Why I Believe There Is No Looming Crisis For Craft Beer

By Andrew Dickey for Indiana On Tap  

A little over a year ago, I penned an article dealing with the state of craft beer partly in response to a Daily Beast article that posited that craft beer was nearing a major crisis and would see multiple breweries going under in a short period of time. This was not idle banter, since an episode just like that had occurred in 1999, when the craft scene was far smaller. A lot of mediocre beer was being made in the late 90s, and there was little to no outside promotion for craft beer.

The article cited tapering growth levels and a flooded craft beer market.  Since that time, I have watched nearly two dozen breweries open or expand here in Indiana, witnessed more beer festivals than I could ever attend, and have seen tremendously exciting products hit the liquor store shelves.  The taprooms are often full, and more Indiana beer is packaged now than at anytime since before prohibition. And in the ten other states I’ve visited recently, similar trends lead me to believe the craft beer scene is healthy in those places as well (look for more thoughts on the craft beer scene in other states in an upcoming article). I don’t feel we are in a crisis at all; the craft beer movement is only gaining steam. Excellent brewers are making excellent beer, so the craft beer drinker has never had it so good.  Let’s discuss the beer buzz here in Indiana, and I’ll tell you why I think there is no cause for alarm. You can form your own opinion, but my observations lead me to believe that we are in a good place as a movement.

To begin, I’ll support my claim with some hard data gleaned from craftbeer.com. As of 2016, more than 150 styles of craft beer are represented by over 20,000 brands (labels) from more than 5000 breweries. The Brewers Association estimates over 2500 more breweries are in the planning stages.  Craft beer continued to grow in 2016, taking 12.3 % of the volume share of beer, up 1/10.  Revenue increased to 23 .5 billion, a 10% increase.  And the midyear report for 2017 says growth has continued by 5% so far.

The blue bars show craft brewery openings /yr. The red line is craft brewery closings/yr. Despite the trends, the openings still far outstrip the closings. image credit: Pat’s Pints

While neither staggering nor equal to years past, these numbers do represent growth, which I personally believe will continue. Bart Watson of the BA says that the, “Growth pace has stabilized to a rate that still shows progress in a more mature market.” Craft beer consumption has more than doubled since 2011, and I think it will double again, as younger drinkers embrace craft beer exponentially.  It’s a highly competitive market, and breweries have to evolve and find their niche.  The BA sees a lot of breweries experiencing tremendous growth, and there is great potential to continue growth.  A mature market can also withstand the ups and downs of business, and that’s another reason to not be alarmed.

In the last year, a lot of good Indiana beer has hit the market.  More breweries are canning, and Upland, Quaff On!, and Sun King are now selling beer out of state joining the few others already doing so. Tin Man nearly went under, but they received an injection of capital with their new owner, Neace Ventures, and are now back on their feet making great beer.  Our festivals are numerous and statewide. At every one that I’ve attended in the past year, I have come across one or more new breweries, and nearly every festival was well attended!  I’ve attended functions at numerous breweries and taprooms, and enjoyed myself all the while drinking amazing beer. This summer I took a Sunday to just try farmhouse ales, and came across excellent examples at all four Indianapolis breweries I visited that day.

Craft beer is truly ingrained in Hoosier culture. Our liquor stores stocked with plenty of it, and I never go out to eat anymore without having a plethora of craft beer options. At both of my places of employment, craft beer is a constant subject. Two weekends ago, I attended a pumpkin beer fest, sold craft beer at work, drank craft beer watching football at Buffalo Wild Wings, helped brew an IPA with friends, and then had a bottle share.  From my vantage point, the beer scene in Indiana is healthy, and seems to grow a little bit all the time.

However, while everything I mentioned in the above paragraphs indicates a healthy beer environment, there still are a few breweries up for sale, and some that have closed.  The bottom line is some breweries are going to close, and the reasons for it are endless.  Compared to a lot of other businesses, the number of breweries that go under is minimal.  Far more restaurants close on a regular basis, but no one thinks eating out is in crisis.  If you compare the craft beer scene to a healthy tree, then it’s understandable that some branches get cut off for the good of the tree.  I have experience working for a brewery that is now defunct, and looking back, I understand what went wrong.  Over-expansion, and not knowing your true customer base can be deadly in a competitive market, and that’s why breweries have to constantly evolve in order to stay relevant.

A Brewers Association chart that shows millennials comprise the largest percentage of craft beer drinkers. Click for a larger image. Source: BA

So while there are breweries closing, far more continue to open. In 2016, 229 brewpubs, and 596 microbreweries opened, while 44 brewpubs, and 52 microbreweries closed according to BA. The rate of closings has gone up, but only slightly.  Also, the rate of openings has decreased, but only slightly.  Breweries opening now are entering a far more saturated market then they were even two years ago, so less expansion is understandable. And while closings are going up a little bit, the same logic applies. Ninety-six brewing endeavors closing is less than 2% of the total number of breweries. Until that percentage is far higher, I see no cause for alarm.

