Brewbound Podcast: Craft Brewers Joining the Non-Alc Beer Movement

[00:00:00] Jessica Infante: 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. The non-alcohol beer shelves are getting more crowded. Find out more on the Brewbound podcast. Hello, hello, and welcome to the Brewbound podcast. My name is Justin Kendall, and I am the editor of Brewbound, and I am joined by Brewbound managing editor, Jessica Infante. Hello, Jess. Hey, Justin. as well as Brewbound reporter Zoe Licata. How are you, Zoe?

[00:01:00] Zoe Licata: I'm doing wonderful.

[00:01:03] Jessica Infante: Is it a bones day?

[00:01:06] Zoe Licata: I think it's a like mandatory bone stay. I think whether we have the option or not, it has to be a bone stay. Yeah, we got a lot going on.

[00:01:15] Jessica Infante: Yeah, if you don't know what we're talking about, listen to a couple episodes ago and you'll figure it out or search the internet. But I wanted to jump right in here and talk about something we hit on last week, which was Ball putting a hold on those minimum printed order quantities for cans. I've talked to a few people about that and while a couple months reprieve is nice, it's not really doing anything. Lead times were already 12 weeks out. And so two months time, eight weeks, that's not going to get you anything. And it really kind of sucks. And it feels like, you know, a Pyrrhic victory at best. That's even a generous statement, I would say. Yeah, that's way too kind. This looks like appeasing a senator, you know, Senator Ron Wyden and saying, hey, we'll try when there's not a lot that they're really offering here on the table. Maybe we can get back to the table or maybe they can get back to the table, I should say, because I'm not going to sit at that table and negotiate this. But this is something that the Brewers Association and Senator Wyden needs to push a little harder on because it doesn't sound like this is going to move the needle for very many of Ball's consumers or a lot of the small craft brewers out there. No, I'm one of ball sticking points in their letter back to Senator Wyden was that they need to figure out a way to not lose revenue when they have to shut the lines off and on to accommodate these smaller runs and until. there's like a major breakthrough in innovation here. I don't see that changing. Not to be the negative Nancy, but that's kind of a big issue. It's reality. That's the reality of the situation. And Ball is a giant publicly traded company that, you know, efficiency and returning that to shareholders is priority one to them. You don't have to like the reality, that just is the reality. Speaking of another couple of publicly traded companies, we had the news last week that Constellation Brands and Coca-Cola have struck a deal for Fresca Mixed, is it? Yeah. So hard Fresca.

[00:03:35] Zoe Licata: Yeah, they're going to make their version of the fresca citrusy flavors, but in a hard alcoholic version. So yeah, another non-alch big company coming in to try to have their play in this space. I am so here for this.

