In the wake of the recent reports by the Brewers Association and Nielsen that show a slowing growth in the craft beer market, a flurry of articles hit the internet. Most seem to be portraying the news with a half-full-beer-glass perspective. Perhaps they’re spinning it that way because the word “slowing” makes for better clickbait than the yawn-inducing “yet another year of growth.”
To follow up on Scott’s recent posts on this (“The craft beer market is slowing down” and “What should breweries in planning expect in a slowing market?”), I’d like to offer some additional thoughts.
CRAFT BEER IS STILL GROWING
Yes, the rate of growth may be slowing, but craft beer is still growing, just as it has for decades. It isn’t double-digit growth like we’ve seen in previous years, but 8% growth is still a very respectable number.
“As craft’s base gets larger, as with any industry, it becomes more difficult for it to grow at the same percentage rate.” Bart Watson, chief economist for the Brewers Association, explains. “Yet there is still tremendous dynamism reflected in 8% growth for craft. It’s one of the key points you’ll miss if you’re only digesting the story at the headline level.”
Let’s also not forget that the number of craft beer drinkers is not a finite number. It’s an actively expanding number with lots more potential. Additionally, there are many cities across the U.S. that are still underserved by craft beer bars or breweries.
“While the craft brewing industry is entering a period of maturation, most markets are not near saturation,” Watson says. “That means there are more communities in the U.S. that could support more breweries.”
In a recent Facebook post, author Stephen Beaumont made some great points:
“Anyone concerned that craft beer growth in the United States has slipped to 8% in the first half of 2016 is missing the point. First of all, 8% growth in a stagnant marketplace is still pretty impressive. Secondly, there exists no industry that is capable of sustaining double digit growth indefinitely. And thirdly, as Tim Webb and I point out in the new, fully revised and expanded edition of The World Atlas of Beer, which comes out this fall, the global growth of traditional and untraditional, flavourful beer remains massive.”
FLUCTUATIONS ARE NATURAL
When it comes to craft beer statistics, there will be dips and rises. But if you look at the long-term figures, all of the numbers (number of breweries, volume of craft beer produced, sales, market share, etc.) have seen meteoric rises since the 1980s. Even during the recession, no less. What other industry can make such a claim?
WE’RE AT AN ALL-TIME HIGH AND IT’S GOING TO GET MUCH HIGHER
There are now 4,656 operating breweries in America, which is more than ever. What’s even more impressive is that there are 2,200 more breweries in planning, including 5 or 6 in Bellingham alone (that I happen to know about). Does that seem like a slowing market to you?
GROWTH CONCERNS FOR NEW BREWERIES
Even though it’s exciting to talk about the constantly growing number of breweries in the U.S., I realize going forward from here won’t be all rainbows and daisies. Inevitably, as the market becomes more saturated, some breweries will get edged out. But I think that’s a good thing for the health of the overall herd (as well as beer lovers), as the increased competition will put pressure on breweries to innovate, and it will raise the bar on quality and flavor.
Of course, we shouldn’t only focus on the total number of breweries. Volume and distribution are more important factors. Small neighborhood breweries that only distribute locally pose little threat to breweries in other markets. 20 small neighborhood breweries would all thrive in Bellingham, in my opinion (assuming they all make good beer), but 20 breweries the size of New Belgium wouldn’t do so well in our community of 83,000 — unless they all exported most of their beer out of town.
Coincidentally, most new breweries these days are small with no intentions or aspirations of becoming the next New Belgium or Sierra Nevada or Oskar Blues. In fact, some established, regional breweries are dialing back their distribution networks and focusing more on local sales because shelf space is getting too crowded and distribution costs can be high.
CRAFT BEER HAS ALREADY WON
The fact that all of the big breweries have invested heavily in craft beer is a clear sign that craft beer has won. Flavor, diversity and quality is the future, and they know it. Just today, in fact, MillerCoors acquired Oregon’s Hop Valley Brewing.
Sure, some point out that industrial light lagers are still growing in some markets of the world, but once those markets mature, craft beer will undoubtedly rise in those places, too. It’s just a matter of time.
THE NONEXISTENT BUBBLE IS NOT ABOUT TO BURST
Craft beer is not a trend and it’s not a bubble about to burst. Hell, it hasn’t even leveled off yet.
In a way, the rise of craft beer is a return to the way things were before Prohibition, with a brewery on every corner in every town. It’s also a progressive movement toward higher-quality beer, better ingredients, improved techniques, increased diversity and new flavors.
The current slowing growth could be a sign of a maturing market, as Watson says, or it could be a temporary lull in the multi-decade rise of good beer. We could still see another surge, especially in new, under-served markets.
Regardless, it’s a great time to be a craft beer lover because we have never had so many quality options before. But it’s also a challenging time for craft brewers, who really need to focus on quality and innovation like never before. And new brewers better bring their A-games. Sub-par beers just don’t cut it anymore.