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Box Scores for the Craft Beer Business 2017

Brewers Association Infographic
The business of craft beer continues to grow both in barrels of beer, and in dollars.  The Brewer's Association just published headline data from their annual assessment of industry trends.  It's teasing out a more detailed presentation at the Craft Brewer's Conference at the end of April.

Here are a few key take aways from the data shared so far.
  • Craft beer prices went up by about 1% in real dollars.  There was an 8% Increase in retail sales.  Inflation was 1.8% in 2017.   
  • Breweries are opening faster than the market grows.  There was a 16% increase in brewers.  
The report does not discuss changes in craft brewing capacity, which I think is the an interesting part of the story.  However a follow up analysis by Bart Watson, BA's resident economist, indicated that the revenue growth was limited to the microbrewers and brewpubs, while the larger so-called regional brewers (>15,000 bbl/yr) lost ground, or at best held near constant volume of +/- 1%.  These large regional brewers are stalwarts and trail blazers of craft brewing: Bells, New Belgium, Stone, Sierra Nevada, etc.

The narrative is that the "medium sized" brewers are squeezed from both above and below.  However, volume numbers suggest that craft continues to eat away at big beer.  The pressure from above is most likely for mergers and acquisition.  The real challenge seems to be from the smaller, emerging players with shiny new tap rooms. coupled with some established players making overly aggressive expansions.  There has been a trend of West Coast companies opening east coast breweries citing environmental concerns, related to shipping, leaving stability concerns related to aromatic hoppy beers unsaid.

Recent press has covered a couple high profile regional brewers who over expanded, assuming that their business would grow in trend with the segment. San Diego based Greenflash just closed their new Virginia Beach brewery, and pulled out of distribution to the east coast.    The brewery had been open less than 2 years, and opened while Green Flash was expanding nationally, and at least in New England, was once the next great thing.

One of New England's oldest craft brewery's, Smuttynose, was just sold at a bankruptcy auction.  The financial missteps of this 25 year veteran brewery may end up being the definitive case study for this era of craft brewing.    I'll provide my take on it in a follow-up post, as this is already quite verbose for something entitled Boxscores.

The 7 - 20 bbl breweries expanding to keep their tap rooms supplied, aren't taking money from the big 3.  They are taking it from their inspirational predecessors. It will be interesting to see how the industry frames the narrative around the upstarts taking business from established players.  It's no longer a collaborative us vs. them battle of flavor vs. bland, or small business against multinational corporations with rigged distribution systems.  Its a coming of age story, and a tale of stubbornness leading to decline.  Quality and consistency of product may not be valued as much as an experience. Could craft beer stop being better beer?

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