[00:03:53] Jessica Infante: I like how Molson Coors was so quick to come back and say, no, no, no, we're still cool with Coca-Cola and we've got something else coming down the line. So I thought that was kind of funny out of all this that they had to come back very quickly and be like, no, no, no, everything's going all right. And apparently it is with Topo Chico Hard Seltzer. They got Ranch Water, they're going national. So lots of good things happening there. And I had no idea that so many people were using Fresca as a mixer. or drinking Fresca at all. I thought the 21 year old me was a genius. My friends and I used to drink a lot of Frodka before heading out the Jersey Shore all summer. And no, it turns out 50% of Fresca drinkers use it as a cocktail mixer. So we were not inventive or creative or anything. Meanwhile, it was a major week in M&A activity as we had quite a Monday of deal activity and I guess retro news on deal activity as well. We learned that Molson Coors was there shelving the St. Archer brand, which it kind of felt like they got their death notice when St. Archer Gold was put into maybe sort of permanent hibernation. Once that brand went away, their Michelob Ultra Challenger, I mean, they had pumped so many resources behind that, including a Super Bowl ad. And for that to go belly up, it seemed like that was the beginning of the end for St. Archer. Yeah, and that was like about a year and a half ago, their termination, hibernation of St. Archer Gold. So that hung around a little longer, I think is maybe a bit surprising, especially because Molson Coors has shown us, particularly last year, that they won't hesitate to cut a brand if they don't think it's doing well the way they did with Coors Seltzer. But of the seven brands in the Ted and Blake fam, St. Archer was fifth. So the brands that are smaller than it have also been acquired much more recently than it. So I think they just weren't that pleased with the acceleration rates. Yeah, and jumping in to take over the Taproom Brewery, all of those assets, not the IP, are the Kings and Convicts. Coming back out of nowhere, making a deal on the golf course, again, we talked to Brendan Waters, the CEO of Kings and Convicts slash Ballast Point, and he told us that just like the deal with Constellation Brands for Ballast Point, He was on The Links with Molson Coors Execs and the conversation turned to taking over that space in San Diego. And why do they need that space when they've got a million barrels of beer capacity at their Ballast Point Brewery? He said that they need it for the Kings and Convects brand as well as doing small batches of Ballast Point offerings, plus all kinds of other crafted beverages that aren't beer. Yeah, he wouldn't tell us much on that front, but he did say there's gonna be news to come. The other huge thing for them is that the St. Archer facility comes with like a really speedy and nimble packaging line. So that will help them because they're, like you said, their ballast point facility is a behemoth and can turn out so much volume, but it's not quite agile. And they're doing a lot of contract brewing as well at that Dallas Point facility. And Brandon said, they're not quite to profitability yet, but once they're able to turn on their tap rooms, if we can get through this pandemic, then they're gonna be raking in some cash. Yeah, for sure. And they've got a lot. They've got three in San Diego, one in Long Beach, one in Anaheim, and they're about to open one in San Francisco. But Brendan told us they have no interest in opening that taproom, you know, at the height of a surge in the pandemic. Speaking of other San Diego brands, Jess, you covered Tilray's earnings call this week, and we learned the sale price of Green Flash and Alpine Oh, we did. My gosh. Yeah. So the Green Flash and Alpine acquisition broke the week of leading into Christmas. Zoe and I tried to tackle that as best we can. It was an experience, but yeah. So now that, you know, they're been acquired by a publicly traded company, Tilray, which is the world's largest cannabis company based out of Canada. They reported earnings this week and we found out they paid $5.1 million for Green Flash and Alpine. based on the volume numbers that the Brewers Association had on file for those two brands in 2020, that's about $150 a barrel, which is far less than most other deals we see. Their deal to acquire Sweetwater, which they announced in late 2020, comes out to about $1,100 a barrel. Well, granted, this is just for the IP, but that just tells you what that IP is worth at this point. Yeah, and what that IP is worth is apparently a really nice condo in Back Bay in Boston. And this was a couple million bucks in cash as well as I think around $3 million in stock if I remember right. And they also made a deal for a bunch of land that Sweetwater sits on had been leasing and I think that was worth $30 million to purchase that. Yeah, about $30.1 million. So just think about that. That's six times more than what they paid for these two whole brands, one of which was one of the largest craft brewers in the country at a time. So lots of fun with numbers. So a lot of shakeup going on in San Diego. And then another deal that caught us a little bit by surprise, but maybe shouldn't have, is private equity has moved on. Another private equity firm has moved on from Uinta in Salt Lake City. US Beverage is partnering with Crestone, which is a family office in Colorado. on a JV to acquire, or they have acquired, I should say, Uintah, and they're going to be moving forward with that brand, which, Zoe, you were on the call with me on that, and they said that Uintah will be a top five brand within their portfolio.

[00:10:18] Zoe Licata: Yeah, we talked with the Uintah president, Jeremy, and to the U.S. beverage president, Justin Fish, and both of them seemed really excited about this deal and really optimistic for Uintah's future about maybe exploring some of the markets that they had to withdraw from a couple of years ago. And they also talked about expanding some of their contract brewing as well. So it seemed like Both sides see this as an opportunity for their businesses and as their combined collaboration. So it seemed to be a very positive move that they've made for themselves.

[00:10:55] Jessica Infante: Yeah, hopefully this provides some stability for you into which they've gone through a couple of private equity firms since 2014, and they've had to retrench to the Western United States and US beverage. They're going to bring some sales and marketing support to you into. And also, I mean, they have a portfolio that includes Enos and Gunn and Moosehead Logger, so. Uintah fits in somewhere in there. And as Justin told us, they'd been looking for a craft brewery for a while now, and I guess the opportunity presented itself with Uintah. Another story that we were on late last week and into this week is Rheingeist launching some hard-crafted beverages, RG Bevs, a lineup of fruited ales, as well as Teegeist, their hard tea brand. You've been on top of that, Zoe.

