The craft beer industry may still have some few more good years left in it, but its old has started showing after years of enjoy double-digit growth over the past years. Single-digit growth only happened last year and with it come the concern that the industry is set for a poor performance.
While several factors played a hand in the slowdown, it is most likely that the craft beer industry from here on will be on a downhill journey.
The Industry Is Aging Well
As of 2016, the Brewers Association said the growth of the craft beer industry slowed shy of 6%, which was a seven digit drop from that of 2015 and a twelve digits from that of 2014. Well, nothing good lasts forever; likewise, no business can register a torrid growth forever. But it can be said that the craft beer industry did last longer than expected and its reached full maturity. Now focus is on what the future hold for the industry’s producers.
From the chart above, it’s clear that the industry as seen the last of its good days and it most likely is a victim of its success.
Boston Beer may not be the first in the craft beer industry but it rapidly became the face of craft beer product. Its success was the start of many other home brewers making their leap in the big-league. The Samuel Adams brands also contributed to the cultural changes that lead to changing how a beer tasted a transition for the weal amber-color beer that were in mass production done by Miller, Molson Coors, and Anheuser-Busch InBev to the dark and richer-tasting brew.
Bound To Be Bigger Than Ever
With more than 5,300 breweries in operation, that is an outstanding number that the country has seen it is history. And of these, 99% are in the craft brewing industry. That is a significant figure, a huge leap from that of less than 2,000 breweries in 2011. Based on that information, the breweries growth stands at around 21% annually. Is the craft beer industry running its last leg?
Boston Beer attribute to its depleted sales to wholesalers and retailers over the last twelve months to the increased demand for shelf space. The wholesalers and retailers are considered as the bridge between the producers and the consumers.
The growth of the craft breweries caught the attention of mega-brewers but their sales soon took a similar direction, flat-lining and taking a decline soon after. To answer the poor turn of events, Molson launched Blue Moon and Anheuser-Busch followed suit with Shock Top; nevertheless, the domestic beer sales never improved. So, they began purchasing the smaller players in the industry and Anheuser-Busch bagging much of the competitions. Other big players that made significant investments in the craft brewery industry include Constellation, Heineken, and Molson Brands (NYSE:STZ).
The decline seen in the brewing of craft beers may be attributed to the turn of events stated above. Nearly 1.2 million barrels have been taken out via the acquisitions must of which was from regionals with much of this coming from micro-breweries and brewpubs. As such, the Brewers Associated noted, based on that data, that the craft is bound to get even smaller. This craft beer industry report has an even more in-depth look into this.
Continuing To Take Market Share
According to the trade group, a craft brewery qualifies to be considered as such if it produces around six million barrels annually and with a control or ownership by a mass brewer that is below 25% and mostly uses traditional brewing ingredients and methods. Ballast Point Brewing was a known craft brewer; it was bought by Constellation Brands, an acquisition that saw it pulled out of the group. The same fate befall all the other craft beer makers that were acquired by Anheuser-Busch over the past years.
The remaining breweries, as of 2016, account for the 1.4 million barrels recorded during the same year which was higher than the volume of barrels taken out and a sign of a better things still to come for the industry. Nevertheless, the many craft brewers still in play contributed to an increased competition for the limited shelf space.
A Shakeout In The Works?
The craft beer industry is most likely going to consider some reductions and making alliances over the next years. 97 breweries close in 2016, 29 more than what was seen in 2015 and 51 the year before that. The numbers may seem alarming but the market still has many old players and new ones who keep coming in; thus the increased competition only promises to make it harder for brewers to operate profitably.
Ultimately, the industry will have to consider a craft beer shakeout which may help keep the breweries that are in the pink operational even as the few local favorites fade off.
