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CASTLE MALTING NEWS in partnership with www.e-malt.com
07 June, 2018



Brewing news USA: Craft beer hopes to reap greater profits through taproom and brewpub sales

Americans’ drink preferences are changing, and as they turn more toward wine and spirits, they have left the once undisputed regent — beer — struggling to compete. Even craft brewers, who for a decade have enjoyed explosive growth after tapping into Americans’ tastes for local and small production, are beginning to feel the pinch, the Food Dive reported on June 6.

Despite an 8% bump in total sales for independent craft breweries in 2017, which sold about $26 billion, another 165 craft breweries closed last year — an increase of nearly 70%. At the same time, for the beer market as a whole, sales volume dropped by 1% in 2017. The big players were hit particularly hard with large drops posted by American flagship products like Budweiser (-6.8%), Coors Light (-4.1%), Miller Lite (-2.8%) and Bud Light (-5.7%).

Although craft beers are still experiencing growth, sales are slowing. Instead of purchasing a pint at the bar, Nielsen data that the Brewers Association analyzed showed 55% of craft beer drinkers buy a brewery’s products after making a visit to a taproom. This trend not only draws in more customers, but provides higher profit margins — so small brewers are striving to shift more of their sales into direct-to-customer channels.

This year, bills in Maryland, New Jersey, Alaska, and Texas have come to the statehouse floor to either help craft beer shift to more direct-to-consumer business or protect distributors and bar owners. They have rankled those on all sides of the divide, since new laws can easily influence consumer habits if they create hurdles. Small breweries have argued some could hurt the industry as a whole if it becomes too tedious for consumers to purchase local craft brews.

While AB InBev and MillerCoors are trying to limit sales directly from breweries, perhaps they should instead be encouraging them as they work to build up the upstart breweries they are slowly buying around the country. After all, the beer giants have recognized that being in the craft beer space is vital to help them grow. MillerCoors bought three craft breweries in as many months in 2016, and AB InBev bought eight craft breweries between 2011 and 2016, including Wicked Weed, Devils Backbone and Karbach Brewing.

AB InBev also has been rapidly growing their acquired craft brands by opening taprooms and on-premise locations, often in new geographical regions, according to the Beverage Marketing Corporation. It estimated in April that the beer giant had roughly 40 taprooms for its craft brands, including three for Wicked Weed and two for Devils Backbone.

With so much variety in the craft beer scene, it literally pays to limit choice. Brewers that stayed small have thrived. According to Beer Marketer's Insights statistics reported by The Wall Street Journal, 5,000 small breweries that shipped fewer than 100,000 barrels a year had an average volume growth of 14% in 2016.

That may be the secret ingredient to long-term success: limiting the quantities of craft brew that are available rather than trying to expand market shares. After all, small-batch, experimental beers that are only available through local sales are most likely what originally drew beer aficionados to the craft brew scene in the first place. These products also are much less likely to seep into business for distributors and bar owners because they would be unlikely to have a piece of their business in the first place.





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