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Control State News April 30, 2018 PA: State of convenience: , show it's about APRIL IS ALCOHOL AWARENESS MONTH more than Shwings and hoagies License State News SAVE THE DATE MAY 21-24, 2018 NE: Midlands Voices: Despite Whiteclay action, state still has issues with excessive drinking (Opinion) !REGISTRATION IS OPEN ! 81st Annual Conference will be held at the International News Arizona Biltmore, Phoenix, AZ. Theme: Bridging Divides; For more Scotland: braced for minimum alcohol pricing information, visit www.nabca.com website. Australia: Study: Booze Brands Are Breaking Advertising JUNE 3-5, 2018 ND Codes 2 Annual Beverage Alcohol Retailers Conference - Denver, Colorado South Africa: SA still among world's top wine makers Registration is open and sponsorship information is available at Industry News www.BevRetailersConference.com. JULY 18-20, 2018 Deschutes Brewery CEO says legal marijuana played role in 8th Biennial Northwest Alcohol & craft beer slowdown Substance Abuse Conference Riverside Hotel, Boise Idaho UK alcohol marketing watchdog announces code review The Pre-Conference Sessions are on Wednesday. The official conference kicks off Daily News Thursday morning. Visit The deadliest drug in America at center of VA nominee NorthwestAlcoholConference.org for more information. withdrawal: Alcohol News Alert: Kraig Naasz Leaving The Distilled Spirits Council NABCA HIGHLIGHTS Launches Smaller Wine Bottles Inspired by Health- Conscious Millennials New! The Public Health Considerations of Fetal Alcohol Spectrum Disorders (Whitepaper) Native American Nations & State Alcohol Policies: An Analysis Alcohol Technology in the World of Tomorrow - (White Paper) The Control State Agency Info Sheets. Please view website for more information. NABCA Survey Database (members only) Upcoming NABCA Meetings Statistical Data Reports

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NABCA Daily News Update (4/30/2018) 2

CONTROL STATE NEWS

PA: State of convenience: Sheetz, Wawa show it's about more than Shwings and hoagies PennLive By Charles Thompson April 30, 2018 It's a tough time for chain retailers, who are closing their doors and shedding employees in frightening numbers. But there's one segment of the industry where some -based companies are just killing it. We're talking convenience stores, and whatever your political loyalties, your education level, your musical tastes, we're willing to bet that you do business with at least one of them on a semi-regular basis. These stores aren't just "smokes and Cokes" anymore. Now, the savvy shopper can fill up his or her gas tank, buy a six-pack of beer, and a crabcake sandwich. Which you can eat in while you watch the end of the game on a big-screen TV. Several Pennsylvania-based chains, industry trackers say, are right at the forefront of this evolution. "In terms of innovation, chains like Wawa, Sheetz and Rutter's are... industry leaders in food service offerings, guest experience and employee relations," said Linda Lisanti, editor-in-chief of News. The colors of Pennsylvania. The following map shows the distribution of various convenience store chains in Pennsylvania as of 2016. It is based upon lottery retailer location data. It's already well-established that, just like sports teams, many people have their favorites. A documentarian is actually now doing a deep dive into the cultural ramifications of what defines the Sheetz fan from the Wawa fan. (Spoiler alert: Simple geography has a great deal to do with it.) Even Gov. Tom Wolf, proud York Countian that he is, used the powers of his official account to put in a plug for York-based Rutter's earlier this month, when stories about said film made the rounds. Whatever your preference, convenience stores are big business in Pennsylvania. As of the end of 2017 there were 4,855 stores across Pennsylvania, employing 77,680 people in full- or part-time positions, according to the National Association of Convenience Stores. While these aren't typically what you would call family-sustaining jobs, it is also true that even in a growing economy, people still need first jobs, part-time work, or second income streams. And at a starting wage of $11 to $12 per hour, depending on the labor market, many of these stores are way ahead of Pennsylvania's $7.25 per hour minimum wage. A look at national store counts and sales figures shows you the relative strength of Pennsylvania's players in the convenience game. Wawa, based in Media, County, ranks 10th in the industry in total sales, according to Convenience Store News' most recent Top 100 list, which ranks chains by store count. That rank rises as high as fifth if one factors out the -related chains with their national footprints. Sheetz ranks a healthy 13th in sales -- and seventh after the oil companies are factored out. Even more impressive, Sheetz and Wawa rank #2 and #3 respectively when you look at sales per store. And coming up on the outside lanes is York-based CHR Corp., perhaps best-known to mid-staters as Rutter's, still tiny when compared to Wawa and Sheetz at just 69 stores, but a newcomer to the national Top 100 in 2017.

