By Gregory Dunkling
Recent headlines report that big beer’s acquisitions of independent brewers across the nation are to blame for slower growth in the craft beer industry. But news of the craft beer market slowing down isn’t entirely accurate, especially when it comes to microbreweries in Vermont.
Over the past decade, during the heady days of craft beer, breweries typically experienced annual growth of 12-18 percent. The market shifted in 2016, when the industry come back to Earth. In fact, the industry slowed to 6.2 percent growth last year, according to the Brewer’s Association.
Still, it’s important to keep in mind that we’re still talking about growth of over 6 percent—a rate most industries would gladly welcome. Yet, in comparison to recent years, some industry observers are using these numbers to validate concerns about a possible bubble in the industry—or the impact of “Big Beer.”
Not to worry.
There are several categories of “craft breweries,” and it’s necessary to examine each of these to gain an accurate picture on today’s beer industry.
By the Numbers: Production and Growth in the Craft Beer Industry
According to the Brewer’s Association data on craft production by volume, Vermont’s 51 breweries produced 261,654 BBLS (barrels) in 2015 vs. 295,717 BBLS in 2016, an increase of 13 percent.
By comparison, in 2011 Vermont breweries produced 199,830 BBls, an increase of 48 percent between 2011-2016. (Note: several Vermont breweries do not report this data so these numbers under-represent this data to some extent.)
Larger regional craft breweries, or those producing 15,000 to 6m BBLs per year, when examined as a group, slowed considerably in 2016. According to Brewer’s Association data, the 50 top craft breweries representing some of the best-known national brands in this sector declined by 1 percent. Given the amount of beer these “Big 50” produce, a reduction in their production results in a significant drag on overall craft industry numbers.
As a category, regional breweries produced 73 percent of all craft beer, nearly 18 million out of 24.5m BBLS. A slowdown within this category has an outsized impact on the overall craft beer sector.
Yet, when we examine results for smaller microbreweries—defined as producing up to 15,000 BBLS per year with 75 percent or more of its beer sold off-site, and brewpubs, a restaurant-brewery that sells 25 percent or more on site—it reveals a very different story. These categories are still humming.
As an example, Vermont microbreweries and brewpubs, saw continued strong growth of 43 percent for micros and 51 percent for brewpubs, a far cry from the 6 percent national numbers for craft or decline for large regionals.
The smaller a brewery is, any reasonable increase in production results in a large percentage increase. Keeping this in mind, 11 of Vermont’s 17 micros experienced growth of 10 percent or better; four saw no growth and only one brewery reported a decline (-5 percent). Within this category, six breweries had growth of 40 percent or greater, several exceeding 100 percent growth.
For brewpubs, six had growth of between 20 to 500 percent, six saw no growth and only one experienced a production decline (-6 percent). It’s important to keep in mind that brewpubs are more frequently constrained by space limitations with a balance between their restaurant and beer operations. As a result, brewpubs may have no expectations for future beer production growth. In such a case, zero percent growth may simply mean they are already operating at full capacity.
Over the last few years the focus nationally has been on local beer consumption. Taprooms in breweries have emerged and grown in size and importance to a brewery’s operation. As consumers continue to demand local beer products, small, local breweries continue with strong growth.
Shifting Numbers with Winners and Losers
Does all of this paint a picture of market saturation or an impending bubble in craft? Hardly.
There will likely be shifting numbers within the overall craft beer industry with winners and losers. Continued 50 percent-plus growth may not even be a brewery’s goal, or desirable. As some of our smaller breweries are demonstrating, having a positive impact on the New England beer scene involves arguably more important factors. For example, operating an efficient brewery, making consistently excellent products, establishing an enthusiastic team at the brewery, building strong connections to local communities, and continuing to drive industry experimentation are important goals.
The time might be ripe to explore alternative ways to define success in today’s craft beer industry other than a focus on growth.
Note: It should also be noted that some larger craft brewery brands were removed from the Brewer’s Association numbers due to their being acquired by larger entities and no longer meeting the membership requirements of the Brewers Association. As a result, this was a factor in reducing craft’s overall growth numbers.
Interested in pursuing a career in craft beer? Learn about the UVM Business of Craft Beer Certificate Program.
-Gregory Dunkling is the director of the UVM Business of Craft Beer Certificate Program.