The craft-beer market – for years, the lone bright spot in an otherwise sluggish industry – is starting to get stale.
Sales growth is slowing, once-thriving brewers are laying off workers, and the proliferation of new brands all competing for attention hearkens back to the dime-a-dozen start-ups from the web’s early days. On Friday, the world’s biggest brewer, Budweiser-maker Anheuser-Busch InBev NV, acknowledged the slowdown for the first time, saying that the sector has been decelerating for more than three months.
While many craft brands are still thriving (and few analysts expected the category’s supercharged growth to continue unabated), the cooling market isn’t welcome news for a brewing sector that’s desperate for growth. Mass-market beers such as Budweiser and Coors Light have been suffering for years, and AB InBev now expects US industry volumes to decline this year versus previous expectations of an improvement.
“There’s a natural point where it can’t grow any more, and this might be it,” Anthony Bucalo, an analyst at HSBC, said by phone. “Consumers are overwhelmed by too much choice – the industry has been swamped. There are too many brands, too many styles, not enough quality.”
Some of the early pioneers of the craft-beer movement in the US are starting to feel the pain. Stone Brewing, the 20-year-old Escondido, California-based brewer of Stone IPA, laid off about 5% of its 1,200 employees this month, citing a less predictable business environment. The news came less than two weeks after Craft Brew Alliance, Inc., owner of the more than 30-year-old Redhook Brewery, said that it was halving the number of workers at its Woodinville brewery in Washington State.
More Breweries
The stress is partly due to the sheer number of beer-makers competing to entice drinkers. A thirst for more local and flavoursome beers swelled the number of breweries in the US to a record 4,656 in June, yet the volume of beer produced is growing at less than half the 18% rate that it boasted two years ago, according to the Brewers' Association, a trade body for the American craft-beer industry. The US now has more breweries than it did at its high-water mark of 1,873, according to the group.
"There’s only so much shelf space for craft beers to share, and the abundance of choices could put off some consumers," AB InBev chief executive officer Carlos Brito said on a call with analysts recently.
The slowdown didn’t put Kirin Holdings Co. off buying a minority stake in Brooklyn Brewery earlier this month.
Amid a stagnant beer market, the faster-growing craft segment has attracted larger players, whose brands have increasingly fallen out of favour with consumers. AB InBev has been serially acquisitive, building a roster of small brewers over the past two years that includes Devils Backbone Brewing, Breckenridge Brewery and Four Peaks Brewing.
‘Recent Slowdown’
Those brands, which are more local than national craft-beer-makers, are still growing strongly, AB InBev chief financial officer Felipe Dutra said on a recent call with reporters. Boston Beer Co., the maker of Samuel Adams lager – often considered the grandfather of the modern craft-beer movement – this month reported third-quarter revenue that missed estimates.
“We see a very recent slowdown in the craft industry. It’s still too early to say whether there’s a trend,” Dutra said.
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