NABCA Daily News Update (4/30/2018) 3

The innovations are continuing apace. Wawa has just announced the development of its largest-store ever, in Center City -- an 11,300- square-foot space in the Public Ledger Building at 6th and Chestnut streets. As reported by PhillyMag earlier this month, it will offer artisanal coffees, specialty baked goods (plus the regular fare, of course) and plenty of seating, as well as some greenery. It's one of several urban prototypes (a Washington D.C. Wawa opened in December) the chain says it using to make noise in pedestrian-friendly, and upwardly-mobile center city markets. Along the highways, meanwhile, Sheetz and Wawa are installing car charging stations in the lots of some of their newer stores. Stores such as Rutter's are now encouraging us to cruise by and try their expanded seafood offerings. What made convenient stores such a thing? History tells us that the first convenience store, a forerunner of the 7-Eleven chain, was created at an old-time ice house in Texas. In 1927, Jefferson Green ran the Southland Ice Company's dock in the Oak Cliff section of Dallas, where people would come to stock up on foot-long freezing blocks they carted home to refrigerate their food. Green's business was already open 16 hours a day, seven days a week - much longer than the grocers of the day. So Green thought, as the story goes, why not sell milk, bread and eggs, too? He did, from 7 a.m. to 11 p.m., and you know the rest. Oregon-based retail economist Bill Conorly said the segment really got a shove when Big Oil married it with gas sales and grafted small stores onto their existing gas pump islands. They realized, Conorly said, there was more profit in the chance of selling cigarettes, a six-pack of beer or candy to every customer coming in for gas, rather than just awaiting the occasional mechanical repair. The oil companies still dominate the top 10 chains in terms of store count. But as other companies got their own gas distribution deals, we were off to the races. Meanwhile, supermarkets -- by choosing bigger and bigger prototypes over the years -- unwittingly created a vacuum in the convenience space. "As they get bigger, the convenience of going into a for one item is low," Conorly said. By now, we have seen two tracks develop in the convenience store segment, with the chains increasingly embracing the restaurant concept, and essentially becoming fast-food chains with gas pumps. Meanwhile vast numbers of independent operators -- often left with town center locations that the chains have vacated, or in very rural areas -- are in many cases taking the place of the old corner store. Conorly expects both to be around for a long time. "There are still plenty of areas where you have a 10-to-15-mile drive to get to a supermarket, but there is a convenience store, and that's where they get their bread and milk, or, hey: 'We need a bottle of ketchup.'" As for the top-performing chains, they seem to have evolved from and embraced the American car culture -- when you think of it, it's really not that different an experience than the drive-in restaurants of yesteryear: just add gas pumps and retail space, improved technology and better access to fresher and more varieties of foods. Industry snapshot Gas is still king. Fuel sales account for 60.6 percent of the total sales of the 2017 convenience store market, according to the latest report from the National Association of Convenience Stores. It was also the fastest-growing segment, up 14.9 percent from the year before. NABCA Daily News Update (4/30/2018) 4

Inside sales, meanwhile -- literally those things you go into the store to buy -- accounted for the other 39.4 percent. They rose just 1.7 percent in 2017, according to the trade association's report. That was a 15th straight year of sales increases, however. The biggest single category of in-store sales is still cigarettes and tobacco products, at 34.1 percent of the total. Packaged beverages -- bottles and cans of beer, soft drinks, juices and teas -- are the second-largest category at a combined 24.3 percent of sales; with in-store food service third at 22.5 percent. Candy bars, bags of chips and other snacks ran at 9.9 percent, trailed by all other items, from the frozen dinner to the quart of oil to the daily newspaper, at 9.2 percent. What is a convenience store? TDLinx, one of the leading trackers of the business, has defined a convenience store as a store with at least 800 square feet, open for business at least 13 hours per day, and selling between 500 and 1,500 different products, including at least two of the following: toilet paper, soap, disposable diapers, pet food, breakfast cereal, tuna fish, toothpaste, ketchup and canned goods. The East Coast is the capital of the business, according to Lisanti. "For years, the convenience food service trend has been more advanced on the East Coast, led by chains such as Sheetz and Wawa," she told PennLive this month, "and only more recently is this trend gaining traction on the West Coast." It's not just by chance that we have two of the industry leaders in Pennsylvania. Weak land use planning and development laws here, for example, have made this state particularly prone to the kind of suburban sprawl development that the chain's site locators crave. But the companies deserve credit, too. Ryan Sheetz, assistant vice president of brand strategy at Altoona-based Sheetz, points to his company's vision statement as a credo that never lets them get too comfortable: "Our vision is always to the Sheetz that will put Sheetz as we know it today out of business," Ryan Sheetz told PennLive in a recent interview. So... Don't be surprised when the chain rolls out new ways to handle transactions in the coming years that this writer can't even adequately explain: Like a coffee mug with an embedded chip that the regular customer can simply scan, pour and leave - no cash register needed. It's being tested already. To the east, Wawa is just as much of a commercial church to those who tend to worship the Eagles, prefer their pretzels soft, and know the is always just an hour (or two, depending upon traffic) away. Spokeswoman Lori Bruce says the company plans to open 50 new stores a year for each of the next several years, roughly split between the Mid-Atlantic states and its burgeoning market. Wawa's leaders, like the Sheetzes, espouse an ethos centered around both convenience and customer service. For example, CEO Chris Gheysens confirmed to The Philadelphia Inquirer in 2016 that management balked at a suggestion to install automatic doors in the Florida stores, fearing that it would cost them the person-to-person connection of one holding a door open for another. As Gheysens put it, in confirming the anecdote: "We want to strive to be the friendliest three minutes that anybody has in their day. That's our mission." There are other Top 100 chains in Pennsylvania, to be sure. Have you seen GetGo stores on a trip to ? NABCA Daily News Update (4/30/2018) 5

