- Craft beer sales are continuing to decline as more competitors enter the market and rivals are acquired by brewing powerhouses, according to The Wall Street Journal. Retail-store sales of all craft beers fell $143 million to $2.3 billion in the first half of 2017, Nielsen said.
- Demand for craft beer began to wane in 2016 and is continuing to decline for most brewers, large and small. Sierra Nevada Brewing, the No. 2 U.S. craft brewer by volume, reported shipment volumes fell 6.9% in 2016, according to the paper. That was the company’s first drop since its founding in 1980.
- The two exceptions to the trend are smaller breweries that chose to stay small and ones that were bought out by a larger competitor, The Wall Street Journal said. The paper cited Beer Marketer’s Insights, which noted 5,000 small breweries that shipped fewer than 100,000 barrels a year had an average volume growth in 2016 of 14%.
Craft beer first started to see sales slow in 2016, and the trend hasn’t changed so far in 2017. The first problem brewers are running into is competition. The number of breweries in the U.S. increased from 1,447 in 2005 to more than 5,300 in 2017, the majority of that expansion tied to craft beer. As the marketplace becomes oversaturated, it’s natural for sales to decline. It's no longer enough to simply be a craft beer, a brewery needs to produce good tasting and cleverly named brews that appeal to consumers, especially millennials.
Another issue facing craft beer is changing consumer tastes. Many Millennials are loyal craft beer drinkers, drawn to trendy, local brews, which should help craft beer sales. However, a growing number of drinkers are turning to spirits such as bourbon and mixed drinks.
While the torrid growth may be over for some craft breweries without the capital to weather these changes, craft beer isn’t going the way of Crystal Pepsi anytime soon. Last year, breweries that shipped fewer than 100,000 barrels a year had twice the growth of craft beer overall, according to Beer Marketer’s Insights. The key to success appears to be staying small.
Start-up breweries also could point a finger at their larger competitors, which have been acquiring successful independent beer makers. Constellation Brands, known for its Corona and Modelo beers, bought South Florida-based Funky Buddha Brewery earlier this month for an undisclosed amount. The acquisition looks like it could pay off for Constellation as the microbrewery has already experienced 30% volume growth this year. With its new parent company’s financial support, Funky Buddha is planning on expanding distribution beyond Florida.
AB InBev closed its purchase of craft brewery Devil’s Backbone last fall. Before the year was over, it announced it also would buy Texas-based craft brewer Karbach Brewing Co. MolsonCoors has also bought several craft beer breweries. Many acquired craft breweries are able to lean on their deep-pocketed owners to expand their market share and promote their beers to a wider audience, giving them a distinct advantage over their competitors.
Owners of independent craft breweries aren’t just standing by as sales decline. Dogfish Head, Saranac and Abita are reportedly increasing spending on marketing, accelerating new product launches and cutting costs where they can, The Wall Street Journal said. In an attempt to lure back consumers who are turning to hard liquor or wine, some breweries are testing out aging beer in casks infused with grapes or previously used in whiskey or wine production.
Small craft breweries also are trying to differentiate themselves from competitors who have been bought out. Recently, the Brewers Association introduced a new seal to identify small and independently owned beer makers. The seal, which features a picture of an upside-down beer bottle, is free for use by small craft producers. The hope is that consumers will be able to easily identify which breweries are truly independent, and which have giant parent companies.
The last albatross for craft beer is that it’s a mature industry. A small startup that has a popular brew still can succeed. The caveat appears to be that they just can’t get too big. If they keep barrel production under 100,000 a year, this past year shows sales will flourish.