Every year, like the salmon of Capistrano, American beer journalists — all 11 of us — flock to the Brewers Association’s website to sift through the trade group’s Annual Craft Brewing Industry Production Report. Chief economist Bart Watson lovingly prepares the report annually (how else?) along with a list of the top 50 craft brewing companies (the org’s semantic umbrella for individual breweries plus brewery rollups not owned by macrobrewers) in the country to provide the BA’s constituents, members of the media, and rank-and-file drinkers a data-driven snapshot of the American craft brewing industry’s overall health. The upshot, at least as far as growth is concerned, is that there isn’t any.
“In this maturing and competitive market, collective growth for the category is hard to come by,” Watson said in a press release that accompanied the report. That’s not good news, per se. But considering total beer’s 3 percent year-over-year volume slide, 2.5 years of pandemic complications, and increased competition from spirits suppliers’ ready-to-drink offerings, the fact that craft brewing’s overall output in 2022 — 24.3 million barrels — held roughly static with 2021’s figures isn’t bad news, either.
Those big top-line numbers never tell the full story, either. So on Tuesday, I attended a virtual press conference where Watson expanded upon some of the aspects of the report and took questions about it (including a really boneheaded one from yours truly; we’ll get to that in a bit). Here are the six biggest takeaways I got from the presser:
On-site is back…
If it feels like more people are drinking more beer at breweries these days, that’s because they are. Volumes at “brewpubs and taprooms, which would make up the vast majority of breweries, collectively grew in 2022,” Watson said. “There are still opportunities in that hospitality-focused model.” This is great news if you like drinking at places that make beer, which I do. Also, give it up for brewpubs, huh? The cockroaches of the craft brewing industry! They’re not growing their volumes quite as fast as taprooms, Watson noted, but still. That model predates every brewery having an Instagram-optimized, built-in bar by what, a couple decades? And it’s still kicking.
…Even if overall draft isn’t.
“Draft was already on a decline pre-Covid, but we haven’t returned to even that pre-Covid trend level for draft beer,” Watson said, noting that while craft beer’s share of total beer volumes grew this year, that gain is partly due to the overall category’s decline (down 3 percent over last year, 4 percent if you include the industry’s growing hard seltzer hangover), which draft’s sluggishness is exacerbating. Craft breweries for which draft is important aren’t exempt from those broader challenges. Not great!
Distribution is tight and getting tighter for craft brewers.
On the other end of the retail spectrum, distributed, packaged craft beer volumes (as opposed to distributed draft) took a bit of a beating this past year. “Distributing breweries … saw volumes decline in 2022,” Watson said. “I think a lot of the slowdown in the total [category’s] numbers is a result of that distributed market becoming much more competitive.” This makes sense, right? With new players from outside the beverage-alcohol business, and new products from within it, wholesalers’ portfolios and retailers’ shelf space are both tighter than ever, as is the battle for their attention. Breweries across the board had two paths to growth last year, Watson said, and it’s especially true for distributed firms. They could either outcompete for shelf space, taking share from someone else, or “do something new and incremental,” like Athletic Brewing Company (an astonishing No. 13 on this year’s list of the country’s top 50 craft brewers, up from No. 27 in last year’s list). “The full-flavored non-alcoholic market, that’s really a new market that adds occasions to the category and adds spots to shelf sets,” Watson said.
Despite a tough year, brewery closures didn’t spike.
The year saw roughly 3 percent of BA-defined craft breweries close, which remains relatively low compared to general small businesses, which typically close at an average rate between 7 and 9 percent annually. “For years, I’ve been predicting [the closure rate] is going to go up, and brewers keep defying me with their nimbleness, success, tenacity, and willingness to persevere,” Watson said, responding to my question about when the industry might reach more of an equilibrium on closures. “Most of these businesses are still relatively young in their life cycles,” he added, noting that spot checks of this year’s closures revealed that many were triggered by the expiration of an existing lease. “In the coming years, as breweries start to hit that five-, seven-, 10-year period, where they have to renegotiate that lease and the numbers may or may not work.” But for now, even as craft brewing continues to mature as an industry and the lines representing openings and closings move closer to one another on Watson’s charts, the number of actual closures remains below normal. It’s both a testament to craft brewers’ resilience and an unwelcome reminder that there will be more closures, and likely at higher rates, still to come.
