The Future of Craft Beer

The craft beer industry as a whole is beginning to embark on unknown territory. In late 2015, the number of craft breweries in the United States reached an all time historical high of 4,131. Those numbers have not been seen since the 1870’s, decades before the prohibition. In the 1970’s the U.S. passed laws that allowed people to legally brew beer at home, which lead to the craft beer industry skyrocketing from less than 100 breweries to it current number. People are currently leaning on the side of cautious optimism when looking into the future of the industry.

The Brewers Association has set forth a goal of capturing 20% share of the beer industry as a whole by 2020. By the end of 2015, craft beer held an 11% share of the industry and a 19% share of the dollar sales of beer. This may begin to spike upward quickly in the next few years in response to some grey area in terminology and due to larger companies acquiring the competitive craft breweries. In 2010, the Brewers Association changed the definition of a craft brewery from one that produces 2 million barrels to on producing 6 million barrels in order to include Samuel Adams’ Boston Beer, Sierra Nevada and New Belgium. Just a year later the definition was amended once again to include beers brewed from corn, rice, and other adjuncts, meaning large brews such as Yuengling, Straub, and Minhas are now considered craft beers. With the trend of increased acceptance of craft breweries by consumers, large companies, such as Anheuser Busch (AB), have begun to buy up the competition. AB currently owns Goose Island Brewing Co., 10 Barrel Brewing,Long Island Blue Point, Elysian Brewing, and many more. These acquisitions have sent a ripple through the craft brewing community for fear of “selling out” and, one day, possibly seeing the industry absorbed into large conglomerates that won’t celebrate or continue the culture of craft beer.

The sheer number of breweries opening in the market each year could add to the downfall. Over the course of a decade the number of craft breweries has grown from less than 1,500 to over 4,000, with 2,000 more breweries set to open. Widespread local support for craft brews has lead to an average of 2 new breweries opening every day. The movement has spread across the country and now 75% of the legal drinking aged adults in the United States lives within 10 miles of a local brewery. Though, there is still room for untouched geographical markets, for 64% of craft beer is made in just 10 states. These high density markets make it difficult to build a unique and coveted brand, giving way to the trend of small breweries selling out to large conglomerates. Since so many beers are on the market, small brew companies can only hope that their beer is being represented sufficiently by their distributors. But, now a days, it is not uncommon for distributors to have 2,000 SKU’s in their contracts, counting a lot of breweries out of the marketing game for a lack of a large budget to make sure their distributors make their specific beer a priority. These factors are leading people to believe that the 20% market share predicted in 2020 for craft brews will actually be mostly comprised of portfolio’s similar to AB’s.

Craft breweries have and will continue to add to local economies. In the state of Virginia craft brews generated $1.045 billion in revenue last year from its 78 breweries. In the U.S. over $55 billion is contributed to the economy and over 424,000 jobs. A survey has shown that one in every five dollars spent in the US is on beer and one in every 10 dollars is spent on craft beer. American craft breweries do not show any sign of slowing down openings in the future. As long as there is local demand for beer, breweries will continue to seek to be their neighborhood brew.

Trends in the upcoming year are moving in several different directions. The one that is making the biggest splash in terms of stealing market share is the creation of hard ciders. With the social and cultural trend towards healthier life styles and also appealing to women, the sale of ciders has grown exponentially in the past few years. Hard ciders are not technically a beer, usually classified more toward a sparkling wine or in its own category, but threaten to leave a huge dent in the craft beer market. Since the explosion of craft breweries in the U.S. there have also been and influx of flavor options to appeal to many different people. Women are the next segment to be targeted by craft breweries. It has been calculated that women have influence on about 80% of all purchases made, yet only around 23% of women that are drinking age choose to drink beer. Breweries are going to begin to appeal to the palettes of women creating notes that will attract an entirely new market segment.

As for the flavors of beer moving forward, there is constantly a roller coaster of “in” and “out” trends. Predictions for 2016 include, hard sodas, such as the Not Your Father’s Root Beer. Breweries have begun concocting variations on ginger ale and orange soda. Crowlers will become more popular in the next year. This is the can version of a glass growler. The can is a one time use, but allows for a longer shelf life after purchasing because it does not let light in. IPA’s will begin to grow less bitter as brew masters are appealing to a broader audience and bringing in the female segment. And lastly, based off of the success of bourbon barrel brews, companies are looking for the next big liquor based beer. The tallies are in and it has been predicted that the next big beer will tequila barrel beer.

 

SOURCES
http://www.pastemagazine.com/articles/2015/10/yes-the-future-of-craft-beer-is-in-question-dont-p.html
https://www.mainstreet.com/article/why-craft-beer-will-be-almost-unrecognizable-by-the-year-2020
http://www.craftbeer.com/craft-beer-muses/why-women-are-a-critical-part-of-the-future-of-u-s-craft-beer
http://www.nytimes.com/2015/10/22/opinion/craft-beer-is-booming-but-some-brewers-worry-about-the-future.html?_r=0
http://www.investopedia.com/articles/investing/102715/future-craft-beer-industry.asp
http://vinepair.com/wine-blog/craft-beer-bubble/
https://www.brewersassociation.org/statistics/economic-impact-data/
https://www.brewersassociation.org/statistics/economic-impact-data/
http://fortune.com/2016/01/09/craft-beer-trends-2016/
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