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Market Watch Magazine July/August 2014

August 04, 2014

From the coconut mussels at the Palace Cafe to the shrimp and grits at Emeril's NOLA to the barbecued shrimp at Dickie Brennan's Steakhouse, some of the
most revered New Orleans restaurants proudly incorporate the beer offerings from Abita Springs, Louisiana-based Abita Brewing Co. into their dishes. Not only are Abita's beers present at the top Big Easy eateries, but the city's star chefs frequently tout the brews' excellent pairing and gastronomic attributes.
"Our beers are made to complement the food of Louisiana," explains brewmaster Mark Wilson. "We want our beer to be a natural extension of the local food." With endorsements from chefs like  Emeril  Lagasse, John Folse and Tory McPhail, the brews-produced just 30 miles north of New Orleans, using water direct  from the wells of Abita Springs-are growing in popularity among beer connois­seurs and foodies alike.


Founded in 1986, family-owned Abita Brewing is the oldest craft brewer in  the Southeast and  the nation's largest craft player, according to the Brewers Association. Its beer volume increased about 4 percent last year to 157,000 barrels (the company also produced 10,000 barrels
of root beer). A soon-to-be-completed brewhouse expansion, along with organic growth, should drive volume up
6 percent this year, according to chief financial officer Troy
Ashley. Abita Brewing's sales revenue was $39 million in
2013, and Ashley expects that figure to rise to $43 million in 2014. Abita's beer is available  in  41 states  and Washington, D.C., as well as a handful  of international markets. Not surprisingly, Louisiana is its top market, while other key areas include Texas, Florida, Mississippi, Alabama, Georgia, California and New York.

Abita's president, David  Blossman, didn't  start   the company, but was one of its earliest investors. The brewery was founded by Rush Cumming and the late Jim Patton. Shortly after its opening, Blossman, a local home brewer, invested  $2,500 in  the  cash-strapped company.  Abita produced just 1,500 barrels in its first year. By 1987, Blossman and two of his brothers had acquired a controlling stake in Abita. He joined the company as president in 1996 after working for several years in finance and as a CPA. Like other craft brewers, Blossman concedes that the early years were difficult as most consumers weren't interested in full­ flavored brews. In those days, it was even hard to entice beer wholesalers, he recalls. But Abita remained committed to promoting beers that "go with our cuisine and our life­ style here in Louisiana," says Blossman, now 45. In time, the growth started coming.

BROAD PORTFOILIO 


Today, Abita produces seven year-round beers and five seasonals, along with four Harvest Brews that feature locally grown ingredients and the Big Beers, which contain at least
7-percent alcohol-by-volume and are packaged in 22-ounce
bottles. Every few months, the brewery releases draft-only Abita Select offerings for sale at limited accounts, and the series has included styles like alts, wit beers and nut brown ales. According to Ashley, Abita Amber is the company's top-seller, accounting for 30 percent of total volume, followed by Purple Haze lager at 22 percent of volume. The four Harvest Brews-Grapefruit,
Strawberry,  Lemon  Wheat  and  Pecan-  together comprise
17 percent of Abita's volume. Meanwhile, the Big Beer label Andygator is one of the company's  fastest-growing  brews, registering a 60-percent  sales volume increase last year. It's also available in six-packs of 12-ounce bottles. Abita's offerings are generally priced between $7.99 and $8.99 a six-pack and
$3.99 to $4.99 a 22-ounce bomber.


"I think we have some of the more sessionable craft beer lagers," Blossman says, noting  that  the lineup should  bode well for Abita as session beers become more popular. "But of course some of our beers were specifically designed for the climate of the Southeast," he adds.
In order to keep up with demand, Abita is in the midst of doubling its brewhouse capacity, along with expanding its visitors center and cellaring space. The expansion will bring annual brewing capacity to 400,000 barrels. Three years ago, the brewery added canning capabilities, a move Ashley calls beneficial. "Cans have opened  up new markets, such as golf courses, and have nicely complemented our business," he says. Abita labels that are available in cans include Amber, Purple Haze and Jockamo IPA.



