Its not all plain sailing for craft brewers in the US

It's not all plain sailing for craft brewers in the US

Has the craft beer backlash begun? Here Technomic's Donna Hood Crecca takes a look at the current state of the US market and the issues facing the sub-category.

Some might say it’s almost blasphemous to raise any negatives about craft beer.

The category posted another double-digit volume gain in 2012, according to our 2013 State of the Industry Report, and it continues to expand, attracting consumer and trade attention and providing much-needed momentum to the beer industry. As the segment evolves and more brewers and brands enter the fray, however, some interesting developments are emerging:

Sensory Overload - The number of new craft brews coming to market is overwhelming, and not just in the figurative sense. Two-thirds of the 35 new beer product introductions recorded in our DRINK database’s New Product Tracker in the first quarter of 2013 were craft beers. Brewers need not adhere to strict style definitions or naming constructs and often get pretty creative with their label verbiage. That, paired with the onslaught of so many new products, can prove confusing to the consumer, let alone the bartender or retail salesperson.

Now we’re seeing a backlash against the uber-hip, obscure or insider-jokey beer labels and style names with the launch of The Just Beer Project line from Alchemy & Science, which includes Just IPA, which is currently in limited distribution. In an interesting twist, JBP is the brainchild of former Magic Hat executives. Could the pendulum be swinging back to easy-to-comprehend, easy-to-drink brews?

Quality Quest - During a recent discussion with some top on-premise operators about managing beer lists in light of the craft beer explosion, one piped up and said, “Just because it’s craft doesn’t mean it’s good.” That led to a rash of tales of woe about rushing to get the next seasonal release from a hot local brewer only to have the bottles gather dust because, cool labels and limited availability aside, the brew was found lacking by the patrons. Having been so burned, on-premise and off-premise operators alike are now more skeptical and want assurances that what’s in the bottle will satisfy the customer.

Questioning “Craft” - The proverbial elephant in the room is the actual definition of craft. The Beer Institute says no more than 2 million barrels of production; the Brewers Association says 6 million. The federal and state governments have their own standards. We at Technomic go with the 6 million barrel cap. Brewers also will argue about the percent of malt and use of adjuncts, and probably the alignment of the stars when the barrel was tapped. The upshot is that retailers and operators are making their own individual classifications of what is craft and what is, well, not craft, and are organizing their shelves and beer list space allocations accordingly.

Craft vs. “Crafty” - The other elephant in the room is the major brewers, who’ve done a fine job of offering up craft-like brands (our DRINK database shows super-premium domestic beers like Shock Top and Blue Moon posting strong results) much to the chagrin of the smaller brewers. The craft camp wants transparency regarding the ownership of such labels so it’s clear to consumers that the origins of these beers lie with major brewing entities, not a local outfit. The major brewers contend it’s what’s in the bottle that counts. Ultimately, consumers will vote with their dollars for their brews of choice.

High Prices, High Octane - Some on-premise operators love craft beer because it drives up check averages, but others are lamenting the tighter profit margin and inability to heavily promote. What’s more, with many crafts showcasing ABV in excess of 7%, the prospect of selling more than one to a guest diminishes. And now with the government floating a 0.05% BAC, the high-octane brews could be even less attractive on-premise.

Don’t get me wrong, I’m a fan of craft (trying to work another visit to Ommegang into the annual Cooperstown visit…). I fully acknowledge that it’s sparking new life in the industry overall and teaching a lot of old dogs new tricks.

But, the consumer and the trade are starting to make their own decisions about how to approach and manage the category. The brands that define themselves and come to market with appropriate pricing and positioning are most likely to continue on the current upward trajectory. And this small beer category will continue to make its mark on the industry.

Donna Hood Crecca is senior director of Technomic's adult beverage resource group.

This article first appeared on Technomic's website and has been re-produced with the permission of the company.

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2012 The U.S. Beer Market

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