What’s behind Craft Beer numbers?

As the Brewers Association released their mid-year report showing  5% as the growth of craft beer for the first half of 2018, we took a critical look at what is behind the numbers.  Averages never tell a total story such as an average household size of 2.58 in the U.S. captures single people in apartments to families of 10, and the police never want to find two-and-a-half people in a house!  Though there is overall growth, results are clearly a mixed bag.  Many large national and regional brewers, even craft brewers, are struggling while some small and local breweries often thrive.  Yet we see  some small, and even mid-sized breweries shuttering while new breweries open.  According to their report, there were 6,655 active breweries in the U.S, compared to 5,562 at the same time last year. While filings show another 2,500 to 3,000 breweries are in planning, based on active Alcohol and Tobacco Tax and Trade Bureau (TTB) licenses, some of those won’t open and some are not truly new brands. With overall beer consumption off slightly, this means more breweries are competing for the same dollars. Some breweries have to lose for others to gain. For example from the year 2000 to 2008 there were less than 1600 breweries in the U.S. That more than doubled by 2014 at over 3,000.  Now it has doubled again while overall beer volume sags.  More beers to drink, to split up volume between brewers. For a number of years the mega-brewers lost volume with Bud, and others. Now as the mug gets divided up some of the big craft brewers feel it.  There are simply more brewers producing beer than ever and beer sales are basically flat.

New Belgium and Sierra Nevada both lost volume in 2017, with New Belgium also losing a VP of marketing this year after only 16 months on the job, after losing their long-time brewmaster and their HR head.  Brewers Association Economist Bart Watson wrote this week that “the distribution of growth rates is all over the place and their are plenty of negative numbers.. just as there are some double-digit growth numbers from widely distributed breweries.” (brewers association.or July 31, 2018)  a MillerCoors blog reports that Samuel Adams brand has posted double-digit losses, yet the company is showing increases due to non-beer beverage growth.

Craft Beer Growing: The Beer Purchasers Index from the National Beer Wholesalers Association is one I watch as it reports actual beer withdrawals from distributors, though granted won’t chart self distributing local breweries, but neither will scan data from IRI or Nielsen. That data supports that craft beer withdrawals are positive though not as strong as last year.  Growing fastest are imports and specifically Mexican imports which are in favor with Millennials. For example, the “Sol” brand of MillerCoors posted over 250% growth in a recent four week period.  Local craft brewers are riding that wave with popularity of beers like Sun King Pachanga and Bier Brewery Chica International Pale lager.

Small growing more than large:  In the numbers from the Brewers Association small breweries show the most growth.  Looking only at scanner data, representing beer flowing through stores such as supermarkets, the smallest brewers category is up nearly 31% in equivalent units as many craft breweries continue to gain supermarket distribution, and three-fourths of microbreweries and brewpubs reporting increases in sales.

Thinking locally in Indiana expect to see Sun King and Daredevil with positive sales. On the micro side Backstep brewery, which opened late in 2017 and is the only brewery in Crawfordsville, is enjoying strong local sales and growler fills, as is Switchyard Brewing which opened in May of this year in Bloomington, Switchyard is the fifth brand to brew in that town and the eighth local  taproom.   (Related Story on Switchyard here)    Any local brewery that has just average beer or worse, that has a bad business plan or lack of funds, and that cannot garner community excitement is likely to struggle. Switchyard hired a former brewer from Sierra Nevada and cranks out solid beers while touting a community meeting/board room that has state of the art projection and white board.

Mixed results are not doom and gloom. Though Millennials look to flavor over brand loyalty and the preference for beer over wine or cocktails now lags, there are many examples of new beer items catching on.  While IPAs are strong and sours have soared,  many items that traditional brewers may scoff at including fruit infused beers, offer the flavors many of today’s beverage consumers are looking for. One small craft brewer/owner whose brands are doing well told me recently, my consumers walk in the door and ask “what’s new.”

Local thrives.   Mid-tier craft brewers are expanding outside of state lines with a flurry.  In Indiana Upland markets their sours in twenty-five states.  Sun King has been Indiana’s brewery in term of local craft sold in-state and is now marketing outside of Indiana as well.   There is plenty of good news in the numbers for those with ambition and flexibility.   We expect the numbers to get even more complicated over the near term.

Cheers, go support your craft brewery by having fresh beer!

Greg Kitz