Brewers Association to New Brewers: Set 'Realistic' Growth Expectations

Discussion in 'Beer News & Releases' started by drtth, May 3, 2018.

  1. drtth

    drtth Poo-Bah (3,680) Nov 25, 2007 Pennsylvania

    Some interesting data on 2017 growth including projections and cautions for brewers looking to survive the future.

    One particularly interesting bit is the numbers on 2017 growth.

    "During their presentation, Watson and Gatza confirmed growth figures that were released in March — one in eight beers purchased in 2017 came from small and independent brewers. Watson said craft’s 12.7 percent share of U.S. beer market volumes last year was a record, and noted that craft dollar share increased to 23.4 percent.

    “Craft share is at an all-time high,” he said. “But at the same time, it’s more competitive than ever out there, in particularly with competition from the world’s largest brewers and not to mention wine and spirits.”

    “I don’t think we’re ever going to see a year with three or three and a half million barrels added again,” he said.

    As growth has slowed, that’s led to an increasing number of brewery closures. Last year, 165 breweries shuttered, the most in the modern craft era, Watson said.

    My personal prediction is that in the next few years we'll be seeing a continuing increase each year in the number of breweries closing per year.
    #1 drtth, May 3, 2018
    Last edited: May 3, 2018
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  2. JackHorzempa

    JackHorzempa Poo-Bah (3,760) Dec 15, 2005 Pennsylvania

    “Most of those companies are classified as “microbreweries,” meaning they produce fewer than 15,000 barrels annually, according to the BA. Watson, who said companies in that group grew 17 percent in 2017, to 5.7 million total barrels, referred to microbreweries the “growth engine of craft.”

    “To give you an idea of what 5.7 million means, that’s the total beer demand in a state the size of Georgia or Michigan,” he said.

    Brewpubs, meanwhile, grew 15 percent to 1.5 million barrels while regional brewers — those making more than 15,000 barrels a year — grew 1 percent last year, to 17 million barrel.”

    So, small (less than 15,000 barrels) breweries exhibited significant growth in 2017 (17%) and brewpubs as well (15%) but the larger, distributing breweries had smaller growth (1%).

    This re-enforces my thoughts that I have expressed that small, local breweries are ‘where it’s at’.

  3. Oktoberfiesta

    Oktoberfiesta Aspirant (251) Nov 16, 2013 New Mexico

    Most 'small' microbreweries don't seem happy or content with the less than 15k barrel destination. It's like they can't make money at the smaller margins.

    Small becomes larger regional. Yet they should realize what these numbers are really showing them.

    I have no more sympathy for these breweries closing up or struggling.
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  4. EvenMoreJesus

    EvenMoreJesus Champion (886) Jun 8, 2017 Pennsylvania
    Premium Trader

    At what point, however, do we start seeing more breweries closing than opening? It has to reach that tipping point at some point, doesn't it?
  5. Ranbot

    Ranbot Zealot (547) Nov 27, 2006 Pennsylvania

    I would like to see similar industry-wide statistics that includes all "craft" and "crafty" premium beer sales. Many US beer consumers are choosing more flavorful independent "craft" and non-independent "crafty" beer without any awareness/concern for the BA's definition, which makes me suspicious of whether the BA's statistics tell the full picture of national beer consumption trends. I would think that consumers choosing a non-AAL premium beer product is an market trend of interest, regardless of any other definitions or labels. If the goal is to study and predict consumer trends, it's seems silly to set the goalposts differently than the consumers being studied would.

    Note: I personally don't like "craft" or "crafty" descriptors for beer, but for simplicity I'm using them anyway. We all know what these terms mean, even if there is disagreement with their application.
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  6. AlcahueteJ

    AlcahueteJ Champion (872) Dec 4, 2004 Massachusetts

    Is this simply a function of the overall number of breweries increasing? Isn't that at an all-time high too?

    More breweries, more will close...

    There's what, almost 6000 breweries (maybe more) in the US now? If only 165 closed last year, that could take awhile.
  7. hopfenunmaltz

    hopfenunmaltz Meyvn (1,390) Jun 8, 2005 Michigan

    Brewers Association says 6372 at the end of 2017.
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  8. jesskidden

    jesskidden Meyvn (1,362) Aug 10, 2005 New Jersey

    For 2016*, the Brewers' Assoc's The New Brewer magazine listed 7.72 million barrels of beer coming from "Regional Brewing Companies/Brands owned by Large Breweries" - the latter including NAB, Heineken, Constellation, AB, MillerCoors, United Breweries and CBA.

    The total barrelage of those so-called "captured brands" (although they also include created brands like Shock Top and Blue Moon) has been up every year since 2012 (obviously some of the breweries listed were likely bought during that period) but for '16 NAB, CBA, UB and even MC were all down from the year before, and AB was virtually flat at 1%.