[00:11:50] Zoe Licata: Yeah, so we talked to them again today to the Ryan gas team and so we'll have some more coming on them and what they're doing with this, but what they were saying is this is kind of their way of getting into the shelf space that's outside of beer. but still providing something that's different from the hard seltzers or similar things that they're seeing. So they've created this R.G. Bev's line of fruit forward beverages that are inspired by some of the fruited ales that they've had success with in the past. Bubbles, Zango Crush, Wowie Pilata, and a lemonade. And then also this new hard tea. So it seems to be their way of playing is this growing beyond beer space, but they still want to really have that flavor focus and not just be another hard sells or whatever in the void of many different ones out there.

[00:12:44] Jessica Infante: And also the Rheingeis brand is going to be entering Michigan this spring, so look out for that if you're in Michigan. And finally, a rant here before we get into our featured interview. I'm going to tie it to that featured interview because we get a lot of pitches from non-alcoholic beer brands that are coming up and almost invariably the pitch is the founder of this brand couldn't find a good non-alcoholic beer on the market. And in the year 2022, that's kind of a, it's a ridiculous proposition. We are so beyond the everything out there sucks already. I'm here to fix that story, or at least I would hope we are. And there are non-alcoholic brewers out there who do a great job of uplifting the rest of the segment. Bill Shufelt from Athletic is one of those people. He has been a great cheerleader for non-alcoholic beer. He uplifts everybody. He doesn't say, yeah, everything else out here was crap. you know, he uplifts all and there are so many go right now. You know, we c of brands. I think Heine good brand. I think brook We can keep going if we wanna get into a lot of the craft players such as Hairless Dog and Surreal and Partake, but there are no good options out there. That doesn't really fly now, at least not to me. And I don't think that should be a part of your pitch. And I think that if this segment is going to grow, you have to get past that type of language, that type of like tearing everybody down, especially for brands that, aren't even nationally distributed. I just think that it is a very short-sighted story to put out there. And also, the segment needs to get past language like, it's good for a non-alcoholic IPA. It's good for a non-alcoholic Amber. These are good beers. I mean, good non-alcoholic beers, period. And I guess I'll get off my rant now.

[00:15:04] Zoe Licata: I mean, you said it great the other day was like, yeah, these are legit. Like there are some non-alcoholic beers that I've tried where like, these are just a legitimately good beer, non-alcoholic or alcoholic, like that's a good beer. It just seems like a lot of these people who are trying to play in that space right now need to update how they're viewing it. If they want to be successful in the space and have the space be successful overall, because it's just, It's evolved quickly and the people or the consumers in that space are looking for people who are going to be marketing it in the more modern way.

[00:15:37] Jessica Infante: And hopefully that trade group of non-alcoholic beer brands will help push this idea. Let's get into it with our featured interview with three very esteemed guests. We are gonna talk through what they're seeing and doing in the non-ALC space in craft beer. So I'm really excited to have this conversation as you probably are figuring Justin is too. So without further ado, let me introduce you to everybody. With us today, we have Veronica Vega, the Director of Product Development for Deschutes in Bend, Oregon. Hey, Veronica. How's it going, Jess? Good, how are you? Thanks for joining us. I think I just saw you. Veronica Vega one of our esteemed judges. I think I've just said the word esteem twice now, but at the Brewbound Pitch, I'm at Brewbound Live. So always good to have you around. Thank you, feeling very loved. Good, good. We also have joining us from sunny, warm San Diego, Brandon Richards, the president of Ale Smith Brewing. What's up, Brandon?

[00:16:34] Dry January: Good morning. Just happy to be here with everybody to talk about some non-alcoholic brew. Awesome.

[00:16:39] Jessica Infante: Glad you're here. And last but not least, basically my neighbor, Chris Lohring, the owner and founder of Notch Brewing down the road from me in Salem. What's up, Chris?

[00:16:48] Veronica Vega: Hi, Jess. How are you? Good to see you again.

