Wednesday, April 16, 2014

The State of American Craft Beer

I found this article interesting.

Written for The, the article's author, John Tierney considers the U.S beer industry over the past year and as the piece's subtitle notes, he takes a look at "What's rising, what's fading, and what people are really drinking"

For the beery minded, what Tierney writes isn't much of a revalation—domestically produced macro's have had sales losses; imports have had a slight rise in sales (especially Mexican made beer); and craft beer is on the rise. Tierney specifically mentions the amazing jump Lagunitas had this past year—an 80% plus rise in case sales between 2012 and 2013.

What caught my eye though, was the total sales numbers for the three categories. The top three in each category were: Bud Light in the domestic macro group at $5.94 billion, Corona Extra in the Import category at $1.22 billion, and in the craft category, Samuel Adams at $329 million. But, take a look at the total craft sales—about $1.8—versus just the top two brands in the other categories. There's a $5.36 billion dollar difference between the top two domestic and imported beer labels in the country, and the top 10 best selling craft breweries*.

That's two individual brands versus ten breweries, folks.

So what do I take away from this?  

As usual I'll let my standard sense of skeptism with the craft mantra rear its head. I hear a lot of folks saying that people are demanding locally made and sourced, innovative craft beer. But, is that really the case, or is that what the craft breweries and their fans have led themselves to believe? I have 5.36 billion reasons to think otherwise. Granted the so-called "craft" category has seen growth, but it's one thing to offer a variety of "innovative" beer, but quite another for it to be truly wanted. Add to the mix that micros, nanos and subnanos are opening hand over fist—and yet there is an industry acknowledgement of quality control issues, by some participants. Perhaps, the craft segment's rapid growth is not as healthy as it might seem—or is perpetuated to be.

Here's why I worry. It's one thing to open a small brewery with the intent to stay small—that is to say with no goal to expand. It's quite another thing to use a small brewery brewery as a springboard for larger plans. With expansion comes investment, and with investment comes the demand for return, and in turn the demand for return begets gimmicks and marketing simply to sell beer—and not necessarily good beer. At some point we'll end up having have hundreds of medium-sized craft breweries carrying oodles of debt, and producing marginal beer saddled with gimmicks and ploys, simply to pay down that debt—in a market that doesn't truly demand it.

How sustainable is that? More importantly—are we already there?

*Three of which—Widmer, Kona and RedHook—are partially owned by ABInBev, by the way.


  1. Yeah, it's sometimes salutory to remember that the US micro/craft sector is just under 8% by volume, according to the BA. That means 92% of beer sold in the US is Bud/Coors/Corona/etc.

    On the other hand, 10 years ago craft was only 4%, if I remember rightly. Is doubling your share in a decade - against such entrenched opposition - good or bad?

    (Oh, and craft's nearly 15% by revenue, so it's rather more profitable than macrobrew!)

  2. I think we are there now, yes, especially as the 92% by volume exists after some 35 years of trying by the craft sector. Doubling share in a decade is good but some hoped it would be 50% by now, that mega beer would have (almost) collapsed, but it hasn't. I think taste is the main reason, strong and "out there" flavors take years to acquire if at all: a mass market brand remains at least inoffensive, and benefits from a certain stasis. Many present brewers will fall out of the market and some will be bought by large brewers but the segment is well-enough established I think that it won't lose share going forward: nor will it grow much I think from here.


  3. BryanB states: "...Oh, and craft's nearly 15% by revenue, so it's rather more profitable than macrobrew!..."

    Not surprising, given that craft is almost always priced higher (in quite a few unfortunate cases, unjustifiably higher).

    Also, I think Gary's assessment of the rise, the current state, and the future of craft beer is pretty much spot on. Craft is here to stay and while there are a lot of not-so-good craft brewers jumping on the bandwagon and entwring the commercial fray, hopefully only the best of them will survive and grow ...although I can think of quite a few really _great_ craft brewers of the last 30 years that didn't :-( I suppose they are good proof that being ahead of your time can sometimes be far worse than being behind it.