Regional Brewers Hardest Hit

Good thread, thought provoking stuff.

 

Is it any wonder that Minhas has had the greatest slowdown?

 

Good read. Most of the increases/decreases mentioned make sense to me. The one odd except is that New Belgium showed increases. I thought they too were falling off like the other big/national craft brewers. Is their Voodoo IPA series solely behind that increase or other factors?

IMO, FW was always been a premium craft retail beer (more expensive than most other shelf options). At same time, when fresh, they were also better quality than most shelf offerings but consumers frequently go with the lower price tag when undecided between all the options. Excellent beers like Luponic Distortion series and other great beers combined with migrating to cans, has bumped sales. Plus I'm thinking with the localvore craft movement in consumer buying, those local beers are generally more expensive than retail beers (and not always as good). Craft consumers are realizing that FW beers at the same price or cheaper than high priced locals is then the less expensive buy. Does that make sense?

 

I wasn't aware Wicked Weed sold to In-Bev. That buy scares me, but really didn't care about Elsyian, GI, Terrapin etc. Hopefully the Funkatorium stays funky.

 

Great article thanks for posting it. I am surprised that AB-InBEV is selling 600,000 of GI beers. Didn't think it was even close to that. Looks like the only way for a large "craft" brewery in grow is to expand distribution. If you are already in all 50 states looks like you better start exporting.

 

Fairly certain he meant the little guys - that's how I read it at least

 

Possibly due to an expanded distribution footprint? I know they've been nearly national for a while, but my area (upstate New York) just started seeing their beers within the past year or so.

 

Here is my 2 cents

I see the issue as fatigue and the cult of the new. You can see evidence in that every brewery has to have an "unfiltered" on the shelf now. This hurts two fold. It clogs up shelf space while also chasing a fad that is fairly local. Most of these NEIPA style beers are being sold direct to consumer straight from the brewery. That only reaches so many wallets and is only viable on a very small scale. Most of these big breweries that are putting unfilitered IPA's on shelves aren't stirring up the craze the direct to consumer guys are.

On top of all of this there is only so much room and the free market is sorting itself out. How special is Left Hand where there are 6 other nitro stouts on the shelf? How many more times can I buy a sixer of Lagunitas IPA before my eyes start to wander around the shelf?

There is going to be a limit on the market share of Craft just because it is Craft. I don't think 35% is the threshold but when we have so many competing labels the pie can only be split so much.

I think the most interesting part of the article is the end. Weathering the storm as in, staying big enough to be viable yet small enough that when the pop comes it'll pass right over you.

In the future when the market starts correcting itself within craft I think the local guys pumping out the premium stuff will be the best off.

 

1994 - 18,000 (# 29 "Craft" brewery)
1995 - 19,162
1996 - 20,642
1997 - 23,733
1998 - 22,700 (# 33 "Craft" brewery)

In recent years, the B.A. combines all the Gambrinus breweries and brands, IIRC.

 

Larry (@LeRose), thanks for starting this thread. I think it is a thought provoking topic worthy of further discussion.

“One of the takeaways for me is the fact that the breweries in the middle are fighting a battle on two fronts - there's the big conglomerates on one side and the truly little guys on the other.” I agree with your assessment here. Recently Jim Koch (Boston Beer Company) wrote an Op-Ed where he discussed the BIG BEER element but was strangely silent on the topic of the small, local breweries as being part of the competition in today’s craft beer market.

“Plus Watson recognizes the shift to the on-premises sales model . As shelf space is limited, people are turning to on-premise sales as a primary option, which represents another source of "erosion" for the brewers "in the middle". Whether it is lack of selection at the retail level (in some places), the locavore movement as we've been discussing in other threads, shelf-space squeeze from the big boys, lack of interest in general, the desire for fresh from the source beer, or other things...who knows?” I can comment anecdotally that more and more craft beer customers are very motivated and willing to purchase packaged beer directly from the small, local breweries in my area. For those small, local breweries this is a great source of Revenue/Sales/Profit. I bolded the term of “profit” since by selling their packaged beers directly to their customers they are realizing the profit margins that would have otherwise gone to the Wholesale Distributors and Retailers for the case of a distributed beer. In other words, these small, local breweries are making BIG BUCKS via direct sales. In addition, some of the prices these breweries are charging for these direct sales are pretty steep. For example a 4-pack of 16 ounce cans can cost anywhere between $14 – 24 per 4-pack. That is a tremendous source of profit!! And customers are even willing to wait in line for hours to hand this amount of money over. This is a very, very different business model vs. breweries like Boston Beer Company (Sam Adams), Stone, Sierra Nevada,… selling a 6-pack for about 10 bucks via a retailer.

