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Where is craft brewing today?

From statistics to exports to the trend toward aluminum cans, Economist Bart Watson of the Brewers Association shares his insights into the state of the craft brewing movement.

Bart Watson
Bart Watson

Editor’s note: Few organizations are better equipped to describe how the craft brewing movement has emerged, where it is today, and where it might be headed than the Brewers Association. Headquartered in Boulder, CO, BA is a trade association whose mission is to promote and protect the interests of small and independent craft brewers. Just a few days before the start of the Craft Brewers Conference in Philadelphia, PA, we talked with the organization’s Chief Economist, Bart Watson, for this detailed view of craft brewing in the U.S.

Packaging World:
What kind of volume are we looking at where craft brewers are concerned?

Bart Watson:
Craft brewers produced 24.5 million barrels in 2015. Once you subtract out exports, which were more than 400,000 barrels, that gives us 12.2% of the U.S. beer market by volume. Last year growth was 13% by volume and 16% in terms of retail dollar sales. We’ve had eight out of ten years with double-digit growth, so it’s been a pretty good decade. Going forward we have an aspirational goal here at the Brewers Association of getting to 20% of the U.S. market by 2020. Based on what I’m seeing now, it certainly appears to be doable.

So many of us think of craft brewers as people who started in their garage and are now selling beer in their neighborhoods and home towns. What about exports?
It’s small but growing. It really varies by brewery, and it’s a limited number of craft brewers who are involved. Most breweries don’t export at all because they can’t even meet demand in the U.S., so looking into export markets makes very little sense. When craft brewers do export, Canada is number one, but overseas we’re also seeing strong demand for U.S. craft brewed products, particularly in Europe and Asia. The UK and Sweden have been strong markets in recent years, too. I do think it’s something that will continue to grow in the future, particularly as the U.S. market growth inevitably starts to slow down. There’s more demand abroad than there is available supply right now. But most U.S. brewers are looking to expand domestically first.

Do you have any resources to support exports?
We have an Export Development Program that helps brewers understand some of the challenges, like making sure there’s an identified cold chain and that the distributors and importers on the other end are going to be treating the beer the right way. There are some limitations to exporting super fresh, hoppy IPAs around the world, and I think that’s one reason we’ve seen a few U.S. craft brewers start to establish a presence overseas by building breweries in Berlin, for example. Remember, freshness is a big part of the appeal.

What’s the big picture look like today? Are there too many craft brewers?
We’re at about 4,400 craft brewers now, and they’re opening at the rate of about 2 per day. But I don’t think there are too many, and I say that for a couple of reasons. One is that the vast majority of craft brewers are very small and locally focused. They’re operating like a neighborhood bar, sometimes combined with a restaurant, and they’re distributing within a pretty tight locale. In such an environment, adding another one doesn’t necessarily change distribution that much. Look at all the small wineries in the U.S. We have more than 8,000 wineries in this country, and Americans drink a lot more beer than we drink wine. When you talk about saturation you really have to talk about where. Portland, Oregon, has 60-plus breweries, and San Diego County has more than 110. In regions like that, maybe we should expect to see a slow down in new breweries being added. Though having said that, in both of those areas we still saw growth last year. I think there’s still a lot of room for growth in the U.S., especially in places like Texas or Florida.

What about all the craft brewers being snapped up by the big guys? Is authenticity somehow endangered in this process?
As the larger brewers enter this space we are seeing some blurring of the lines between the products of independent brewers and large brewers. Anheuser-Busch has been the most aggressive, buying eight breweries recently. But remember, that’s eight out of 4,400. Probably more troubling to the craft brewers is the combination of those acquisitions with some of the moves that AB is making in distribution channels. They incentivize their distributors to carry their products, and that combination is one that has the potential to limit market access for some independent brewers.

I see on your Web site that you define the craft brewer as small, independent, and traditional. How small is small?
Less than 6 million barrels per year. Brewers like Boston Beer and its Sam Adams brand are at about 2.5. Yuengling is less than 3 million. For comparison, Anheuser-Busch in the U.S. is like 95 million barrels, and globally they were at 360 million, though after the merger with SABMiller they’ll be near 525 million.

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