Has craft beer lost its cultural capital?

by Nigel Hollis | February 08, 2017

Ben Marshall referred me to this article which suggests the growth in craft beer consumption is largely the result of people seeking cultural capital. Consuming craft beer and decrying mainstream brands was a way to gain standing with your peers but which may now face a countervailing trend of “beer poptimism”.

Now I am on record as saying that I like a good craft beer but it was something of a relief to see a French Country Ale with a 4 percent ABV when I stopped in at the Worthy Kitchen the other night. Craft brewers seem to have decided that maxing out on flavor and alcohol content is the only way to attract drinkers these days and sometimes I want to be able to drink more than one beer before I am over the limit. And maybe I am not the only one who is struggling to find a craft brew that fits my needs and palate. Time reports that the growth in craft beers in the U.S. is decelerating

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If the appeal of craft beer has gone flat as the Time article proposes, then it might come as a relief to the big brewers. Domestic brews like Budweiser, Bud Light and Miller Lite still take a large share of the U.S. beer market; however, while millions of people still pick up brands like these on a regular basis, consumption is not growing. According to the Brewers Association craft beer has doubled its share of the market from 6 percemt in 2011 to 12 percent in 2015. Worse, craft beers sell at a premium, which means that in 2015 they took 1 out of 5 dollars spent on beer in the USA.

The big brewers have fought the rise of craft in a couple of different ways. The first is the ‘if you can’t beat them buy them’ strategy pursued by ABInBev with the purchase of Goose Island and others. The second is the ‘imitation is the sincerest form of flattery’ approach which has enabled Blue Moon to take a big share of market while being owned by MillerCoors. Finally there is the ‘popular and proud’ strategy pursued by Budweiser which took mocked craft brew drinkers and then renamed itself America for the Olympics and election run up.

But maybe the big brewers need not worry because craft beer may have sown the seeds of its own demise. Firstly the growth in the number of craft brewers may simply be outstripping growth in demand. There are now 5000 craft breweries in the U.S. up 4255 in 2015, a rise of about 18 percent compared to the 6 percent growth in sales. And then there is the ‘push it to the max’ strategy pursued by so many craft brewers, or what Jake Tuck describes in his article as “the whole flavor-exploding-iconoclast thing”. And then maybe the whole sophisticated beer palate thing is losing steam as people get fed up with hearing others laud the latest competitor to Heady Topper

But what do you think? Is the whole craft beer thing waning or are simply seeing a segmentation of tastes, needs and budget? Please share your thoughts.

4 comments

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  1. Nigel, February 11, 2017
    Well I think Alex just won the prize for lengthiest comment in the history of this blog! An intriguing, back-to-the-future vision of what brewing might become thanks to technology.
  2. Alex Church, February 09, 2017

    This is a market I know really well having been in the business of advertising in the hazy days of Guinness, Fosters and even Hoffmeister spending millions on television advertising.

    So a long comment but stick with it, this is what has and will happen in the UK.

    Some 10 years ago here big beer chopped its budget for television and most other advertising to divert their budgets to give a massive discount to supermarkets.

    This is the main event that many consider opened the door far wider for Craft Ale and microbreweries than CAMRA had achieved in 30 years of campaigning for better beer.

    Why? Partly because no one wants to buy a pint of Carling for £4 in a bar when it is only £1 in a supermarket. So a fast growing percentage of beer lovers were desperate for something different ad so were the bars.

    Of course on the face of it, this was a shrewd move for big beer, they were right about the increase in drinking at home. The smoking ban together with a bunch of other factors had bars pretty empty.  Big beer has certainly gained as home consumption rocketed. 

    It is reported that supermarket and other off license sales represent a massive 70% of the £17 billion spent by British consumers and yet they only represent 40% of those licensed to sell beer.

    The desire for something different for bars goers and the lowering of brand awareness allowed UK microbrewers to kick into action. There are now an army of almost 2,000 that have risen only over the last 7 years or so.

    As Nigel reports above, now the microbrewers are facing similar problems to the USA. Too many small brewers producing often strange but generally wonderful brews but none with any material brand strength and so no loyalty.

    It is hard to fathom why AB Inbev spent £85 Million on Camden brewery and Coors £25 million on Sharps. Did they think buying craftier brands put them in the Craft ale frame?

    They overlooked an important factor. As Goldman Sachs reported “Local provenance is king”. Shift Doombar away from Cornwall to Burton and it does not have quite the same ring – as the Advertising Standards men made clear.  However, another door is swinging open that at first sight big beer may not like. The arrival of brew bars.

    In 1850 every bar brewed their own then the landowners shut them down and built their own big breweries. Over time brand strength and the idea that brewing is really difficult stopped many smaller breweries in their tracks and if they were not beaten they were gobbled up.

    In the 1990's Mash and Air and Firkin pubs were the first brew bars. They made the mistake of installing far too large microbreweries that took far too much floor space and the £100's of thousands to buy but that was all that was available. They couldn’t they heavily advertised big beer brands on TV every night and closed up shop.

