It seems to be a constant question circling the craft beer world: how can the business of craft brewing still be growing? Haven’t we reached the point of saturation?
According to a report released this week by the Brewers Association, 2017 saw sustained growth across the board for the craft brewing industry.
There were just under 6,300 craft breweries in operation in 2017, up 16 percent from 2016 and 116 percent from 2013. In total, 25.4 million barrels were produced, which is a five percent increase from the previous year—and which represents 12.7 percent market share by volume of the overall beer industry. The retail value of craft beer was estimated at $26 billion, an eight percent rise from 2016.
Of the total growth in the craft beer realm, microbreweries and brewpubs were responsible for 76 percent. However, there are signs of harder times ahead for craft brewers.
“Beer lovers are trending toward supporting their local small and independent community craft breweries,” says Bart Watson, Brewers Association’s chief economist. “At the same time, as distribution channels experience increased competition and challenges, craft brewer performance was more mixed than in recent years, with those relying on the broadest distribution facing the most pressure.”
This increased competition and pressure may have factored into the number of brewery closings rising to 165 in 2017, up from 97 in 2016. But still the number of brewery openings still greatly outnumbers closings. In 2017 alone, there were 997 new brewery openings, up from 826 in 2016.
This year’s report suggests that craft beer is still in a period of growth, although it’s much more moderate than the explosive numbers the industry saw back in 2013 and 2014. And that could spell trouble for brewers whose business plans were built around the stronger numbers of yore.
“Compared to many parts of the U.S. economy, craft’s five percent growth rate is quite strong,” Watson wrote in his analysis of this year’s report. “That said, it’s probably not as strong as many breweries expected as they built their business plan.”
The positive views, says Watson, is that “even in an extremely competitive environment, 73 percent of breweries were flat or up last year. The flip side is that 27 percent saw declines greater than one percent, and 17 percent saw double-digit declines.”
With the total of craft breweries reaching a new all-time high of 6,266, craft brewers are facing their stiffest competition yet, and not just with the macrobrewing conglomerates but among their fellow craft brewers as well.
While it’s unclear exactly what 2018 has in store for craft brewers, it is clear that these are defining times for the industry.