“Very crowded and competitive marketplace” discussed from many different angles in Brewer Assn’s state of the industry report by director Paul Gatza and economist Bart Watson at Craft Brewers Conference this morn. “It’s a new world” and it’s “changed significantly,” said Paul, with “regional brewers squeezed from large brewers above and small brewers below.” It’s now “beyond the point where everyone rising with craft,” Paul added. Microbrewers (3,132 of ’em), under 15,000 bbls, jumped 27% to 5 mil bbls in 2016. That’s a gain of at least 1.050 mil bbls. So microbrewers accounted for almost 75% of the segment’s 1.4 mil bbls growth (in BA definition). And about 40% of total craft growth came from taprooms, which grew from 1.75 mil bbls to 2.3 mil bbls, according to Bart. Paul called microbreweries and taprooms the “happiest part” of the segment. “For a lot of people in this room, you are selling everything you can make.” (Also includes lotsa newbies). Paul added: “I will caution you. It may not always be that way.” Meanwhile, brewpubs (1,916) also generated some of their best growth in recent yrs; up 14.8% to 1.35 mil bbls. But regional brewers (186) up just 0.9%. They are almost 75% of BA craft volume, but up not much more than 150,000 bbls. Got about 10% of segment growth.
Slower Growth a “New Norm”; Big Brewer “Feeding Frenzy” Slowed; Capacity Decisions Craft segment’s 6% growth last yr is still “pretty darned good,” said Bart, even if a big slowdown from 12% in 2015 and 18% in 2013-2014. Non-craft domestic brewers were down 2%. Think of that slower growth “more as the new norm,” going forward, said Bart. But even with growth slowing and an already crowded marketplace, there’s still “a tremendous number of openings.” Over 800 craft brewers opened their doors last year for the 3d year in a row. And there are still 2000 more in planning. Meanwhile, big brewers purchased a number of craft brewers, but that “feeding frenzy,” has “slowed a little bit,” according to Paul.
Interestingly, craft brewer capacity didn’t grow that much last yr. Of 1,000 brewers surveyed, capacity only up 2.8%, Bart noted. Overall, craft capacity still around 40 mil bbls, while BA-defined craft produced 24.6 mil bbls. That utilization rate of about 60% is rather low, especially as growth slows. Some brewers who are “overleveraged” and built too much capacity could get caught in this trap, and craft even seeing some “bankruptcies,” noted Paul, in a “different environment.” So those “decisions” of how much to build become a critical success factor. Once again, Bart said, expect closings to go up. “With more competition, there are going to be more closings,” Bart added.
“There Is Still a Lot of Growth Out There,” Fast-Growing Sessionable Styles; Export “Headwinds” And yet, overall message one of optimism, despite these darker tinges. “There’s still a lot of growth out there,” asserted Paul, asking “who will get it?” Could be “larger brewers climbing into craft space” or craft brewers brewing lighter styles, in styles closer to those of big brewers. “A variety of lighter styles showed tremendous growth,” noted Bart. Golden Ales up 51%, Saisons/Farmhouse ales up 44%, Pilsner, wheats and Belgian wits all up double digits in IRI last yr. Exports’ 4.4% growth in 2016 was slower than expected, but Paul explained some important “headwinds” like a strong dollar and “small, nimble, local, competitors” popping up now in other countries. Sound familiar? American craft brewers “exported craft revolution” but now other countries are developing their own craft scenes.