2022 saw some easing in the craft brewing labor market.
Remember the whole “nObOdy WaNtS tO wOrK aNyMoRe” thing? That may be subsiding, at least in the craft brewing industry. The BA’s report indicates that industry was responsible for 189,413 direct jobs in 2022, which is 9 percent more than the prior year’s figures. Watson attributes the bump to the aggregate increase in breweries nationally (we closed out 2022 at 9,709, nearly 350 more than last year) and the larger staffs necessitated by breweries’ shifts to more hospitality-focused business models (i.e., taprooms.) Watson was cautiously optimistic. “You can paint with [a] broad brush nationally, but for a local business, what matters [are] local conditions,” he said, responding to my question about whether this increase could/should be interpreted as a loosening labor market for the industry. “What we hear from most breweries [is] that it’s still a tighter labor market than what we had pre-pandemic, but it’s not as bad as it was at the peaks of labor tightness” over the past couple years, he said, noting that the industry’s labor outlook roughly mirrors the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey (JOLTS) figures, which show some slackening labor demand. Craft breweries’ entry-level roles will probably remain tough to fill, Watson warned; that’s partly due to the simple fact that Gen Z is a smaller generation than millennials (in the U.S., at least.)
“We’re in whatever the ‘new normal’ is.”
That labor outlook — not as tight as it has been recently, but not as slack as it has been historically — is just another example of craft brewing’s “new normal,” Watson said. This phrase got thrown around a lot during the pandemic, but you don’t hear it so much anymore, because we’re just kinda living it now. So is the industry. In other words, breweries waiting for more of a restorative pandemic bounce-back should stop holding their breaths. “We’re in whatever the new normal is,” said Watson, responding to a question about whether the industry had fully recovered from the Covid crisis. “I don’t think we’re going to see ‘pandemic rebound’ be the key reason that drives the numbers going forward, whereas it was in 2021 and to a lesser extent 2022.” The channel shifts from on-premise and on-site to off-, have by now mostly cycled back around and found new equilibrium with drinkers’ preferences and industry business models. This is good news for firms that have found new ways to adapt to those shifting market forces, and less so for those that are aching for the return of “business as usual”; Watson thinks this is pretty much it.
As for my boneheaded question… Given the growth bets craft brewers large and small are making on “beyond beer” innovations like hard tea, I asked Watson whether the BA has considered breaking out products like that — flavored malt beverages and flavored sugar beverages, which are both taxed as beer — from the report’s totals. The question was sparked by Boston Beer Company’s No. 2 spot on the BA’s Top 50 list, a position it’s held for many years despite the fact that its beer brands (Samuel Adams, Dogfish Head, etc.) are overshadowed on volume by Twisted Tea and even Truly. This was boneheaded because a) the BA already does this, and b) I already knew that they did this! Plus there’s a whole footnote about it in this year’s report! Embarrassing stuff, folks. Still, Watson was gracious enough to hazard an answer (other than “you know better than this, Dave.”). “The growth in the taxed-as-beer category has come primarily outside of core beer,” he said, adding that Boston Beer’s position on the BA’s Top 50 would be much higher if the report included its entire taxed-as-beer portfolio.
It’s yet another reason breweries looking for growth shouldn’t “denigrate where consumers are entering craft.” The American drinking public is still drinking plenty, and most craft brewers still have plenty to offer in terms of new flavors and local bona fides (both of which customers consistently rate highly as factors driving their drink purchases). But given the way 2022 went, and the way 2023 is going, there’s no reason to hope for a massive course-correction back to traditional beer just over the horizon line.
🎙️ Introducing Taplines, VinePair’s new beer podcast
Here’s a little breaking news that’s both from and about your humble Hop Take columnist. On Tuesday, we published Episode No. 1 of a brand-new beer podcast I’m hosting on the VinePair Podcast Network called “Taplines.” The episode is an interview with the historian Maureen Ogle, author of the essential American beer survey “Ambitious Brew,” about the start of the Light Beer Wars, when Miller, Coors, and eventually Anheuser-Busch rolled out low-calorie line extensions and high-dollar ad budgets to battle one another for the hearts, minds, and wallets of the American drinking public. It was a fantastic conversation, and you can listen to it right here. Alternatively, you can watch the interview here.
