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Thoughts on the Brewers Association’s Growth Report

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Every spring before the Craft Brewers Conference, the Brewers Association slowly rolls out their annual updates by cataloging the Top 50 Breweries and Craft Breweries. Then just yesterday they announced the 2017 stats on brewery openings, closures, and industry performance.

The BA usually tries to spin things in a positive sense, titling their press release “Small and Independent Brewers See Sustained Growth in 2017.” Aside from the expected branding of “Small and Independent,” which have become definitive buzzwords, the numbers generally bear out with growth in two key areas.

Their headlines state that the “2017 total craft brewer volume growth” was 5% versus a -1% decline for beer overall, and the “2017 craft retail dollar value growth” was 26 billion or 8% more growth than 2016. Last year also saw a 16% increase in breweries in operation to 6,372 total (including 106 large, or non-craft brewers).

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While their release lightly touches upon the downsides of the report, most every outlet covering this story appeared more focused upon the negatives than did the BA. Last year saw 997 breweries open and 165 breweries shuttered, which they described as “a closing rate of just 2.6 percent.” Further, the BA’s chief economist Bart Watson went on to state:

“Beer lovers are trending toward supporting their local small and independent community craft breweries. At the same time, as distribution channels experience increased competition and challenges, craft brewer performance was more mixed than in recent years, with those relying on the broadest distribution facing the most pressure.”

There’s no doubt the numbers are mixed, yet the response from other periodicals was, as expected, a little more hyperbolic.

Most notably, Brewbound, who entitled their article “A Record Number of Breweries Opened in 2017, But Closures Are on the Rise” featured a “below the fold” snip of the BA’s infographic that the creators decide not to feature – the data showing closures.

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But the most eye-popping stat in Brewbound’s feature was that “the number of breweries that closed last year increased by 70 percent, to 165.” Yes, 2016 saw 96 closures, though also saw 826 openings. Let’s try to keep things in perspective…

Aside from local writer Jeff Alworth, who entitled his excellent analysis “Have We Reached Peak Breweries?,” I haven’t come across any other local Portland coverage as of yet. And while I agree with Jeff that the large number of “Microbreweries” – those selling 75% of their 15,000 bbls+ annually offsite is disconcerting, I simply haven’t reached the same level of concern.

As I wrote about this nearly 2 years ago, in a piece entitled “Bursting the Hype of a Craft Beer Bubble,” demand hasn’t ebbed. Yes, the shelves are packed, the biggest producers are struggling, and these “Microbrewers” are striving to get their product to market, yet craft beer distribution has become a far more a local and sub-regional thing, instead of the multi-state, hyper-regional footprint it used to be. Not to mention more draft sales vs. bottle or can distribution than in the past.

Those 3,812 or so brewers distributing the bulk of their output have more non three-tier distribution options than ever before: online, in dedicated craft beer bottle shops, in convenience stores, but most importantly, in smaller local outlets including pubs, restaurants and other tap locations. Some outlets now provide increasingly prominent shelving, in addition to sales and special events for smaller breweries.

Many allude to the wine industry having over 9,000 wineries in the U.S. which is a fair measure, though it is a bit more mature. More importantly though, wine might just be the best way to postulate how much more the beer industry could continue to grow.

Just think… these wineries tend to be rural, forced to bring their product to market or draw tourists, and otherwise service a local populace. I’d say that far more of America’s 6,266 craft breweries can be found in more populated metropolitan areas, where getting the product to market is easier, and more profuse with options, then also enjoy wine’s tourism angle as well.

Combine that with a product that’s less niche and less expensive, I can’t see how even this closest example of market saturation would be able to project where the industry’s ceiling lies. Will there continue to be closures? Certainly. Will growth slow or stop? Quite possibly, though save another economic crisis, I don’t see any catastrophes on the horizon.

Yes, growth is no longer in double digits and the market has plateaued for now, yet I’m not ready to sound any alarm bells, yet.

 

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