Abita has a long commitment to sustainability.  In addition to its stubby "heritage" bottle-   which uses nine percent
1...that requires half the paper of ordinary packaging. "But it's just as good as the others," notes director of brewing operations Jaime Jurado, who joined Abita last year. In addition to overseeing the plant expansion, Jurado is responsible for mapping out the sustainability and energy efficiency of the operation. A
340-panel solar  energy  system   was
erected on the brewery's roof in 2013, using all available surface area, according to Jurado.

GOOD COPORATE CITIZEN


Abita Brewing looks to give back in other ways too. Over the years, the company  has produced  several  charitable brews. For two years, $1 from every six-pack of Restoration pale ale was contributed to hurricane relief efforts

and those impacted by Hurricane Katrina. Blossman says that more than $550,000 was raised during that time period (Abita  weathered  the  storm   with  minimal damage). S.O.S.  (Save   Our Shore) Weizen Pils was launched following the 20lO Gulf of Mexico oil spill disaster, with  75 cents from every 22-ounce  bottle sold donated  to the rescue and restoration of the area, as well as those impacted by the spill The brew has raised about $600,000, Blossman says. And Abbey ale, another Abita Big Beer, donates 25 cents from every bottle sold w the local St. Joseph's Abbey, which operates a brewery.

To promote Abita's brews, the company employs a combination
of strategic , including television,  print and outdoor ad   in Louisiana, a long with p-o-s materials, events and social media. Digital platforms like Twitter, Facebook and lnstagram have been effective in allowing the brewery to engage with consumers. But Abita's positioning of its products with Louisiana food and culture has perhaps sealed its fate as the local brew of choice. For many years, the company has partnered with local chefs and restaurants on beer dinners. "From the very beginning, some of the great chefs here in Louisiana took us under their wing and starred offering items on their menus that were made with our beer," Blossman says, citing Emeril Lagasse and John  Folse. "I believe that beer has a place on the table just as much as wine does." The relationship with noteworthy chefs prompted Abita to publish a cookbook several years ago featuring their recipes. "Abita Beer: Cooking Louisiana True" is now in its second edition.
The on-premise channel has played a key role in Abita's growth over the years. When entering a new market, "we try to lead with on-premise distribution," Ashley says, adding that draft beer represents about 35 percent of company sales-   well above the industry average. But other trade channels are also important, notes Ashley, who joined the company 10 years ago. He points to supermarkets' sizeable factor in the Southeast beer market and notes that convenience stores are a growing part of Abita's business.

SUSTAINABLE GROWTH 

Both Ashley and Blossman believe craft beer will continue to provide beer retailers with growth and profit opportunity. Abita's president cautions retailers to be sure they allocate enough space to the burgeoning segment. "Don't get caught up in SKU rationalization," Blossman says, recommending that stores expand  the  space  allocated to crafts as they provide "good  marginal  growth."  Ashley emphasizes that retailers must be vigilant in ensuring that their customers are purchasing only quality  beer. "You don't  want someone to have  a bad experience that  impacts future purchasing decisions," he says.

Blossman sees a bright future for craft beer and Abita. While he's concerned that the craft slowdown that marked the late
'90s could recur, Blossman notes that today's beer consumer is better  educated  than  consumers 20 years ago, and  that high-end  beer could easily rival high-end  wine in terms of category market share.

"Brewing is perspiration, inspiration, an and  science," Blossman says, adding that patience is also a key component to success. "We'll grow into our new capacity and we'll do it with patience." After all, it took Abita Brewing 28 years to grow from zero to 160,000 barrels. "It doesn't mean we have to hit 300,000 barrels tomorrow,"  Blossman says, aiming instead for" mall, sustainable growth."

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