[00:16:50] Jessica Infante: Good to see you. I do want to kind of kick this off by walking through some data that we received from Numerator, which is a pretty popular data source in the non-alcohol beer category. Wow, that's a lie. Data source in everything, but we get a lot of really interesting beverage alcohol stuff from them. So Numerator did a survey of people participating in Dry January, which is kind of almost cliche by now I feel like we're all kind of, I personally am a little sick of hearing about it and it's only the 11th day of the month, but basically they find that two or three people participating in Dry January using it as an opportunity to live a more holistic health focus lifestyle. a quarter of Gen Z and millennial consumers are participating in the month where you abstain from drinking alcohol for the whole first 31 days of the year should probably explain it before we talk about it too much. And that's a bit higher ratio compared to Gen X and boomer consumers who are doing it at about one in five. On our end, as a news publication covering the beer industry, our inboxes have been overrun with Dry January pitches for weeks now, featuring everything from non-alc beers to mocktails to non-alc spirits. The concept has certainly taken root with consumers. So I'm going to throw this to our guests. Why do you think only 6% of Dry January participants, according to Numerator, are interested in non-alc beer if everybody is all on board? Brandon, let's start with you on that one.

[00:18:18] Dry January: Yeah, that's that's a good question to start off with. I still think that there's a perception out there that non-alcoholic beer lacks flavor, which I don't think it's the case anymore. You've seen great breweries put out some of their core offerings or innovation. And I think the percentage is going to continue to grow as there's more trial and we start to see it more in restaurants and bars and shelves.

[00:18:41] Jessica Infante: we should probably set the scene for everybody here. Brandon, tell us what Alesmith is doing in the non-ALK space. Because, you know, Zoe and I know, because we chatted a couple of weeks ago, but for listeners at home, what's the plan?

[00:18:50] Dry January: Yes, our plan is to launch a single SKU, our Alesmith IPA. We're known for making good IPAs here and that's been a highly rated beer in our portfolio, but we're going to kick it off with one and we're going to eventually get to two to three beers. We're looking at bringing that out in February. or just wait on that pasteurizer to arrive. It's probably stuck on a truck somewhere, but we'll be getting going with it here pretty soon.

[00:19:14] Jessica Infante: Oh, God. And Chris, Notch has done two different Not-N-Out beers. Can you tell us about them?

[00:19:18] Veronica Vega: Yeah, we introduced two pilot batches. One was a Kraft Pills to designate it or separate it from the bland mass market lagers. And that was at the end of last year. And then we just released in January one, IPA, basically New England style IPA. And both of those are basically informed by beers that we've had in the market for 9, 10 years. And so they're kind of our non-alcoholic versions of beers that are typically 4.5%.

[00:19:45] Jessica Infante: And Veronica Deschutes, you know, one of the nation's largest craft brewers, is launching a non-alcoholic version of which big beer in your portfolio? And by big, I mean important, not, you know, high ABV.

[00:19:57] Brandon Richards: Well, sure. It's America's best-selling porter. It's Black Butte Porter. But we started with the proof of concept last year, still the dark beer category. We knew we wanted to start out with the dark beer. And that proof of concept was an Irish style stout. So once we proved out that we could make a delicious malt poured beer, then we turned our attention to our flagship.

[00:20:20] Zoe Licata: It seems to be that Gen Z millennial consumers a little more participating in Dry January, but beyond this month, who are you guys seeing as like your consumers for these non-alcoholic brands? I think we've talking about this misconception of the non-alcoholic space in general, but I think there's also a misconception about the drinkers themselves. So whoever wants to start off, just who are you marketing these beers to?

[00:20:46] Brandon Richards: Yeah, I'm happy to start out. We've been able to do some internal customer research with our own customers and asking them when they drink non-alcoholic. And most of them are pretty heavy craft beer drinkers, meaning that they drink craft beer at least five times per week. But they aren't just exclusive non-alcoholic beer drinkers. So they're adding it to different occasions during their drinking sessions during the week. And so I think that's a unique point on our customers that we have found.

