Small and indie craft brewer production dipped 2% in first half of 2023, Brewers Assn economist Bart Watson estimates after “triangulating” various data sources, he shared today. “Fundamentally, all of this stems from consumer demand,” which for craft simply isn’t growing, Bart said. For craft to grow, small brewers need to “generate new demand.” The number of breweries is still growing (albeit more slowly) and at-the-brewery sales grew 2-3% in the 1st half, he estimates. But broader draft biz remains a big problem, flat to down vs last yr and still 20-30% below 2019. “Packaged distribution is still contracting,” tho it improved a bit in Q2. In fact, total BA-defined “craft brewer” off-premise volume moved positive recently thanks to strong gains by Yuengling.

BA volume within total beer universe (i.e. including Yuengling’s premium segment biz) up close to 5% during recent 4-wk periods in Circana scans, Bart showed. But BA volume within Circana’s craft segment (more representative of most BA members) still down around 5%. When it comes to off-premise chains, smaller craft players clearly faring worse that larger counterparts. BA craft $$ up 2% for 4 wks thru Jun 16 in NielsenIQ scans provided to org by 3-Tier Beverages, an improvement from +0.9% for 13 wks and up just 0.1% for 26 wks. But pull out the top-15 players and small/mid-sized craft $$ still down 0.2% for 4 wks, also an improvement (tho a smaller one) from 1.5% dip for 26 wks. Changes on the shelf contribute to this, Bart suggested: “where we’re seeing shelf sets get cut is more in that long tail.” Indeed, NIQ data from 3-Tier shows total BA craft distribution pts down 1.8%, but small/mid-sized craft distribution down 3.6%.

Grains of Salt: Survey Data and Big Shipments Drops “Take these results with some grains of salt,” Bart advised. Part of his analysis based on survey of members that doesn’t get as many responses and isn’t as extensively checked or cleaned as BA’s yr-end survey. After various attempts at weighting the survey results to correct for possible issues, Bart consistently ended up in the range of down 2-4%. Grouping breweries by size didn’t generally diverge from a range of flat to -5% (tho brewers under 500 bbls in 1st half reported far better trends overall). He also referenced estimate from this time last yr that BA craft grew 5% in 1st half of 2022. Looking back, it was probably up a little, but “I don’t think it was plus 5%,” he acknowledged.

Note too that current estimates suggest total US beer shipments are way down thru first half of 2023, to tune of a 5%, 5-mil bbl loss thru June. Based on reports by major US brewers, once again hard to estimate that small brewers outside the top-10 gained share of US biz.

Improving Taproom Trends as Total Brewery Count Nears 9,500 Bart’s analysis of data from taproom POS-provider Arryved also points to trends generally improving thru Q2. He estimates a big volume gain in Jan off a considerably smaller base, while Feb and Mar flattened out a bit and April volume dipped 3%. Come May, total at-the-brewery sales ticked up 3%, Bart figures, before a 6% jump in June. Meanwhile, preliminary opening and closing analysis continues to suggest consistent slowing of openings but still no sharp spike in closings. BA estimates the total US brewery count increased another 2% to 9,456 in June.

Watchouts: 2 Mil Missing Draft Bbls; Pricing, Inflation, Spending & Student Debt “Draft beer never really came back from the pandemic,” Bart reminded. Keg volume started to slip in the US in 2014 after building for a few yrs, he showed. It dropped from close to 20 mil bbls to about 17.5 mil bbls from 2014 to 2019. But even if you extend that trend thru the Covid period, the industry’s still “missing two million barrels from the overall environment.” He also estimates that the avg value of draft beer to restaurants was cut in half from around 3% of sales in 2017 to more like 1.5% in early 2023. So “when do retailers stop caring?” That is, at what point will operators stop investing in draft “infrastructure,” making it even hard for beer to rebuild it?

Pricing and spending data point to some other watchouts, Bart explained. Avg off-premise prices for BA craft averaged around 1.6x avg beer prices in Circana data in early 2020. But that’s trended down to close to 1.45x in recent periods, he showed. That “creates both opportunities and challenges.” A smaller price-gap could aid trade-up. But it also means the segment is “eroding that price premium” and could mean slimmer margins. “Beer has taken on a lot less price” than food in last yr-plus, Bart reminded, even if price index for beer outpaced overall inflation since late last yr. In all, consumers “saw their savings and purchasing power get eroded by inflation.” So that “overall environment” may present another pressure point for small brewers. Similarly, the growth in the number of bars and restaurants “stalled” around the same time that the Consumer Price Index for food away from home hit +7% vs yr ago, back in Apr 2022.

