Ever since craft beer got a grip on the American drinker’s imagination a couple decades ago, it has commanded more than its market share’s worth of attention. Craft comprises only 11% of the U.S. beer market, yet craft breweries and beer styles dominate the coverage in the popular press, relegating news about mega brewing companies to the business section.
The Brewers Association, a trade group for the craft sector, reports that over 3,400 craft breweries operate in the United States today. Through a combination of good brewing and business savvy, 135 of these have exceeded 15,000 barrels in annual production, and are now categorized by the association as “regional” breweries. Most of these distribute in the majority of states, while some have national reach. Together, the “regional” breweries churn out nearly 80% of our craft beer.
These breweries see their beers featured in airport bars and ballparks. Their flagship brands are the reliable choice in convenience stores, a channel where craft beer sales have risen sharply in recent years. And, because success of this kind only comes with longevity, these are brands that have naturally been around for a long time: California’s Lagunitas Brewing Company, the youngest of the ten top-producing craft companies (according to the Beverage Information & Insights Group), is older than a new LDA consumer.
Is Local Better?
Although the big craft brewers have the advantage in volume, the fastest rate of growth for many years has been among the microbreweries (under 15,000 barrels annually) and brewpubs. Consumers love local, and they love what is rare, seasonal or new. That is a challenge for brewers and retailers, alike: the big flagship brands are widely available to the point of over-familiarity, dependable, and generally brewed in styles with broad appeal. The smaller brands are harder to find, often more extreme in style, and more variable in quality.
A recent Nielsen study (February, 2015) concluded that an increasing number of people say that knowing a beer is locally made is important to their purchasing decisions—a preference that is greater among the drinking-age Millennials.
“It’s something all the national craft breweries are facing, and it’s a very delicate balance point: how do you maintain your brand’s relevance?” asks Jeff Billingsley, director of marketing at Deschutes Brewing Co., the seventh-largest craft brewery. “In a craft market with so many new breweries, and the interest in all things locally sourced and produced, it’s not easy to go about it.”
When Deschutes enters a new market, the company makes an effort to acquaint consumers with its values and origins, and to contribute to communities in ways that are locally meaningful. That way, “we become more than just another new beer placed on the shelves,” Billingsley adds. “That approach is pretty widespread across craft. A lot of breweries our size are doing similar things.”
Sierra Nevada (number two in size) retains a local edge by producing beers that are, indeed, local—exclusive to a few limited outlets, through small-scale pilot brewhouses at both the original California brewery in Chico and the new facility in North Carolina.
“In recent years, we’ve brewed more than 100 different beers annually, though many of those don’t reach much farther than our on-site taprooms,” notes Ryan Arnold, Sierra Nevada’s communications manager. “That’s part of what makes it special; those numerous limited releases create local experiences at or immediately around our breweries. The hope is we’re covering the gamut of drinkers. We want craft beer to be inclusive, and we imagine our peers feel the same.”
Flagships Still Strong
Retailers know that consumers still expect to find the big brewers’ brands in stock. “The bigger breweries that have been around and that are consistent and smart like Sierra Nevada, for example, or Avery, we give them displays because they will get the distributors’ backing and floor space,” says Derek Ridge, beer manager at Hazel’s Beverage World in Boulder, Colorado. “We’re pretty fortunate to have plenty of space to hold for rare and new items in addition to the flagship brands, which are usually on display and in the doors.”
Boston Beer’s Jennifer Glanville, brewer and director of brewery programs, would applaud that approach, noting, “We see that retailers most often see success when they offer a variety of craft beer, including leading brands like Samuel Adams along with regional and local brands.”
Beers from the major craft brewers can be an entry point into the craft category. “The big breweries are great!” says Nathan Robinette, president of Knoxville, Tennessee-based craft beer franchise The Casual Pint. “Without the success of the larger breweries, the smaller breweries wouldn’t have a path to follow. The bigger breweries offer a selection that appeals to the masses, so we believe in a good mix between the bigger and local breweries.”
However, Ed Mulvihill of Peco’s Liquor Store in Wilmington, Delaware, turns that logic on its head: “What we’ve seen is local beers are what get our local clientele to switch—particularly older clientele who have always been domestic premium drinkers. They want to support local beer, but then they kind of branch out and try some of the national craft brands.”
Boston Beer’s Glanville sees the power in the company’s 60-plus portfolio of Samuel Adams beers: “I like to say that we have a brew for every craft beer-lover’s palate, whether it be a hop-forward beer like Rebel Rouser Double IPA, a Belgian sour like our Kosmic Mother Funk Grand Cru, a wheat ale like Summer Ale or a balanced but complex amber lager like Boston Lager.”
Given the expanding number of retail outlets for craft, some retailers are choosing to specialize and not even try to carry every brand. Sometimes, this means not stocking the reliable flagships.
Lisa Morrison, co-owner of Belmont Station in Portland, Oregon, is guided by one rule: “The customer votes and their votes count. That means that whatever is selling is what we are offering.”
