GuestMetrics: Craft Volumes Slowing at On-Premise

It’s not uncommon to hear craft brewery owners gripe about the stiff competition for tap handles and cooler space on-premise. Now they’ll have some new data from GuestMetrics LLC to cite while they carp.

Craft’s on-premise dollar sales are up 7.5 percent and volume is up 4 percent year-to-date, but according to Peter Reidhead, the vice president of strategy and insights for GuestMetrics LLC, that growth is beginning to slow.

“Volume growth for craft was near 6 percent in May and that has slowed to 1.9 percent for the 4-week period ending August 11,” he said.

Black Box Intelligence (a sister company of GuestMetrics) reported restaurant and bar food traffic was also down 1.9 percent during the same 4-week period. That may have been a major reason for the sluggish sales, Reidhead said, but he also pointed to other causes for concern.

“There are so many small players rushing into a finite space and they are starting to elbow each other,” he said. “If you are an established craft brewery like Lagunitas or Stone, you’re knocking it out of the ballpark. It is the breweries with a lack of distribution, marketing and quality products that have something to worry about.”

So are the tap lines drying up? It’s possible, said Reidhead.

“Sure, there is the physical reality to on-premise,” he said. “Unlike the off-premise [market] — where craft has a lot of room to grow — if you think about the on-premise drinking experience, you see new tap handles that you never noticed before. Compared to the off-premise, craft’s share is so much higher but I’m not sure how much higher it can go.”

Craft has captured more than 20 percent of total on-premise beer volumes, according to GuestMetrics, which pulls from a database of more than $8 billion in sales. That database currently represents a broad bar and restaurant base, 30 percent of which is from chains and 70 percent independently owned. In terms of types of establishments, 68 percent are casual dining, with fine dining, bars and lodging each comprising about 10 percent.

But Reidhead said he isn’t sure how much more growth retailers will be able to handle.

“Sometimes, more choice doesn’t help the consumer,” he said. “Whether you are talking about beer, mustard or sweaters, sometimes scaling down the selection can actually help improve volumes.”

That’s the case at Boston’s Eastern Standard Kitchen & Drinks — located one block from Fenway Park — where this baseball season’s overall beer sales have declined 8 percent compared to last year’s. Baseball season is the restaurant’s busiest time.

“We tripled the size of our beer list but got rid of products like Amstel, Budweiser, Narragansett and Pacifico,” said Kevin Martin, the restaurant’s bar manager. “We’ve seen small growth of 3 percent on our craft beer offerings.”

Reidhead believes there might be a “sweet spot” for the number of brands a restaurant or bar should carry but also said overall beer volume declines could be attributed to the typical flavor profiles of many higher-alcohol craft beers.

“If you think about a typical craft beer, it tends to be heavier and hoppier,” he said. “Say what you might about light lagers, but they are very drinkable. Craft’s success is actually one of the drivers hurting category volumes. It lacks sessionability.”

Despite the sluggish numbers, Reidhead said established craft brewers shouldn’t be too concerned.

“Craft brewers who are making a high quality product don’t have much to worry about,” Reidhead said. “But someone who is jumping into the category, if they don’t have something unique that helps them stand out, has more to worry about. The easy days of low-hanging fruit might be a thing of the past at this point.”

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