Bart Watson, the newly appointed President and CEO of the Brewers Association (BA), gave his State of the Industry address last week at the Craft Brewers Conference in Indianapolis. Before becoming head honcho, Bart was the longtime chief economist for the BA, so he’s addressed the CBC before. I will summarize, paraphrase, and bullet-point his speech for you here. His message reiterated some too-familiar bad news. It also provided some positive insights, hope, and direction for breweries looking for a path forward.
In his address, Headwinds or New Reality, Bart suggested that you reconsider your strategy if you hope to ride out the storm until things return to normal. He spoke of fundamental changes to the market and a shift in consumer habits. What’s happening right now is not a diversion from business as usual; rather, it is part of the new normal.
Particularly Hard on the Little Ones
First up, craft beer production and sales. Craft beer sales were down by 4% in 2024 compared to the previous year. That’s tough news, but 43% of craft breweries increased production over the same period. “While the overall growth number isn’t necessarily determinative of your company’s success (-4% doesn’t mean you can’t grow), it does set the overall balance of growth versus failure.”
Here in Washington state, we see examples of this. Despite the headwinds, some breweries are growing. Things are tough, but some breweries are finding a way to grow, whether by opening additional locations or increasing their presence in the local market; growth is still possible. It’s just never been harder.
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Watson reiterated that this downward trend has proven most damaging for the smaller breweries. The pain was felt most profoundly by breweries producing fewer than 500 barrels annually. The breweries that produced more than 15,000 barrels per year and that sell most of their beer through distribution channels performed slightly better than the craft beer segment overall. Smaller declines for bigger breweries, on average.
Recognize that in Washington, only a handful of our 400-plus breweries produce more than 15,000 barrels annually. Maybe half a dozen? The overwhelming majority produce much, much less than that. This is true across the entire nation.
Also disproportionately impacting smaller breweries, brewery closings outpaced brewery openings for the first time since 2005, with 524 closings and 430 openings. Watson said that the vast majority of closures involved small breweries–those producing fewer than 500 barrels per year. In the end, there are still more than 9,000 breweries in the USA, which is remarkable.
Omnibibulous Consumers
Omnibibulous is not just a fun word to say; it accurately describes many consumers nowadays. Beer is not the only alcoholic beverage they drink. In the post-pandemic world, the percentage of craft beer drinkers who also consume other alcoholic beverages has increased. Once upon a time, craft beer drinkers consumed craft beer exclusively or almost exclusively. Wine and spirits drinkers were similarly unibibulous.
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Today, craft beer consumers who say they drink less craft beer say they are doing so because they are also drinking other things, such as seltzer, cider, spirits, fermented malt beverages, etc. Regardless of how much craft beer they are or are not drinking, they also drink other things. This is a drum that Bart has been beating a lot over the past couple of years.
Bart pointed out that the breweries that have diversified are performing better than the ones that have not. We might pooh-pooh the idea of a brewery producing and/or offering seltzer, cider, NA beer, and whatever else. Still, we must acknowledge a consumer trend that is not going away. Watson noted that 52% of craft brewers producing non-beer beverages recorded growth in production volume last year.
Brewbound did a follow-up interview with Bart in the form of a podcast. It’s a follow-up to the Craft Brewers Conference in general, but it includes an interview with Bart.
Beer Flavored Beer
Sticking to consumer trends, Bart referenced a Harris Poll commissioned by the Brewers Association. The poll surveyed consumers who drink alcohol several times a year or more but do not drink craft beer that often–people who drink alcohol but don’t drink craft beer. This group represents 29 percent of the population.
Why don’t they drink craft beer? More than half of the respondents said they “do not like the flavor.” Beer aficionados know there are many beer flavors, but maybe craft beer has painted itself into a corner. What does craft beer taste like? These days, to many consumers, IPA has become the stereotypical flavor of craft beer. If you don’t like IPA, you don’t like craft beer.
In a big way, IPA built this industry, but we need to blow up the stereotype. Watson suggests that we need to change the perception and work to introduce consumers to the wide range of beer flavors. How do we do that? It’s a million-dollar question. You can read more about Bart Watson’s address on Brewbound.
