Commentary on the State of Craft Beer

Over the past few months, I’ve heard the narrative from a few different sources that craft beer is starting to struggle. Sales are slowing. Production is decreasing. New competition, in the form of hard seltzer, hard tea, hard kombucha and flavored malt beverages, are beginning to intrude on craft beer’s popularity and growth.

The latest example of this is the recent Brewbound article, Many Top 50 Craft Breweries Struggling to Grow, Brewers Association Data Suggests.

To be fair, that article provides much better context than others I’ve seen, but I’m citing it because it’s the latest and got me thinking about this topic.

As that article suggests, the 50 craft breweries producing the most beer are struggling to grow. Many are actually shrinking. This would include Yuengling, Sam Adams, New Belgium, Boulevard Brewing, Brewery Ommegang, Deschutes, and Alaskan Brewing.

It would be easy to see this data and apply it to the entire industry, branding the whole industry as declining and in danger. I’ve seen a number of people insinuate that, though not outright exclaim it. Some of these same people, pointing to the upward production and sales seen from other alternative alcohols, namely hard seltzer, have hypothesized that some craft beer drinkers are moving on. They attribute this mostly to lifestyle shifts, with drinkers looking for more health conscious alternatives.

These arguments, insinuations, and hypotheses seem to neglect a good amount of content though:

  • To many craft beer consumers, Sam Adam, New Belgium, and certainly Yuengling, are not viewed as “craft beer.” I know they fit the Brewers Association definition, but I think there’s a gap between their definition and the definition of many consumers. Part of this is because the terms craft brewery and microbrewery have essentially become one in the minds of many drinkers; many don’t even use the term microbrewery any longer. However, in production and sales there’s a sizable difference between the two and the BA still distinguishes between the two, since their definition of craft brewery starts at 15,000 barrels of production a year. But even using their definition, 15,000 - 6 million barrels produced per year, there’s a huge size difference.

  • I’m shocked I haven’t seen this thinking stated more, but how are more people not hypothesizing that the production and sales the top 50 craft breweries are losing, as well as the losses of other larger craft breweries, are not being reallocated to smaller, regional craft breweries? This seems more likely than craft beer losing share to hard seltzer. I’m sure there’s a small segment switching to hard seltzer, but I’m seeing many more wine and cider drinkers making the switch to hard seltzer. The BA even provided data in its analysis of the top 50 craft breweries to support that regional breweries could be taking share from national craft breweries:

    • Seattle’s Georgetown Brewing grew 37% in 2018, but they only distribute to Washington, Oregon, and Idaho.

    • Indiana’s Three Floyds grew 25% through distribution only to Indiana, Illinois, Kentucky, Ohio, and Wisconsin.

    • Cincinnati’s Rhinegeist Brewery grew 18% while distributing only to Ohio, Indiana, Kentucky, Pennsylvania, Massachusetts, and Tennessee.

    • Outside of the top 50, but still considered a larger craft brewery, Tree House Brewing in Massachusetts increased volume 130% - and they don’t distribute at all. They only sell their beer out of their taproom.

  • It’s hard for the BA to track the production and revenue and smaller craft breweries. They have to rely on those companies self reporting to them. While it’s good for the industry to have this compilation of data, some small breweries just don’t report it. Therefore it’s hard to get an accurate read on if smaller breweries are taking share from the bigger ones.

So is the craft beer industry hurting?

I would say no. The big breweries are struggling, but this is seen in many industries where evolution and innovation has happened quickly. It’s harder for big companies in any industry to adjust to a massive increase in competition. Local and regional breweries seem to be thriving. There’s a lot of growth happening in that sector. Sure, every now and then you hear about a small one closing, but again, that happens in many industries where explosive growth is seen by upstarts.