It’s been a tough year for Sierra Nevada.
At the company’s national distributor meeting, held earlier this week in Asheville, North Carolina, Brian Grossman, who oversees operations at the brewery in Mills River, N.C., said he expects sales to decline 4.4 percent in 2016.
Sierra, the country’s third largest craft brewery according to Brewers Association records, was founded in 1980 in Chico, California and has long been credited as a pioneer of hop-forward beer styles. It will sell just over 1.1 million barrels of beer this year.
But with more than 1,000 beer companies now selling upwards of 7,500 different packages in the food channel alone, according to Sierra’s director of sales, Joe Whitney, larger and more established craft entities like Sierra Nevada have found it more difficult to grow sales of their higher volume offerings.
A quick look at the latest statistics from IRI Worldwide tells you all you need to know about the health of Sierra’s flagships: volume sales of Pale Ale, a grocery store staple, are down 5.8 percent year-to-date through September 4. Meanwhile, volume sales of its next largest brand, Torpedo Extra IPA, are down 9 percent year-to-date.
So what’s an aging craft brewery to do when its two primary offerings aren’t performing as well as they used to and an onslaught of new craft brands are cutting into their share of the craft business?
Innovate.
For Sierra, that means introducing a pair of line extensions the company hopes will breathe life back into their flagship counterparts while simultaneously bringing “more growth to the craft segment” than any other single company has brought to the category before, according to Whitney.
So, beginning January, 1, 2017, Sierra Nevada will introduce two new core products:
The first, Sidecar Orange Pale Ale, is a 5.3 percent pale ale brewed with oranges that the company hopes will generate interest from consumers craving a more fruit-forward drinking experience.
“If you look at pale ale, we are 40 percent of that segment,” he said. “The signature of the west coast style is a citrus and piney note. Our thought was to take that citrus note and bump it up a bit.”
The name Sidecar, one that Sierra Nevada had already trademarked for use with a different product, is also synonymous with a cocktail that is traditionally made with orange liqueur and often served with an orange wedge or twist.
Sidecar will be packaged in 12 oz. bottles, 16 oz. cans and in kegs, the company said. Bottles will be sold in 6-packs and 12-packs and cans will be sold in 18-packs.
A second product, Tropical Torpedo, will also look to capitalize on a growing shift toward citrus and tropical IPA variants.
The Tropical Torpedo recipe is similar to the one Sierra created for its “Beer Camp Tropical IPA” this year, according to Tommy Gannon, the company’s director of Eastern U.S. sales. And, like the Beer Camp offering, Tropical Torpedo also checks in at 6.7 percent and 55 IBU’s.
That beer will only be sold in 12 oz. bottled six-packs and on draft, the company said.
A third new product, Golden IPA, will also be released as a spring seasonal and is intended to compete with Lagunitas Brewing’s Little Sumpin’ Sumpin’ and 3 Floyds’ Gumballhead — both wheat IPAs.
“Those are the big volume opportunities for next year,” Whitney told a crowd of nearly 500 U.S. beer distributors attending the meeting.
Indeed, IPA dollar sales have more than quadrupled over the last five years — from $191.4 million in 2011 to $829 million in 2015 — and sales of IPA currently make up 75 percent of total craft volume growth year-to-date, Whitney said. On top of that, four of the top five best-selling new products are fruit and citrus-forward IPAs, he added.
But are Sierra’s citrus-forward line extensions rolling out a year too late? And will growth within the IPA category continue in 2017?
Whitney contends that IPA is now an entry point for many new craft consumers and that “almost 90 percent of the growth in IPA is from ‘approachable styles’ of IPA.”
Nevertheless, the company’s two new introductions are intended to be longer-term plays that Sierra hopes will help it double in size over the next decade.
In doing so, Nick Lundquist, Sierra’s director of national accounts, asked wholesalers to achieve “50 percent or higher” distribution of Sidecar and Tropical Torpedo, relative to their flagship counterparts, by June 1, 2017. And by our math, that would be around $20 million of combined sales in IRI-tracked food stores.