The craft beer party might be over. The Brewers Association (BA) released their annual growth statistics for small and independent craft brewers in 2016, calculating a 6% volume growth with a corresponding growth of 10% by retail dollar for the year. While those numbers are good for most industries and suggest the brewing climate remains healthy, they’re way down from 2014, when the industry grew 18% by volume, 22% by retail dollar and 2015, where the numbers were 13% by volume, 16% by retail dollar.
The Brewers Association conceded the brakes had been applied to all the go-go growth of the past few years as BA economist Bart Watson intoned “Small and independent brewers are operating in a new brewing reality still filled with opportunity, but within a much more competitive landscape.” It should be pointed out these numbers reflect “craft breweries”, as defined by the Brewers Association, which depending on your opinion, may or may not actually reflect the health of craft brewing. The BA craft brewery definition excludes breweries with large corporate investment or ownership, so breweries own by large corporations or investment groups like Boulevard Brewing, Goose Island, St. Archer, Lagunitas, or Ballast Point no longer qualify. These and other breweries with similar corporate ownership are pulled out of the BA’s analysis.
The numbers back up what we’re all starting to see: The business climate for independent breweries is definitely getting tougher. Just this month, San Francisco’s Speakeasy, ceased operations for about a week before going into receivership due to failed expansion plans launched in 2015. Portland’s Metalcraft Fabrication, once a successful supplier of innovative brewing equipment sold to craft breweries has also shut down, with Metalcraft co-founder Charlie Frye citing greatest factor their demise due to “...several unforeseen challenges associated with our expansion.” There will always be failures in any industry, even in good times, but Speakeasy and Metalcraft were two rocks in craft beer, yet both embarked on failed expansions during craft beer’s heady growth that weren’t sustainable. Given that Speakeasy and Metalcraft were hardly the only two established craft beer businesses engaging in major expansions during those optimistic times, there’s a good chance more failures will follow.
Were their any craft beer success stories in 2016? Depending on your view of craft, yes there were. Goose Island’s IPA recorded an astonishing 81.7% growth in 2016. Lagunitas IPA and Little Sumpin’ Ale sales grew 20.5% and 45.2% respectively. Firestone Walker’s 805 Blonde Ale took off by 74.4%. What do all these beers have in common? They were all from breweries with corporate ownership, not included in the Brewers Associate figures, with the extensive distribution networks to drive that growth, which many small independent breweries lack.
While there were certainly some small independent success stories and corporate craft flops, the concerns many small and independent breweries raised about recent corporate acquisitions seem validated. Corporate breweries are clearly putting the squeeze on the independents, and their distribution networks seems to be the key. The smaller independents will continue to do well, as long as their ambitions are modest. But if you’re a independent brewery who took considerable financial risks to ride the once fast growing wave of craft beer, watch out! Those aggressive plans may lead to very tough times ahead in the current market.