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The old year isn't over--not for another few hours, anyway--so the beer market's 1997 numbers are not in yet. By all reckoning, though, rough waters have been sighted off the bow of the craft brewing industry. It may not be obvious from the Willamette Valley, where sales of craft-brewed beer have risen to 30 percent of the draft market and nearly 10 percent overall. But some market watchers and economists have declared the craft beer "fad" dead. Within the past six months, more than one report has called beer the most recent "Snapple" phenomenon--a quick start, booming sales and an equally quick fade. It's true that in the past year there have been slowing sales and, as in the case of Nor'Wester, some thinning of the herd. But the market is still growing at a healthy pace, and there's no reason to expect it won't continue. As we look ahead to a new year, some reflections on the brewing industry: The Bad News The craft brewing market continues to get more competitive, even as sales slow. From June to September, North America saw a 3 percent increase in the number of new breweries and brewpubs. In some already crowded markets, that doesn't leave much elbow room. Combine that growth with the multiple beer styles from each brewery, and it's clear that 8 feet of shelf space isn't going to accommodate everyone. In addition to the growth of craft breweries, the majors have begun to make inroads into the market with "all malt" lines like the new Michelob family. Finally, when small companies merge with a major to secure large distribution networks, shelf space can be further restricted for other breweries. One option for brewers seeking a less-saturated market is moving beyond Oregon's borders. But this has its own set of issues. To begin with, most craft-brewed beer is perishable. Except for a few high-alcohol styles, the lifespan of a beer is limited to a few months, after which the flavor will begin to degrade. Perhaps more significantly, craft brewing markets are becoming increasingly regional. There are no longer vast swaths of America untouched by microbreweries. Consumers tend to buy local, and as brands proliferate, it becomes harder for out-of-state breweries to compete. On the other hand, the craft brewing market hasn't completely swept the country. According to the Institute for Brewing Studies, craft-brewed beer accounts for roughly 3 percent of all beer sold in America. If Oregon is any indication, critical mass for a healthy market is reached before 10 percent. But if sales plateau, is 3 percent enough to keep an industry alive in those ale-poor states? It seems less likely that someone will venture over to that small section of microbrews--next to the wine coolers--and plunk down $7 for a six-pack of something called Extra Special Bitter if no one else in that town is doing so. The Good News Even though it may be restricted nationally, growth can occur at fairly high levels within a local market. Against claims that craft beer is a fad, most folks in the industry (brewers, distributors and retailers) point to a snowball effect of growing sophistication among the clientele. They're right. Look no further than the robust health of brewpubs. Not only do they offer another place to go have a beer, but they appeal to a more family- and food-oriented crowd than traditional bars. It is no surprise that draft sales of craft-brewed beer account for nearly three times the market percentage of bottled beer. A core group will always drink light lagers from major breweries, but another group will never return to them. There is an equilibrium somewhere between 3 and 97 percent, and that means big growth for the craft market. As with any growth industry where there is money to be made, certain brewers will become dominant in the craft beer market. Already, Boston Beer Company and Pete's Brewing Company have established national reputations. As long as they make high-quality beer, however, brewers such as Hair of the Dog will be able to survive in a market where people with sophisticated tastes are willing to pay $3 a bottle. Another indicator that this is true is the growth of imported beer. Having tried American interpretations of English, German or Belgian styles, consumers are turning to the models. All of this means a more diverse, growing market for beer drinkers. A final note. What happens with the market is determined by demand. Distributors will stock the brands that are selling. If you find that there are fewer and fewer of your favorite beers on the shelves, ask the supermarket to stock them. As consumers, there's only one way to make sure your favorite beer stays on the shelf: Vote with your wallet. |
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