There is no question that Craft Beer has seen a massive growth spurt in the last decade. Consumers have increasingly turned to the more flavorful and higher cost brews from a wider number of suppliers, as well as embracing a constant cycle of product innovation, style proliferation and “SKU armageddon” at the retail level. The entire supply chain – from craft maltsters to multi-generational hop growers to upstart yeast wranglers – have enjoyed a significant increase in demand for these products on draft, in small and large format bottles, and increasingly in 12 and 16 ounce cans, not to mention the trendy new 32 ounce “Crowlers”.
However the craft segment is now seeing slower growth and declines for the first time since this brewery boom. Brewbound cites market research firm IRI Worldwide data in a recent article reflecting a 1.2% decline in US beer sales volume for the first months of 2017. Nielsen reports a similar downward trend, highlighting a decline in sales volumes of 1.3% over the last 12 weeks. Comparatively, the craft beer segment has shown growth of 1.6% over the same period, but compared to the 18% growth rates craft beers have enjoyed in the last few years, those numbers also reveal a disturbing weakness. Are Americans losing their taste for suds? What’s behind the slump and what can producers do about it?
The “why” is far less critical than the “what can be done about it”, but to be thorough, let’s first look at what’s behind the downward vector. Fortune magazine suggests the craft brew segment is a victim of its own success. Lately, craft beers have been taking a bigger bite of the overall market share from top macro producers. This prompted Anheuser-Busch InBev, Molson Coors, Constellation and other “bigs” to embark on an acquisition spree, gobbling up many of the popular craft brewers. Increased production of these newly acquired “craft” labels ultimately hurt sales, as these brews could no longer truly be regarded as “craft” products in the eyes of consumers craving “authenticity”.
The “what to do about it” is more critical now for those smaller and still independent players and regional players; especially given the current depressed environment. Brewbound suggests the remaining independent craft brewers could band together in collaborative arrangements, thereby gaining economies of scale in the sourcing of materials and the ability to leverage distribution. Such alliances will certainly require more visibility and control in the management of sales and marketing activities to ensure brand activation spend (and resulting performance) is properly attributed to all concerned parties.
For those brewers not interested in forging alliances in this manner, it is still going to be crucial to invest in heightened and more strategic sales and marketing activities. Even with consolidation, there are still a record, 5000 brewers operating in the US per Fortune. With this level of competition, only those producers with powerful, industry-specific technology at their disposal will be equipped to push their marketing messages up above the din of this mushrooming segment. With automation technology, beer producers can more effectively concentrate on getting “New Brands” into existing clients. With the increased visibility yielded by centralized sales and marketing activity data, brewers can focus on “Key Accounts”, maintaining their presence on shelves and taps. The reporting and metrics capabilities that contemporary tools offer are great at helping to determine which markets their story works best within and what activities work best for getting their product placed in retailer channels. Whether the desired strategy is a geographical one like deciding between regional vs. national distribution or a financial one, like weighing revenue numbers as opposed to volume/depletions, beverage selling software is going to be a crucial factor in helping brewers survive and thrive as the tides of their industry continue to ebb and flood.