As defined by the Brewers Association, a craft brewer cannot produce more than 6 million barrels of beer per year and no more than 25% of the company can be controlled by a non-craft brewer in the alcoholic beverage industry. The market share for craft beer doubled in size between 2011 and 2015, with rising disposable incomes largely explaining this rise in demand. Within craft brewing several models exist. In particular, this blogpost will examine the business models of brewpubs and microbreweries.
The Brewers Association points to microbrews and brewpubs as the main drivers behind craft brewing growth in 2016. Microbreweries sell more than three-quarters of their beer off-site and produce less than 15,000 barrels of beer per year. They sell beer to the public through a wholesaler who distributes the beer to retailers who sell the beer to a consumer. They also can act as a wholesaler selling directly to a retailer, in addition to selling directly to consumers through on-site taprooms and carry-out sales. A brewpub operates as a restaurant that makes its own beer, while selling more than 25% of its beer on site. When the law permits it, brewpubs will engage in selling beer offsite, like a microbrew. Still, a brewpub sells less beer off-site than microbreweries. In fact, when a brewpub sells more than 75% of its beer off-site, it can become reclassified as a microbrewer, following the American Brewers Association’s guidelines.
While both forms have experienced growth in recent years, the microbrew is outpacing brewpubs. Now why is this happening? To begin, the emergence of taprooms due to new laws and provisions allowing on or bordering site sales by small brewers allows a consumer to buy directly from production breweries. Taprooms focus on selling beer, whereas the brewpub attempts to sell both good beer and food. The taproom manages to avoid this money losing operation, reaping the cost of beer sales, while also pleasing customers by allowing food trucks on-site.
Craft beer have come to represent a large share of the total breweries in the U.S. Of 5,005 total breweries, approximately 99% are small and independent craft brewers, according the Brewers Association. The craft brewing industry thus provides a wide variety of beers, in addition to benefiting the public as a whole as it continues to grow. As two vital components facilitating craft brewing success, microbrews and brewpubs are important business models to pay attention to. In the eyes of the customer, the beer may not look different, yet craft brewery owners face the decision of which model to pursue: a brewpub or a microbrew. This decision ultimately plays a major role in the distribution and sale of beer. Regardless, both brewpubs and microbrews remain able to return high margins on the sale of beer by selling directly to customers. As more states allow small brewers to operate such taprooms, microbreweries should continue to flourish in the U.S.