- Beer sales from smaller, independent craft breweries grew 8% in 2017 to $26 billion in sales, according to a newly-released annual report from the Brewers Association. The retail dollar value represents 23.4% of the American beer market.
- The growth of the craft brewing industry continues to outpace the total beer market, where volume dropped by 1% in 2017. Volume in craft brewing rose 5% from a year ago.
- Despite another strong year, a new trend has emerged in the space: 165 craft breweries closed last year, which represents 2.6% of total breweries. This is a jump of nearly 70%, indicating a maturing industry.
Is the craft beer industry finally experiencing a shakeout? In 2017, there were nearly 6,300 craft breweries in the U.S., up from about 2,900 just four years prior, according to the Brewers Association.
Still, the industry experienced a jump in closures, underscoring just how competitive this space has become since it emerged as a millennial darling. This discerning group of consumers has a more sophisticated palate than their beer-drinking predecessors, and they demand more from their brews. As a result, a significant number of independent breweries continue to capitalize on the opportunity with high-quality, uniquely-flavored beer.
But there is such a thing as too many choices and the craft beer space is just now starting to reflect this. According to the Denver Business Journal, there are about 350 breweries in Colorado. At the same time, there are about 237 McDonald’s restaurants in the state.
How can craft breweries survive as signs of a shakeout emerge? By sticking to what they know, staying small and standing out in an increasingly crowded market. The Wall Street Journal reported that brewers that stayed small have thrived; 5,000 small breweries that shipped fewer than 100,000 barrels a year had an average volume growth of 14% in 2016.
Craft breweries can stand out with seasonal, unique, diverse or heavily localized batches – the very attributes that led to their success in the first place. They can further leverage their locality by collaborating with nearby independent bars or restaurants to expand their brand without a perception of selling out.
To be sure, as more players enter the space and competition intensifies, a growing number of craft breweries are likely to go out of business. But at the same time, more players will likely force those who remain to step up their game with unique, great tasting brews to attract the fickle consumer.
It is worth noting that some craft players have decided to sell themselves to bigger brewers to take advantage of the owner's deep pockets and distribution channels. South Florida-based Funky Buddha Brewery and Ballast Point, for example, were both purchased by Constellation Brands, and AB InBev has added Devils Backbone and Karbach Brewing Co. to the mix. Their growing presence will likely put added pressure on smaller craft breweries in the segment.
As the craft beer industry continues to mature and face more competition, breweries left standing will be those that stick to quality over quantity, and businesses who offer their customers plenty of unique choices so they'll want to keep coming back – regardless of how many new breweries open up in the neighborhood.