How craft beers are growing the beer market.
Forecasted to grow from $12 billion to $18 billion in sales by 2017, there is no denying craft brews are taking the beer world by storm. Utilizing an antiestablishment attitude and word-of-mouth buzz, these brands are so effective at reaching their audience many are having trouble producing enough product to satisfy demand.
So, what is a craft beer exactly? It was originally designated as a product brewed by an independent brewery that produces 2 million barrels or less per year. However, in 2010 the Brewers Association expanded the definition to include brewers producing upwards of 6 million barrels of traditional beer. Compare this to the 98 million barrels produced by Anheuser-Busch in 2011. More importantly, craft beer is the only beer segment that is growing.
Despite this growth, craft and indie beers only account for 6% of the market. Brewery behemoths Anheuser-Busch InBev and SABMiller still control nearly three-quarters of beer sales. Unable to deny the power of the craft beer, big brewers have now joined the trend in a way many independents would describe as sneaky. Shock Top, Goose Island, Blue Moon and Third Shift are all popular, craft-classified brews that are actually brewed by Anheuser-Busch InBev and SABMiller. Most consumers don’t know this. There’s no mention of the brand’s parent company on the labels, websites or advertising materials for these beers.
Why wouldn’t these large brewers want consumers to know they are manufacturing craft brews? Part of the reason craft brews are so popular is the perception that the beer is special, local, rare or unique. A craft brand being seen as part of a larger company could undermine this perception. However, trying to hide the brand’s ties to a large brewer can just as easily backfire. Consumers could feel deceived. This is especially true for millennial consumers who value authenticity and are the main participant driving the craft brew trend.
According to the Pew Research Center, this year the number of Americans in their 20’s will reach 77 million, almost equal to the size of the baby boomers generation. Over half of all millennials over the age of 25 drink craft beer and as the millennial age group gets older, the number of consumers will grow. This means the potential for craft brews to grow even further is enormous.
In a brave attempt, the Brewers Association is pushing for large manufacturers to put their names on the packaging and advertisements for their craft segments.
“People want to know if they are supporting large brewing companies or the brewer down the street,” said Julia Herz, program director of the Brewers Association. In the Association’s statement, they call for information to be clearly presented to allow beer drinkers to make an informed choice about who brews their beer.
Large manufacturers, although refusing to comply with the Brewers Association’s request, say that it wouldn’t matter, claiming that most consumers care only about how a beer tastes, not about who owns the brewery. A Mintel research report disagrees, showing that fully half of craft brew drinkers are interested in locally brewed beer, while 25% are interested in purchasing craft beer only where it is brewed.
The founders of Lagunitas, a San Francisco based craft brewery, aren’t too worried though. Todd Stevenson and Tony Magee believe craft brew fans are smart enough to know the difference between large brewers and the real thing. They maintain that as much as taste matters in the craft brew industry, it all comes back to that grassroots, antiestablishment culture.
“We are selling community, and they are selling liquid,” says Magee. So when it comes to the battle of the large brewers’ boutique brands versus the indie hometown brew, will the deciding factor be taste or the story behind it?