On a gloomy day, even relatively sunny information can seem a tad bleak.
That was the case Wednesday at the Craft Brewers Conference when officials with industry trade group and conference organizer the Brewers Association delivered a state of the industry address. That state, based on 2018 numbers, is still growing but slowing down significantly compared to years past even as thousands of new brewers get into the market or prepare to.
“Craft and imports continue to be the things that are driving the beer market forward even in a very challenging market for overall beer,” Bart Watson, the Boulder-based Brewers Association‘s chief economist told the crowd in the Colorado Convention Center’s Bellco Theater.
Providing data that is sure to have executives from Golden to St. Louis wringing their hands, Watson said total U.S. beer sales were down by almost 1 percent in 2018. It’s a trend tied to declining alcohol consumption by younger consumers in general.
Craft and independent brewers meanwhile, saw their retail sales rise 7 percent over 2017, to hit $27.6 billion. Total brewing volume, the main statistic the Brewers Association uses to track its constituency, rose 4 percent last year to more than 25.9 million barrels.
“There is growth in the beer industry. Where it’s occurring is in this room,” Watson’s co-presenter, Brewers Association’s senior vice president of professional brewing, Paul Gatza said.
The clouds begin to roll in when looking at the 4 percent growth in volume compared to a few years ago. In 2014, craft brewing production grew by 18 percent. The year before that it was 17 percent after growing 15 percent in 2012.
The slowing growth comes amid record brewery openings last year and record closings. At least 1,049 new craft and independent brewers launched their operations in 2018, according to Watson. Meanwhile, the Brewers Association tracked 219 closings in the U.S. last year, a closure rate of 3 percent.
The flood of new players into the market isn’t letting up. Comparing U.S. Tax and Trade Bureau statistics on the number of active brewers’ licenses to data on recent closing and breweries already operating today, the association estimates at least 2,500 new businesses are in planning in the U.S.
“Companies need to think about how they can still be relevant in a market where we are going to see thousands of new breweries open,” Watson said. “This is a trend. It isn’t going away.”
After his presentation, Watson attributed some of the closures to just being part of a bigger industry. More breweries will inevitably lead to more closures. A ratio of three openings to every closing isn’t bad in context, nor is an industry-wide growth rate of 4 percent.
“I think the number of closings is still amazingly low,” he said. “Try to track all the restaurant closings in Colorado last year.”
While on stage, Watson and Gatza provided reasons for their audience to be optimistic as well. Watson cited data collected by market research firm Nielsen CGA that found that the association’s certified independent craft brewer seal, first introduced in 2017 as an identifying mark members could put on their packaging, is resonating.
The research found a 7 percent increase in the number of self-identified craft beer drinkers who said they would be more likely to buy a product with the seal on it in 2018 over 2017. The seal certifies that product carrying it was made by a brewer that is small (brewing less than 6 million barrels of beer per year) and independent (no more than 24.9 percent of the company is controlled by an entity that is not an independent brewer.)
And there is room to hook more drinkers. Craft made up about 13.2 percent of all beer produced in 2018, leaving almost 87 percent of the U.S. beer market out there to capture.
“One of the challenges is to bring more new drinkers to the craft party,” he said. “If we can get 1 million new craft drinkers to drink one pint a week that’s 200,000 incremental barrels.”
Gatza threw in two final reasons for brewers to look on the sunny side.
“Beer is delicious and beer is fun,” he said.