by Tamara Scully
No matter where you live, odds are likely that a handful of craft breweries have opened up nearby. The industry has undoubtedly been growing over the past decade. But the growth seen in 2017, according to the Brewers Association (BA) economist Bart Watson, has changed. And the change is impacting all segments of the industry.
Watson recently presented a teleconference on the topic and has written informational posts on the BA website. The goals of the organization include measuring the growth of craft breweries, based on BA definitions, but not of “craft beer,” which is not defined by the BA, according to Watson.
The BA defines craft breweries as those which are small, producing under six million barrels of beer per year. They also must be independent, or with less than 25 percent of the operation owned by any alcoholic industry representation that is not in itself a craft brewery; and craft breweries must be brewing beer using traditional techniques, via fermentation.
The BA further divides craft breweries into several categories: microbreweries, brewpubs, contract brewing companies and regional craft brewers. Microbreweries are defined as producing less than 15,000 barrels per year, with 75 percent of sales off-site. Brewpubs have more than 25 percent of their sales onsite.
Regional craft breweries, defined as those with over 15,000 gallons of beer sold per year, aren’t in a growth pattern. And the ones showing the most growth are those in the smallest range of this category, below 30,000 gallons per year production, Watson said.
It’s the microbreweries that have grown significantly in 2017.
“Brewpubs had a solid year…but the microbrewery category continues to be the bigger growth engine, both because of the number of breweries in the category and because of higher growth per brewery,” he writes in his BA post “Analyzing 2017 Craft Brewery Growth.”
Microbreweries themselves accounted for about 60 percent of the craft brewing industry’s growth. If microbreweries, which jumped into the regional category during 2017, are included then almost 80 percent of the industry’s growth can be attributed to these small beer makers.
“The volume shifted into smaller production, which typically means higher retail value breweries,” Watson wrote in another post. “The average/median brewery in the data set was a smaller one that the previous year.”
Because breweries may no longer be qualified to be considered “craft” from year to year, those that were in the craft category in 2016, but not in 2017, were removed to make the “comparable base” figures which were used for tallying the industry’s growth. The resulting statistics indicated an overall growth rate of five percent for craft breweries. The market share growth, by volume, of craft breweries also increased by five percent from 2016.
Along with those growth percentages, however, the actual number of craft breweries has grown by 1,000. So that five percent growth is shared by established craft breweries and 2017 newcomers alike. Individual brewery growth has slowed overall, so brewers in general are not seeing growth numbers they may have anticipated based on past years’ figures.
Excluding 2017 newcomers, 27 percent of the craft breweries saw a decline in growth in 2017. About 25 percent of craft brewers saw zero to 10 percent growth rates, while another quarter saw rates up to 25 percent. The remaining 23 percent had over 50 percent growth rates. This last group primarily included the craft breweries which opened in 2016.
While initial growth upon opening may be promising, more established craft breweries may be finding that growth is much slower, or possibly even non-existent. Overall per brewery growth in 2017 was less than one-quarter of that seen in 2014.
“If you’re a brewery in planning — I’d urge you to base your plan on not just the breweries around you that are in their first few years, but also check out those that are a bit older,” Watson advises readers.
Breweries reporting onsite and offsite sales saw both sales venues increase in volume. This group of breweries grew by more than 900,000 barrels overall. Onsite sales grew less than offsite ones, with the offsite sales growth representing about 90 percent of the overall growth in this group.
“For craft, however, nearly 40 percent of its market occurs in the on-premise, a market which has been quite dynamic over the past decade,” Watson writes in another post from March 2018. “I think there is growing evidence that within beer, on-premise trends are better than they have been for a long time.”
Off premises beer has been declining for the past several years. Putting this into perspective, on-premises beer holds a lot of potential for the craft brewing industry. Brewpubs, taprooms and tasting rooms have replaced the corner bar, and their market is growing.
A survey taken in June 2017, by the BA in partnership with Nielsen, found that 12 percent of craft drinkers were drinking more craft, and visiting breweries was one reason why those numbers were up. As per Watson, this category of “experiential” beer drinking is only growing.
In conclusion, the craft beverage industry is growing, but is doing so more slowly. And the growth seen in 2017 is a change from the growth seen thus far.
“Growth hasn’t just decelerated, it has fundamentally changed compared to a few years ago, and those changes are affecting different segments of the craft community in very different ways,” Watson states in the “Analyzing 2017 Craft Brewery Growth.”
Craft breweries: A numbers game
by Tamara Scully