It's a wholly-owned division of the supermarket chain and has established a significant footprint for itself in western Pennsylvania, West and . It is number 47 in national store count. Company spokesman Dan Donovan said last week the convenience store line evolved out of the grocery chain's decision to get into the fuel perks business to reward customer loyalty. "We had islands, but we realized that to bring all of that expertize and passion for food into a more convenient setting, we could place that in some neighborhoods or urban corridors where you just can't put a Giant Eagle" Donovan said. Rutters popped into Convenience Store News' Top 100 list for the first time this year (91), and Minit Markets is represented as one of several brands operated by the supermarket chain (15). Collateral damage The convenience store evolution is isn't good for all. Some people are definitely feeling squeezed by the pressures from the chains. Joe Ressler, owner of Ressler's Bagel and Deli in Mechanicsburg's Windsor Park Plaza, rues the day that a Sheetz opened up at the busy intersection right down the road. "It has really affected my business," Ressler said. "I've noticed that I'm not really that busy in the morning any more, and I go by Sheetz and they're just packed." Ressler's is not a sit-down restaurant that requires two hours of the customers' time, mind you. He's got free parking. And he puts the quality of his product up against any chain any day of the week. But Ressler said it's hard to beat the convenience of the one-stop shop. "Everyone's in a rush to go nowhere," Ressler said in a recent interview about the convenience store boom. "We're going to be a dying breed in a couple of years, I think." Restaurants that used to supplement their business with take-out sales of beer have also taken a blow, now that convenience stores are allowed to get licenses to sell six-packs in Pennsylvania. Will this party last forever? It seems like times are good for all of these convenience store chains at present. But you can't say there aren't challenges. For one thing, gas is the cornerstone that brings many customers to the stores' doorstep every week. But will it always be so in an age where the market is pivoting ever so slowly to more-efficient engines and electric cars? And remember, number two in the revenue pie is tobacco products, a big group whose adult customer base has been on the decline for obvious reasons since the 1970s. What's the future in that? For Sheetz, Ryan Sheetz said, it was that very realization that these pillars the business is built on may not be strong forever, that a generation ago led the company to take a deep dive into food and beverage. Finally, there will be others who continually try to wrest the convenience mantle away from these in-and-out stores. Amazon, Lisanti said recently, sent tremors through the convenience store industry recently with the opening of its first cashierless store, . The Seattle prototype opened to the public in January. Dollar stores, too, are a growing threat as they add more and more traditional convenience store products. As in many businesses, the future will belong to those who adapt to changing markets the best. It will be fun to watch how it plays out. And, more than likely, you and your wallet will be the judge.

NABCA Daily News Update (4/30/2018) 6

LICENSE STATE NEWS

NE: Midlands Voices: Despite Whiteclay action, state still has issues with excessive drinking (Opinion) Omaha World-Herald By Chris Wagner, Executive Director of Project Extra Mile April 29, 2018 Today marks the one-year anniversary of the closure of the beer stores in Whiteclay, Nebraska. The decision to close these stores was a significant public health victory for our state that would not have been possible without the tireless efforts of advocates. Project Extra Mile commends them on their work to bleach the stain of Whiteclay from the fabric of our state. We also want to commend the Nebraska Liquor Control Commission and the Nebraska Supreme Court for their decisions to permanently close the stores. Efforts by advocates to shut these stores down spanned decades, and Nebraskans have a moral obligation to spend the coming decades helping our brothers and sisters on the Pine Ridge Indian Reservation heal from the harms and injustices inflicted on them by predatory alcohol sales. The fear that the carnage in Whiteclay would spread rampantly throughout Sheridan County has been dispelled. The unincorporated village is now devoid of the lawlessness that defined it when its four off-sale beer stores were operating with impunity. However, our state’s problems with alcohol don’t end in Whiteclay. We consistently rank among the 10 worst states (currently sixth-worst) in the nation for binge drinking, and all Nebraskans are paying the tab for this dangerous behavior. According to the latest survey data, we have the second-highest rate of self-reported DUIs in the country. Alcohol-related crashes appear almost daily in local newspapers statewide, and stories often detail injuries to and deaths of innocent bystanders both young and old. The harms of excessive drinking are more widespread than most would think. According to a study in the American Journal of Preventive Medicine, Nebraska experienced over $1.1 billion in economic costs (health care, law enforcement and work productivity) in 2010 alone because of excessive drinking, $491 million of which was borne by taxpayers. This figure stands in stark contrast to the $27.6 million the state collected in alcohol tax revenue that year. There is also ample research showing that alcohol causes at least seven types of cancer in the human body, including breast cancer for women. The American Society of Clinical Oncology recently affirmed this link, calling for policymakers, clinicians and organizations to embrace evidence-based strategies for preventing and reducing excessive drinking and its harms, such as those outlined by the World Health Organization. Despite the many social and economic consequences of excessive drinking, the most effective policies are the least likely to be implemented due to the efforts of a powerful, disingenuous industry working hard to frame alcohol in the most positive light (health benefits of moderate drinking, alcohol as a driver of economic growth, alcohol as a social elixir). Policymakers from the U.S. Congress down to city councils are more likely to respond favorably to the industry’s arguments than to connect the problems in their communities to the need for population-level policies over individual responsibility. The World Health Organization recommends that governments address alcohol affordability (increasing price), availability (regulating outlet density) and advertising (restricting where and how companies can target audiences, especially youth, with their misleading messages) as cost-effective solutions to this problem. Community leaders are doing all that they can to protect their communities — we need lawmakers and regulators at all levels of government to recognize their role in enacting policies and regulations that would improve the safety and health of our state and communities.