[00:21:19] Dry January: I could speak for Ailsmith. Our core consumer or drinker is gonna be the sober, curious, wellness-focused, but we're looking primarily at the beer drinker that's looking to reduce their consumption of alcohol. Maybe they wanna keep a social lifestyle, but is mindful of the impact of what that alcohol does to them. So that's where we're headed. We wanna win that beer drinker that's adding it to their lineup.

[00:21:40] Veronica Vega: At Notch, it's been basically served at the tap rooms, a little bit of distribution. And what we've seen, we really have two demographics or customers that we've seen. One is someone's just given up drinking. That used to be one of our customers and are happy to come back to the tap room or to grab beer for home for either health reasons or fitness reasons, et cetera, they've given up drinking. So they're happy to have good beer again. And I would say most of it are our consumer who just wants to take a round off, a day off, a week off, a month off, whatever it could be. And they're integrating this into their drinking in a way that's thoughtful. And again, it may be from a health standpoint, it might be from a fitness standpoint, but it's just another opportunity to drink at a time they didn't think they could drink. Instead of going with soda or seltzer, they have a beer.

[00:22:26] Jessica Infante: That's something that we keep hearing about is unlocking these other occasions that aren't necessarily, you know, days that a consumer is looking to drink a beer or whatever. Is that how you guys sort of approached this getting into this space? Is this gives us an opportunity to capture a few more occasions that we may not have been able to play in? I guess I'll throw that to you first, Veronica.

[00:22:50] Brandon Richards: Absolutely. And I can say personally that my personal occasions have become more evident. So if I'm, you know, we all work in beer, so there doesn't lack opportunities to like drink daily on the daily. And there's been times where, you know, we were having lunch with a supplier, you really want to have that feeling of sharing a beer, but I have three meetings and something due tomorrow, you know. So that occasion, now that I have a non-alcoholic beer available to us at the pub, I'm, you know, reaching for that occasion. So I know that there are others that are similar out there, even outside of working in the craft beer industry.

[00:23:30] Jessica Infante: Is this something you're finding too, Chris? And is it working its way into your rotation?

[00:23:35] Veronica Vega: Yeah, we've seen it for notch. We've been at it now for 12 years and we basically make session beer. We, all our beers are 4.5% and lower. So we've always been an occasion based brand. And so, you know, we've been singing that song for over a decade now that you can have a beer when you didn't think you could like at lunch or whatnot. It doesn't have to be a big, you know, 7% IPA. You could have a nice three and a half percent, you know, whatever, whatever style we have. And so this just kind of fits into our model of just providing more opportunity for an occasion you may not have thought you could have a beer. And for me, I mean, I'm drinking non-alcoholic in my car on the way home. It's really, it feels really weird, but it just, it highlights that, you know, it does open up a world of opportunities to drink a beer when you didn't think it was appropriate.

[00:24:17] Brandon Richards: Chris, I agree that is the most fun feeling to crack a beer on the drive home.

[00:24:22] Veronica Vega: It really feels like you're doing something wrong, but you're not. It's hard to get around.

[00:24:27] Jessica Infante: Brendan, are you cracking non-Alcs on the way home? I haven't yet.

[00:24:32] Dry January: We got to get it. We have some beer here, but it's not pasteurized, but I'll be right there next month. I think both of them nailed it. I think what we're trying to understand here, this new entrance in the market is understanding the occasion and finding it. We all want to be the day off beer, the day off option from the regular alcoholic drinking occasion.

[00:24:53] Jessica Infante: With so many non-alcs coming to market, what's the response each of you are getting from your wholesalers or your retailers on these products if you are taking them to the off-premise?

[00:25:06] Veronica Vega: So we found is that there's a real excitement about it. And when you walk into a store now to sell something, there's a fatigue on the buyer and saying, all right, what new thing am I being pitched at? And if you walk in with a seltzer, they laugh at you, like you're a little late to that game, which we don't have. But when we walk in with the NA, the buyer is really excited to talk to us because there's a lot of enthusiasm. eyes on the category in general. So it's a nice feeling to walk into an off-premise and actually have the buyer want to engage and really hear the story of what you're about to sell. It's great.

