If the U. S. economy’s in a recession, you wouldn’t know it looking at the performance of the small 5% market segment known as the craft brewing industry.
The Brewers Association, a trade association which represents the majority of the U.S. brewing community, recently released mid-year 2011 statistics for craft brewing.
What do the numbers say? Growth is healthy — double digits in both volume and retail dollars.
During the first half of this year, sales are up 15% and volume is up 14% to roughly 5.1 million barrels. In comparison, the first half of 2010 delivered 12% growth by sales and 9% by volume.
Even though the economy is providing many challenges, craft brewing continues to grow and accelerate compared to the overall U.S. beer market, which has essentially flat-lined over the last 30 years. The chart below, compiled from data from the Beer Institute, bears out the story of total domestic production.
Paul Gatza, the director of the Brewers Association, provided some perspective, “Craft brewers continue to innovate and brew beers of excellent quality. America’s beer drinkers are rapidly switching to craft because of the variety of flavors they are discovering. And they are connecting with small and independent craft brewers as companies they choose to support.”
The Brewers Association also maintains statistics on the number of brewery start-ups in the planning stages, as a barometer of potential entrants into the craft category. As of June 30, 2011, there are 725 breweries in planning compared to 389 last year, and 207 just three years ago. Additionally, the total count of operational breweries has steadily risen to 1,740 as of June 30 from less than 100 only 30 years ago. Of these breweries, roughly two-thirds are brewpubs, an operation that combines a brewery with a restaurant. Since brewpubs don’t distribute and only provide for on-premise consumption, their market is limited locally. The other one-third of the breweries distributes their beer to markets across the country.
[ Enlarge Image ]Gatza noted, “It seems like every day we are hearing about a brewery in planning. Will they all make it? No, but many will if they produce high-quality, interesting craft beers and can get them to market through self-distribution and beer wholesalers and beer retailers.”
If craft brewing as an investment interests you, bear in mind there are currently only two publicly traded craft brewers in the U.S. — Boston Beer Company (SAM) and the Craft Brewers Alliance (HOOK). Anheuser Busch-InBev (BUD), SAB-Miller (SBMRY) and Molson-Coors (TAP), have all taken note to add some growth to their anemic U.S. results in the last few years. BUD purchased Goose Island brewery in Chicago, Ill., and also has a 30% stake in HOOK. Additionally, SBMRY recently announced a bid for Australia’s Foster’s beer, which was later rejected. There’s also the possibility that one of the 725 breweries in planning may IPO one day — one never knows.
What is clear, is there is an obvious, growing ground swell of interest in craft beers and in starting craft breweries. This period represents the second craft brewing wave after the initial movement started in the 1980s with its subsequent industry consolidation in the 1990s. Expect industry saturation again with another consolidation.
However you look at it, tailwinds continue to fuel the craft beer industry since the 1980s. It is the one oasis of growth in an otherwise flat beer market.
Disclosure: Long SAM