    * Their 2017 figures not out yet.
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  9. jmdrpi

    jmdrpi Poo-Bah (5,703) Dec 11, 2008 Pennsylvania

    As @Oktoberfiesta alluded to, it depends on what these new breweries aspirations are. If a brewery has a business model where they can stay profitable functioning as just a brewpub (with or without food), then their spot in the market is competing against local bars and restaurants. The upper bound of these types could be much higher.

    But if they want to package beer and distribute, I think there is market saturation in most populated areas already. The shelves and taphandles are already full.
  10. EvenMoreJesus

    EvenMoreJesus Champion (886) Jun 8, 2017 Pennsylvania
    Premium Trader

    Wonder how many bars have closed during the explosion of small, local craft breweries?
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  11. donspublic

    donspublic Poo-Bah (1,621) Aug 4, 2014 Texas
    Premium Trader

    Smart money in on the small breweries who focus on the taproom and limited distribution to get some of their beer out in their region so people will know who they are. Do crowlers/growlers to go in your taproom and pocket all that money at the tap. You aren't going to get rich, but you are going to make some money. As this trend increases I think you will start seeing, or are already seeing beer bars take a hit as the local taproom supplements the local watering hole.
    If you have more breweries opening than closing, I don't think that means the bubble is bursting, I think it means increased competition has weeded out those who were either 1) under capitalized 2) bad business plan 3) bad beer.
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  12. drtth

    drtth Poo-Bah (3,680) Nov 25, 2007 Pennsylvania

    Yes, it could be but it's interesting to know that the number of both is going up even when there is record growth of sales. What would be helpful in the break down is knowing something like the average age of those that closed. The general stats across all small business startups are that 50% have failed within the first five years and that the most frequent reasons are related to business management issues and errors rather than quality of product.
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  13. drtth

    drtth Poo-Bah (3,680) Nov 25, 2007 Pennsylvania

    Well, I think we can draw a couple of inferences. If the market share of craft, as defined by the BA, increased last year while the overall share of the alcohol market has decreased it's safe to bet that Big Beer and Crafty beer may be on a downslope or that Crafty beer is helping Big Beer hold on to some of their declining market share in both marketplaces--i.e., beer and alcohol in general.

    What might be worrysome is that the Craft share of the overall beer market is growing but the overall market for Beer is shrinking. This suggests that the growth in the share of beer is in not growth in an absolute sense and appears larger than it really is, i.e., getting a bigger share of a smaller pie might not be as healthy as it looks.
    #13 drtth, May 4, 2018
    Last edited: May 4, 2018
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  14. elohim

    elohim Initiate (183) Dec 4, 2010 Georgia

    There is only one microbrewery local to me and I haven't enjoyed a single one of their beers. Macon Beer Company in case anyone is curious. Sweetwater and Terrapin are both a couple hours away and have much better beers but I rarely buy Georgia beers.
  15. JackHorzempa

    JackHorzempa Poo-Bah (3,760) Dec 15, 2005 Pennsylvania

    @jesskidden reported that in 2016: "AB was virtually flat at 1%." I wonder how important the crafty beers (e.g., Goose Island, etc.) were in making AB overall to have positive growth? Perhaps if AB did not purchase craft breweries the change in 2016 would be a negative value?

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  16. jesskidden

    jesskidden Meyvn (1,362) Aug 10, 2005 New Jersey

    No, AB's "captured" and "crafty" brands were virtually flat:
    2015 - 1.78m bbl
    2016 - 1.8m bbl

    AB's total US barrelage went down 1.7%, from 94.2m to 92.6m in the same period of 2015 - 2016.
  17. AlcahueteJ

    AlcahueteJ Champion (872) Dec 4, 2004 Massachusetts

    If I had to guess, this isn't an issue for bars. Many bars, and many "beer bars" also have strong cocktail programs. And they may have also have decent wine lists. Finally, many of them may also have great food.

    Tap rooms are very popular, but I don't know how much business they're actually taking away from bars that have other things going for them. Far more people love food, wine, and liquor than they do craft beer. As much as we might think otherwise in our small world here on Beeradvocate.
  18. AlcahueteJ

    AlcahueteJ Champion (872) Dec 4, 2004 Massachusetts

    Wow, that's an incredibly small percentage of their sales from craft beer.

    Kind of makes me wonder why they even bother purchasing craft breweries.
  19. jesskidden

    jesskidden Meyvn (1,362) Aug 10, 2005 New Jersey

    Yes, but their craft total makes them larger than than every craft brewer in the country beside Yuengling (debatable, since it's all adjunct beers) and BBC...

