What's next for craft beer?
The craft beer phenomenon has won over consumers for various reasons. There’s the emphasis on authenticity and craftsmanship; the use of quality ingredients; and adventurous flavors.
As an alternative to mainstream beers, craft brands have been particularly successful at engaging with consumers.
‘Craft & imports are the two engines of US beer growth’: Bob Pease, president and CEO, The Brewers Association.
“The demand for fuller-flavor, variety, and local products from small and independent brewers doesn’t appear to be waning. As craft has gotten larger, it’s only natural that growth has slowed, but we still see future opportunities.
“It’s worth noting that the high-end of the beer market is still underdeveloped relative to many other consumer goods, so the current premiumization trend we are seeing likely has future legs.
“Since beer lovers are looking for variety there isn’t a single style or flavor to highlight. IPAs continue to be a huge driver of craft, partly because of the innovate twists brewers keep adding to IPAs. IPAs are as much a platform for innovation as they are a single style.
'IPAs are as much a platform for innovation as they are a single style'
Bob Pease, The Brewers Association
“On the other end, we’re seeing strong group in more sessionable styles from small and independent brewers. These include blonde/golden ales, kolsch, pilsner, other lagers, and light sours. This makes sense, since the vast majority of beer volume is still in the 4-5.5 ABV range, so growing craft brands are increasingly offering those options for beer lovers.
“We’re likely to see continued interest from multinational brewers in acquiring craft brewers. Craft and imports are the two engines of beer volume growth in the US right now. The large multinationals see the same demand trends and will do what they can to capture that market. At the same time, brewers looking for exit options may choose a strategic buyer over other options.
“The largest challenge for craft beer will be the ability of large brewers to use their scale, marketing, and distribution advantages to push their acquired brands into distribution and retail - even if that runs counter to consumer pull.
“Market access more generally will also be a challenge. Shelves are getting crowded, it’s harder to get tap handles, and many distributors are picking up fewer new brands than in the past. In states where brewers don’t have sensible options to access to the market, such as limited self-distribution and direct sales, brewers risk having few avenues to market.”
‘The rise of crowdfunding could have a significant impact on craft’: Spiros Malandrakis, senior alcoholic drinks analyst, Euromonitor International.
“In the UK, the decline in bar and pub numbers, competitive pressure from the major brewers, and the growing numbers of craft beer SKUs is limiting exposure in on-trade channels. As a result, BrewDog, one of the biggest craft brewers in the UK, has been tapping into crowdfunding to raise capital for additional BrewDog bars in order to expand its own on-trade channels.
“The rise of crowdfunding could have a significant impact on the craft trend. Camden Town Brewery (previously independent before being taken over by AB InBev in 2015) raised well in excess of its target of £1.5m ($1.8m) through Crowdcube, a crowdfunding platform, to help market and distribute its beers in continental Europe. This type of finance could ensure that other prospective craft manufacturers are able to launch their products.
“As witnessed across markets, major brewers are seeking to include craft beers within their premium portfolios, as seen with Camden Town as well as SABMiller’s acquisition of Meantime in early 2015.”
‘The brewing industry is in a state of change’: Chris McNamara, Executive Officer, Craft Beer Industry Association, Australia.
“I believe craft beer will continue its growth trajectory. Presently independent craft breweries have about 4.3% of the Australian beer market and output grew about 40% from 2015 to 2016. Over the same period the number of independent craft breweries grew from 287 to 354. I can see no indication that this growth will slow down in the immediate future.
“The landscape of the Australian brewing industry is in a state of change at present with AB InBev only recently completing its takeover of SABMiller and its Australian arm, Carlton & United Breweries (CUB). AB InBev has shown a willingness to purchase existing craft breweries in other markets particularly the US. While Australia is a much different market than the US, I think the management at CUB will look at expanding their craft portfolio in some way.”
‘Craft will become two sub-categories: mass craft and true craft’: Jonny Forsyth, Global Drinks Analyst, Mintel.
“I expect to see craft beer continue growing healthily in the US over the next few years. But craft will evolve into two separate sub-categories: ‘mass-craft’ and ‘true craft’.
“For example, Sam Adams is now so widely available and so big that it has transitioned into mass craft, despite the protestations of Jim Koch. This puts it alongside the likes of Blue Moon and Shocktop (brands which, because they are the offspring of big brewers, cannot authentically claim to be true craft).
