Craft beer market beginning to get sluggish
The world's biggest brewer, Anheuser-Busch - maker of Budweiser - conceded yesterday for the first time that the craft beer segment was indeed slowing down. The sector has decelerated for more than three months and the slowdown is attributed to an explosion in brands, style but not enough quality. The stagnation is serious enough for massive lay-offs at brewers that were thriving until recently.
Craft beer
For a beer to be qualified as 'craft beer' it must be produced from a small brewery whose output does not exceed 6m barrels of beer a year. The brewery must be 'independent' and will not be considered so if 25 percent or more of the business is owned by a large corporation. Additionally, its ingredients and brewing methods must essentially be 'traditional'.
One-fifth of the US beer market
According to the Brewers Association, six years ago, craft beer market was worth $8.8 million and in 2016, it's upto $22bn craft sector and represents 21 per cent of the value of the $106bn US beer market.
Massive growth; then a lull
Over the last few years, particularly in 2013 and 2014, sales of craft beer grew at an impressive 18 percent in the US. The growth rate slowed down to 13 percent in 2015 and has dropped further to 8 percent in 2016. Anthony Bucalo, an analyst at HSBC said, "There's a natural point where it can't grow anymore and this might be it."
How bad is the slowdown?
According to analysts, it is unlikely that the category's impressive growth in the past will continue at the same pace. Anheuser-Busch now anticipates industry volumes in the US to decline this year as opposed to anticipation of an increase. Even owners of decades old craft beer brands like Stone Brewing and Craft Brew have been in the news for significantly trimming their work force.
What's causing the slowdown?
The market is swamped with an influx of beer makers. As on June 2016, a demand for local and 'flavoursome beers' led to breweries in US hitting a record number of 4,656 yet the volume of growth is half of what it was two years ago. The bigger players indicate that there is "limited shelf space with distributors" and customers were overwhelmed with choice.
What's the future like for craft beer?
Trends indicate that major brewers are keen to include craft-beers within their portfolio: this is evident from Anheuser-Busch's dozen acquisitions of craft-brewers. Chris McNamara of Craft Beer Association, Australia believes that although craft breweries form 4.3% of the Australian market, output grew a massive 40% last year. Other analysts believe craft beer was experiencing a messy phase but would eventually regain a healthy growth-rate.
