The Craft Beer Boom Has Gone Flat

My initial reaction was that the craft beer market is approaching the saturation point. I then clicked to read the article to see:

"The growth pace for small and independent brewers has stabilized at a rate that still reflects progress, but in a more mature market," says Bart Watson, chief economist of the Brewers Association. "Some breweries are continuing to grow, whereas others are having to evolve their position and nurture new opportunities to ensure they keep pace."

My guess is that Bart’s statement of “mature market” is the same as my view of “approaching the saturation point”. If US craft breweries want to increase at the rates of recent years they will need to grow/expand the market for craft beer.

I also took note of:

“Over the past two years, the number of breweries in the U.S. has increased almost 50%. As of June 30, there were 5,562 breweries operating in the U.S., 900 more than there were at this time last year. And another 2,739 breweries are in the planning stage, says the Brewers Association.”

Given that increase of 50% over the past two years and plans to open another 2,739 in the near future seems to indicate that the craft beer market will be hype-competitive. More and more craft breweries competing in the same “mature market”. It would seem that unless the craft beer market grows/expands we will be reading about more craft brewery closings over the next few years. There are only so many US craft beer consumers around at the present day.

I wonder if the US craft breweries could expand exports to remain economically viable? Maybe that is one way they could grow/expand the market for US craft beer?

Cheers!

@RobH @sierranevadabill @Sixpoint

 

https://www.bizjournals.com/denver/...r-production-rises-in-first-half-of-2017.html

Looks like production is actually up for 2017 and like the article says as the industry grows this would be expected with regards to the growth rate. I think the craft market is actually very strong and will continue to be going forward.

 

being in retail I am seeing that more and more people are buying local craft beer. I can sell VT all day long. if I bring something in from out of state that I would normally expect to sell real well it just sits there. my customers are not buying out of state beer. they are supporting local. I bet we see this trend pick up all over the country.

 

Yes, there's a growing buy-local trend across the US, but Vermonters local-focus is a special case. It's instilled in Vermont culture and economics in a way you probably won't find elsewhere. You kind of have to experience it to understand, and many Vermonters are likely too deep in their culture to see it. (FWIW, I was born/raised in VT and moved away after college, but distance can bring perspective. VT's unusually strong local focus one of several things I picked on after being away for a while.)

 

Haven't read the article yet, but do these numbers inlcude on-premise sales for local breweries?

 

A few comments:

1. Relying on the BA's numbers is deceptive, since the growth of "craft" in their numbers is fighting the headwind of the loss of "craft" brewers to AB-Inbev, Heineken, et. al., not to mention the growth of those absorbed brewers. IOW, the BA is hoist with its own petard here.

2. Speaking only in % is an incomplete picture. It needs to also include volume (either in barrels of production or in sales dollars, preferably both) to help balance the analysis.

3. If the numbers are only measuring retail package sales, they are an incomplete picture, since they leave out the on-premises local sales, which are (by all reports) increasing at the loss of retail package sales.

4. An independent business journal (like Fortune supposedly is) should not be wedded to the BA definition of "craft brewer" and should analyze the entire market, including the pariah-class of former "craft" brewers.

 

My recommendation is that you send an e-mail query to Bart Watson (chief economist of the Brewers Association). I would suspect that he is the best person to respond.

Cheers!

P.S. Please share your findings in this thread.

 

Never been to VT so simply asking a question. Are there quality local beer priced reasonably and at what price?

 

“The pressure is also resulting in some increased closures. 97 craft brewers shut down last year, up from 78 in 2015 and 75 the year before.”

http://fortune.com/2017/03/28/craft-beer-sales-fall/

Cheers!

 

I see the pie getting larger (albeit more slowly that past years), but each piece of the pie is getting smaller.

Each retailer's piece of pie is getting smaller as more and more retail outlets selling craft beer open (more specialty "bottle shops", more Grocery and big box stores [Walmart, Target, Cosco, etc.] selling craft, more brewery taprooms selling their own beer across the counter, more convenience stores selling craft, etc. It's great as a consumer to have it available in so many places, but it's putting a squeeze on stores/outlets retail segment.

I'd say the same for the producers, and the whole hyper local movement, making it harder for the veteran, regional breweries to grow as they once did.

 

Let's not leave out Total Wine!

 

Rob, what are your thoughts about the increase in the number of retailers and the freshness of beers on their shelves? Does having more retailers improve the situation of having non-old beers on retailer's shelves or does it exacerbate the situation?

Cheers!

 

Beer is a drug so it will keep growing.. people need their drugs point blank

 

They don't cite their source for this article, but these reports typically cite IRI and/or Neilsen data, which is pulled from register scans at major chain stores. This is also the main reason why these numbers don't tell the whole story.

The 8-10 largest craft breweries have a disproportionate amount of shelf space at the majors, and when 2/3rds of them are down YTD it drags down the whole category. For example, New Belgium will brew somewhere around 1M bbls per year, so a 1% decline in their sales is 10K bbls. That's more than the entire yearly output of Culmination, Hair of the Dog, Barley Browns, Crux, Great Notion, Cascade, and Upright combined.

 

Ah ha. Indeed, I was referencing big boxes that are/were not traditionally sellers of craft beer (therefore are "new" to the craft beer retail scene). Total Wine has always been a seller of craft beer...since before craft beer was called craft beer. Owners started with a beer store in PA back in the early 1980's.

In that sense, TWM is a "plankowner" (to use a Navy term) in the craft beer retail landscape. The shrinking of the pie pieces is from the newer players in the space. In my view that is part of the core of why, for many, it "feels" as though craft beer sales have really slowed down (more than actual from a global perspective).

 

The overall market for beer has been declining in size for a while now and flavorful beers have been increasingly gaining market share despite that overall smaller market for beer.

The Craft Brewery success when the overall beer market is declining is exactly what prompted Big Beer companies to start buying flavorful beer producers. (It's less expensive to buy an existing successful brewery than to build something new. Most Big Beer facilities are built around Lager brewing and not suitable for brewing ales.) This is an additional factor heightening the competativeness of the market place.

So in the face of increased competitiveness we can expect to see the number of small brewery failures increase over the next few years. (BTW, this is something that would be happening regardless of whether the Big Beers are players on the flavorful beer market.)

 

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We should also remember the "growth rate" for craft had been inflated 2 years ago when it was decided to include Yuengling and other independent breweries as craft.

 

Great question. Logic could dictate that with a static, set quantity of beer spread out across more retailers and therefore, in theory, more easily accessible to consumers to purchase, the result would be an increased pace of sales of that static quantity and therefore fewer packages aging out on shelves.

However, that has not been the reality. The reality is there is not a static amount of beer being spread further around, rather the quantity of beer has increased along with shelf space, but consumption has not kept up in equal parts with the increase in quantity. And with beer spread out into more shelves, with not enough consumers to empty all those shelves within the lifespan of the beer, there's more beer ageing out on shelves in more places.