During an annual conference call with the media on March 28, Brewers Association economist Bart Watson broke down the latest figures for craft beer’s growth in 2016. In many ways, the industry continues to show strong, sustained growth. There are 5,234 operating breweries (a number that's already old due to openings every day) that have produced 6% more beer and earned 10% more in retail dollars compared to 2015.
Volume share, however, had its slowest rate of growth in nearly a decade. In 2016, craft beer claimed 12.3% of volume growth, a minimal increase from 2015’s 12.2%. The percentage hasn’t been that low since 2008, when volume increased from 3.8% to 4.02%.
Given the change in ownership of regional and national breweries in recent years, losing their “craft” defined status along the way, it now seems highly unlikely the Brewers Association will be able to achieve 20% market share by 2020, a goal originally set by the organization in 2014.
WHY IT MATTERS
In discussing the reality of craft-specific growth in the next few years, Watson called the initial promise of not hitting 20% “an aspirational one.”
“In many ways, having that goal was very useful in framing how we do in the marketplace,” he said. But in terms of achieving the goal, it’s “a long shot at this point,” he added.
Believe it or not, it was barely three years ago—March 2014—when the Brewers Association revised its official mission statement with the hope of its 20/20 ambitions: “By 2020, America’s craft brewers will have more than 20 percent market share and will continue to be recognized as making the best beer in the world.”
At the time, Gary Fish, president of Deschutes Brewery and then-chair of the BA Board of Directors, used the same phrasing of “aspirational” but also said it would be within reach if the industry stuck to its principles of quality beer.
However, a report from the Brewers Association later that year—September 2014—noted that, based on demographic and sales trends, and “the fact that markets like San Francisco, Portland, Seattle and Boston are already above the 20% share mark, it is easy to forget that the many markets across the country are still just beginning their craft journey. For the following reasons many believe 20 by 20 is not only achievable, but a predictable result of demographic, market and growth trends.”
Now we know, with greater certainty, it simply ain’t gonna happen. A flurry of acquisitions in recent years has stripped the “craft” badge from some of the largest brewers, taking away volume production and the rapid growth that was going to come with it and bump up the overall market share percentage.
As the BA essentially moves on from “20 by 20,” the question now becomes: do consumers really care what is “craft,” even?
Beer enthusiasts are not shy about their adoration for “craft,” and their personal definitions of it, but in the end, this is a small number of beer drinkers overall. According to numbers reported by Brewbound, two of the top-growth brands in 2016 were Goose Island IPA (81.7% sales growth) and Lagunitas IPA (20.5% sales growth), both of which are owned by global companies, making them breweries without the BA’s “craft” status. Ballast Point, kicked out of the craft club due to ownership by Constellation Brands, will soon fill a national footprint.
“The era of 18% growth rate is probably over,” Watson said during his conference call, later noting to Brewbound that final numbers included “non-BA defined craft brewer volumes” from places like Terrapin and Devils Backbone, pro-rated to count toward what was “craft” at one point in 2016 before their sales to AB InBev and MillerCoors respectively went through.
Even with that boost, the BA-defined “craft” gained 0.1% in volume, a feat that could prove to be harder in 2017 without numbers from Terrapin and Devils Backbone, let alone any acquisitions that will likely take place over the rest of this year, further chipping away at the Brewers Association’s once “predictable” goal.
In terms of priorities and strategy for the trade organization, shifting away from “20 by 20” could be a good thing. One less goal to worry about as the BA turns its attention to ongoing legislative battles.
Local is how to play the game now. New breweries are small and stay small, meaning incremental advances will become par for the course. Aiming for 20% market share by 2020 wound up being a “useful exercise,” Watson said, but in a constantly shifting industry, has proven to be too much.