The craft brewing industry has reached its “most competitive moment,” but that’s not necessarily “a bad thing,” Dogfish Head co-founder Sam Calagione said during a “state of the industry” panel discussion at the final Brew Talks meetup of 2018.
Calagione, along with Revolution Brewing chief commercial officer Donn Bichsel and Canarchy Brewery Collective president and COO Matt Fraser, explained to more than 150 beer industry professionals how they’re navigating through the so-called “noise” in the space.
“There’s noise in the sense of 7,000 voices [are] trying to be differentiated from the other 6,999,” Calagione said, “but that’s why we all go to work every day — is to try to build something really special and distinct.”
And those 7,000 voices could be expanding, according to Bichsel, who estimated that the number of breweries in operation could eventually exceed 12,000.
“I think the number 7,000 is just the beginning; I think we’re going to see 10,000, 12,000 [breweries],” said Bichsel, who also estimated that 15 percent of the beer in the U.S. is being sold directly to consumers via brewery taprooms. “I think the ability to make your own product and sell it direct and tell that story is one that the consumer really wants to latch onto.”
As the number of breweries continues to creep upward, its become more difficult for beer companies to gain “share of mind” with wholesalers, especially ones who want to rationalize the number of SKUs they offer. Bichsel added that some of Revolution’s distributors consider smaller batch products beyond the company’s flagship offerings “just noise.”
“They just want to focus on our top two or three SKUs,” he said. “As we try to find our way back into the top 10 of their houses, it’s hard because our brand as a whole becomes noise.”
As for Canarchy, Fraser said having a rollup of seven breweries has helped create a “halo effect” that’s benefited other brands within its portfolio. He also noted that aligning Canarchy’s breweries — Oskar Blues, Cigar City, Three Weavers, Deep Ellum, Squatters, Wasatch and Perrin Brewing — within the same wholesaler network has become a top priority for the company.
“We’re probably 90 to 95 percent aligned,” he said. “A year ago, it was probably closer to 85 percent, and we’re continuing to make some strides in aligning the network, but it’s absolutely important that we align the network.”
Meanwhile, Calagione, Fraser and Bichsel each agreed that shelf placements are becoming harder to secure as some retailers are beginning to reallocate space that had, for a moment, belonged to craft. Domestic beer brands from large breweries or import labels such as Corona and Modelo are making headway, they said.
In some cases, Bichsel shared that he’s had conversations with wholesalers outside of Revolution’s home market of Chicago to see if the brand is “still a fit” in those houses. Although those conversations are difficult, Bichsel said they’re necessary and beer companies must realize they’re often receiving the focus they deserve until they do “something transformational.”
“You have to agree with them because they are right,” he said.
Calagione added that he doesn’t blame wholesalers for SKU rationalization, but he wants to be the decision maker on which brands from his portfolio survive.
In the video above, Calagione, Fraser and Bichsel discuss how success will be defined for beer companies moving forward, the growth of taproom sales, their thoughts on the Brewers Association’s independence seal, and the continued threats from wine, spirits and cannabis, among other topics.
Speaking of cannabis, Fraser also revealed that Canarchy has had meetings with several manufacturers about potentially entering the space, following moves by larger beer companies such as Molson Coors and Constellation Brands.
“If the right opportunity comes along, we’ll look at it,” he said.