[00:25:41] Brandon Richards: Yeah, I agree. You're giving the retailer customers that are going to their store uniquely to buy non-alcoholic beer. I think for the choice that we made to add a dark beer to our portfolio in the non-alcoholic portfolio to start there at least. We're also adding a point of distinction to, you know, like Brandon's IPAs and Chris's loggers and the loggers that have been out there. So that was an important decision for us to know that not only we're bringing drinkers to that retailer, but we're adding to distinction to the portfolio that's already going to be pitched to them.

[00:26:16] Dry January: And what we're seeing from our wholesalers down here is that they're excited. We have Athletic in our backyard, and they're one of the brands winning in the space. We also have a lot of the national players, but what we're seeing from both our distributors and our retailers is that there's an opportunity for a regional player to come in and pick up some shelf space as this category continues to grow. We're definitely going to release it commercially, but we're kicking it off with direct-to-consumer shipments across the country to launch it.

[00:26:45] Jessica Infante: I know this is not a question I sent you guys in advance, but we're, you know, doing some real journalism here, I suppose. One of the big perks or a perk of launching a non-ALC is that you can operate outside the three-tier system. So, and I know that's a good way for you to get really powerful data. If you were, you know, shipping to consumers' homes, that tells you a lot, but you also can go through distro. So what are you hearing from distributors? Are they concerned about the DTC piece at all, you know, taking away from the bottom line?

[00:27:12] Dry January: I'll go first. I haven't heard much from them yet on this one. I think that they're probably watching both the large and the small producers of non-alcoholic products do this. And I'm not hearing many complaints right now, but I think all it does is it adds to what will be the future of the distributor sales by getting trial, driving awareness around the product. and really getting consumers comfortable with drinking it, which was that very first point of why are only 6% of people drinking non-alcoholic brew in Dry January? So I would think they'd be on board and that'd be probably something we could overcome with them.

[00:27:46] Brandon Richards: I mean, think about how long we've been talking about this. It's been years that we've been saying, oh my gosh, look at the growth in NA. And then the response is always, well, but it's not a small base. And so there's still a lot of proving that needs to be done in the category. And so what we have found is A year and a half ago, when we approached our main distributor, it was actually a positive to know that we were going to be getting proved out through a DTC model first, so that we really knew that we had a customer out there, as opposed to just pitching them something that we haven't proved out first.

[00:28:22] Veronica Vega: I haven't really talked to my wholesalers about direct-to-consumer. It's just not a topic I really want to bring up with them, so that remains to be seen.

[00:28:29] Jessica Infante: Well, that makes sense. Let me just color a little bit more detail here on what we found in that numerator survey where we've gotten a 6% number from. In the survey that the numerator did of some consumers, 74% of respondents said that they're going to substitute alcohol with water. So looking to be very hydrated, I suppose. 27% are going to be drinking fruit juice, which all right, sure. I'm sure our colleagues over at the BevNET side of things would probably have some thoughts on that. 20% are going to be substituting alcohol with energy drinks, 9% with non-alcoholic craft cocktails, 7% with non-alcoholic wines, and then that 6% with non-alcoholic beers. So that's kind of the state of substitution that that numerator has found. You know, we touched on this a little bit briefly at the top, but Veronica Deschutes intentionally launched a non-alcoholic version of Black Butte Porter. Why was it important to keep that well-known brand name attached?

[00:29:24] Brandon Richards: Well, I think that 6% number for the number that they're substituting with non-OC beer, that shows that there is some category-wide education that has to occur with non-OC. I don't think there's a lot of awareness. And I mean, when you're talking about something like Dry January, that's like abstinence. driven choice. And so we, we know that there is some education. So we're trying, we're making it as easy as possible to educate on our product. It's the best-selling porter in America. This is a non-alcohol version of it. Very, very simple. There's not a lot of like smoke and mirrors there. So that was an important choice for us.

[00:30:03] Jessica Infante: So I mean, what has been the development process like for all three of you? Because I know from my time in and around beer, making an non-alcoholic beer is actually really freaking hard. It's not easy. It's definitely you make a beer and then you unmake part of it. So how long did it take you to develop the offerings that you're about to bring to market? How much consumer testing did you do? What has this process been like? Chris, do you want to start?

