Is a reckoning on the horizon for the brewing market?


It's no great secret that the craft beer scene continues to expand at a rate that is simply astounding. If you think about it, just 10 years ago Jacksonville could not claim a single craft brewery. Today, when you take St. Augustine and Fernandina Beach establishments into account, there are nearly 30 to choose from and more in the planning stages.

While beer-lovers may be reveling in this embarrassment of riches, can the rapid growth be sustained, or will the craft beer bubble burst? The answer is not as straightforward as it may seem. Sure, as more and more craft breweries open, market saturation will occur, but breweries seem to be taking on the mantle of the neighborhood bar. Taprooms are becoming less like destinations and more like local hangouts where neighbors walk for a cold beer and fresh conversation. 

Still, the days of opening a brewery and expecting it to instantly do well are long gone. In today’s market it is not enough to merely make good beer. Throughout the craft beer renaissance, as drinkers have become more educated, their palates have evolved, and they have come to expect more from craft than just a cold brew. Today, brewers have to continually create new concoctions to delight beer-lovers and entice them to come back for more.

“The next 10 years will be more challenging then the last 10,” announced Jim Koch, owner of the venerable Boston Beer Company, makers of Samuel Adams, at the Florida Brewers Conference last August.

According to advocacy group the Brewers Association, there are nearly 7,000 craft breweries in America right now. That is up nearly 4,500 from just six years ago; or an astounding approximately 300 percent growth. At a time when the mega brewers are seeing flat, or even declining growth, craft beer sales rose 6.2 percent from 2015 to 2016.

Still, even with–or maybe because of–these kinds of figures, craft beer may soon experience market saturation.

One solution for newbies could be to embrace the hyper-local model known as nano brewing. A nano brewery produces a very small amount of beer—usually less than 10 barrels per batch—and rarely cans or bottles for sales outside the taproom. The economy of a nano brewery makes sense since breweries that sell kegs of beer to a distributor for resale at a bar or restaurant often sell that keg at a very low price, say $75. This means that after costs the brewery might only make $35-$40 per keg. Whereas a nano brewery only produces beer for their taproom. If a beer sells for $6 per pint, and a half-barrel contains 124 pints, then the brewery stands to gross $744 per half-barrel keg.

Another solution to the coming reckoning is consortiums. In this model brands band together and pool marketing platforms to extend reach into new markets. The blending of Oskar Blues and Cigar City breweries is a good recent example of this concept at work.

Perhaps the best way to fight a possible craft beer market correction is for drinkers to support their local breweries and visit their taprooms often. For my money, that’s the most refreshing choice, too.

No comments on this story | Add your comment
Please log in or register to add your comment