NABCA Daily News Update (4/30/2018) 7

INTERNATIONAL NEWS

Scotland: Supermarkets braced for minimum alcohol pricing The Scotsman April 30, 2018 Scottish supermarkets are preparing to raise the price of certain high-alcohol products when new minimum- pricing guidelines become law on Tuesday. Retailers will be forced to increase the cost for own brand spirits by up to £3, while larger multi-packs of beer, wine and strong cider will also be affected. The move, which will set a baseline price of 50p per unit of alcohol, is designed to deter the sale of cheaper alcohol in an attempt to curb the nation’s drinking problem. However, certain supermarkets have responded to the incoming price hike by slashing the cost of products as they look to pull in customers hoping to stock up before the increase. Some of the big six supermarkets have cut prices on bottles of 70cl spirits to as little as £10, while others have - introduced huge savings on multi-packs of lager, with 20-can packs available for just £10. It is hoped that minimum pricing will help to reduce the number of alcohol-¬related deaths across the country, ¬saving at least 400 lives over the next five years and leading to around 8,000 fewer hospital admissions. Under the new laws, a 700ml bottle of vodka, with a typical alcohol content of around 37 per cent, could not be sold for less than £13.13. For whisky, the minimum price would be £14 and for 20 cans of lager, in 440ml volume cans, the base price would be set at £17.60. But, with the minimum price for a pint (568ml) of beer being about £1.14 and large glass of wine about £1.50, the move is unlikely to have any noticeable affect on pubs and restaurants. The new law is not a tax and does not generate income for the government. Instead its aims it to reduce the availability of cheap alcohol by setting a floor price. In particular, ministers want the guidelines to target large bottles of super-strength cider, which currently retail for less than a bottle of cola. A two litre bottle of strong cider at 7.5 per cent abv (alcohol by volume) is 15 units of alcohol and should cost £7.50. The policy was initially passed by Holyrood in 2012, but it wasn’t until November 2017 that the Supreme Court dismissed the challenge of the drinks lobby, lead by industry body the Scotch Whisky Association, that a timeline for the proposal was put in place. Shortly after the ruling, Health Secretary Shona Robison announced the date for the minimum pricing introduction off the back of figures showing more than 1,200 people had died of alcohol-related illness in the previous year. A public consultation was then held before the minimum 50p price was agreed upon in February this year – however some opponents criticised the rate for being too low, arguing it should have been set higher to account for inflation. Speaking to MSPs on Thursday, First Minister Nicola Sturgeon said: “Prevention is better than cure, which is why the introduction of minimum pricing is such a positive step forward.” She continued: “In years to come, I think this will be something this parliament will be really, really proud of.” The legislation has a “sunset clause”, meaning it will be reviewed after five years before a decision is taken on whether it should continue.

