As some of America's largest craft brewers continue to buck industry trends that show local and regional companies are primarily driving growth, newly-announced numbers by the Brewers Association reveal 2018 was another slowing year for its members.
The BA announced yesterday that year-to-year growth dropped to 4% last year, a decline of 1% from 2017 and the lowest growth rate in a decade. Growth was steady and upward through 2014, hitting a peak of 18% year-to-year growth in both 2013 and 2014, but fell to 13% for 2015, 6% in 2016 and 5% for 2017. Despite the drop, BA-defined craft beer picked up another .6% of category share last year, and is now at 13.2% of volume in the U.S.
“The beer landscape is facing new realities with category competition, societal shifts, and other variables in play,” Bart Watson, the BA's chief economist, said in a release highlighting the numbers. “There are still pockets of opportunity both in terms of geography and business model, but brewers need to be vigilant about quality, differentiation, and customer service.”
As has been the trend for the past decade, the largest BA-defined craft breweries had the hardest time last year. While official estimates for total barrel production won't be released until later this spring, IRI-tracked volume for grocery, convenience, and other stores showed 2017–2018 declines for Harpoon (-4.5%), Boston Beer/Samuel Adams (-7.9%), New Belgium (-7.9%), Deschutes (-8.7%), Brooklyn (-11.2%), and many more.
According to estimates by Beer Marketer's Insights, the share of craft volume produced by the top 39 breweries in the country (all over 100,000 barrels) dropped from around two-thirds in 2008 to half in 2018. Quite literally all volume gains for craft came from America's other 7,200 beer makers, according to numbers recently shared by the outlet. According to the BA, 2018’s 50 fastest-growing breweries—including many whose growth was due to jumps in production as local or regional players—created 10% of craft brewery growth.
Part of that change undoubtedly comes from own-premise sales in taprooms, where Insights estimates consumers bought 3–3.25 million BBLs of beer in 2018, a total figure that has doubled since 2015. Watson gave an estimate of 3.1 million BBLs during his call with media, an increase of almost 43% from 2017.
However, there are still plenty of examples in which package sales play a part in overall growth—and are an invaluable source of revenue for some of the country's biggest craft players. Dogfish Head, which will spend 2019 focusing on becoming the "number-one active, lifestyle-oriented craft beer brand," grew 11% in IRI stores last year with strong figures also coming from Stone Brewing (+10.7%), Tröegs (+10%), and Allagash (+9.7%). Founders, thanks to the success of its national distribution and hit brands like All Day IPA and Solid Gold Premium Lager, earned 37.7% growth.
Growth for craft brands owned by Anheuser-Busch InBev and MillerCoors was mostly strong, although flagship portfolios like Blue Moon (-3.4%), Blue Point (-7%), Goose Island (-9.8%), and Leinenkugel’s (-16.1%) were all down in IRI sales. With increased production and points of sale, others grew tremendously in grocery, convenience, and other stores. Wicked Weed more than doubled IRI sales (+153%), and Golden Road (+61%), Elysian (+45.4%), and Karbach (+31.1%) were highlights for AB InBev. MillerCoors saw gains for Hop Valley (+29.2%) and Terrapin (+19.8%). Lagunitas, owned by Heineken, was essentially flat at +1.7%, and Constellation's Ballast Point (-5%) was dwarfed by Funky Buddha (+54.8%), all in IRI stores.
Out of Chicago, Revolution Brewing grew to around 85,000 BBLs “despite a challenged year for craft” in Illinois, says Doug Veliky, CFO and head of communication for the brewery. Revolution brands grew 13.5% in Illinois-specific IRI stores and 19.1% across its entire eight-state footprint. Veliky noted the success of Anti-Hero IPA, Illinois’ #2 six-pack, behind only Corona Extra. A 19.2-ounce canned version of the beer was also the top-selling craft single in the state.
One of the biggest success stories of a brewery growing into a regional powerhouse was Ohio’s Rhinegeist Brewery, which expanded nearly tenfold in the last five years, producing around 10,500 BBLs in 2014 and up to around 100,000 in 2018. That growth has come from selling exclusively in all of Ohio, Indiana, Kentucky, Massachusetts, Pittsburgh, and Nashville—and while slowing down, says Matt Steinke, director of sales for the company. No new markets opened in 2018.
“In a slowing industry, you have to be a little smarter and a little more intentional when it comes to chain business,” he says.
Those tactics included hiring a national accounts director and additional regional account manager—both new positions—to better focus on growth in grocery and convenience stores. Rhinegeist grew 21.3% in all IRI stores from 2017–2018, but a little faster in convenience stores specifically, increasing volume sales by 26.8%. Convenience stores represented almost half of the brewery's IRI-tracked sales last year.
“It’s about finding where there’s opportunity to gain new consumers and elevate the category for retail partners,” Steinke adds.
Nashville will be the only market with a significant, new push in 2019 for the brewery, thanks to additional placements in Kroger grocery stores. Steinke says the company is particularly excited about the prospects of Cheetah, a Lager launched in 2018 to replace its SKU of Cougar, a Blonde Ale. In five months, Cheetah outsold a year’s worth of volume for Cougar, Steinke notes. Rhinegeist will also additionally push Little Bubs, a Session Rosé Ale made with apple, peach, and cranberry. It follows in the steps of other successful brand extensions, building off interest in Rhinegeist’s Bubbles, a Rosé Ale that grew IRI volume by 30.4% in 2018.
The use of new brands and slow growth is all intentional, Steinke says, adhering to a “mile-deep” mantra so many in beer are repeating these days. Growing the overall beer category continues to be a challenge as the largest macro and craft brands struggle with volume, so sticking to what works and building home markets is becoming increasingly pivotal.
“We’re looking at 10% growth for 2019, then [we’ll] evaluate what’s happening in the industry and where things are gaining or losing share,” Steinke says. “We’re not happy being stagnant, but OK slowing down the growth to intentionally sustain it long-term.”