There are another 2400 breweries currently in planning in the United States, where regional players have been worse affected by increasingly fierce competition, according to the Brewers Association.
The US currently has more than 5300 breweries, with two more opening every day, Brewers Association director Paul Gatza told delegates at the Craft Brewers Conference 2017.
“That’s been ten more breweries since I got here to DC,” he said.
“Things have changed significantly, particularly for the regional breweries who are being squeezed from the large breweries above and the small local breweries below.
“I think we’re beyond a point where everyone’s rising with craft.”
Chief economist Bart Watson said growth of the BA-defined craft beer sector slowed further during 2016, which he argued was still an impressive figure in the context of America’s total economic growth.
“Growth slowed, down from 18 per cent to 12 per cent and finally six per cent last year,” he said.
“I urge those in the room to think about this a little bit more as the new normal.
“You can’t keep growing 18 per cent year over year over year, when you get to an industry that’s our size.”
More breweries will close
Watson said that while 97 breweries had closed in 2016 (up from 78 in 2015 and 75 in 2014), this figure was not as grim as it sounded, considering it has been proven that 50 per cent of new businesses close within five years, across all sectors.
“Percentage-wise with 5300 breweries, this is one of the lowest levels of closings we’ve ever seen,” said Watson of the 2016 tally.
“I don’t think that can last for ever, we should expect this number to rise.”
Watson said there were more than 800 openings last year and at the end of March 2017, US authorities were tracking more than 7700 brewery permits.
“There’s more than 2000 breweries that are not just in planning, but have gone far enough to get a brewery permit,” he said.
“For those in the room, these breweries are coming and you can either lament it, or you can prepare for it.”
Great year for brewpubs
Watson said 2016 had been “a great year” for BA-classified brewpubs, which increased their volume by nearly 15 per cent, while microbreweries grew their volumes by 27 per cent.
“We can’t sugar-coat that regional craft brewers had the toughest go of it in 2016. They’ve got small and nimble competitors in local markets, not to mention big and powerful brands that have been acquired and have lots of advantages in distribution and retail,” said Watson.
He said regional breweries recorded growth of slightly less than one per cent, which should “give some pause to microbreweries and brewpubs to think about wider distribution”.
“If you grow and you move further away from home, you’re going to face similar challenges to what these regional craft brewers are facing,” he said.
Watson said the overall beer market was flat, meaning non-craft [BA-defined] domestic brewers declined by two per cent last year.
“If you take holistically, all of the domestic specialty brands that aren’t independent, they only grew two per cent,” he said.
“This means that beer drinkers, and we’ve seen this in our surveys, do support small and independent and they’re showing it with their dollars and their purchasing.”
The conference continues.