Sales of craft beer are still slowing, according to the latest data from market research firm IRI Worldwide.
Craft volume sales across the firm’s measured multi-outlet and convenience channels (MULC — which comprise grocery, drug, club, dollar, mass-merchandiser, Walmart and military stores), are up just 6.2 percent year-to-date through June 12. And over the latest four-week period, also ending June 12, volume gains are even slower — craft sales are up just 5 percent.
By comparison, craft sales were up 17 percent at this time last year. And in 2014, volume sales were up more than 20 percent through the midway point of the year.
So what’s happening to the once red-hot craft sector? There are a few reasons for the softer sales.
It’s harder to grow on a larger base
As Brewers Association chief economist Bart Watson told Brewbound earlier this year, slower growth is a “natural part” of category maturation. As craft brewers penetrate deeper into more mainstream retail channels, and as competition increases, growing at a double-digit pace becomes more difficult.
So while U.S. craft brewers collectively grew more 6.5 million barrels in 2014, to 22.1 million barrels, according to the BA, that kind of furious growth rate is unlikely to continue long-term. That was evident in 2015, when craft brewers collectively grew just just 13 percent, to 24.5 million barrels.
The largest brands are in decline
While IRI data can and should be used as a leading indicator of overall category health, the information is heavily influenced by the performance of the country’s biggest craft brands.
In IRI’s most recent monthly report, 15 of the top 30 craft brands were in decline. That includes some large mainstream brews like Sierra Nevada Pale Ale, Shock Top Belgian White, New Belgium Fat Tire and Samuel Adams Boston Lager.
Six of those 15 brands are experiencing double-digit volume declines, which has a significant impact on IRI’s topline craft category growth figure of 5 percent.
The extent to which those declines can impact category trends is perhaps best illustrated by examining sales for a large brand like Boston Lager. At this time in 2014, it had racked up more than $43 million in MULC sales, according to IRI. Fast-forward two years, and Boston Lager has tallied just $37.5 million in sales in those same retail channels year-to-date.
Flavored Malt Beverages, Import Beer Taking Occasions?
Go to any industry conference — including our own — and you’ll undoubtedly hear the oft-repeated “we’re losing share to wine and spirits” refrain. While it’s true that products within those segments are cutting into beer’s purchasing occasions, two categories — FMB’s and import beer — also appear to be impacting craft’s growth trends.
Volume sales of flavored malt beverages, driven largely by the success of Pabst’s Not Your Father’s Root Beer and similar offerings from other companies, are up 11 percent year-to-date. Import sales, propelled by the growth of brands like Corona Extra, Modelo Especial and Dos Equis, are up 6.7 percent.
In response to those trends, some craft brewers have begun introducing their own hard root beers and even created a few American-made “Mexican lagers.” Ska Brewing, which has canned its “Mexican Logger” brand since 2011, Oskar Blues, 21st Amendment and Pelican Brewing are just a few companies hoping to capitalize on a consumer shift toward more sessionable offerings.
Nevertheless, the slowdown hasn’t deterred craft brewers in California from opening up shop.
In a press release promoting its upcoming “California Craft Beer Summit and Beer Festival,” the California Craft Brewers Association today reported that more than 700 craft breweries are now operating across the state.
“California continues to lead the nation’s craft beer movement and the Summit showcases the wild success of a community united over a common passion: craft beer,” CCBA executive director Tom McCormick said in the release.
Putting California’s current brewery count in perspective:
- 1994 — the last year when there were less than 700 breweries in the entire U.S., according to the Beer Institute.
- 15 — the number of breweries that were operating in California in 1986, according to BI records.