Update on Craft Beer

The craft beer industry is a booming one that has seen a meteoric rise throughout the past decade all over the country. After seeing the Brewers Association data from the past year, the market seems like it is showing no signs of slowing down.

The Brewers Association has a lot of interesting data that breaks down total craft beer into many different segments. Those segments range from regional craft breweries to microbreweries to brew pubs, and finally to contract brewing companies. The two segments that have most of the craft market share are the regional craft breweries and microbreweries. According to the Brewers Association, a microbrewery is defined by having sold less than 15,000 barrels of beer per year, while a regional craft brewery can sell between 15,000 and 6,000,000 per year.

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The latest report from the Brewers Association for 2014 shows that the microbreweries and regional craft segments of the market increased significantly in the past year. Microbreweries increased their production of barrels by just over 25%, going from 2,377,107 to 3,171,582 barrels. Regional craft breweries had an even larger increase in production at a rate of over 31% and going from 11,973,628 to 17,559,294 barrels. With all of this increase calls the question as to how much more can the craft beer market share increase.

Bart Watson of the Brewers Association wrote an interesting piece in April of this year using statistics to try to determine the capacity for craft brewing companies. Right now the total production of craft beer per year is 22.2 million barrels. Using an algorithm that includes a 16% compound growth rate over three years, Watson makes the case that the capacity is 34.6 million barrels per year. This indicates that production right now is at 64%, which should enhance more growth to the market.

The main point that Watson makes is that the craft beer industry should continue to be successful, and that there should be areas of entry for new firms to enter the market for at least the next few years.

 

 

8 thoughts on “Update on Craft Beer

  1. It does seem like the craft beer industry will continue to be successful. It has become very competitive and popular craft breweries are expanding to meet demand. One way to increase operations is to be aquired by a larger macro-brewery. This provides the necessary capital to innovate and keep up with the market, so it can be a favorable option so long as independence is maintained. MillerCoors recently acquired local San Diego brewery Saint Archer, who will still be able to operate as a separate entity. Other craft breweries are looking to hire on more marketing and management positions, as well as expand their facilities in order to increase production.

    • To go off of what Katie mentioned with MillerCoors, this buying out of micro-breweries is a common trend with the larger companies, but they need to keep that in mind when bringing up the subject these smaller breweries. This article ( http://money.cnn.com/2015/02/02/media/budweiser-macro-beer-super-bowl/ ) is about the Budweiser commercial during the last Super Bowl. It was interesting how the ad campaign from AB-InBev joked about the different microbeers even though their company is now a parent for many of these. There are still a large amount of Budweiser drinkers, but this also might not have been the smartest decision with the increasing number of micro breweries and craft beer drinkers as highlighted in Jordan’s original post. In the grand scheme of things I don’t believe that this affected either market all that much, but it would be interesting to see how AB’s acquired micro-breweries reacted.

      • AB’s craft beer mockery has continued since the Superbowl advertisement. Budweiser’s twitter page ran a series of viral marketing campaigns, with ads poking fun at craft beers through posts such as “Nobody cheers for the guy who brings a watermelon wheat beer. #ThisBudsForYou.” Clearly the AB doesn’t mind mocking the fancier side of their beverage sector.

        • I think that part of AB-InBev’s strategy in mocking these craft breweries was to create a dichotomy between their mass-produced beer like Bud Light and the craft breweries they own. Each craft beer is meant to be enjoyed in a unique situation whereas Bud Light is targeting consumers who want a beer for every occasion, as evident by their “Up for whatever” campaign. Clearly, these craft breweries understand the risk they are taking by selling out to the largest beer company in the world, and may even encourage this marketing strategy to further separate themselves from mass-produced beer.

  2. I think Katie makes a great point in noting that the big beer companies like Heinken and MillerCoors are using M&A activity to tap into the craft beer market. The craze for craft beer among millinneals seem to be one of the main driving forces behind the rising statistics that Jordan mentions earlier. Lagunitas, a popular craft brewery is now 50 percent owned by Heineken with Lagunitas hoping to use Heineken’s international distribution channels to extend into Europe and Latin America (http://www.sacbee.com/food-drink/beer/beer-run/article36332292.html). I would expect these kind of mergers and acquisitions to become commonplace as the craft breweries can offer the beer giants a popular product while the beer giants provide the resources and infrastructure for more effective production and distribution taking advantage of economies of scale.

  3. Can the management structures of a macro brewer provide the autonomy that to date has been part of the microbrewery success story? For example, such small breweres are constantly launching new beers with the expectation that some will fail – there’s no year-long test-marketing analyzed and then reviewed by a hierarchy of committees. New marketing campaigns aren’t carefully vetted by multiple committees. And so on. Can you run a big business that way?

  4. Total mkt 191.7 mbbl up 0.5% so last year 191.7/1.005 = 189.8
    … net gain 1.9 mbbl

    Craft mkt 21.8 mbbl up 17.5% so last year 21.8/1.175 = 18.6
    … net gain 3.2 mbbl

    Import mkt 29.4 mbbl up 6.9% so last year = 27.5
    … net gain 1.9 mbbl

    So mass-market beer net loss 3.2 mbbl or -2.1%

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