For the curious, allow me to explain a bit more about what “Taplines” is, and why we’ve decided to foist yet another beer podcast upon the internet. Put simply, this show is going to explore modern American history, one beer at a time. It’s not all about craft beer, or imports, or mass-produced adjunct lagers. It’s about all of those styles of beer, and everything it’s taken to get them from the brewhouse floor to your fridge over the years. There will be zero bros sitting around drinking IPAs and making inappropriate jokes about the word “mouthfeel.” In fact, while this show is nominally about beer, it’s really about so much more: politics, culture, labor, power, and all the other Important-with-a-capital-”I” forces that shape our country. In my reporting, I always try to showcase ways that beer is in dialogue with those forces. That’s what we’re aiming for on “Taplines,” too — big stories about beer, told with a mix of journalism and history, in conversation with the people who know it best.
Here’s how it’s going to work. Each week, I’ll be tapping (ahem) a brewing icon, industry insider, or outspoken expert to help me tell the story of a triumph, tribulation, or turning point in the evolution of the United States’ bajillion-dollar beer industry. This week it’s Maureen Ogle; next week, we’ve got a fantastic episode with Natalie Cilurzo, co-owner of Russian River Brewing Company, about the fateful February day in 2010 when seemingly the whole beer-drinking world showed up at their Santa Rosa taproom to lay hands on Pliny the Younger, in what would come to be a defining early moment in the birth of craft beer’s line culture. And after that… well, I don’t want to ruin the surprise, but we’ve got a living beer industry legend joining “Taplines” to talk about one of the most pivotal moments of the century for American brewing. (Here’s a hint: I wanted to call the episode “Tha Carter XXXIX,” but VinePair managing editor Tim McKirdy was like “absolutely not.” Thanks for nothing, Tim!)
Hopefully the “why” is obvious at this point, but just to spell it out: I think beer is central to so many important stories that comprise the core of the American experience. “Taplines” is a new opportunity to tell them in forms of media that I love working in. This show is going to be a ton of fun, and we’ve got a ton of fun episodes programmed, so please subscribe and stay tuned, and I’ll be in your feed every Tuesday — and by all means, leave a rating or comment to let us know your thoughts, show you liked it! See you there.
🤯 Hop-ocalypse Now
It’s been a nutty month for news, but I didn’t want to let another week pass without noting the massive impairment charge Constellation Brands tucked into a recent filing with the Securities and Exchange Commission. The company indicated it was writing down $66.5 million of its craft beer business. At this point, said portfolio is basically just Florida’s Funky Buddha Brewery and Dallas’s already-heavily impaired Four Corners Brewing Co., and (according to Constellation’s own assessment) basically worthless, too. That’s a helluva hangover after pouring $1.2 billion into acquisitions in the craft brewing sector last decade, although to be fair, Ballast Point was a full billion of that, and… ah, actually, that makes it worse, not better. But hey: How ‘bout that Modelo Especial, huh?!
📈 Ups…
Big year-over-year jumps up/onto the Brewers Association’s list of Top 50 craft breweries by volume include Athletic Brewing Co. (#13 this year, from #27), Fiddlehead Brewing Co. (#36, from #49), Jack’s Abby (#47, from #63), and Craft ‘Ohana (the Maui Brewing Co. x Modern Times Beer Co. tie-up, which lands at #28, up from #43 and #48, respectively)… Molson Coors x Coke continue the alcoholization of every soft drink you’ve ever known with a new Peace Tea crossover… If you’ve got the 19.2-ounce imperial IPAs, gas stations and convenience stores have the cooler space…
📉 …and downs
Biggest tumbles on the BA’s Top 50 include Abita Brewing Co. (#35, from #16 last year), Rogue Ales (#41, from #33), and Kona Brewing Co.’s non-Anheuser-Busch InBev Hawaii operation (#33, from #29)… Anchor Brewing Union’s contract negotiations with Anchor owner Sapporo have stalled, leaving frustrated workers in limbo… Bud Light’s NFT holders are debating gender theory now… Wade Boggs’ “exposé”/ad about Pabst Blue Ribbon is kinda sad, right? Just me?… ABI’s U.S. CEO issued a say-nothing statement last Friday about the Bud Light backlash…
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