Craft Beer's Amazing Growth in a Down Economy
Craft Beer's Amazing Growth in a Down Economy
Craft beer industry laughs in the face of global meltdown. In these trying economic times, the craft beer industry has continued to grow, not only in the US but it has also become the beacon of brewing creativity around the world, with their beers and their creative fervor being the catalyst for Craft-Beer revolutions in countries like Denmark, Sweden and even Great Britain. The bad news for the beer industry as a whole is that overall beer sales were down approximately five million barrels in 2009.Yet, last year; the craft beer industry experienced perhaps its most stellar performance ever. Nationally, the craft brewing industry grew a little more than 10%.
2008 was a historic year for beer with the large brewers with consolidation and imports losing market share all while the top ten selling beer brands dropped in sales. The consolidation resulted in most major commercial beer brands no longer being owned by American companies. Despite this 406 Beer SKUs generated 90% of total beer sales in the US.
With beer industry representing an estimated retail dollar value of $101 billion, the Brewers Association estimates the actual dollar sales figure from craft brewers in 2009 was $7 billion, up from $6. Since 2004, dollar sales by craft brewers have increased 58% percent. Still the craft brewery industry has some hurdles to overcome. Retailers are able to command a higher profit margin on the craft-brews as compared to regular beers, they are reluctant to carry them because of the lack of volume sales.
Major brewers stopped producing fuller-flavored beers because they do not fit into this mass production mode although some of this is attributable to higher production costs. The primary mobility barriers that prevent larger brewers from capitalizing on the organizational positioning advantage are their orientation towards scale production, their inability to duplicate the craft-brewed flavor and quality and, their inability to promote the craft-brewed market image
While Big Beer’s mega-corporations continue to dominate the world market with slick advertising campaigns and inexpensive products, brewers of handcrafted beer stick to a more localized, or regional, business model that prizes quality and diversity over mass production. Technological advances in brewing equipment have reduced the costs of brewing small batches by creating some economies of scale at lower levels of production. Craft-breweries are much closer to their market and may therefore engage in different production systems (such as non-pasteurizing methods of preservation). Also, small brewers receive an excise tax credit in the amount of $11 per barrel on the first 60,000 barrels produced per year, given to brewers with production under 2,000,000 barrels per year. All of these factors allow craft-brewed brewers enjoy higher profit margin.
Additionally, some craft-beer statistics do not include contract brewers, companies whose brands are made, under contract, by breweries the company doesn't own. A contract brewing company is a business that does not brew its own beer but markets and sells beer brewed to its specifications by an existing brewery. The fact is that the sales of craft beer are growing faster while the sales of “popular US beer” drop suggest that a segment of the population understands the concept of beer with taste. Industry giants are hoping to regain sales with new packaging and ad campaigns, but smaller craft beers catering to more sophisticated palates are posting healthy gains.
Change, for better or worse, is part of everything, including the craft beer industry. Just like rock 'n' roll, the craft beer industry has grown up and matured and now is introducing new sub-genres. The Craft Beer industry should be celebrated by all Americans due to the fact that it lives up to the true ideals of the spirit of entrepreneurship and the rugged individualism wished upon us by our founders.
written by LIQUOR COOL, December 27, 2011
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