This brings me to my next point. Consumption remains steady, but it is highest among twenty somethings. According to the BA, millennials drink 57% of the craft beer consumed on a weekly basis. After doing much research, I feel that while millennials have embraced wine, liquor, and Michelob Ultra with gusto, any statistics for millennials are skewed since it is such a large group, the youngest of which will not turn 21 for seven more years. So even if craft beer drinkers among millennials do not seem prominent statistically, they do drink 57% of craft beer weekly! And for those who turned 21 since 2010, they have spent their entire adult life in a more craft beer friendly environment. They are the first generation to have this much craft beer available to them, and I feel that those that have found it will drink it for life. Craft beer offers something else to them, and when all is said and done, millennials definitely are the biggest segment of craft beer drinkers. As more of them come of legal age, craft beer has the opportunity to continue to grow.

New drinkers are embracing craft beer in hordes.  They won’t tell you this, but the domestic mega-breweries know the median age of their drinkers is high, and in 30 years, a large percentage of domestic beer drinkers will have moved on. They don’t like losing revenue and they’re buying as many craft breweries as possible in the hopes to stay relevant in the future. So while growth for craft beer may not of been staggering in 2016, when the numbers are in for 2017, I think we’ll all see craft beer consumption is only rising.

On top of everything else I have shown, I don’t see a crisis coming because the craft beer environment in 2017 is very different from the one in 1999. Remember I said that a lot of the beer back then was mediocre at best. There was little promotion for a much smaller number of breweries, and these craft entities weren’t recognized at all by the large domestic breweries. We have a much higher quality of beer in 2017, and thousands of more breweries making a higher quality product. If craft beer wasn’t recognized as a threat by the domestic breweries, they wouldn’t be buying up as many craft breweries as possible as I stated above. And perhaps one of the biggest reasons craft beers is far healthier now is how much craft beer you can find on the shelves in grocery stores, or on tap at most restaurants. It’s a part of our culture, and a BA Survey in 2015 found that 45% of beer drinkers say they do like craft beer. In 1999, I doubt even half that many people were even aware of craft beer.

Trevor Monar, 23, is a millennial, and serious craft beer nut who’s very helpful in helping people select craft beer at his liquor store. He is pictured with some of his favorite beers! photo credit: Andrew Dickey

Before I go into the conclusion, I would like to discuss one statement made in the aforementioned Daily Beast article that has stuck with me: namely that fruit beer would be the death of craft beer.  Fruit infused IPAs fly off the shelf liquor stores, and some of them are quite good.  It has turned a lot of people to IPAs that otherwise may shy away from pale ales. I am aware that I have previously written that fruit beer was a tad excessive, but people do seem to like them and if anything else, fruit infused IPAs have been a shot in the arm to an already thriving style!  Kettle sours are really popular right now, and a lot of varieties of Gose have fruit in them. Lambics and Farmhouse Ales are also a natural fit for fruit, and they are currently very popular. Sour beer is becoming it’s own thriving subculture, and described as a gateway to craft beer. I definitely concur as these styles turn a lot of people onto beer who otherwise would drink something else. I could give more examples, but I think not only is fruit not the death of craft beer, it’s a driving force in the tremendous growth the craft beer scene has experienced of late.

I feel that my argument supports a claim that craft beer is alive and well, and will be for a while.  Craft beer has reached maturity, and growth has stabilized. Breweries continue to open, and sadly close, but since openings out number closings 8-1 (825-96, BA 2016 report), I feel we have a healthy scene.  It’s a great time to be drinking beer, with great taprooms, and phenomenal beer selections available. So as far as I can tell, there is no looming crisis on the horizon.

One of Greenbush Brewing’s slogans is “Good Beer Wins!” As I look at the hard data, and think about the bustling taprooms I have been in recently, I definitely share that sentiment.  As long as the younger drinkers continue to embrace craft beer, it’s portion of the overall beer drinking population will only continue to grow. There is still plenty of room for more breweries in some places as “thinking globally, drinking locally” becomes a way of life for so many.

The quality of beer in this country is as good as it’s ever been, and we have the most active breweries going since prohibition. We may see a bump in the road, but too many conscientious brewers and consumers embody craft beer for the movement to seriously derail anytime soon. Indiana is full of great breweries, and great craft beer people. I continue to travel constantly discovering new and exciting breweries and beer.  Until that changes, we have nothing to worry about, and I see no looming crisis. A few breweries may shut down from time to time, but another brewing interest can always fill that void. As long as people want good beer, the breweries will provide it, and good beer will continue to win!

 
 

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