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Australia: Study: Booze Brands Are Breaking Advertising Codes Bandt By Daisy Doctor April 30, 2018 Liquor brands in Australia have been accused of breaking the voluntary Alcohol Beverages Advertising Code by using actors under the age of 25 in their campaigns. A study released on Friday led by the National Drug and Alcohol Research Centre at UNSW has found teens are likely to be influenced by the “young and attractive” actors in ads. According to the code, actors in alcohol commercials must be over the age of 25 and must be depicted as adults. The study, which surveyed 351 ‘heavy drinking’ teenagers – those who consume more than 11 standard drinks in a session – found that more than half of the participants thought actors always or usually appeared to be under 25 years of age. As well as this, 68 participants were shown six current print and online advertisements for different types of drinks including beer, cider, wine, whiskey and sweet liqueur. Of the 68, 94 per cent thought the character in a liqueur advertisement was under 25 years old and almost 30 per cent believed the ads were targeting people under the age of 18. In terms of beverages, Apple cider and liqueur advertisements were rated most often as “very” or “quite” appealing. According to the study, “The liqueur ad was associated with attractiveness, partying, and being fashionable: ‘If you are a girl, it will make you look hot like her. If you are a man, you can buy these drinks for girls who look like her’ (Female, 19), ‘You look fun; you are up for a good night’ (Male, 17), ‘It’ll taste good, it looks pretty and it’s cool, yeah’ (Female, 18).” Speaking on the results, NDRI Research Fellow and co-author of the study Tina Lam said the results were concerning. “The majority of the 351 participants reported regular exposure to alcohol advertising, particularly on television, outdoor billboards and at festivals,” Lam said. “The young people’s responses support a large body of research indicating that young people regularly perceive messages that alcohol enhances mood or confers some social benefit. The perceptions of these young people are also in line with public health expert assessments that the voluntary industry-managed codes are frequently breached,” she added. The study follows a hypothetical study from the US last year which analysed the potential financial impact of a plain packaging policy on food and beverage brands in four categories: alcohol, confectionery, savoury snacks, and sugary drinks, like that of cigarettes locally. It found eight major brand-owning companies are predicted to lose a total of $US187 billion should plain packaging be mandated for other FMCG products, with alcohol and sugary drinks brands most vulnerable.

South Africa: SA still among world's top wine makers Business Report By Luyolo Mkentane April 30, 2018 CAPE TOWN - Despite the damaging drought that has affected parts of the Western Cape’s winelands, South Africa remained one of the world’s 15 largest wine producers, churning out 10.8 million hectolitres (hl) of wine in 2017.

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One hectolitre equals 100 litres. According to data from the Paris-based International Organisation of Vine and Wine (OIV), South Africa occupied the number nine spot from the list of 15 countries, beating First World nations such as Russia, Germany and Portugal. South Africa produced 11.2 million hl in 2015, but this slowed down 10.5 million hl in 2016 as the drought scourge affected grape production. However, local wine sales volume grew by 2.8% to 406 million litres in 2017 and the value increase by 8.6% to R13.2billion. The OIV said wine production totaled 250 million hl last year, down 86% from 2016. This was reportedly its lowest since 1957, when it had fallen to 173.8 million hl. This was attributed to poor weather in wine-producing regions of Italy, France and Spain. The South African wine industry body, Vinpro, which represents about 3500 local wine producers, cellars and industry stakeholders, stated in January that the 2019 wine grape crop was expected to be the smallest since 2005. This was due to a decline in vineyard area, an ongoing drought and crop losses due to frost and hail, according to Francois Viljoen, the manager of Vinpro’s viticultural consultation service. As a result the industry was bracing itself for a R700m shortfall at farm gate. Vinpro media and communications manager Wanda Augustyn said: “Looking ahead, the 2019 wine grape harvest will depend greatly on rainfall during the 2018 winter season, as well as smart post-harvest practices by producers. “We do expect a transfer effect, because a lot of vineyards were badly affected by the drought this year. “To what extend this transfer effect will be depends on the 2018 winter season, as well as the longevity/lifespan of leaves of individual vineyards (the pace of leaves falling from vineyards will be much quicker if the drought persists), which, in return, will have an impact on the build-up of reserves for the next season.” Augustyn said the wine industry was innovative and resilient and, in many cases, acted proactively to any situation that might result from the drought.

INDUSTRY NEWS

UK alcohol marketing watchdog announces code review Drinks Business Review April 30, 2018 The Portman Group, a trade group composed of alcoholic beverage producers and brewers in the UK, has announced the fifth major review of its Code of Practice to future proof the framework that governs alcohol marketing in the country. The watchdog is calling on everyone with an interest in alcohol marketing to respond to the public consultation that will run for 10 weeks. Some of the key issues being raised include: Changes in mood or behaviour – giving the Independent Complaints Panel (ICP) further powers to rule against implications that alcohol consumption will ‘improve’ mental/physical capabilities; Defining immoderate consumption – establishing a new and credible definition for assessing complaints about irresponsible sampling promotions or packaging such as single-serve, non-resealable containers, following the removal of daily guidelines from the Chief Medical Officers’ lower risk drinking guidelines; Offering additional protection to vulnerable individuals – by amending the Code to protect those that are socially or mentally vulnerable; Strengthening the code to prohibit direct or indirect links with alcohol and illegal activity; NABCA Daily News Update (4/30/2018) 10

