[It’s 5:00 somewhere… time to try that new Octoberfest?]
As of June this year, the U.S. has more than 3,000 breweries in operation. And, according to the Brewers Association, there are about 2,000 more in the planning phase. To illustrate the explosion further, in 1983 there were just 80 breweries in operation. The number of U.S. breweries is on its way to becoming full circle- with over 4,000 logged in 1873. But times were just a bit different then.
Most of the new kids on the block (literally) are small, local craft breweries operating in neighborhoods and towns. The majority of Americans today have a brewery within 10 miles of their home. Depending on the market segment- whether operating as a microbrewery or brewpub, consumers can “drink local” by ordering a cold pint on tap or filling up a growler to go. And, not to worry, if a brewery is not nearby, you won’t have trouble finding craft beer in other retail environments: restaurants, bars, liquor stores, convenience stores, groceries, drug stores, and others.
How Have Craft Beer Sales Affected the Retail Market?
Craft beer sales are estimated to reach $20 billion this year, more than doubling sales from five years ago. According to the Brewers Association (BA), the not-for-profit trade group representing U.S. breweries) sales have risen 18% just in the first half of 2014; with 10.6 million barrels sold. (see chart)
The chart further illustrates the rise in consumer demand and market growth since 2010. 2013 craft beer sales experienced a 20% growth over 2012 at $14.3 billion of the total U.S. beer market retail value of $100 billion. “The sustained double-digit growth of the craft category shows the solidity of demand for fuller flavored beer in a variety of styles from small and independent American producers,” the BA’s Bart Watson said.
No doubt the national (non-craft) brands still reign in beer sales across America; with Anheuser- Busch InBev at $12.4B and MillerCoors at $9.1B in 2013. However, the “other” beer sales have become flat (pun intended) and have even declined by 1% in the past four years. By definition, craft brewers are small. In fact, to be considered a craft brewery you must make less than 6 million barrels of beer a year. (compared to Budweiser at 40 million barrels)
Who are the Craft Beer Consumers?
It seems this explosive growth completely defies economic logic considering the selling price of a craft beer. Craft beer enthusiasts will tell you that it is about making a statement, being a part of a community of other enthusiasts, and not just the awesome beer. In an article titled “Craft Beer Drinkers Value Style & Substance”, new research by Mintel revealed some insight into craft beer drinkers:
- 55% are willing to spend more money for craft beer
- 51% indicated the beer style was most important in their product selection: (IPA, wheat, stout, etc)
- 47% say brand is not a factor in their choice (compared to 56% of non-craft drinkers)
- 13% select craft beer with packaging that “looks cool” when their brand of choice is unavailable
- 53% enjoy sharing information of craft beers with others
- Millennials aged 25-34 years old consume the most craft beers – and 70% believe that the brand of beer says a lot about them
How are Retailers Reaping Benefits of Craft Beer?
Multiple retail industry channels are reaping the benefits of selling craft beer. For example, a case sells for about $35, which is 2/3 more than the non-craft beer average. Selling more of the higher end craft beers can improve revenues and retail store traffic. Convenience stores (c-stores) lead in off-premise beer sales at 40%, which is more than liquor, food, club, mass and drug stores. However, they only sell about 2% of craft beer. Groceries sell about five times more craft beer than c-stores which is attributed to the ability to offer more selections (SKUs). CSPnet.com shares some tips for gaining more share of the $20 billion craft beer market:
- Offer the top 20-25 craft beer SKUs to meet most consumer expectations
- Leading craft beer brands are Sam Adams (Boston Beer Co), Sierra Nevada, Blue Moon and New Belgium Brewing Co.
- Regional craft brands also have localized appeal
- Display craft beer in high traffic locations
- Use point of purchase materials and displays to show assortment and selection of craft beer available
- Advertise competitive pricing with retail store signage
How Can Craft Beer Manufacturers Improve?
Keep up the innovations! ‘nuff said.
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