It’s a Bear Market for a Beer Business

On a whim, I visited Busch Gardens on the one good day in August where temps were a normal 82 degrees. The tickets were free (Thanks Hattie!) and I was looking forward to quenching my thirst with an ice cold, freshly brewed, mass-market barley beverage. Much to my chagrin, all I could find was craft beer stands. There I was in the middle of “America’s Most Beautiful Theme Park,” built 300 yards away by “The King of Beers” and I couldn’t find a Budweiser tap. I managed to find one after a long walk to the FestHaus. It was a can, in the gift shop. Amazing to me that Busch Gardens was selling more craft beer than Anheuser-Busch (now InBev) products. Big Beer is Dead! All Hail Craft Beer!

In the last decade, from 2011-2021, the overall market share for beer fell from 46.9% to 38.6%, despite the craft beer boom. In that same period, the number of breweries in America more than tripled, numbering almost 10,000.

Beer is big business in Virginia. There are 344 craft breweries in Virginia alone which isn’t surprising if you’ve been to Scott’s Addition lately, where currently half of them are based. (#IJest) Coors has a huge operation in the Shenandoah Valley and Anheuser-Busch has been pumping out Bud since 1972 in Williamsburg. 

Way before the Bud Light marketing fiasco and subsequent boycott earlier this year, Gen Y and Gen Z consumers had already developed tastes for other bevvies. Get X consumers have been drinking more spirits and younger folks have been buying up seltzers, ciders and RTDs (ready-to-drink cocktails in a can.) These alcoholic alternatives have been sharply rising, which means Americans aren’t necessarily drinking less, they’re just drinking different stuff. U.S. craft beer sales and volume actually declined in 2022, and the BA (the Brewer’s Association) predicts 2023 will be worse.

So what does the future hold for the craft beer biz? 

1. Less start-ups. The pace of new micro-breweries has already slowed. High interest rates and less venture capital will mean less new brew pubs.
2. Mergers. The bigger, better branded brewers will still grow and that means the acquisition of mid-size breweries by big beer companies will continue. (Locally we’ve already seen this; InBev bought Devil’s Backbone and Sapporo bought Stone Brewing)
3. Diversification of product. Boston Beer Company, the largest craft beer in the U.S. and maker of Sam Adams, has diversified into seltzers and Twisted Teas. Other craft brewers that want to survive need to look at making other canned concoctions or risk an uncertain future.
4. Diversification of business model. The small craft breweries will need to diversify their business models if they’re going to thrive. Tasting rooms and food trucks will give way to larger wholesale distribution and hospitality add-ons; events and food operations and retail merchandise to name a few things.
5. Only the best brands will win. Most small businesses, micro-breweries and taprooms included, can only survive stiff competition if their brand is 1) awesome and 2) top-of-mind. This work can not be “homemade.” It needs to be done professionally. Think of this way, there are 10,000 competitors making beer and people are drinking less of it. Your beer brand has to be the one that people love — not like — because you’ve created an emotional attachment to your brand of brew; through packaging, website, consumer experience, and the people who do what they do and brew what they brew. 

During our nation’s long 13-year nightmare known as Prohibition, only 100 breweries of more 1,300 alive in 1920 survived. Bold brands like Anheuser-Busch, Miller, Coors and Yuengling had to change to survive and re-connect with consumers. AB made baby formula. Miller crafted soft drinks. Coors made malted milk and ceramics. Yeungling made ice cream. 

These iconic American beer brands adapted and survived, and ultimately thrived. It’s a valuable lesson for the beer industry or any business for that matter. Weathering the storm is much easier when you build a great brand and can adapt to market forces.