Still, as grocery stores and convenience stores expand into craft, she knows customers can find the most widely distributed beers elsewhere. “While some standard offerings from larger, regional or even national breweries are represented here at Belmont Station (including PBR, which we sell enough of to warrant a space in the coolers), others are no longer offered,” she says. “But we probably will bring in their seasonals and one-offs.”
The Lure of Specialty Releases
This underscores a valuable point: special releases garner attention, no matter what their source. So the major craft breweries balance their portfolios—and retailers balance their shelves—between the flagship beers that pay the rent with their huge volumes, and the specialty beers that generate buzz and compete successfully with local brands.
Last year, Sierra Nevada released its first widely available mixed 12-pack. “The variety really seems to resonate with craft drinkers,” notes Ryan Arnold. “We’ve released a few more mixed packs, and along with seasonal staples like Celebration IPA. The responses continue to be exciting.”
Morrison notes, “Folks love those special seasonals and variety packs from the larger breweries. Especially the long-awaited seasonals. If it’s a customer favorite, we will start getting phone calls asking when it’s due weeks before it arrives.”
“The Casual Pint customers seek out special releases, seasonal beers and mix packs regardless of the size of the brewery,” Robinette confirms. “Special releases and seasonal beers are big sales drivers throughout the year.”
Local brewers worry that splashy releases from the big companies will take attention from their own beers, but Ridge at Hazel’s Beverage World finds the relationship is synergistic. “It doesn’t seem to hurt other brands when really unique beers are released. It’s kind of cool because it gathers excitement for other breweries to do the same—like Goose Island Bourbon County Stout.” Besides, he adds “People are loyal and they may try new stuff for a while. But they always have that favorite to fall back on.”
Despite its position as the third largest craft brewery, New Belgium, with its pioneering reputation in the emerging niche of sour beers, may have one of the edgiest lists of experimental beers of any brewery through its Lips of Faith series.
“Lips of Faith beers are known for pushing the envelope with sour, brett, fruited or spiced components. La Folie, Le Terroir, Yuzu Berlinerweiss and many others fall into this category,” explains Bryan Simpson, New Belgium’s director of public relations. “They are more challenging to the craft beer initiate drinker, yet they allow our brewers to stay innovative and playful—that’s what craft drinkers are really looking for when they seek out unique.”
Novelty vs. Size
It’s worth wondering whether the consumer’s passion is actually for local beer, or if it is at least equally a passion for what is new or rare.
As a small market, Delaware has been “last in line” at times to get some of the major craft brands, according to Peco’s Mulvihill. So when New Belgium, Lagunitas and Oskar Blues (all among the top 25 largest breweries) opened distribution there within the last two years, it was big news. “When we launched New Belgium, we sold 25 cases of Fat Tire the first night,” he says, referring to New Belgium’s very popular, but in no way palate-challenging amber ale. “That was a big deal: we had a big display and signs in the windows saying, ‘Welcome to Delaware!’”
By contrast, comparable flagship beers like Samuel Adams Boston Lager or Sierra Nevada Pale Ale have been on the Delaware market for years. “Their sales are strong, but I think the new breweries here like New Belgium and Lagunitas, that’s where the growth is coming from,” Mulvihill says. Novelty trumps size in this case.
The hunger for novelty has become a well-accepted assumption about younger consumers in particular. Brewers and retailers chase this apparently fickle audience with constant innovation. Deschutes’ Billingsley calls it “a double-edged sword”—words that brewers and retailers might take to heart.
“The looking for new experiences, for what’s new, is becoming a self-fulfilling prophecy: everybody believes that the consumer wants something different, “ he says. “So breweries are creating new and unique beers, and it’s accelerating to the point that it’s challenging to keep up with, especially when you are at the scale of a regional or national brewery.”
Maybe the lesson is that the big breweries shouldn’t—can’t—chase every new trend that comes along, nor should customers or retailers expect that of companies that have to invest six to eighteen months in the launch of a new beer, compared to the rapid turnaround possible for micros. The big brands, instead, provide quality, consistency and measured experimentation.
Listening to consumers, it’s hard not to liken their love of the small and local—and the rejection of the established and successful—to the music fan who discovers a great band in its indie days, and feels betrayed when its appeal grows beyond a small group of followers.
Peco’s pushes back strenuously against beer fans who condemn the regional brewers for their success. Boston Beer, the largest craft brewery, comes in for particular criticism from a vocal few for “selling out.” “Really?” demands Mulvihill. “They still consistently produce beers that people want. And when we get our allocation of three bottles of Utopias, those bottles come in and go out in the same day. Conveniently, when the Utopia is on the table, everyone’s a Sam Adams fan.”
Julie Johnson was for many years the co-owner and editor of All About Beer Magazine. She has been writing about craft beer for over twenty years. She lives in North Carolina, where she was instrumental in the Pop the Cap campaign that modernized the state’s beer laws.