Pretty Crafty

Ten years ago, Kim Jordan, co-founder of New Belgium Brewing Co., challenged her fellow craft beer professionals to picture a future where their creations comprised 10% of the beer market. At the time, the entire craft beer segment owned only 3% of the American market, a smaller share than that held by a single brand – €”Busch Light – €”brewed by the country’€™s largest brewing company, Anheuser-Busch.

In her keynote address to the annual Craft Brewers Conference, Jordan told the audience they would succeed as a united industry – “we have a collective brand, the Craft Brewers of America” – if they emphasized quality, distinctive flavors and compelling stories that fostered a unique connection to their consumers. “€œOur niche as an industry,” she said, “is small, American, distinctive, well-made, fun beer.”

This past spring, Jordan returned to the conference podium again to look back at a decade that has seen craft beer’€™s share more than double to 6.5% of volume, and over 10% of dollar sales. Once again, she lauded the industry’€™s collaborative culture, the attention to quality, and the innovation that keeps consumers engaged.

By every measure, craft beer is cool. At a time when overall beer sales have been near-flat, craft beer sales volume has grown by 12%, 13%, then 15% over the past three years. Data from GuestMetrics reports that craft beer has a 26% share of on-premise beer sales (and over 50% of draft sales), as big as Anheuser-Busch’€™s share and bigger than MillerCoors’€™.

Numbers Are Growing

According the Brewers Association, the trade association for craft brewers, there were 2,347 craft breweries operating in 2012, 409 of which opened that year; just a few years ago, the industry marveled when the number of American breweries passed 1,200, roughly the number that existed in the United States before Prohibition. And the expansion hasn’€™t slowed: another 1,254 new breweries are in the planning stages.

The growth of the craft category and the continuing recruitment of newcomers mean relatively large and small companies coexist under the umbrella of ‘€œcraft.’€ The largest and oldest of the craft breweries, while still tiny compared to brewing’€™s behemoths, are still larger by many orders of magnitude than the small start-ups. Boston Beer, maker of the Samuel Adams beers and the largest craft brewery, produced 2.7 million barrels last year. Twenty-seven breweries now produce over 100,000 barrels annually. But across the entire category, the average production by a craft brewery is a mere 500 barrels per year.

Paul Gatza, director of the Brewers Association (BA), likes to apply the concept of the ‘€œLong Tail’€ to craft beer. It was proposed by Chris Anderson in a 2004 Wired article to explain the internet’€™s ability to make niche products viable in the entertainment field: it turns out that the total market for all non-hit songs combined exceeds the market for the few big hits. And in craft beer, the proliferation of small, local breweries means that the demand for those small brewers combined’€”the ‘€œtail’€’€”exceeds the market for the small number of ‘€œbig’€ craft breweries. This rapid growth has not been evenly distributed across breweries of all sizes. The top ten craft brewers, with nearly half the market, grew at 8% last year, according to Beer Marketer’€™s Insights. At the other end of the scale, the microbreweries (the BA’€™s category for packaging breweries producing less than 15,000 barrels annually) grew by 33%. It would be wrong to suggest that a divide has opened between the large and small craft brewers, but there is certainly a tone of concern in the industry that the rapid growth and wide range in brewery size and strategies could erode the industry’€™s well-established camaraderie.

Jordan, at the helm of the third-largest craft company, acknowledged to her audience that ‘€œresources will become tighter.’€ Brewing ingredients, adequately-trained brewing and sales staff, distributor attention, shelf space and tap handles may become harder to get.

Who Is a Craft Brewer?

A substantive difference of opinion’€”and one much more likely to test the unity of the craft brewing community’€”concerns the question of exactly who is and who is not a craft brewer. Alarmed that the biggest-selling beers brewed in the craft tradition, Blue Moon and Shock Top, were in fact produced by MillerCoors and Anheuser-Busch InBev respectively, the Brewers Association issued a statement last December headlined ‘€œCraft vs. Crafty.’€ In it, the association drew attention to the number of craft-like beers brewed, they say, by non-craft breweries. Given the enviable growth in the craft beer sector, the BA warned that large brewing companies are attempting to steal business from smaller companies by imitating their products and concealing the connection to big breweries.

The BA reiterated its tightly circumscribed definition of craft beer and craft brewers, which combines brewery size and governance structure, as well as the types of beers brewed, their ingredients and the intentions behind using those ingredients.

