April 4, 2017
The Brewers Association (BA), a trade association representing small and independent craft brewers, released data on March 28, 2017 on the growth of craft brewing in the U.S. There were over 5,300 breweries operating during the year. For some perspective, that means there are nearly as many craft breweries in the U.S. as there are Wendy’s restaurants (which totaled about 5,700 in 2016). Craft brewers have a ways to go to reach the roughly 14,000 locations that McDonald’s has in the U.S., but it’s a lot closer than one would expect.
The 2016 craft beer market analysis reported the opening of 826 new breweries, and only 97 closures. In addition, craft brewers saw a six percent rise in volume from 2015 to 2016 – a total of 24.6 million barrels in 2016. Craft brewers also generated an estimated $23.5 billion in revenue, or about 21.9 percent of beer revenue in the U.S. In terms of production, however, craft breweries increased from 12.2 percent market share in 2015 to only 12.3 percent in 2016. Given that volume share for craft breweries has grown from 5.7, to 6.5, to 7.8, to 11, to 12.2, and to 12.3 percent from 2011 to 2016, it appears that growth relative to the overall market may be slowing. Despite the relatively small growth in volume share for craft breweries, they did see a 10 percent growth in revenue from 2015 to 2016.
The full story is not quite as rosy as in previous years. For example, the BA found that the overall craft beer industry trends “remain static,” meaning that craft brewers are not necessarily bringing in new consumers to the beer market – rather, they are converting purchasers of larger breweries’ products. And as these large breweries continue to acquire craft breweries, the BA suggests that growth for small and independent breweries will slow as they are forced to compete with craft brands that have access to the money and distribution of larger global breweries.
What does this mean for breweries in planning? There’s not one key takeaway from these numbers, but it does seem that craft beer growth through distribution is going to get more competitive, particularly as larger global breweries acquire more craft brands. This, however, is not a death knell for new breweries – the key will be finding good locations so that breweries can make a living off of taproom sales, and to grow through distribution, making great products will still be one of the most important factors for new breweries entering into the market.
Additionally, there are a number of states that haven’t seen the growth in breweries per capita that others have. For example, in 2015, Minnesota had about two craft breweries for every 100,000 people over the age of 21. Washington, however, had about five craft breweries for every 100,000 people. This does not mean that Minnesota can support as many breweries per capita as Washington, but it does shed some light on the fact that there is likely still room for breweries to come into the market, so long as they do it properly and make beer good enough to compete with breweries already in existence.