    Now the wheel is turning. The microbreweries that have been opening worked with the engineers that had been laid off by big beer and they have hand built the costly 10 Barrel and bigger microbreweries that you typically find. The success of the microbrews as guest ales has made consumers very ok with the idea of virtually unknown brands. Craft Ales have moved beer into the same mysterious and aspirational space as wine. Consumers want choice. No longer do they look for a well-known brand and we are all relaxed about who brews it. 

    So here is what many consider is the obvious next step. Consider this, bars have now smelt the profit in coffee. This is thanks mainly to the Tsunami of “Costalot” style coffee bars lifting the price way out of all proportion to its cost. Now bars in pubs and clubs are turning their attention to beer.

    Bars have been investing in increasingly expensive sophisticated coffee machines - less than a decade ago it would have been hard to buy any coffee in a pub. But hold on say the bar owners. Ingredient costs are much the same for a cup of coffee as they are for a pint of beer. A cup of coffee typically sells for £2.50 great profit when the ingredient cost is only 20p but a pint of craft ale can sell at £4.

    No wonder bars are waking up – the ingredients in a pint also only cost pennies and duty is not the ogre we think at around 20p a 4%ABV pint.  Plus, what better local provenance than your own unique brands. No brewery to tell you how to run your promotions. You can even run a Wetherspoons style £1 a pint promotion and still make some profit. Fizzy moon in Leamington Spa, Warwickshire have been doing just that this last January.

    Given a profit of over £3 no wonder the ambition of so many bars is to brew their own. The problem until now was how can they brew? 

    Big microbreweries's are too big and too expensive as Firkin pubs found. They are over complicated and brewing 10 barrels is certainly not what is needed if you want to offer creativity and choice.

    The solution that Fizzy Moon and a range of bars across the UK have found is the Technobrewery™ and it is launching fully right now on both sides of the water.

    Visit www.brewfirst.com and www.truebrew.co.uk and see what is going on! This is not some up graded tea urn on a gas stove, it is a very sophisticated, fully professional brewery. A traditional brew process but a big difference is the batch size - variable from a cask to a barrel and brewed in under 3 hours per batch. That makes it possible to brew over 20 Brewers Barrels a week, ideal for bars selling their brews at their bars and wholesale too but equally affordable for a bar just wanting to brew for themselves.

    Only 4 or 5 casks a week and they are into profit.

    The Technobrewery™ succeeds because it brews the quantities that really suit Craft ale. It uses far less food grade stainless steel than any ordinary brewery so saving on the price without cutting back on quality. A big issue is that now with Technobrewery software brewing has become a part time job for any member of staff and even a novice will brew consistently good beer.

    So what next for big beer. When you think about it there are 160,000 businesses licensed to sell beer in the UK. That means almost as many trucks shipping largely water around at least once a week.

    Any biggish brewery that cares about their negative effect of their carbon foot print stamping all over the country to be important or even if they only worry about cost of labour and fuel and its effect on profits, I see a big opportunity to improve profits and truly get in on the Craft ale act.

    If I were a big brewery I would take a long hard look at the opportunities. Brew bars are a tide will not turn easily. Think about it what bar would buy in ready brewed coffee! Once bars taste the profit will they want to change back.

    If it were me i would do a careful costing. I would calculate just how much advertising would cost to give my brands dominance and then what is my investment in plant to satisfy the demand.

    I would check the profit supplying bars with ingredients and what premium might they pay ion ingredients if I rented them their own brewery. They could brew their own guest ales and be busier and happier if it mant I could increase their profit. I would link the rent I charged on a sliding scale relating to how much of my ready brewed beer they buy in. Much more valuable than trying to win their business by paying for their new decor.

    They would prefer to work with me as I have the most credibility to give the training and support that only an established brewery could offer.   

    So what do I think – my view is Craft Ale is here to stay. The market will not wane but it is going through a dramatic change.

    Now we have the taste of decent beer we will never go back to corn fed factory brews that have been stored for months – it is little wonder that lager sales have dropped below 50%.

    The segmentation of taste will go from strength to strength, just as it did for wines in the 1960’s when your choice was as limited as it was for beer only a handful of years ago.

  3. Bobby Calise, February 09, 2017

    The demand will probably level off at some point, and not every local/regional small craft brewery will survive, but indies like New Belgium, Harpoon, Southern Tier, Brooklyn and, of course, Boston Beer Company (Samuel Adams), will only grow stronger. (And some may be bought up by Big Beer.) 

    Perhaps the real paradigm shift we'll see in this space is that eventually craft beer will just be called "beer."

  4. Philip Conliffe, February 08, 2017
    Slowing and over-supplied, yes.  Waning, unlikely.  It feels like a generation of young drinkers has bypassed the mainstream domestic brands and it's hard to envision them ever finding their way to that segment.  But you're right to point out the opportunity to widen perceptions of craft beer as excessively flavourful and hard-to-drink.  

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