JB Shireman has been in the beer business at some level for over 20 years. First, as a tavern owner and then with over twelve years at New Belgium Brewing Company, opening 26 states. Currently, he is a Vice President at Bill Anderson's First Beverage Group, a financial services firm focused exclusively on beverages.  He is also the owner of the Bar Double S, a 60 plus year old tavern in his hometown of Laporte, CO.

Harry:  So what are you up to these days?

JB: Spending time with my wife and boys and really enjoying the diversity of work we have at First Beverage right now.  We have a very strong and cohesive team, and we are active in all segments of the beverage industry in investment banking and strategic consulting, as well as, directly investing in emerging brands.  It's been fun to talk as part of a broad team about the trends we see affecting the industry and to be able to take that intelligence to help our clients grow their businesses.   My focus lately has been on consulting to craft brewers and distributors, as well as advising our investment banking team.

H: What do you think of all the new entrants to craft.  Will they all make it?

JB: First off, I think it's great. The consumer is clearly excited about them and supporting them and that alone is a bit of a bright spot considering the past few years for beer generally.  Second--even though I'm about as bullish as they come on craft--I don't think they will all make it.  Unlike the first shake-out of craft that I feel was largely quality driven, with some price erosion help from larger players in the industry, I feel this next shake-out will be driven largely by three things: 1) an under-estimation of the cost to compete effectively; 2) a lack of long -term strategic planning skills both operationally and with sales, marketing and branding; and 3) uncertainties on how to appoint and effectively manage their chosen distributor networks.

H: What do you think of the latest messaging from A-B?

JB:  I worry about the long-term implications of this position, as it appears that their approach is really out of sync with the needs of their distributors, retailers and consumers.  Having said all that, they are very smart and they don't seem to do anything without good reason. I recently had a conversation with a long-time industry sage who asked and answered some key questions around this. Will this message be disruptive to crafts?  Yes.  Will this message garner ABI more focus in the short term as wholesalers jockey to be the anchor wholesaler in their region? He believes so. Will this message be a catalyst for more consolidation, thus allowing ABI to have more control of the middle tier? Most likely. This looks to be AB's long anticipated move to make major changes in their system and with this week's release of their new consolidation strategy, it appears they are willing and able to play a much more active role than they have in the past.  In short, their message was a smart one to serve their needs.

H: You were quick to point out that this will be disruptive for crafts. Can you elaborate?

JB: Clearly, this announcement is going to cause a lot of people to think, both distributors and suppliers. I think most of the ABI distributors will see that this is good for ABI, but out of touch with market realities and customers.  Most will likely move forward promoting ABI and non-ABI brands and will continue try to acquire other crafts. For the craft brewers themselves, they have to be more prepared than ever to manage these wholesalers once they are inside because there will be a lot of pressure to not focus on their brands. It forces the craft guys to raise their game significantly in order to do well at a time when I personally feel most of them are already behind a bit in wholesaler management.

H: How about on the other side of the aisle? What are your thoughts on Tenth and Blake?

JB: Clearly they have a winner in Blue Moon and brand extensions within that family appear to be going well. The success with Leine's shows the power of the "push" they can exert within their system.  Their Apollo Program has a lot of craft people uneasy and understandably so. They still have work to do with  understanding how to brand, promote and sell within the many sub-categories of craft that are growing now and in communicating this to their network.

H: What do you think this means for the "all other" distributors in the market?

JB: I think they will continue to grow and become more relevant, particularly in the all-important, trend setting on-premise accounts. A few of the important questions any craft needs to ask itself when looking at a new wholesaler choice are: What do I want to be when I grow up? What are my long-term aspirations for this market? What will success look like for me one year from now, five years from now, etc.? There will be trade-offs as there always are. In an all-other house, they will be high-spotted to a certain degree, but they will be in the "right" accounts.  As we have seen, aspirations and goals change over time. Many crafts didn't know or think they were going be as successful as they have been. With this success often comes the need to address a move to a new network. A small brewer carve-out from franchise laws, for fair market value, makes sense.  No one deserves to have the long-term strategic direction of their company dictated to them by another party.

H: Is the long talked-about consolidation of craft coming?

JB: Well, clearly we've seen some already with IBU/NAB and a smattering of minor plays. Consolidation, taken in its broadest sense, is definitely coming.  Everybody building their own breweries does not seem like a tenable long-term solution.  I think you will see more breweries collaborating in a more serious way and larger crafts looking at buying all or part of smaller crafts before we see a number of big craft brewers selling out to large private equity firms.  Having said that, the big brewers and importers have deep pockets, and a lot of craft breweries don't have solid succession plans, so to some of them the money may matter more.  But to a lot of them, it doesn't. It's more about their legacy and continuing to do things their way in spite of capital needs and that's where people like us at First Beverage can really help. We know the industry, we know the people, we understand the collective needs, we can find the right "fit" for these crafts, and we have access to patient, long-term capital.

H: Can you describe the dynamic that exists between smaller growing craft brewers and the larger, what I would call Legendary Craft Brewers?  It seems there has recently been some animosity...

JB: Regardless of the spats that take place from time to time over definitions or taxable barrels, the craft community is still a pretty tight-knit bunch.  All the new entrants owe a great deal of gratitude to people like Jim Koch and Ken Grossman who helped pave the way for all of us. When Jeff Lebesch and Kim Jordan started New Belgium there weren't even categories at GABF to enter almost half their beers in. Today, breweries hang their hats on points of differentiation like being exclusive with only 100% organic, Belgian-style ales. That's a lot of change. Ken told me when I interviewed him for his 30th anniversary that he felt like the days of building a portfolio based around a flagship with national appeal was much harder these days, particularly for small, independent guys and gals. The newer entrants have to be deeply relevant in their backyard and build a solid business plan around that.  In turn, the Legendary Brewers need the small local folks to continue to drive innovation and excitement into the deepest pockets of the U.S. to help spread the buzz.  That's how we grow our collective share.

H: Are we over-SKUing?

JB: No.  At least not at retail.

H: Why is that?

JB: Ask any retailer how many of their customers come in and say, "Jeez, you have too many crafts. I can't find the domestic premium I'm looking for." It's funny to me that the same people that are telling the retailers that crafts are over-spaced are the same ones who insist on placing upwards of a half-dozen pack sizes of a declining brand in the cold box.  All of this is about the consumer, and the consumer wants new and exciting beers to complement their go-to staples.

From an on-premise standpoint, very few places can turn 100+ handles and keep the product fresh. This, to me, is where SKU proliferation can backfire on us as an industry.

The biggest challenge with the increasing number of SKUs (on or off premise), in my opinion, is with distributors being able to effectively (and profitably) manage them and in turn the crafts being able to supply them with quantities that will satisfy market demand. There are lots of supply chain challenges with this but the bottom line is the consumer wants these beers and that's who we should think about first.

H: Any closing thoughts?

JB: I love this industry. I feel fortunate to work with a super talented team at First Beverage and enjoy being a part of such a dynamic industry. I feel like we can and will continue to help a lot of people grow their business and create solutions to some of the largest challenges facing us today.  That's hard work and it's exciting. One thing's for sure...it's never boring.