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Live at the Craft Brew Conference: Is the Pint Glass Half Full or Half Empty?

Pandemic-related channel shifts subsided in 2021, and on-premise sales bounced back, but there are both encouraging and concerning signs for the craft brew industry. Brewers Association's Bart Watson captures the landscape in his State of the Industry.

The Brewing Association's Economist Bart Watson delivers the good news and the bad news in Minneapolis.
The Brewing Association's Economist Bart Watson delivers the good news and the bad news in Minneapolis.

The craft brew industry bounced back in 2021, with 8% growth over the unavoidably abysmal pandemic year of 2020. That sounds good, but only if you conveniently ignore 2019 (pre-pandemic) trend lines. The bounce-back was real, and gains were strong for taprooms, brewpubs, and microbreweries, but the landscape has changed. Even without the ongoing pandemic reverberations, longer-term demographic and behavioral shifts mean breweries face opportunities, hurdles, and growing new challenges (and challengers).

The biggest picture snapshot doesn’t tell us much: half of breweries responding to Watson’s survey are at or above their 2019 numbers, and half are at or below. So, it takes some economist-level digging into the numbers to start seeing actionable trends.

“Like the proverbial pint half full or empty, you can look at what happened in the past year and have very different views depending on your size, business model, geography, and more,” Bart Watson, Chief Economist for the Brewers’ Association, said today in his annual State of the Industry Address at the 2022 Craft Brew Conference. “Obviously, our top line number of 8% is a very positive growth number, but it's cycling a minus 10% given the huge channel shifts we saw in COVID away from draft, away from at-the-brewery sales, and so what we're seeing is a rebound as much as true growth.”

Some good news comes from a big-picture view of craft volume, and craft dollar share over time. The recent dip and rebound are driven by the channel shift away from in-person in 2020, which bounced back robustly in 2021 with dollar shares rising to an all-time high. A lot of this is driven by increased growth in retail, with people returning to on-premises retail settings. Screen Shot 2022 05 04 At 1 57 02 Pm

“We're continuing to see more share for taprooms and brew pubs who tend to have higher retail value, as well as be selling more of their beer on premise, which was a higher retail markup,” Watson said.

Beer ceding territory to competitors

But this growth is largely illusory, according to Watson, due to evidence of an overall growth problem in the industry. While craft beer grew in 2021, and in fact, that growth of shipments up 1% was the strongest for beer in a decade. That rises to 2% when including other segments that are taxed as beer, such as fermented malt beverages (FMBs) and hard seltzers (fermented seltzer beverages, FSBs).

But if 1% growth is your best in a decade, then the industry has growth challenges. And those numbers look worse when looking at just traditional beer, and removing those taxed as beer, like FSBs and FMBs. The answer for the largest brewing companies in the country has increasingly been to call themselves “beverage companies” rather than “beer brewers.” They’ve pivoted into products that they see growing: the former competition of wine, hard liquor, and RTDs.


Read article   Read about Bart Watson's State of the Industry from last year, Sept. 2021, to compare and see what sentiment has changed. 


“To me, this invites a question: “what does craft want to be?” Watson asks. “And I'll start by saying, I'm never going to tell an entrepreneur what they should do with their business. That's your choice. Some brewers are clearly going to move into these other beverage products, moving into the fourth category and trying to grow like the large brewers into wine, hard liquor, or other beverages. Others are going to try to stay in beer. I think we're reaching a call-to-action moment for those who really want to grow the beer category.” 

Consider the big picture of beverage alcohol share, comparing overall beer (not just craft) to overall hard liquor. A few decades ago, beer had nearly a 30 point share lead on hard liquor. Fast forward to today and that lead has largely eroded. And if these trends continue, beer is not going to be the number one beverage in the United States going forward. Screen Shot 2022 05 04 At 1 59 04 Pm

Craft brewers might want to shrug this off as not their problem – they’ve grown over that period while what Watson calls the “leaky bucket” of macrobreweries’ yellow lagers and light beers have been trending down.

“But as this trend continues over time, it tips the playing field more and more away from here and toward other categories,” Watson said. “There are only so many consumer dollars, distributor trucks, and retail shelves. And as we've seen in the past, craft has been a beneficiary of this. Growth categories often get more favorable regulatory and tax treatment as they grow.”

Bars and restaurants fully rebound, but draft lags

While on premise beer sales certainly rebounded in 2021 when compared to 2020, they're still well below where they were in 2019. Even in the back half of the year, after many people were vaccinated and closure mandates and restrictions waned to nearly fully opened, on premise draft beer numbers level off at around 15 to 20% less than 2019 levels. When including the full year data, they’re down almost That's despite the fact that bar and restaurant sales overall have returned to their former trend.

“We're going back to bars and restaurants as we did before, but we're buying less draft beer. That's a problem,” Watson warns. “Rebuilding this channel is going to be critical for craft brewers. Craft brewers have a 30% share in this channel, and this is going to be something those individual brewers are going to need to do account by account, keg by keg, and bring back that innovation, quality, and variety that is more crafted recent years.”

Categories and their respective bounce back

Craft brew categories are subdivided by venue into taprooms, brew pubs, microbreweries, and mid-sized regional breweries.

As stands to reason, the craft brew venues with the biggest 2021 bounce-back were taprooms (+21%) and brew pubs (+19%). Those two categories are most dependent on foot traffic and butts in bar stools, so naturally they experienced the most growth in 2021. Watson cautioned that these numbers were the national averages, but there was a whole lot of local variation, region by region. For instance, as the number of taprooms continues to grow, certain regions might be reaching carrying capacity.

“We've been growing the pie of at-the-brewery sales in recent years, but we've also been growing the number of slices,” Watson said. “And at some point, we have to question whether that pie can grow as fast as the slices. This is really a local market question.” 

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LAST CHANCE TO SAVE! New Trends for Food at PACK EXPO Southeast