    Keeps their breweries running closer to capacity for the former craft brands (GI, BP, etc.) done at AB's breweries and the profit margin is no doubt much larger. For a few dollars more per barrel spent on ingredients they get to charge 2 to 3 times as much as for Natural Light.
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  20. JackHorzempa

    JackHorzempa Poo-Bah (3,760) Dec 15, 2005 Pennsylvania

    So, can you share with us the details of why AB experienced 1% growth in 2016?

  21. jmdrpi

    jmdrpi Poo-Bah (5,703) Dec 11, 2008 Pennsylvania

    I have heard local brewers talk about being shunned by local bars that see them as competition. And there was the whole brewhaha between NJ bar owners and brewers:

    In the Philly burbs, the renowned long standing beer bars of years like Monks and Capones definitely show up less in visitor suggestions on the BA forum, compared to popular breweries.

    Last year there was the closing of Eulogy Tavern, a 15 year old Belgian beer bar in Philly, but as for reasons the Owner gave some weird stories to the press about employees and drugs. But considering it was barely a blip on the local beer drinking radar, it showed how much had changed in the last 10 years.
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  22. jesskidden

    jesskidden Meyvn (1,362) Aug 10, 2005 New Jersey

    That's not how MillerCoors interpreted Neilson statistics :
    Brewery taproom visits dragging down the corner bar
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  23. jmdrpi

    jmdrpi Poo-Bah (5,703) Dec 11, 2008 Pennsylvania

    Perhaps the markup on craft beer is higher than AAL?

    And an easier way to take away shelf space and tap handles from their competition.
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  24. jesskidden

    jesskidden Meyvn (1,362) Aug 10, 2005 New Jersey

    The 1% growth was for their "captured" brands - all of which saw increases except for their own crafty "Shock Top".

    Many were in the low double digits (19% - 27%), led by Golden Road up 57%.

    EDIT- For those (like me) trying to "do the math" on that one - How are most of their craft-brands up that much while the total increase for the year is only 1%? "Shock Top" was down 200k bbl. - that's more beer than every AB-owned former craft brewery makes in a year, except for Goose Island.
    #24 jesskidden, May 4, 2018
    Last edited: May 4, 2018
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  25. jmdrpi

    jmdrpi Poo-Bah (5,703) Dec 11, 2008 Pennsylvania

    In PA, the PLCB changed the law so now brewery taprooms can serve PA produced cider, wine, and spirits without any additional license. Most breweries take advantage of this to offer a couple of non-beer options. And most either have their own food or get food trucks on the weekend nights.

    Personally - with my wife being a non-beer drinker, that change has greatly increased our visits to local breweries compared to bars.
  26. AleInAPale

    AleInAPale Initiate (37) Apr 16, 2018 Ohio

    Another thing that I think plays into these numbers, is the fact that craft beer, in general, has more alcohol in it. Therefore, with more crafty, alcoholic beer available, people are drinking less beer by volume, but still getting...drunk. Lets be honest, you could drink 3 Bud Lights but only one Kentucky Bourbon Barrel Ale to get to the same level of BAC (that is an incredibly rough estimate, but you get the point). Roughly using that same logic across the entire industry, I can see how less beer is being consumed-- even with more and more breweries opening.

    I don't know even where to begin on how much alcohol has been consumed via beer year over year, but I would love to know if more alcohol is being consumed now via beer than ever before. I think it is, but that's just my $0.02.
  27. JackHorzempa

    JackHorzempa Poo-Bah (3,760) Dec 15, 2005 Pennsylvania

    So, the 1% growth was solely for that sub-segment of AB, not AB overall?

  28. emannths

    emannths Aspirant (224) Sep 21, 2007 Massachusetts

    I think this is probably strongly dependent on the local licensing structure. In places with a shortage of licenses (e.g., due to quotas/caps/etc), taprooms probably don't steal customers from bars. In places without such limits, they probably do steal some customers.

    That said, these places are becoming the corner bar. Sure, they don't by M-C beer, but otherwise they're basically the same. And the concern about "taprooms" monopolizing the on-premises business is misguided. There's not a single Taproom brand--each brand is limited to a single location--it's hard to imagine each replacing more than one or two bars pure based on capacity arguments. Everyone is playing on a level playing field at the other tens of thousands of locations in the US.
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  29. AlcahueteJ

    AlcahueteJ Champion (872) Dec 4, 2004 Massachusetts

    I wonder how many people did not visit their local tap room after going to their local bars.

    Both good points. I totally looked at the numbers and didn't realize it was volume, not revenue. My bad.

    Personally, if I visit a tap room, I end up at a bar because I want to go to a restaurant for dinner, and not eat from a food truck. The majority of local tap rooms around me also aren't quite as diversified as the one's you have. But if I thought about it longer, I'm sure I'd realize there is a fair amount of diversity and options at some of them.

    Purely anecdotal, but from what I understand many people frequenting tap rooms are in the 30 - 50 year old crowd, with kids and pets, who otherwise wouldn't be going out to bars anyways.