks to our one man audio team, Joe. Thanks to Jess and Zoe for holding it down here. And thanks to all of you for listening. We'll be back next week.