The Shape of Pints to Come: How American Craft Beer Will Survive and Thrive

In the last half century, independent craft beer has grown to account for 13% of beer volume sales in the US. Driven by the consistency of stalwart brands and a wealth of pioneering offerings, craft beer has overcome a harrowing trial. Now, in the aftermath of COVID-19 and the augur of recession, independent craft beer faces a reckoning that will alter its very identity.

Craft’s Past

Craft beer wasn’t given an easy runway to success. In the early 20th century, American Prohibition resulted in the dissolution of many regional breweries, larger breweries created barriers to entry through aggressive lobbying, and the newly implemented 3-tier system prevented direct sales to retailers and consumers. American beer consolidated into a handful of lager brands, leaving the survival of beer’s breadth and complexity to historians and import brands. Thankfully, in 1978, homebrewing was finally legalised, allowing open exploration of lost styles and creation of new styles of beer. Adventurous souls wagered their livelihoods on the success of such brands as Sierra Nevada and Goose Island.

Momentum grew in the 1990s as concerted legislative effort at state and federal level improved the feasibility of craft brewing. Brewpub legalisation allowed production and sales under one roof, circumventing the onerous 3-tier system. The American Brewers Association worked to lessen the tax and regulatory burdens that had made brewing an economy of scale. Enthusiastic consumers, pushing back on market uniformity, explored novel styles like the American IPA.

Macro breweries found ways to enter the craft space, albeit hedging the importance of the qualifier, “independent”. In 1995, Molson Coors introduced Blue Moon, a Belgian-style wheat beer that has dominated craft for nearly 30 years. Alternatively, global players looked to acquisition to get into the craft market, such as with AB InBev’s purchase of Goose Island. Both approaches saw push back from craft consumers, including consumer litigation against misleading labelling.

Craft’s Present

The past five years of craft beer have seen brand maturation and a flurry of innovation. Regional and national craft breweries embraced the quality management and marketing strategy that had made global brands indelible in the minds of consumers. Explosive SKU growth coupled with inconsistent new offerings led to consumer and retailer choice fatigue, largely benefiting more established craft brands. Raw materials, long focused on pale lager uniformity and costing, underwent craft-focused R&D efforts. Boutique hop and yeast suppliers created novel products to evoke tropical and citrus flavours pleasurable to modern consumers. These offerings allowed the embrace of the modern IPA as it evolved from bitter and pithy to juicy and quaffable.

As consumer sentiments waned on beer, brewers diversified into “beyond beer”, adding hard seltzer, fermented malt beverages and non-alcoholic beer to their portfolios. Larger independent and acquired craft breweries easily shifted production with minimal capital expense or fulfilment disruption, while brewpubs, limited on space and liquidity, struggled to adjust.

With COVID-19’s disruption, brewpubs were hit hardest by an inability to sell draft or to-go beer directly through their storefronts. Many adapted to e-commerce, but those focusing solely on draft offerings were forced to dispose of much of their product.

Craft’s Future

In recent years, one of the largest American independent craft breweries, New Belgium, saw two defining milestones: its acquisition by Kirin and the runaway success of its Voodoo Ranger brand family, offering higher alcohol content and hop-forward fruity flavours at competitive prices. Independence is no longer a necessity for a successful craft brand and savvy strategists can and will capitalise on this.

Craft beer, historically focused on stylistic variety, will see a consolidation of offerings in the face of multiple market stressors. A retail and distribution space flooded with an excess of choices, a waning interest in beer, and a more discerning consumer will prioritise shelf space for only the fastest of brands and styles. Even with improved efficiencies, raw goods will face environmental and geopolitical challenges raising costs for those smaller breweries that lack enough cash on hand to secure grain and hop contracts. Finally, the looming spectre of an American recession will further erode small breweries that struggled to survive the past three years under COVID-19 restrictions and shifting consumer behaviours.

Fear not, though, these grim prospects. The global trend towards premiumisation, including in the beer space, only serves to bolster consumer interest in craft products. Craft beer’s survival will be a matter of adaptation. Deliberate strategy, community engagement, an effective narrative and, above all else, a good product will differentiate those that thrive.

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