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What's going on with craft beer in the US? - Analysis

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Late last month, Beer Business Daily hosted its annual Beer Industry Summit in San Diego. 

Big craft beer brands appear to be slowing in the US

Big craft beer brands appear to be slowing in the US

In the notes that followed, analysts took a closer look at the state of the craft beer scene in the US. While growth may be slowing, the sector is here to stay. 

In IRI figures released last month, growth for the category was shown to be sluggish. US sales for the leading 20 craft beers in multi-outlet channels were up 8% to US$3.8bn in the 52 weeks to 25 December. Volumes were up 5% to 106.1m cases in the same period. In comparison, for the 52 weeks to 15 May, sales for the top 20 craft beer brands were up 13% while volumes grew by 9%.

But, found analysts at the summit, craft is not slowing equally across the board. 

"The craft beer segment represents around 11% of the total industry and while still growing mid-single digits, growth has been decelerating," said Wells Fargo analyst Bonnie Herzog. "The segment remains very fragmented and is bifurcated with the bulk of growth being driven by the long tail of smaller, emerging craft brands such as Ballast Point and Lagunitas."

Herzog said established brands such as Blue Moon, Sierra Nevada and Sam Adams have been "dragging down" the overall category. "While consumers don't appear to be leaving craft," she noted, "the concern - and challenge - is that there are fewer consumers entering the segment." 

Looking specifically at pricing for new and established craft brands, Stifel analyst Mark Swartzberg summarised a panel discussion between Jon Collins, president, Nielsen CGA, Tom Fox, partner, CM Profit Group and Danelle Kosmal, VP, Beverage Alcohol Practice, Nielsen.

"Average 2016 US case price for 'mature' craft brewers was US$32," noted Swartzberg. "$40 for 'maturing' craft brewers, and $69 for "newbie" craft brewers.

"Not sustainable," he wrote. 

Meanwhile, focusing on craft beer styles, CLSA's Caroline Levy said the trend towards IPAs could be maturing.

"Craft beer tends to be synonymous with IPAs," she said in a note following the summit. "However, we are also seeing fragmentation within craft, with nine non-IPA styles up 16% in 2016."

Overall, said Levy, a slowdown in the growth of craft beer could lead to a shakeout of brands, with potential benefits for big-brewer craft brands.  

Echoing the sentiments of both Anheuser-Busch InBev's CEO Carlos Brito and also Molson Coors' CEO Mark Hunter, SIC analyst Pablo Zuanic said the sheer volume of choice in the craft sector was perplexing for some drinkers. 

"Excessive variety of brands and SKUs has confused the consumer," said Zuanic. "Retailers are either cutting space for beer or culling lower selling items."

Levy quoted a distributor at the event as saying: "Craft is 70% of my SKUs and 14% of sales." 

It looks like 2017 will see some brands fall away while others get to enjoy some breathing space. 


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