“The consumer is a fickle beast - hard to say what influences decisions and intent to purchase.” In a past BA thread there was discussion concerning a marketing study commissioned by Boston Beer Company (Sam Adams) to characterize craft beer consumers via a number of classes. From memory they used labels like: casual craft beer customer, beer geek customer,… The result of that analysis is likely different today (2017) vs. when the study was conducted but I suspect that the aspect of craft beer consumer classes still have some merit. In other words I would suggest that there are a number of different types of craft beer consumers. For example, a casual craft beer consumer is likely not too concerned about Wicked Weed now being owned by ABI and is more concerned about ease of buying the beer and perhaps the price of the beers. In contrast a portion of the beer geek craft beer consumers will likely state: I will never buy another Wicked Weed beer since it is now owned by ‘evil’ BIG BEER. In some ways the small, local craft breweries have a benefit here from a customer assessment perspective in that they get to see and hear their customers every day when they come to the brewery to buy their beers. If there is a demand that their customers wish to be fulfilled they have the opportunity to listen to it on a daily basis. For the larger distributing breweries they do not have this intimate opportunity.

Hopefully some of the beer industry folks will chime into this discussion and provide their perspective.

Cheers!

@sierranevadabill @StoneBrewingCo @Sixpoint @JeremyDanner @RobH

 

I see this trend in my own buying habits. One of the reasons I was shocked to see Flying Dog was planning to build a big, new brewery. I don't think there's really demand for Flying Dog in New England or the West Coast if it were to ramp up production and try to compete more seriously in other markets. And they're not the only ones in that bucket.

There's others that are trying to reach that mid-major, regional status as well. In the current market, I don't think you can assume that a new market will have the same kind of loyalty or enthusiasm as the local market that's grown with you.

 

I recall seeing Flying Dog on the shelves up in NH several years ago and buying them prior to the glut of IPAs on shelves these days. Double Dog IPA might have been one of my first double IPAs. Nowadays I don't think I've even lingered more than a moment to see what they have on the shelves. Apparently their overseas footprint is much larger and maybe that is the source of their growth.

 

Related to the thread topic, this dynamic is currently on display with my local regional, Redhook. In the past couple years they have started contracting for several brands, I presume to help maintain production levels as interest for Redhook brands seem stagnant at best. They have started brewing Widmer beers as well as several others: http://craftbrew.com/brands/

I still like visiting the brewery as they often have more interesting pilot batches, and they do a good job of hosting summer events.

 

I think this is predictable and understandable. The people who transition to "craft" from AAL are often price driven shoppers. The will but Narrangansett or the cheapest brands available, like Goose Island often is. My neighbors who mostly drink AAL will still stock a cooler or bring a 12 pack to a party. It's going to be Harpoon, Sam or Goose Island almost every time.

The hard core people, like those on this site, are shifting to the small on premise brewers, or to specialty brewers like The Bruery or to foreign brands.

In the middle, it's a war. Some brewers, like Firestone, have done a pretty good job of differentiating themselves as one of the best in quality shelf beer. Jack's Abby is like that too in my area, and my perception is that Surly is as well. Three Floyds, New Glarus, Westbrook and others can probably make that claim on a regional basis. But there's a huge list of brewers, and I noted Shipyard on the list, brewing the exact same beer they brewed in the late 90's early 2000's. Magic Hat, Saranac, Left Hand I just don't see reason for people to buy those beers. Those breweries need to either step up their games or compete on price.

 

Drank a lot of Raging Bitch when it first came out, was one of the few Belgian IPAs around at the time. Don't think I've had one of their beers in 5+ years now.

 

Red Hook is a great example. I visited the old Seattle brewery a couple of times in the late 90's, the second time was when they had just broken ground on the new Portsmouth brewery. It was among my favorite craft breweries then, and I still like ESB. But they brew the exact same beers now that they did then. They have been passed by. It's not even on shelves here now. I watched Long Trail revamp its lineup considerably, and Otter Creek as well. Why are others standing pat on these old lineups?