Craft beer growth hasn’t fallen off the map- not even close, but growth has declined significantly over the past two years. You may have not realized it with today’s craft beer news release though because the Brewers’ Association used the press release, not surprisingly, to hype that we broke a 100-year mark for independent craft breweries operating in the U.S.

The number of breweries in today’s report is officially 1,525 which exceeds the mark in 1910 of 1,498. 1,545 breweries operated during 2008 according to the association’s published statistics though that number includes breweries that closed down during the year. North American Brewery Updates released this past year indicate that somewhere in the neighborhood of 50 breweries closed down in 2008. As a result, The Brewers’ Association couldn’t have been certain that it broke the 100-year mark in December.

Still, it begs the question: why wait several months when we likely hit 1,500 breweries in January or maybe February? The answer to that question lies somewhere in, of all places in this high-speed internet age, a book. Maureen Ogle’s Ambitious Brew states that, “American brewing peaked in 1873, when there were 4,131 breweries.” This 100-year mark is about 1/3 of the U.S. record set just 27 years before it.

The truth of the matter is that what was mentioned today in that press release isn’t much of a mark at all and its timing is a bit helter-skelter. I’m not saying that the Brewers’ Association just pulled this out of thin air but it comes at the expense of what could be a much more critical dialogue about the health of the craft beer industry.

Craft beer numbers are floating back to earth. Dollar Growth has gone from 14% to 9% in two years with most of that coming before the word, “recession,” started gaining steam late last summer. In the same timeframe, production growth has dwindled from 11% to 5%. Meanwhile, we have 100 more breweries than we did two years ago. The beer supply is increasing despite demand decreasing.

Is this floating back to earth or two trains on a collision course?

Slowing growth is a good problem to have relative to the rest of the beer industry, one whose metrics even reveal 10% declines depending on the segment at which you’re looking. But it’s still a problem. While, there are dozens of breweries out there with distributors ringing their phones off of the hook, realize that those few breweries are not a microcosm of the craft beer industry, otherwise, we wouldn’t be 5% lower than we were two years ago.

Beer Advocate columnist, Andy Crouch, has taken multiple looks at craft beer and the economy. He mentions two interesting things (at least) which I bring up, less as arguments, and more as general talking points.

Point one: Crouch sees a looming problem in the distribution model of some craft beer brands in the States. A number of breweries are distributing beer to several markets across the country as opposed to distributing deeper into local markets. A brewery doing this could run the risk of long-term stability for short-term gain. This is by no means empirical but wouldn’t common sense say that you’re less likely to have loyal customers away from home? Within the past year, I have seen new displays in stores with discounted beers that need to be sold; it’s been sitting there for months. These are top notch brands that I am finding on those shelves.

Point two is more of a solution should things turn sour: adaptation. Crouch brings up an interesting anecdote about Greg Koch from Stone Brewing to illustrate: “Stone Brewing’s CEO Greg Koch recently told local business students that he wanted to change the company’s expansion model. Instead of selling more than 90,000 barrels of beer in thirty-three states, as Stone will do this year, he’d prefer to save on fuel costs and sell more beer in just five states.” For every Oskar Blues out there (they reported 84% growth as I write this), there are several breweries with stagnant growth, some of which may need to consider changing their approach. Just consider Hale’s Ales and Pete’s Brewing, each of which reported production sales losses in excess of 10% last year [ed. note: these figures appeared on pages 43-48 of the May/June issue of The New Brewer, a publication put out by the Brewers’ Association.]

The Brewer’s Association isn’t unlike any other organization that paints a rosy picture with press releases. Let’s hope that their downplaying of what I’ve mentioned here is for good reason. That the numbers will bounce back and craft beer will grow at double digits again.

But we have nothing to worry about, right?

We have 27 more breweries today than we did in 1910.

Sources:
2008 – http://www.beertown.org/ba/media_2008/midyear2008.htm
2007 – http://www.beertown.org/ba/media_2007/midyear2007.htm
2006 – http://www.ibabuzz.com/bottomsup/2006/08/21/craft-beer-sales-still-soaring/
2005 – http://www.allbusiness.com/food-beverage/beverage-industry-beverage-manufacturing/5065706-1.html

Photo 1:

Photo 2: