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Don’t be deceived by the explosion of craft brewing in America, overall beer volume in the United States fell last year by 400,000 barrels to 197 million barrels. This decrease in output is the equivalent of two breweries the size of Dogfish Head shutting its doors.

In the face of overall beer sales stagnation, the import and especially craft beer sectors have been growing rapidly. Last year imports grew by 6% to a total of 31 million barrels. Imports (think Skunk-e-ken) are a much larger market than the craft market – about a third larger. The craft sector clocked in at a total of 24 million barrels produced across the 4,000+ small places scattered about the country.

Aside from the size differences, recognize that what tends to distinguish “craft beer” (it is hard to define) from “mass produced” beer is that craft beer tends to focus on using the freshest, all-natural ingredients and especially does NOT employ any lightening or alcohol enhancing “adjuncts” in their beer. In other words, we do not see Sierra Nevada using corn or rice in their beer. Almost all craft-beer can be characterized by using 100% barley malt, or pure grain specialty grains to go into the brews they make (e.g. Spelt, Wheat, Oats, and more exotic stuff too). The emphasis on all-barley / all-grain beers and not extract or adjunct beers, and an emphasis on freshness, piles and piles of innovative hops, hundreds of proprietary and innovative yeast strains, makes that beer more expensive to produce. Furthermore, sellers of high quality craft beer tend to be selling into a market with more discerning taste and to folks with a smaller degree of price sensitivity than the average mass market drinker. While folks like myself do tend to buckle at a 4-pack on an IPA that may cost $22, we are not exactly lining up craft beers on the shelves and buying the one with the lowest price to alcohol ratio we can find. So there is considerable room for price stratification in the craft beer market,

This is borne out in the sales data. While the overall brewing industry revenues stood at $106 billion last year, and while the craft segment accounted for only 12% of the sales volume, the craft segment revenues were over $22 billion, so over 20% of the value of the beer being sold in the country is coming from craft. Whether or not the boom in craft will continue is an open question, but I do not expect the last trend to change any time soon. In a highly competitive marketplace, brewers are going nuts first to find a niche they can fit nicely into and to craft a message to attract a following, and they are all on the constant experimentation expedition to highlight the incredible array of flavors and aromas and other characteristics, and will continue to reach into the “Long Tail” of the beer consuming population to find a sustainable business model.

We’ll have a lot more to say on brewing and the brewing industry soon. In the meantime, go pick up something funky, perhaps a Long Trail Cranberry Gose, to keep you cool on a hot summer day.

Prost!

One Response to “High Value, High Gravity”

  1. sherlock says:

    Tree House on Wednesday went through roughly 2000 people buying 12 cans (16 ounces per can) for $45 in 4 and a half hours. Granted it’s probably the “#1” brewery going right now but they could certainly raise the price of their beers and people will still flock.

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