Despite craft beer’s sustained, double digit annual growth, people
love to bring up the possibility that the craft beer market teeters on the
brink of outgrowing itself. I hear many people use the word “saturation” as
they sagely nurse their third beer. “There’s too many breweries in Michigan,”
they say. “No market can sustain double
digit growth forever. At some point,
these little start-ups will begin cannibalizing their own market.” Then these people – who I assume mean well –
go back to the beer that didn’t exist six months ago because the brewery wasn’t
even built yet.
The myth of the saturated market has been around since at
least 2010, when I first entered the craft beer scene. I remember sitting at
the Vierling in Marquette, back when Michigan was sustaining about half the
breweries we have now, having the same conversation I see people have now; and all
of us are making the same statistical
errors that I did in 2010. The craft beer scene is growing, and that growth is
unsustainable; those parts are definitely true. However, craft beer has light
years to go before it runs out of growth potential; what people are missing is
what, exactly, craft beer is replacing.
See that chart? You see that tiny, 13.9% sliver of American
beer consumption marked “others?” That’s
all the craft beer consumed in America.
That’s what this blog covers, that’s what the 120+ breweries in Michigan
and the 2400+ craft breweries produce nationally. Everything else (except Heineken)
is either owned by two corporations, or produced by two corporations. Yes, even
our beloved PBR, Lone Star, Schlitz, Blatz, Natty Boh, and Old Style, while not
owned by AB-Inbev or SABMiller/MillerCoors, are produced in their
breweries. Right now, for every pint of Two
Hearted you drink, America drinks five macro lagers – and while that ratio is a
little smaller than it was five years ago, that’s a whole lot of potential Two
Hearted sales growth that wouldn’t eat into a single pint of All Day IPA. Put plainly, craft beer is definitely
cannibalizing the beer market, but it’s nowhere near in danger of saturation; it’s
chewing right into the production of the macro lagers.
“Craft brewery saturation” is not something anyone needs to
worry about for a long time. That said, the reality
that craft beer is viciously dismantling Big Beer’s empire does have other
consequences. AB-Inbev is a giant, hulking behemoth, but they didn’t build a phenomenally
efficient corporation by being dumb. They’ve
moved to emulate craft beer’s success (some
people call these attempts faux craft – I admit to enjoying an occasional Blue
Moon). They’ve utilized their
pocketbook to purchase great craft breweries outright – Goose Island is now an
AB-Inbev company. The consequences of success ripple beyond the reaction of Big
Beer as well; to protect their success, successful breweries have become more
litigious. They’ve become more exacting
as to what, exactly, craft beer means, which has resulted in the redefinition
of the term both on the state and federal level. Even still, some people
disagree as to whether the largest traditional craft breweries (Boston Beer
Company, Sierra Nevada) even count as craft beer anymore (they do.)
All that is largely invisible to the consumer, however. That’s why so many people talk about
saturation; a local brewery going out of business due to competition by other
local breweries would be directly felt by local imbibers. Lawsuits or statistical
pie charts are largely theoretical compared to a place shutting its doors…but that’s
already happening. The rise of craft
beer isn't killing craft beer, but it is
replacing something. In
every neighborhood, in every state that has embraced craft beer, we’re seeing
an inexorable shift; small microbreweries and brewpubs are replacing local
watering holes. The 21st
century, with its bans on smoking, its preference for serving food with
alcohol, and its demand for variety simply isn’t as welcoming to a place with
three taps, a popcorn machine, and a trough in the men’s room. Cheers, that gilded television dive bar from
the 80s, cannot compete in today’s landscape. As our preference for locally
brewed, quality beer increases, the places that offer Busch Light on draft with
a package of peanuts will continue to fade away -- unless they can evolve into
something more.
This shouldn't be thought of as a sad time. Remember that these same dive bars sprung up
in the vacuum left after Prohibition; prior to that, the local brewery was
where everyone gathered. In a way,
America is coming back to its roots by supplanting places serving faceless, adjunct
beer with pubs where your neighbor makes the products. Talk of a saturated market, therefore,
fundamentally misses the point. The
craft beer revolution has decades of growth left, and it’s already begun to threaten
the status quo. The short term losers, however, certainly won’t be well managed
breweries: they’ll be macro brands and the pubs who rely too heavily on those
brands.
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