[00:30:27] Veronica Vega: Yeah, we started, geez, probably two and a half years ago. We were involved with a technology partner, it was a spinoff out of MIT, where they were doing membrane filtration. And one of the benefits of that, when you remove alcohol, water from beer, you remove alcohol. And they were looking at like a concentrated delivery system of beer, which I couldn't get my head around as a brewer. But I did like their technology in terms of they could take alcohol out in a way that I think left the non-alcoholic beer tasting like beer. So we went through a bunch of trials on the Tapper in previous to COVID, COVID hit, and then we're onto our second technology partner trying to figure this out in a way that we feel good about the beer. So for us, we've been patient with it because we want to bring something to the market that we feel represents notch. Because our consumers definitely, they expect something from us and they expect a certain level of quality. And just because it's N.A., it's not acceptable to step down in what they expect from you. They're going to take you to task if it's not up to what your alcoholic beers are. So we've been very patient with it until we get to that point. We're probably late to the game because of that, but we want to make sure we deliver it on the promise that the N.A.

[00:31:32] Jessica Infante: beer will be everything you expect.

[00:31:37] Dry January: For us, we've been talking about it for two years, and we were mid-pandemic, and as we saw consumption of alcoholic offerings continue to rise, we're like, let's go work on our non-alcoholic version now. We've been doing it for about 18 months. More specifically, in 2021, we were brewing with different types of yeast and different types of methods to get it done. We brewed about six or seven times. All of them we brewed and dumped, which is sad. We we've been trying it as a group. We've been trying it across the bar, just giving small samples to consumers that are our customers that are in our building often. And that's been our process. We're ready to go. We just waited on that pasteurizer.

[00:32:16] Jessica Infante: Veronica, how did this all go down at the shoots?

[00:32:19] Brandon Richards: Yes, similar in timeline in that this started about two years ago. It's such a capital intensive thing. And so to start with small batches is really, really challenging. So for us, the thing that made it possible for us was partnering with Sustainable Beverage Technologies because they were able to pilot the first couple iterations. And so having that partner where A, we believed in the product because they had proof points that were very, very high quality and met our standards there. And we kind of grew along with them as they scale their equipment at a contract brewer that could take on our volume. And that way we didn't have to, you know, convince folks here at the brewery to spend several million dollars on something that was still a question mark. I mean, that's what really made it happen for us. Even testing equipment, it was like we were looking at a lot of different technologies and to get something in the door for two weeks just to test a batch or two would be like $100,000 just to do that. So SBT has been an incredible partner and so they really made it possible for us.

[00:33:27] Zoe Licata: Now that we're getting into this non-op space and it's getting to evolve, what do you think this segment needs to do to get to the next level and get beyond this smaller space that it's in right now?

[00:33:41] Brandon Richards: Well, I brought up education, I think sampling and also you'll see a lot more, I think, athletic models where there are breweries that create a space for people to go enjoy non-alcoholic beer. When we did our consumer testing on even our packaging, it's so interesting what we think is so obvious within the category that consumers do not. And one of them that I'll share is we originally wanted to call our beer Blackview N.A. because we thought that was very straightforward. We were hearing from customers that they didn't know what N.A. meant. They're like, what does that mean? Non-alcohol, non-applicable? Like, I don't get it. And so we went with a very straightforward non-alcoholic. So there's lots of education that category-wide has to occur. And that happens with conversations, sampling, and also getting people into a space to share it and talk about it.

[00:34:37] Dry January: That's funny, Veronica Vega had the exact same thing happen with the NA. Probably concurrently with working on brewing this product and figuring out how to make it the right beer or brew is figuring out how to communicate what's inside the can to the customer. And we've gone through so many iterations of what we're going to call this. from N.A. to fanciful names. And that's where we just landed on A.L. Smith, IPA or the style non-alcoholic brew. So it's funny to hear the same thing, but it definitely education. And I would also probably say just really, really trying to understand those occasions better and probably, you know, all these breweries that are working on N.A. Talk about the offerings and how they're getting better. They're different than what we've had in the past. And there's just a lot of options out there. There's a lot of really cool things happening.

[00:35:25] Jessica Infante: I mean, how did the on-premise opportunities differ from off-premise opportunities for this particular segment, or do you not see them changing?