Introducing a new rule with supporting guidance addressing serious and widespread offence, such as sexism in marketing. Stakeholders are also invited to identify new issues or concerns, in particular around technology and the evolving marketing and consumer landscape. The Portman Group CEO John Timothy said: “This is a great opportunity to shape the future of alcohol regulation and I urge anyone with a view on alcohol marketing to get involved. We have one of the strongest and most effective systems of self-regulation in the UK and we want to keep it that way. "By asking challenging and ambitious questions now we can ensure the Code provides the right balance between maintaining the highest standards of responsible marketing and allowing producers the freedom to create great brands and campaigns which are so important to the UK’s economy.” This will be the fifth review of the Portman Group Code since it was first introduced in 1996 and will result in the introduction of the sixth edition of the Code in Spring 2019. Since the Code was introduced in 1996, the packaging and/or marketing of more than 150 drinks has been found to be in breach the Code. The Portman Group also provides a free and confidential advisory service for alcohol producers and agencies to check products and campaigns prior to launch and to seek advice on responsible alcohol marketing. Alcohol marketing in the UK is governed through a system of co-regulation between the Advertising Standards Authority, OfCom and the Portman Group. Some of the proposed changes will align the Code with existing regulations, cultural changes and industry innovation. Source: Company Press Release

Deschutes Brewery CEO says legal marijuana played role in craft beer slowdown Craft beer sales in Oregon grew less than 1 percent in 2017 Bend Bulletin By Suzanne Roig April 28, 2018 At a time when craft breweries compete more than ever for shelf space and tap handles in pubs, industry sales are leveling off, even in Bend, known as Beer Town USA. The slowdown has contributed to slumping sales at Bend’s biggest beer success story, Deschutes Brewery, and prompted other brewers to put more effort into their local pubs. Craft beer sales in Oregon stores where packaged beer is sold grew 0.3 percent in 2017, compared to 13.8 percent in 2014, said Patrick Livingston, a consultant of client insights at IRI, a Chicago-based analytics firm. In comparison, packaged craft beer sales nationwide grew 3.8 percent in 2017, compared to 14.6 percent in 2014, according to IRI figures. Craft beer may be a niche market, but it accounts for 28.8 percent of all beer sold in Oregon, Livingston said. The slowdown in sales is more pronounced in Oregon, Livingston said, because other segments of the market — wine, spirits, hard seltzers and malt beverages — have shown dramatic growth. And some believe that legal recreational marijuana, which saw its first full year of business in Oregon in 2016, is a factor. “I believe cannabis has affected sales,” said Deschutes Brewery CEO Michael LaLonde. “It’s so potent today. Someone might go and have a beer and do some edibles, and the combination of those two things means they don’t consume as much alcohol.” After experiencing the first sales decline in its 30-year history in 2017, Deschutes Brewery has opted for more flexibility with its planned expansion in Roanoke, Virginia. Earlier this month, the brewery announced it turned down government incentives in exchange for control of the timing on building a second brewery. NABCA Daily News Update (4/30/2018) 11

The brewery went ahead and closed on the $3.2 million parcel in Roanoke and still plans to break ground in June 2019. “We wanted to go ahead for flexibility, so we can monitor the craft beer landscape in Roanoke,” LaLonde said. “We don’t know what the future is for that facility. We have committed to the location.” Changes like this are not made lightly, LaLonde said. Crowded market Craft beer is still king in Central Oregon, home to 26 craft breweries. In Oregon, craft beer accounts for 28.8 percent of all beer dollars, Livingston said. Craft beer sales totaled $194.8 million in Oregon in the past 52 weeks, he said. “The market is very saturated with increased number of breweries and brands competing for the same shelf space,” Livingston said. “Beer is a heavily marketed category. There are more competitors and flat volume.” There were more than 6,200 craft breweries nationwide last year, compared to 1,430 in 2003, according to Beverage Marketing Corp., a -based consulting firm. In Oregon, there are 252 craft breweries, according to the The Brewers Association. Craft brewer Roger Worthington, owner of Worthy Brewing, confirmed that sales have been flat. He said brewery sales have flattened at 15,000 barrels, staying the same as 2016. But that doesn’t worry Worthington, who has a pub on Bend’s east side near U.S. Highway 20 and plans to open a tap-and-tacos pub in downtown Bend on Brooks Street in June. “We’re seeing it, too,” Worthington said. “The competition is fierce, so the brewers are having to step up their game. In any case, the customers are the beneficiaries. “I love the competition. I look at this as an opportunity to step up our game.” At Worthy, the future is in enhancing the pub experience and making smaller batch beer that’s fresh and different, Worthington said. A slowdown in craft brewing probably won’t affect the local economy much because it doesn’t employ many people, except in the pubs, said Kale Donnelly, Oregon Employment Department workforce analyst. “It’s still a huge draw for our tourism industry,” Donnelly said. “It won’t have much impact. The growth throughout the region is slowing, which shows a maturity of the business cycle. It just shows a more sustainable level.” Like the Central Oregon economy, the craft brewery industry is maturing, which is the reason behind the slow sales, said Bart Watson, Brewers Association chief economist. The big fish in Bend is Deschutes, Watson said, but across the it isn’t considered a large player, he said. Deschutes produced about 335,000 barrels last year and distributes in 29 states and Washington, D.C., according to the company. “What we’re finding is that consumers really trust what we do,” LaLonde said. “States like Washington and Oregon are very mature markets. We found who we are as a company matters to the consumers.” Craft beer is defined as beer made by a small independent brewer who produces 6 million barrels or less a year, according to The Brewers Association. Three-quarters of the breweries in the United States make 1,000 barrels or less a year, Watson said. The United States consumes more than 200 million barrels of beer a year, he said. One of the key drivers for the craft beer market, Watson said, is being local. Consumers perceive that as high- value, along with flavor and variety, he said. “Small, locally produced breweries are doing better than the larger distributed breweries,” Watson said. “The growth in the market will come through innovation and making sure they focus their resources where their brand resonates the most.”

