In my professional career, I’ve seen what I consider to be three major shifts in consumer tastes. The first, was when the consumers moved away from full flavored domestics to light domestics. This shift was led by the marketing of Miller Lite from Philip Morris. Lite, followed by Coors Light and Bud Light, are now three of the four largest selling brands.
Next, although not nearly as impactful, was the growth of imports starting in the 80’s with Corona. The rapid growth of Corona, inspired Heineken and others to invest in their US operations. Imports continue to maintain their share, especially with the recent advancement of Dos Equis and the great success of Stella Artois.
We are now experiencing the growth of craft beers, which probably should be described as “explosive” in light of the recent numbers. Actually, this started over 20 years ago in the northwest where Oregon, Washington, and California had laws which were friendly to craft breweries and enabled them to more easily get established. By the end of this year, there will be somewhere around 2,400 breweries in the US. Most of these established in recent years. Colleges now are beginning to create and offer degrees, certificates and continuing education on brewing and the business of beer.
I’ve been asked on several occasions just how big, or where is the ceiling on crafts? Well, no one can answer that, but I do know there is a template: Oregon and Washington. In these two states, volume sales are 30%+ of market share and 40%+ of dollar share. Many us think we are on the cusp of seeing a 10% share of volume within the next several years.
This week I was talking with a noted industry consultant who commented that some people think that the crafts are really hurting the beer business. The term he used to describe the rapid growth of crafts, is that they are akin to a “cancer” to the overall business. An example of this, which I’ve heard on more then one occasion from a number of suppliers, is that when they lose a draft handle, which was selling at a rate of one per week to a local craft, the craft only pulls at half the rate of the previous brand. The supplier loses, the wholesaler loses and the retailer loses. The consumer, however, seems to enjoy drinking a local product, unaffected by the fact that the craft is only producing half the volume of the previous brand.
Then we have the teas and ciders, which have a very small base, but are growing at incredible rates. Early reports show that these products are sourcing their volume from wines, not other beers. If so, this is exciting in that the industry now can reverse some of what was lost to wines. Hard to define those products as a “cancer.”
Crafts will face the classic growth problems, consolidation, fall-outs, bankruptcy, price wars, quality issues and wholesaler concerns. Then the question becomes, are crafts really a cancer to the beer industry? Another word to describe the craft growth might be “steroids.” Crafts are making the industry exciting with new products and flavors, something that has been needed for a longtime. The consumer, especially the younger ones, are driving the growth of crafts. The industry needs the growth. Maybe we don’t have any problems to solve, just opportunities to pursue.
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