[00:35:32] Veronica Vega: At Notch, in our tap rooms, I was surprised how much we sold over the bar for on-site consumption. I thought it would be a takeaway, and we put it on the menu for on-site. It drove some business and what we saw is you have groups of people coming into a taproom and sometimes they want to treat it like a beer bar or a restaurant and it's not, it's our beer, it's our focus, we have a point of view and you're not going to get everything you want. And that's the beauty of taprooms or you get to see the point of view of a brewery. But there's also people don't want to drink beer or don't want to drink at all. And so they felt more included into the group when they were drinking a beer and not drinking soda water. It didn't feel like such a cast out that they were able to share an experience with a beer with a group of friends. So yeah, I think the on-premises is definitely an opportunity. Non-alcoholic beer doesn't have alcohol in it, obviously. So it does freeze in most draft lines. So it's always going to be a canned situation, you know, for the most part, most lines are glycol chilled, and then there's the challenge, you know, so draft won't really be an opportunity. So it's going to be mostly a canned focus kind of, I think, opportunity.

[00:36:32] Dry January: My answer would be similar to Chris's in that we have Absolutely the occasion where someone comes and doesn't want to drink beer or doesn't drink, and they're asking for what kind of offering and we're selling them soda right now. I think that the thing that I was thinking about myself is really, I go out on a social occasion, I have my keys in my pocket and I want to extend my night. So do I start with two beers and then do I switch over to a non-alcoholic brew and I get to stay out longer because I'm one of those people that likes to have something in my hands. If we can continue to train on that as like, that social element and put something in your hand that really continues your night. I think that's a great option.

[00:37:13] Zoe Licata: By the time this podcast comes out, we're going to be almost exactly halfway through January. And looking ahead into the other 11 months out of the year, how do craft brewers keep NA beers relevant when we're not in this Dry January marketing time?

[00:37:28] Brandon Richards: I mean, I think it's similar to how we think of our other portfolios is that we're gonna have to keep new offerings out there. And so the way we're thinking about it is we're asking for this core lead brand, right? Black but non-alcoholic, but then we know an IP is behind it and then likely some more rotating type of offering. So getting new out in the hands of consumers is going to be a similar story to the rest of our portfolios.

[00:37:54] Veronica Vega: You know, I think for Notch, we just drive home the themes we've been working on for the last, you know, 12 years and that you just extend the occasion you're in, whether it's the beach or a ball game or wherever. And you'd like to just, you know, have social drinking and don't want to have it end after an hour because you're, you know, sitting on a couple of double IPAs. So you just extend those circumstances and those, those occasions. And NA really fits into that. I think it's, it's a message that, you know, it's responsible, but it's also fun. You can extend the fun times. It's not like it's a heavy handed responsibility message.

[00:38:24] Dry January: Yeah, for us, I think Veronica Vega Chris are on track as there's more offerings that are going to come out from regional players. I think we're going to have more offerings to try in the market. I also think that, you know, it's more than just January. I think these customers, the Millennials and the Gen Zers are looking for this lifestyle. And I think that I'm going to flip it on its head. It's like, I think they're going to help us quite a bit versus making it our responsibility to make it relevant.

[00:38:49] Jessica Infante: That's really interesting. I know a few years ago, right before I started at Brewbent actually, I was at a bachelorette party and one of the bridesmaids was like beyond, beyond pregnant. Like this poor girl seemed like baby could have arrived at any time. And when we were doing, you know, the liquor store run, she was like, you know, can somebody just get Beck's non-alcoholic so I feel like I can hang out with everyone? And I know you guys have always mentioned this, but it's a way for people who can't drink or don't want to drink, or for whatever reason, you know, aren't interested in having like a beer, beer can just be included and can hang. So I think you're absolutely right in terms of, you know, the younger consumers are definitely going to be the ones that pick up this torch. So Zoe, it's on your people. Well, this has been a fantastic conversation. Thank you guys all so much for joining us. Big shout out to our one man audio team of Joe, who does the Lord's work in and out every week, making this podcast palatable. And thanks everybody for tuning in. If you've enjoyed this, feel free to like, rate and review the Brewbound podcast. You can always drop notes, questions, commentary to podcast at Brewbound.com and we will see you next week.