NABCA Daily News Update (4/30/2018) 12

The big employment aspect of craft breweries comes from the pubs, not from the brewing side, said Damon Runberg, state of Oregon Employment Department regional economist. “Deschutes (Brewery) deciding to slow down their expansion plan says more about the state of craft brewing nationally than it does about us here in Central Oregon,” Runberg said. No one has to tell John Avella that. As the general manager of the new Boneyard Beer pub going up on NE Division Street in Bend, Avella is banking on the fact that summer tourism will be a big draw to the new pub. No date has been set yet for the opening of the pub. “I think the market is still very strong for places like Boneyard,” Avella said. “We’ve experienced growth here, in Portland and in Seattle.” Even though there is strong demand, the competition is fierce, he said. “Consumers want quality products that are local,” Avella said. “They want something that’s not corporate. We are proud of the product we make.”

DAILY NEWS

The deadliest drug in America at center of VA nominee withdrawal: Alcohol The Conversation By Jamie Smolen, Associate Professor of Medicine, University of Florida April 30, 2018 For the first time in a while, pundits and politicians were talking about the drug that kills more people than any other each year in the U.S. I’m talking about alcohol, which upstaged opioid abuse in news coverage recently, but only after Rear Adm. Ronny L. Jackson withdrew his name for consideration to head Veterans Affairs, in part because of allegations that he has abused alcohol. Jackson has denied any problem with alcohol. This provides an opportune time to discuss the seriousness of alcohol abuse. Alcohol contributes to 88,000 deaths in the U.S. each year, more than double the number of people, 42,000, killed by heroin and opioid prescription drug overdose in 2016. Excessive drinking accounted for one in 10 deaths among working-age adults. In addition, more than 66.7 million Americans reported binge drinking in the past month in 2015, according to a report by the surgeon general. As someone who has studied alcohol use disorder for over 15 years and who has treated thousands of patients who have it, I think it’s a major, yet often poorly understood, public health problem. A social lubricant Alcohol can be a quick and easy way to get into the spirit of a celebration. And it feels good. After two glasses of wine, the brain is activated through complex neurobiochemical processes that naturally release dopamine, a neurotransmitter of great importance. When the dopamine molecule locks on to its receptor located on the surface of a neuron, or basic brain cell, a “buzz” occurs. It is often desirably anticipated before the second glass is empty. There are those, however, who drink right past the buzz into intoxication and, often, into trouble. For them, the brain starts releasing the same enjoyable dopamine, no different than what happens in the casual drinker’s, but it doesn’t stop there. A compulsion to binge drink can result. Binge drinking, defined as drinking five or more drinks for men and four for women on the same occasion on at least one day in the past 30 days, is a medical condition that victimizes the comparative malfunction of the pleasure circuits in the brain.

