Saturday, March 26, 2016

Craft Beer Growth: At Whose Expense?

It's no secret that craft beer is hot, but just when you thought we were sitting on a micro brew bubble, the momentum seems to be picking up pace.  Substantiating this, the Brewers Association released from fresh stats this week that are, frankly, brow-raising.

You don't need to be a market scientist to know that the craft beer segment has enjoyed meteoric expansion in recent years.  Most grocery stores I've walked into have undergone at least some remodeling to accommodate expanded beer selections.  Higher-end beers are now commonplace offerings at restaurants, bars, and even sporting concessions.  Anyone old enough to remember what it was like to be a beer drinker 15 years ago knows that we live in a gilded age.  Selections are expansive to the point of overwhelming saturation.

And why wouldn't they be?  I wrote about how much more compelling a value proposition high-end beer represents than wine a while back, and believe that this remains true.  It's also a leading causal factor in consumers' increasingly beer-centric choices.  So, are these numbers surprising?  Well, yes.  Why?  I'll give you 22 billion reasons why.

According to the Brewers Association, volume was up 13% in 2015, but value was up 16% to $22.3 billion.  Whoa.  I'd like to own stock that delivers those kinds of returns!  What's more is that, as a portion of overall beer sales, craft's market share reached 21%, so for every $4 spent on Budweiser and the like, there's $1 being spent on craft beer.  While that might not sound like a lot, consider the relative infancy of the craft beer movement in contrast to the century-plus history of beer in the US.  It's no wonder there's so much consolidation in this space.

The questions is, as the craft segment grows, whose lunch are the micro breweries eating?  Mass-produced beer?  Wine? Spirits?  Or are there really that many millenial hipsters coming of age all at once? Probably a little bit of all those. What'll be most interesting is to see how/if the wine market wakes up to these impressive trends and what it does about it.  Is it within the realm of possibility that producers will refocus on delivering competitive quality and value in the hopes of retaining customer base?

We'll just have to hope, wait, and see.

No comments:

Post a Comment

Please add your comment here: