It Can Be Denied No Longer
Craft beer is being tempered in a lot of ways.
For some of us, whether it be on the sales or consumer side of the industry, this may not always seem like the case initially. We sometimes have a propensity to stay in the safety of our own craft beer bubbles - and hey, it’s not a bad place to be - but the truth of the story is that the convulsive eruption of the volcano that is craft beer is going through a significant cooling process. The coalescent magma of growth and numbers that has steadily plucked at the world’s attention, is stiffening.
And while we ourselves have been guilty of failing to see this downtrend amongst reports that early 2019 craft beer sales showed promising numbers and continued growth, we think it’s time we took an honest look at what is happening just beneath that picture perfect surface. It’s important to stay informed, but don’t panic… yet.
Growth Ebbs and Flows
Growth in the beer industry isn’t measured on a singular scale. Data is compiled in a variety of sectors that pinpoint trends in beer overall, but also in many subsets such as microbreweries, brewpubs, distribution, retail sales, as well as alcohol in its entirety, pinning beer against wine and hard liquor sales.
For example, according to the market research firm IRI Worldwide, in 2009 the total number of beer SKU’s scanned at off-premise locations grew from about 5,900 to 17,000+ in 2018. That’s 17,000+ individual beer styles, about tripling the previous number in just under a decade.
Most interestingly, the Independent Beverage Group signaled that by the year 2020, the projected number of US beer distributors bringing those SKU’s to market will drop dramatically from 4,000 in 1970 to a concise 650. This is an impactful change that will certainly shape next year’s market should it come to fruition.
While there were 1,813 breweries operating in the US in 2010, and 2018 ended with 7,450 breweries blazing throughout the country, it’s important to note that the overall volume of beer sold has actually decreased over the last 5 years.
This points to a high demographic of new breweries feverishly opening, others consistently closing, and many more suffering due to inadequate sales. In fact, additional data from The Brewer’s Association (BA) shows a dramatic jump in microbrewery and brewpub closings within the last 5 years that can affirm this trajectory.
The Current Downtrend in Numbers
Reflecting on even more data from the BA, 2013 and 2014 showed a peak of 18% yearly growth in the beer industry as a whole. In 2017 growth was only at 5% and dropped another point to 4% in 2018.
Initial 2019 numbers showed more promise for a brief sliver of time, but they quickly revealed a similar, if not more aggressive, downward shift. This might seem like a fairly small shift, but it accounted for millions in sales. Quickly bucking the hype that craft beer’s wild ride is continuing on a voracious upward curve, the BA called this “the slowest annual beer industry growth in a decade”.
The Beer Institute (BI) has reported rough numbers in total U.S. beer shipments over the last several years as well, and is forecasting turbulence for beer in 2019. BI’s chief economist Michael Uhrich stated, “2019 is shaping up to be a fairly rough year for beer”.
The last indicative factor that we’ll talk about today is that for the first time in years, beer has dropped below 50% marketshare. It is now being edged out by wine which holds 15.4% of the market and hard liquor, which stands at 35.6% marketshare. Beer’s current marketshare floats at 49%. Again, while a 1% shift seems minimal, this accounts for 2.5 million barrels of beer. As the largely unchanged macroeconomic conditions that propelled this decline continue, 2019 stands to lose another 1-2 points by the end of the year.
Can We Pinpoint the Causation?
As we see it, there are two prevailing elements that are likely governing this wave:
Over-saturation of the market is a given culprit, and likely the biggest one. With a famed 7,000+ breweries operating just within the United States, there is a never-ending selection of craft beer to choose from. This is both a blessing and a curse. Drinkers have the option to be more selective in what they buy, and many will go in favor of something new and unexplored vs. sticking with something they have already tasted many times.
Concurrently, the overall drop in consumption of alcohol among so called “millennials" also plays a dynamic role in this situation. As people are more and more concerned with their health, carbs and alcohol are usually among the first on the list of things to cut from a diet. While beer actually has some health benefits and, when enjoyed in moderation, is still heavenly, many drinkers are either foregoing booze altogether, or leaning on low-calorie beverages like vodka to get the same bang for their bucks, without the extra health and dietary implications.
How Are Brewers Fighting The Adversity?
We've seen brewers taking on loftier and loftier distribution goals in order to keep up with the ceaseless competition they face in the market. Even though overall beer numbers are on the decline, new breweries are still cropping up everywhere, and as already mentioned, too many existing breweries are closing down.
Alongside distribution as a means of staying relevant and on the shelf, keep your eye out for the natural evolution of rebranding and "freshening up” which, from a business standpoint, makes sense in a lot of ways. For example, last month in April, Bell's Brewing announced the rebrand of their Kalamazoo American Stout from it's previously simplified white and purple label. The new label is black and gold, with attractive lettering and design.
Likewise, Manayunk Brewing Company in Philadelphia has gone to a complete can rebrand and new can release calendar in a move to continue to align their image with the level of their beer, which can be often overlooked in a market where so many breweries are working hard to capture their own unique feel.
So What Does This Mean? Is Craft Beer Going Out of Style?
Despite the negative headwinds, there’s no need for worry just yet, brew friends. The natural peaks and valleys of craft beer as an industry, like any industry, will force it to shift and change. It just so happens that the current shift is an unfavorable one. However, beer is as fundamental and American as the stripes on our flag.
While we will be continually watching reports and trends throughout the year, we rest easy in our certainty that there will be a comeback, and it’s going to be a sharpened version of all the things craft beer is today.