Craft Beer Business Is Booming
A famous bar stool philosopher once called beer “the solution to, and the cause of, all of life’s problems.” Homer Simpson may not have been referring to the recent economic downtown, but when it comes to providing a beacon of hope that more positive times are ahead, the craft beer industry is certainly doing its part.
At time when beer sales as a whole are declining, craft beer sales are surging. According to the Brewers Association, the craft brewing industry grew 9 percent by volume and 12 percentby retail sales in the first half of 2010. The overall beer market saw a decline of nearly 3 percent by volume during the same period.
This continues a trend established in 2009, when craft beer grew 7.2 percent by volume and 10.3 percent by dollars, against a decline of 2.2 percent in volume of the overall beer market.
"I knock on wood everyday because it's an amazing growth spurt we're having right now" says Brooklyn Brewery Founder and President Steve Hindy. His brewery is up 25 percent by volume the first 6 months of this year.
"A lot of the best beers in the world cost less than a gourmet cup of coffee."
Craft brewers are generally defined as having annual production of less than 2 million barrels. The category makes up 5.8 percent of the overall beer market and while it might be small, the craft boom is getting the attention of bigger brewers like Anheuser-Busch InBev and MillerCoors. These two players dominate the U.S. beer space with 50 percent and 30 percent of the market respectively.
John Craven, editor of the popular brewing industry website Brewbound.com, sees larger brewers as battling conflicting interests.
"They may see a market opportunity but there's also a fear of cannibalization and what might happen if a big brewer really made a beer that was clearly much better than their flagship product."
For the mass market brewers, the solution might lie in the old adage of "if you can't beat them, join them" or more appropiately in this case, buy them.
"I think you're going to see some of the smaller brewers get acquired at some point" says Craven. "I can't imagine the larger brewers will sit on the sidelines for to long and watch this category eat their lunch."
For one of the innovators responsible in creating the trend, the ability of craft beer to thrive in tight economic times lies in its appeal as an affordable luxury.
"A lot of the best beers in the world cost less than a gourmet cup of coffee," says Brookyln Brewery Brewmaster Garrett Oliver. "People say 'I am not going to buy that new car or that new suit, but I don't want to give up the small pleasures in life.' So if people were going to hold onto anything, they were going to hold onto craft beer."
As for Oliver's boss Hindy, he's just enjoying the ride. "I pinch myself everyday because its just a great moment for craft beer in America."