The potential that student loan payments restart this fall is another “watchout,” in Bart’s view. A Jefferies analysis pegs those payments as “equivalent to 3% of retail and food service spending.” That probably won’t “go away overnight,” Bart said, but considering that many of the 27 mil folks with student loans took their savings during the pause and “rolled it into new debt” for a “car payment” or “other loans,” that “creates a little more friction,” especially given these folks in their 30s and 40s are at “prime craft ages,” Bart observed.

For many small and mid-size bevcos the challenge is generating awareness and sales. For Reed's Inc that's not main issue; it's filling that demand that's dogged co off and on (mainly on) for years. Its Q2 was no exception, with net sales dropping 27% to $10 mil as peak summer selling season slipped away, with return to normalized inventories anticipated for later this month. This time the snafu occurred not because of production problems but simply because $5.6 mil in new financing didn't arrive in time to line up inputs and copacker line time in orderly way. Co pegged shortfall at $1.6 mil for period, $3.2 mil for first half. Had co notched those sales, period still would have been off 15%, then. Virgil's brand was particularly hard-hit.

Black Rifle Coffee yesterday offered further evidence that its controversial push into bagged coffee is paying off but moderated expectations for RTD line whose explosive growth has tailed off a bit as broader category subsides. Net revenue for veteran-founded and -operated co grew 39% to $91.9 mil in Q2. Among 3 key segments, Wholesale including bagged, pod and RTD coffee surged by 86% to $50 mil. DTC segment eased back 6% to $34.6 mil as co moderated its spend in increasingly expensive channel. Café segment, dubbed Outposts, rose 25% to $7.4 mil as co added 11 locations for total of 31 now. Bagged/pod coffee more than doubled its doors from 3,730 of launch partner Walmart last year to 8,770 while RTD coffees ended period in 82,410 doors, up from 66,770, on way to targeted 100K by year-end. DTC subscribers ebbed to 239,500 from 287,800, still easily largest sub base on branded side, as co-ceo Tom Davin emphasized. Shares surged over 10% in trading today.

Canopy Growth posted smaller net loss in its fiscal Q1 ended June 30 as net revenues grew sequentially. But co again raised doubts about its "ability to continue as a going concern" in 10-Q filing, calling its future into question after the latest in a string of losses. Stock dropped another 11% this wk to just $0.40/share. Now down 83% YTD with clock ticking to hit $1/share minimum or face Nasdaq delisting later this yr (see July 17 issue).

As JuneShine canned cocktails continue to fuel co's growth and rise within its portfolio mix (see Jun 29 issue of sibling pub Craft Brew News) JuneShine is now takin' direct aim at canned cocktail leader, AB's Cutwater, for its sugar content in latest digital ad campaign "Jackpot." Indeed, JuneShine specifically calls out that "the leading canned margarita has 27 grams of sugar" while JuneShine lime margarita only has 6g sugar "from real fruit juice" and "tastes f***** amazing," via spoof news segment in digital ad. "And since JuneShine saved a bunch of money on all the sugar they would've put in a canned cocktail, they decided to give all that money back to their customers with the JuneShine Jackpot," ad continues. Customers can go to Juneshine.com/sugarsucks for a chance to win some of the $20K "Jackpot" in cash giveaways. (This article first appeared in Craft Brew News.)

As one fed ct offered resounding support of a state's ability to block direct wine shipments from out-of-state retailers, another fed ct refused to modify an old ruling that functionally allows such shipments. Just another week in the give-and-take between alc bev laws and the dormant Commerce Clause. (Recall, 2 new suits seeking direct shipments or self distribution by out-of-state brewers also filed just this mo.)

"Draft beer never really came back from the pandemic," Brewers Assn economist Bart Watson reminded while presenting estimate that BA-defined craft brewer production dropped 2% in 1st half of yr (see sibling pub Craft Brew News for more detail). Decline in US draft biz predates the pandemic, tho that obviously exacerbated the problem, he showed. Keg volume grew between 2010 and 2014, when it neared 20 mil bbls. But by 2019 it slipped to around 17.5 mil bbls. If you extend that trend out over next 4 yrs, draft biz would've fallen to around 15.5 mil bbls this yr. But US biz is on pace for just 13.5 mil bbls in 2023, suggesting 2 mil "missing" bbls.

Tho plenty of openings still on the horizon, reports of double-digit closings came in over the last couple wks, a noticeable acceleration at the start of Aug. In Delaware, one of the state's oldest breweries will close after 20 yrs in biz. Fordham and Dominion Brewing employees were "blindsided" as out-of-state owners abruptly decided to shut it down without much explanation, Delaware Online reports.