“True craft brands will be those who carefully guard their authenticity by remaining exclusive, small, regional and vehemently independent. They will reach less of the population but will be the craft beer connoisseur’s choice.
“Mintel’s research shows US beer drinkers are comfortable with the concept of mass craft beers. Many view them as more reliable, better for casual occasions, more affordable, and easier to find than true craft. Mass craft brands will also cater for the majority of the population who want something slightly more flavoursome and premium, but do not want their taste buds blown away by an IPA “hop bomb”. They will help drinkers new to craft beer navigate the dizzying array of choice.
“Craft brands will therefore need to decide which of these two craft sub-categories they play in — they can’t operate in both. These market developments also spell good news for big brewers who have full licence to play in mass craft beer, but need to be transparent about doing so.”
‘Once this messy period finishes, craft growth will resume its healthy pace’: Eric Ottaway, CEO, Brooklyn Brewery.
“Craft beer is experiencing a messy period, not dissimilar to the late 90s, that will take a few years to sort out.
“That being said, the consumer move to premiumization and more flavor has not waned. However, craft has currently overwhelmed the consumer, and it’s not surprising that import brands with simplicity of message are doing well.
“Back then it was Bass, Guinness, and Belgian beers that benefitted; today it’s Mexican, Stella, Mich Ultra that are the beneficiaries.
“Consumers’ expression of confusion is now starting to work its way through the retail segment (reducing SKUs, less tap rotation), and the wholesale segment (reducing SKUs, dropping suppliers), but we have a few years of sorting out still to run.
“Brands with strong home markets and/or strong retail plays will do just fine. Brands without that that have travelled far in search of growth are going to really struggle.
“Once this messy period finishes, Craft segment growth will resume its healthy pace, and Import growth will settle down again. The combination of the two has a long way to still grow - it’s just a matter of which one will be in the lead at any given point in time.”
‘Craft beer is catching on throughout Africa. Kenya will be the one to watch’: Lucy Corne, South Africa based beer writer, and blogger at www.brewmistress.co.za
“There is a lot of question in South Africa about whether the "bubble" will soon burst - we have been experiencing growth of around 50% per year for the past two years.
"I do predict a number of breweries here will close - there is a lot of sub-par beer and I think the guys putting out inferior beer will lose out to those doing a proper job as the public becomes more educated.
"However I suspect other breweries will open in their place. While brewery numbers are growing, the average capacity is still tiny (around 10,000 litres per month) so there is room to grow, though I doubt the craft scene here can ever hope to take a similar sized portion of the pie to that of the States.
“IPAs are taking hold here and we have seen the first few sour beers on the market in the past month, though I suspect it will take some time to truly catch on. Lager is still the dominant style here, both craft and mainstream.
“It's an interesting time in South Africa and Africa in general as AB InBev has taken over SABMiller. There is a lot of concern over how this might affect the craft industry - will we see more imports, for example?
'Indigenous ingredients are also being used in South Africa and this is a trend I expect to continue'
“Craft beer is gradually catching on throughout Africa, though on a very small scale. I would be thrilled to see breweries opening up in more countries and am quite sure that will happen in the next couple of years.
"I think Kenya will be the one to watch (they already have a few breweries) and there are also murmurings in Namibia, Zimbabwe, Ethiopia and Ghana plus a cool crowd-funding campaign to start the first craft brewery in Rwanda.
“The main challenge in South Africa (and indeed elsewhere in Africa) is the availability of ingredients. Locally produced ingredients are limited and currency fluctuations make importing of ingredients, particularly hops, tricky.
"Some are forging ahead and importing some or all of their ingredients, others are finding local alternatives, such as Inland Brewery in Accra, where they are substituting malted barley for locally grown malted sorghum.
“Indigenous ingredients are also being used in South Africa and this is a trend I expect to continue.
"As well as using indigenous grains (a few brewers here also use sorghum alongside malt), there are numerous breweries using endemic plants and herbs to flavour their beers including rooibos, buchu and honeybush.”
‘Craft has not reached its peak yet’: Holger Eichele, General Secretary, German Brewers Association
Holger Eichele sees more and more conversation about all types of beer than ever before.
“Craft enriches the German beer variety and has not reached its peak so far,” he said.
“1,400 breweries in Germany produce 95 mio hl of beer per annum. The percentage of craft beer is about 0.2%.
“The most popular traditional beer styles in Germany are Pils (53%), Weizen, Helles and Export. The most popular craft beer style is IPA.”