Beer, Wine & Spirits

Boston Beer's Koch: Not all shelf space is created equal

With the number of craft breweries in operation approaching 3,000 and countless numbers of beers being brewed, the fight for shelf space continues to be a huge issue in the beer business. 

Speaking during a Boston Beer earnings conference call, founder and chairman Jim Koch said he still sees the amount of shelf space devoted to craft beer increasing, but the industry may be getting to the point where the increases are going to slow "just because there is only a limited amount of space that can be taken out of the mass domestic beers before they start running into 'out-of-stocks.' "  

"There's still some running room, but it's pretty visible that it can't go on forever at this point," he said.

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Koch also noted that not all shelf space is created equal and the more desirable cooler space is also becoming harder to come by for craft brands since "there are some stores you go into that you really can't see a whole lot more space coming out of that cooler."

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As a result, Koch said he's starting to see "more warm shelf activity" as it's easier to make space for craft beer on warm shelves that are already in the store but are carrying something else. The downside, according to Koch, is that the warm-shelf area tends to be "less shopped and less desirable" space.

The situation is an important one for craft brewers, who often roll out seasonal brews and limited-time offerings. 

In Boston Beer's latest quarter, seasonal beer offerings played a large part in the company's depletion growth. CEO Martin Roper noted the success of the new Samuel Adams spring seasonal Cold Snap having a "strong seasonal performance." 

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In the first quarter, the company fell short on earnings per share by 7 cents but revenue topped forecasts. Depletions, or the total number of cases sold by a distributor to retailers, were up by 34 percent over the same time period a year ago.

Still, the company was cautious on its outlook for the rest of year, keeping its depletion estimates in the 16 percent to 20 percent range, noting the increase in depletions in the first quarter was likely impacted by the release of new items like Cold Snap, Rebel IPA and Twisted Lemonade.  

Boston Beer also noted it achieved price increases of about 2 percent during the quarter.

Boston Beer Co.'s Jim Koch on his best beer ever
Boston Beer Co.'s Jim Koch on his best beer ever

Samuel Adams released its new Rebel IPA in January to much fanfare. India Pale Ales are the most popular style of craft beer, but the company's lack of true flagship IPA was a glaring omission in the Samuel Adams' portfolio. 

Koch said he was pleased with the "early success of Rebel IPA" and three months into the national launch of the brew it was among the top three selling IPA's, according to off-premise scanner data.

Boston Beer is still building distribution for the brew, Koch said. He declined to provide a hard number for the company's progress in rolling out distribution for Rebel, but characterized it as being "certainly well over a halfway there, but not 100 percent."

Meanwhile, beer drinkers hoping for another new seasonal this year, may be disappointed. Roper said, "We don't plan any new seasonal launches for the rest of the year."

—By CNBC's Tom Rotunno.