Are Craft Brew Sales Lagging?

Shipments are falling for many independent brewers stuck in the middle between local niche brands and heavyweight competitors.

August 24, 2017

NEW YORK CITY – Some of the country’s biggest craft brewers are struggling with falling sales, hurt by a glut of competitors crowding retail shelves and moves by megabrewers to scoop up some of their rivals. Ken Grossman, founder and chief executive of Sierra Nevada Brewing, the No. 2 U.S. craft brewer by volume, says it’s more competitive than ever.

His company’s retail-store sales have fallen by 7.5% this year as of July 16, according to Beer Marketer’s Insights. The brewer’s shipment volumes fell 6.9% in 2016—its first decline since Sierra Nevada was founded in 1980. Just two years ago, the Chico, Calif., company logged record sales after opening a second brewery in North Carolina, the Wall Street Journal reports.

After years of strong gains, American craft brewers are now bracing for a shakeout. Shipments are falling for many independent brewers stuck in the middle between local niche brands and competitors that were bought by heavyweights such as Anheuser-Busch InBev and Molson Coors.

Besides Sierra Nevada, those losing ground include Sam Adams maker Boston Beer Co., the biggest independent brewer, as well as smaller producers such as F.X. Matt Brewing Co., which brews Saranac in upstate New York, and Abita Brewing Co. in Louisiana, according to Beer Marketer’s Insights.

Benj Steinman, president of the tracking firm, said many craft brewers trying to push into regional and national markets are finding they hit a wall once they surpass 100,000 barrels. Some have stretched themselves too thin and lost ground in their home markets, while others took on too much debt to expand brewing capacity, brewers said. As they expand, they also lose the cachet of being a local brand—something many consumers seek out, reports the news source.

“They used to say a rising tide lifts all boats. And it’s definitely not that now,” Steinman said. His firm estimates that shipment volumes declined for 16 of the top 36 craft-style U.S. brewers last year.

The troubles have continued this year. Retail-store sales of craft-style beers—from brewers big and small—fell $143 million to $2.3 billion in the first half of 2017, according to data from Nielsen. Craft beer shipments grew for years in the double digits, even as overall beer sales fell. But craft demand began to decelerate in 2016.

“We really had to put our big-boy underpants on and up our game,” said Sam Calagione, founder and CEO of Dogfish Head Craft Brewery in Milton, Del., whose volumes were flat last year. “Is it too crowded, the market? We’re almost at the pace of two new breweries a day. That pace is not sustainable.”
Shipments are still rising for many of those craft brewers that sold themselves to Big Beer, including Lagunitas, which was bought by Heineken in May; Goose Island, owned by AB InBev since 2011; and Ballast Point, which was purchased by Constellation Brands Inc. for $1 billion in 2015. Those brands benefit from their parent companies’ distribution networks, capital and marketing.

“Local is still growing, and the larger ones are having problems,” said Ryan Sentz, co-founder of Constellation, which distributes Corona in the U.S. “We saw that as a potential roadblock in the future. We knew that aligning ourselves with a partner would be exponentially easier.”