Historically, the success of any brand of beer or brewery has been relative to its market share. Market share size was the true measure of a brand’s strength. While it market share is still discussed and used, it is no longer considered the main matrix, especially in the craft segment.
As mentioned in previous posts, in 1980, Coors in Kansas had a 60%+ share of market. Schlitz still had a 40% share, but was slipping. When looking at that picture, one could believe that Schlitz’s share might bottom out at 20%. Of course, Schlitz imploded, sold to Stroh and eventually died. No one saw that coming any more than anyone saw InBev buying out AB in 2008.
Published numbers today highlight size and growth of segments. Note the growth of IPAs and the number of not only established IPAs, but the number of new IPAs. When discussing craft brewers, market share is rarely highlighted but their annual production is. In fact, it seems that any brewer that is mentioned almost always has increased its production either at the current time or increased production is planned leading up to an expansion.
The growth of crafts is being driven by all forms of media; and especially social medium which has created investment interest from the financial world. In the last month alone, there has been an increase in fielding questions from PE firms on the various distribution options available for craft brewers, including self-distribution. In addition, questions from lawyers interested in ways around franchise laws and contracts have been on the rise.
By far the majority of new crafts are the very small or 5 bbl. brewers who are mostly brew pubs or tap rooms. Some grow bigger, some stay small, but all are taking advantage of the craft growth. Recently published numbers by Guestmetrics, indicate that crafts are slowing in on premise sales. If true, then will the question becomes: is the off premise going to be the next battle ground for growth?
In a recently published interview with Meg Gill of Golden Road Brewing Co. by Beer Business Daily, she commented that she needed help from some AB wholesalers in learning about the market, what are margins vs. markups and how to sell to chains. She stuck with it, learned the business and the brewery has grown and become viable, but the learning curve took quite a while. Her story is not unusual.
While big money is kicking tires with potential crafts to buy existing volume, other money is moving to build new, state of the art, breweries. Not unlike BrewHub, but on a smaller scale. This money is buying not only the best equipment available, but the best and most experienced talent in the market. The idea is to not only make a quality product to start, but to limit the learning curve going into market. Some of these operations will be up and running within the next year or two.
These start up breweries, if well-funded, have the potential to shake-up the market. How many of these types of startups become reality and how distributors react to them remains to be seen. What this could become is the preferred business model to the distributors for crafts verses the wait and sees, starts up, under financed, small mom and pop type breweries. Maybe a better description for these would be: hops in a box!