Slowing Momentum for Craft Beer?

Anytime something is on a tremendous growth trajectory, the discussion immediately turns to when its bubble will inevitably burst. Craft beer certainly is not immune to such conjecture. Recently a trade publication editor commented to me that surely the category is reaching market saturation and the bottom will fall out of the market any day now; how long can double-digit growth go on?

By our analysis, craft’s moment is far from over. Consider the following:

  • On-premise, craft remains the fastest-growing beer category. Restaurants and bars garner two-thirds of total craft beer volume; on-premise is extremely important and continues to be the growth channel for the category. Our tracking shows a double-digit increase for 2013, and we project ongoing strong growth for craft in restaurants and bars. Based on our surveys, on-premise operators are more optimistic about beer’s growth potential in 2014 than about wine’s or spirits’; anecdotally, they expect craft beer to be an important part of their beer program’s success.
  • More beer menu space is going to craft beer lately, and that trend is likely to continue. Craft beer incidence on leading and emerging restaurant chains increased 4.8% in the third quarter of 2013 as compared with the same period in 2012, according to our MenuMonitor tool. In 2012, craft was the fastest-growing beer style (up 12.4%) on leading chain menus, although cider’s growing presence was almost in lock-step on a growth-rate basis (12% growth). By comparison, menu incidence for domestic regular and imported beer grew nominally; light beer incidence declined slightly. No surprise: The labels that have already achieved or are moving toward national distribution and those with strong regional footing are well-represented. Trending are IPAs, flavored stouts and seasonals of every ilk. Smaller labels show up as well, indicating that leading chains are thinking locally.
  • Craft beer’s growth off-premise is outpacing its growth on-premise. Retailers large and small are expanding shelf space and selection. Walmart’s recent beer focus is sparking cross-channel competition for beer sales among convenience, supermarket and club stores; that battle will only intensify. Not only will competitive price points on mainstream brands be found, but also strategic craft selections will undoubtedly emerge on shelves as retailers jockey for the Millennial beer consumer.

Craft beer is not without its challenges. The proliferation of products challenges wholesalers and operators on- and off-premise; strong category management strategies and tactics will undoubtedly come into play for many. Consumers may also be overwhelmed by the endless stream of seasonals and specialties, let alone the fairly fuzzy style definitions.

As craft’s volume grows, achieving those double-digit gains will become more difficult, but that’s true for any category. To retailers and operators concerned about craft’s continued momentum, I’d say, “Fear not.” The craft market is evolving, and the dynamics are changing with the advent of larger players and competition from highly targeted entries from the major brewers—even the growth of cider will have an impact on the category. So, the key is to stay on top of what’s trending and what’s cycling out while listening to your customers and applying best practices for category management.

To better understand the on-premise craft beer and cider market, we will be undertaking a major research initiative. We’re excited to dive into this developing category and assess its opportunities and potential obstacles. Please contact me if you are interested in this initiative.


Donna Hood Crecca

A veteran of the foodservice industry, Donna Hood Crecca leads the firm’s Convenience Store Practice and is active in its Adult Beverage Practice. She develops research-based insights and recommendations for leading and emerging supplier and operator companies to enhance their go-to-market and product development programs and strategies.

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