PMMI pointed to the 5% growth of US craft beer sales in 2017, which accounted for 12.7% of the beer market by volume and 23% by revenue. By comparison, craft spirits are growing at an annual rate of nearly 30% and surpassing $3.7bn in total sales.
In 2018, total US beer was down by 1%, while craft beer grew at 4%, according to the most recent figures (by volume) from the Brewers Association. There are now more than 7,000 active breweries in the US, and 2018 saw 1,049 openings and 219 closures.
PMMI sees the craft beer category now beginning to ‘slow down slightly,’ while craft spirits are entering a new expansion phase similar in scale to what craft beer experienced over the last decade.
It’s likely the craft beer industry has reached the peak of its growth and will now continue dealing with the strain of an overcrowded market. With the task of standing out to consumers, PMMI says breweries have been reexamining traditional models of scaling and expansion.
Diversifying hybrid 'brewstilleries'
PMMI believes craft distillers are taking note from craft beer’s growth pattern and 'keeping operations quaint and production goals modest,' with an ‘emerging climate of caution’ in expansion.
Craft beer and spirits have overlapping industry challenges and needs, according to PMMI, in space constraints, implementing automation, small batch changeover, outsourcing and packaging considerations.
On the logistics side, craft beer and spirits struggle often with distribution of their products. It varies state by state in the US, though it’s common for a producer to sell to a distributor, who then sells to a purveyor.
Some states allow complete self-distribution, while others allow it up to a certain capacity, and others prohibit it. According to PMMI, 18 states operate under an ‘alcohol board’ that regulates production, distribution and sales. All the differences make it a challenge for small craft producers when deciding on expansion to new states.
PMMI says that diversification into other beverages is becoming increasingly attractive, or even necessary, for craft producers. Craft brewers are introducing spirits and forming hybrid ‘brewstilleries’ because the skills needed for brewing are easily transferable.
But brewer expansion is also coming in the form of roasted coffee, specialty teas, hard teas and hard seltzers. Diversifying in distilleries has been more necessary, according to PMMI. as some state laws dictate what small craft producers can sell in their taprooms.
The offerings are then limited to only products from the distillery. This leads them to add beer and wine options to round out their menu for consumers. Premixed cocktails and canned liqueurs have also been popular choices for craft producers.