Our Take On Growth In Craft Beer

A recent article in the Washington Post asks whether the craft beer industry has peaked. The article references a report by the Brewers Association, which showed craft brewers saw a 5 percent rise in production volume in 2017, but also cited more brewery closures than in previous years.

Another statement said, “The total beer market went down 1 percent by volume in 2017, a decrease in about 2.4 million barrels from the previous year.”

Is the craft beer industry’s buzz wearing off? Are beer sales slowing due to a crowded playing field or is it competition with wine and spirits?

We were curious what our people were noticing in the market so we turned to our sales team to ask their thoughts on growth. You can read the original article here.

 

Our thoughts on the article:

One point in the article was brought up by a consultant was the effect of a small number of breweries putting out infected/sub par beer.  I used to share the concern about one bad apple harming craft, but I don’t feel that way anymore, and this is a good thing. Now that the nation’s craft brewers have moved the conversation past whether or not craft is valid (seriously, this used to be a thing when we started), the risk of a new drinker trying an infected beer and swearing off craft for good has lowered considerably in my opinion.  To take the consultant’s example to the next step, here’s an example. You have a crate of Fuji apples. Someone roots around and finds a rotten one. Instead of throwing out the box, the consumer merely tosses that apple in the compost bin and gets another apple. He doesn’t swear off apples and stick to oranges. With the vast majority of craft breweries producing clean beer, the debate is now over whether or not a consumer prefers that iteration of a style instead of craft beer as a whole.”  — Ross

 

Do you think craft beer has peaked? 

“No, I don’t.  Overall growth has stagnated in the last couple of years, but I think this has more to do with the big breweries upping their game in response to years of being taken to the woodshed by craft.  I also think that in terms of new innovations with styles craft beer is far from peaking. One example is that IPA’s continue to morph as the most popular style receives a ton of attention and thus innovation of flavors, appearance and aroma.” — Ross

 

“I really don’t think that it’s peaked but I think it would be negligent to think that the industry hasn’t become a little saturated and started to show some fatigue. The issue I have with the industry is that as a new brewery opens, immediately they go to market with an IPA. I certainly see why (IPA = 32% of the category) but to think everyone that opens is going to have great success with that IPA and find magic in a bottle is unrealistic. I think that’s where we’re seeing the open and close ratios. Success in this market will be with a continued effort of cutting away at the macro and import market share, through a more drinkable style and a refined story. Local can win but only with a product that appeals to the masses…that would be in concert with the business plan of uniqueness and generalized craft styles. How many new lager, kolsch, blonde, easy drinking craft beers are we seeing in 2018?” — Dane

 

How does this play into the way we handle sales?

“I think the crowding of the market has given us even more motivation to continue to refine not only the way we go to market, but also which new beers we focus on.  Hop forward offerings continue to take the lion’s share of tap handles and shelf space so bringing new beers to the market with that in mind has taken on a higher importance.  Refining our processes and focus was something we have strived for before the market got extremely crowded, what’s changed is that the stakes have been raised since there are so many delicious options out there.” — Ross

 

How does the crowded playing field affect IHB?

“IHB is in a unique position simply because of our flagship brand, its style and the lack of competition we have in that segment. Irish Death doesn’t sell as much as the top tier IPA’s but it is in the top 10 of craft packages for the state of WA. Having this kind brand equity in the market, allows for us to experiment with other styles and get our small wins…and not run the risk of having to win all the time in the more competitive styles.” — Dane

 

Is it worrisome that the total beer market went down 1 percent by volume in 2017?

“When you see that the total beer market is down 1% by volume, immediately you have to look at the national brand influence of those declines. What percentage of the losses are in the top 10 brands? We still have a lot of success to celebrate in craft beer for the mid-tier regional brands. The bigger conversation needs to be where are the top 10 brands losing that market share? Still in craft…or are we losing to spirits and wine? If the category is losing share to outside the category, we need to understand why and how we get those occasions back. (hint: look at the hard sparkling water, direct correlation to health conscious consumers and spirits drinkers).” — Dane

 

What do you think? Has the craft beer industry peaked?

 

 

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