We have reported this before, but if you’ve walked down the beer aisle of any grocery store, you didn’t need us to tell you: Craft beer has grown like crazy during the past decade. And it still is growing. But maybe not as rapidly as it has been during recent years. In this article, Steve King, partner at Emergent Research and a regular contributor to SmallBusiness.com, explores why.
By the Numbers | 2016
Every 11 Hours | How often a new craft or microbrewery opened in the U.S.
24.6 Million Barrels | Volume of micro and craft beer sold
12.3% | Percentage of the beer industry’s total beer volume produced by micro or craft breweries
$23.5 billion | Sales of micro and craft beers
21.9% | Percentage of U.S. beer industry’s revenue generated by micro and craft
Despite these frothy numbers, there were also some sobering craft beer stats in 2016
While the craft beer industry is still growing, the growth is starting to slow.
13% | 2015 rate of growth in volume of micro and craft beer sold
6% | 2016 rate of growth in volume of micro and craft beer sold
16% | 2015, rate of growth in sales of micro and craft beer
10% | 2015, rate of growth in sales of micro and craft beer
Reasons for Craft beer’s slowing rate of growth
1. It is a victim of its own success
Harding Loevner’s report, “Craft Beer is Going Flat, Can Craft Spirits Continue the Insurgency?,” points out that a big reason for slowing growth is that craft beer is a victim of its own success. “The groundswell of newcomers resulting from lower barriers to entry has fragmented the market, making it increasingly difficult for craft breweries to stand out from their peers and grow their brand.”
2. Big brewers are fighting back
They are releasing their own craft style beers and acquiring craft brewers. According to the Brewers Association, large brewers acquired microbrewers that produced roughly 1.2 million barrels of beer in 2015. This was about 5% of the entire craft beer production in 2015.
3. Market Saturation
Harding Loevner also points to market saturation as a source of declining growth. Their analysis shows an estimated 75% of the US drinking age population resides within 10 miles of a brewery.
The Harding Loevner report says, “there are natural limits to how much of the market will pay $17.49 per six-pack (the current retail price of a Dogfish Head “Flesh and Blood IPA” on Craftshack.com).”
Is the craft beer boom over?
No. And it’s especially not over globally. As the chart below shows, there’s plenty of room for craft beer growth globally.
| | < 1% | China
| 1% | Brazil
| 1% | Finland
| 1% | Croatia
| 1% | Italy
| 2% | Singapore
| 4% | Denmark
| 4% | France
| 4% | Poland
| 5% | Canada
| 5% | UK
| 5% | Australia
| 6% | Sweden
| 12% | New Zealand
| 12% | USA
Sources: GlobalData Consumer, Bank of America Merill Lynch Via: Harding Loevner
Also, there are still pockets of high growth here in the U.S.
According to CBS MarketWatch’s Craft-beer glut starting to take its toll on sales, smaller microbrewers are doing much better than larger ones. Key quote: The 5,000 small brewers shipping fewer than 100,000 barrels a year had an average volume growth last year of 14%, double the growth rate for the craft category overall, according to Beer Marketer’s Insights. At the same time, the article points out that “shipment volumes declined for 16 of the top 36 craft-style U.S. brewers last year.”
The more micro the brewery, the more likely it’s doing well.
Photos: SmallBusiness.com, istock