NABCA Daily News Update (4/30/2018) 13

The three stages of addiction The alcohol addiction process involves a three-stage cycle: binge-intoxication, withdrawal-negative affect, and preoccupation-anticipation. It begins in the neurons, the basic type of brain cell. The brain has an estimated 86 billion of these cells, which communicate through chemical messengers called neurotransmitters. Neurons can organize in clusters and form networks in order to perform specific functions such as thinking, learning, emotions and memory. The addiction cycle disrupts the normal function of some of these networks in three areas of the brain – the basal ganglia, the extended amygdala and the prefrontal cortex. The disruptions do several things that contribute to continued drinking. They enable drinking-associated triggers, or cues, which lead to seeking alcohol. They also reduce the sensitivity of the brain systems, causing a diminished experience of pleasure or reward, and heighten activation of brain stress systems. Last, they reduce function of brain executive control systems, the part of the brain that typically helps make decisions and regulate one’s actions, emotions and impulses. These networks are critical for human survival. Unfortunately for the binge drinker, they become “hijacked,” and the bingeing continues even after the harmful effects have begun. Because binge drinkers’ brains feel intense pleasure from alcohol, there is a powerful motivation to binge drink again and again. What may begin as social binge drinking at parties for recreation can cause progressive neuro- adaptive changes in brain structure and function. The brain is no longer well enough to function normally. Continued partying can transition into a chronic and uncontrollable daily pattern of alcohol use. These maladaptive neurological changes can persist long after the alcohol use stops. Your brain on alcohol During the binge-intoxication stage, the basal ganglia rewards the drinker with pleasurable effects, releasing dopamine, the neurotransmitter responsible for the rewarding effects of alcohol and creating the desire for more. With continued bingeing, the “habit circuity” is repeatedly activated in another part of the basal ganglia called the dorsal striatum. It contributes to the compulsive seeking of more alcohol. This explains the craving that is triggered when a binge drinker is driving by a favorite bar and can’t resist pulling in, even after a promise to go directly home after work. During the withdrawal-negative affect stage, there is a break from drinking. Because the reward circuit has a diminished ability to deliver a dopamine reward, there is far less pleasure with natural, safe experiences such as food and sex, compared to alcohol. During abstinence from alcohol, stress neurotransmitters such as corticotropin-releasing factor and dynorphin are released. These powerful neurochemicals caused negative emotional states associated with alcohol withdrawal. This drives the drinker back to alcohol to gain relief and attempt to reestablish the rewards of intoxication. Regions of the brain are affected differently by alcohol. Surgeon General's Report on Addiction After a period of abstinence from alcohol, which may last only hours, the drinker enters the preoccupation- anticipation stage. This involves the prefrontal cortex, where executive decisions are made about whether or not to override the strong urges to drink. This part of the brain functions with a “go system” and “stop system.” When the go circuits stimulate the habit-response system of the dorsal striatum, the drinker becomes impulsive and seeks a drink, perhaps even subconsciously. The stop system can inhibit the activity of the go system and is important especially in preventing relapse. Brain imaging studies show that binge drinking can disrupt the function in both the go and stop circuits. This interferes with proper decision-making and behavioral inhibition. The drinker is both impulsive and compulsive. An illness that can be treated Scientific evidence shows that this disorder can be treated. NABCA Daily News Update (4/30/2018) 14

The FDA has approved three medications for treatment that should be offered whenever appropriate. There is well-supported scientific evidence that behavioral therapies can be effective treatment. This includes recovery support services, such as Alcoholics Anonymous. Most importantly, it is important to know that alcohol use disorder is a brain disorder causing a chronic illness. It is no different from diabetes, asthma or hypertension. When comprehensive, continuing care is provided, the recovery results improve, and the binge drinker has the hope of remaining sober as long as lifelong treatment and maintenance of sobriety become a dedicated lifestyle choice.

News Alert: Kraig Naasz Leaving The Distilled Spirits Council Shanken News Daily By David Fleming April 27, 2018 Kraig Naasz has resigned as president and CEO of the Distilled Spirits Council, effective in June, the group said. Naasz is going to Washington2 Advocates (W2A), a lobbying firm with offices in Washington, D.C. and Bellevue, Washington, where he has worked in the past. Naasz joined the Distilled Spirits Council in January 2016 after serving as the chief executive of the American Frozen Food Institute, Fertilizer Institute, National Mining Association, and U.S. Apple Association. He also worked for nearly a decade on Capitol Hill in both the U.S. House of Representatives and U.S. Senate. The Distilled Spirits Council said it’s launching an executive search for a new leader.

Tesco Launches Smaller Wine Bottles Inspired by Health-Conscious Millennials Young adults are drinking less than ever before Independent By Olivia Petter April 30, 2018 Tesco has released a range of smaller wine bottles in a bid to appeal to Brits who are reducing their alcohol consumption. The new bottles come in two sizes: 50cl, which holds the equivalent to roughly four glasses of wine, and 37.5cl, which contains three. The supermarket chain hopes that the new range will appease those who want to drink less without succumbing to finishing an entire 75cl bottle of wine, which is the average size. The smaller bottles come at a convenient time, with Brits drinking less than ever before according to figures from the Office for National Statistics. The rise of teetotalism is particularly prevalent in young adults, with more than a quarter (27 per cent) of 16 to 24- year-olds abstaining from alcohol completely. This figure has risen substantially in the last decade, when 19 per cent of those in that same age group said they didn’t drink alcohol. Meanwhile, one in five Brits of the broader adult population do not drink, with the proportion of adult drinkers at its lowest level since 2 Tesco’s Product Developer, Alexandra Runciman said: “We are currently seeing an increase in the number of shoppers wanting to enjoy a smaller amount of wine or a mid-week treat without having to purchase and potentially waste a full-size bottle. “Millennials in particular are generally more concerned about the quantity of alcohol that they drink and so we hope this new range will help them manage portion control. NABCA Daily News Update (4/30/2018) 15

“This new range of smaller wine bottles will also allow customers to cut down on waste by giving them the exact portions they want.” The new range includes a New Zealand Sauvignon Blanc (£5.50 for 50cl) and a Rioja Reserva (£6.25 for 50cl) and will be available in up to 2,000 Tesco stores across the country and online.

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