There was understandable push-back’€”from the mega-brewers, who asserted that their versions of traditional styles were as worthy of consideration as the versions produced by breweries that are, in the BA’€™s words, ‘€œsmall, independent and traditional.’€ More relevant to the craft beer drinker, in all likelihood, were protests from well-loved micros who found themselves cut from the craft beer club following sale to a larger company, or multi-generation regional breweries excluded because their flagship brand is in the pale lager style.

What do consumers want? Most beer drinkers don’€™t care as much as the BA would like about who brews their beer. But when they have the chance, they care more about supporting local Davids more than the Goliaths would like them to.

Craft Beer Trends

The growth in craft beer sales may be tilted towards small and local breweries, but the largest brewers’€™ beers are a ubiquitous feature of the retail landscape, and their new developments will be felt by far more consumers. This spring, Boston Beer startled longtime observers by embracing beer in cans. Founder Jim Koch has long harbored doubts about the wisdom of canning craft beer, concerned with the possible effect on beer flavor. The wide-spread belief that a can’€™s lining would taint the beer has been debunked. But what about the final obstacle, the likelihood that consumers would drink straight from the can, missing all the precious aromatics released by beer in a glass? In typical Boston Beer style, the company solved the problem with a new design, a can shaped to create more turbulence, and better aeration of the beer while drinking. In releasing Boston Lager in cans, Boston Beer is late in adopting a well-established trend. Canning, once limited for reasons of cost to the largest brewing companies and saddled with a déclassé image, has now been adopted by over 300 craft breweries, according to CraftCans.com. For this convenience and accessibility, consumers have to thank Oskar Blues Brewery, which in 2002 became the first American craft brewery to can its own beer. The Colorado company has done so well with its image-shattering work that last December it opened a second brewery, in western North Carolina.

Oskar Blues will soon have company in the Blue Ridge Mountains, where two other major micros, New Belgium and Sierra Nevada, have decided that nearby Asheville’€™s beer-centric culture and central location make it an ideal location for a second facility.

Other fast-growing micros have decided that a second site is the answer to the challenge of how to get a local product to a remote audience. Lagunitas Brewing Co. of Petaluma, CA, has construction underway in Chicago, and another California brewer, San Diego’€™s Green Flash, announced plans for a facility in Virginia Beach.

What’€™ll You Have?

In the early days of the craft beer movement, pale ale, the English staple, became the most popular style. In recent years, though, it was overtaken by its burly sibling, India pale ale. And within the IPA category, the more assertive examples attract an enthusiastic following.

Lagunitas India Pale Ale, the fastest-growing IPA in 2012, is also the brewer’€™s flagship beer. It joins other popular and widely available examples of the style, including Bell’€™s Two Hearted, Bear Republic’€™s Racer 5, or Ballast Point Sculpin.

In recent years, even breweries that had shied away from brewing an IPA took the hoppy plunge. New Belgium released the eponymous Ranger to honor their field reps (‘€œrangers’€), who were tired of deflecting requests for a New Belgium IPA. Sierra Nevada, having retired their English-style IPA some time ago, is doing well with Torpedo, an aggressively-hoppy ‘€œextra’€ IPA.

Such is the pull of the IPA name that beers that depart radically from style are borrowing the badge. This began with a decade ago with double or imperial India pale ales that were far stronger than normal. Now, new twists include IPAs that gloss over the word ‘€œpale’€: black IPAs (hoppy but black), including 21st Amendment’€™s Back in Black or Stone’€™s Sublimely Self-Righteous; or white IPA (a hybrid with a Belgian wit) such as Deschutes’€™ Chainbreaker White IPA. Belgian India pale ales appear to trace their heritage two different continents. And what are drinkers to make of a ‘€œsession IPA’€’€”an India pale ale with low alcohol. Surely, that’€™s a pale ale that’€™s taken a marketing course? Year after year, IPAs are topped in popularity only by a style that is not a style: the seasonal category. Limited in time and availability, these beers are eagerly anticipated by craft drinkers. But consumers also become frustrated that the ‘€œseasonal’€ roll-outs are moving ever earlier on the calendar: sought-after pumpkin beers may be supplanted by winter ales before Halloween, and the seasonal maibock (May bock) can vanish by March.

Finally, a niche within a niche, deliberately soured beers seem to have caught brewers’€™’€”if not consumers’€™’€”imaginations. Though the puckery flavors may never enjoy wide popularity, the category grew from a small base by a striking 31% in 2012. Although a large craft brewer, New Belgium, has been one of the pioneers introducing these unique beers to American drinkers, sour beer brewing may be the kind of small-batch experiment best suited to local companies.

So will the emerging beer of next year be a locally brewed, seasonal sour ale…in a can?

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