Craft brewery production volumes are down between -2% and -4% halfway through 2023, according to the Brewers Association’s (BA) Midyear Survey.
BA chief economist Bart Watson shared the survey results during a webinar Thursday. He gave the caveat that the midyear report has a smaller response pool than the BA’s year-end survey (hundreds of breweries versus thousands), and there could be more response bias, as the BA does not fill out the data with as much additional information such as state reports. For example, the 2022 midyear report had craft breweries growing +5%, but the year ended with static growth.
As of June, there are 9,456 breweries in the U.S. (9,336 active), up from 9,242 (9,119 active) in June 2022.
“From a competitive distribution market and rising costs, to changing consumer preferences and supply chain disruptions, the craft brewing industry has radically grown and shifted over recent decades, with that change only accelerating in recent years,” the BA said in a press release. “In this maturing market, explosive growth from years past has tapered out, but openings continue to slightly outpace closings, and brewers are finding success in niches where they can succeed.”
At the midyear mark, off-premise craft sales were down -3% year-over-year (YoY) – an improvement over the -9% decline recorded at the end of Q1 – according to Watson, citing Circana scan data. Paired with reported draft and on-site sales, Watson estimates craft volume is down -2% through June, marking only the second time Watson has reported a decline for craft, with the first being 2020.
“Is there still room for recovery or a new normal?” Watson said. “Right now, this seems like it trends a little bit more to new normal than room for recovery.”
That said, Q2 skewed more positive than Q1, suggesting the “worst of the contraction is behind us,” Watson said.
Off-Premise Still Down, But Improving
Watson also shared recent NIQ off-premise data from the BA’s dashboard with 3 Tier Consulting. In the latest 13 weeks (through June 17), total craft dollar sales increased +0.9% YoY in NIQ-tracked off-premise channels, while volume declined -2.9%.
When eliminating the top 15 craft brands – reflecting the more “typical experience” of BA craft breweries – craft dollar sales declined -1% and volume declined -4.4%, Watson said. While trends are down, they represent some improvement, as 25-week dollar sales are down -1.5% and 52-week dollar sales are down -2.2%.
At-the Brewery Sales Growing
There is “still a strong demand for visiting breweries,” Watson said, citing BA consumer research.
The number of consumers surveyed in the BA’s annual Harris Poll who said they visited a brewery at least once in the last 12 months increased +3%, to 69% in 2023, suggesting a return to previous trends. That number had been steadily increasing every year until 2021, when it dropped from 66% to 65%.
That data is also backed up with Arryved data, which shows the average checks per location per month has remained steady in 2023, around 2022 levels. Watson added that Arryved data does not account for changes in the dataset, such as the amount of breweries growing.
Adding in the growth in the number breweries in operation, Watson estimates total at-the-brewery sales to be up +6% YoY through June. At-the-brewery sales were up YoY four out of the six months, led by January (+14%), which was “cycling a pretty easy comp,” Watson said. March sales were flat YoY, while April was down -3%.
Draft Declines Could Have Long-Term Impact
Draft beer “never really came back from the pandemic” and continues to struggle, Watson said. Midyear distributed draft volumes are at nearly the same place it was in mid 2021, down around -30% YoY.
Some of that decline is from the increase in at-the-brewery sales. However, the majority is from a “total loss” of draft volume from changing consumer habits and preferences, shorter on-premise hours and more to-go delivery sales.
Distributed draft was already seeing a “long-term decline” as early as 2015, so a decline was expected, Watson said. However, Watson’s estimated total 2023 distributed draft volume is still 2 million barrels below what it should have been if previous trends continued.
That loss is particularly heavy for craft beer, which accounts for 30% of distributed draft volume, or about 700,000 barrels of that lost 2 million barrels, Watson said.
The trend could also have a long-term effect on how bars and restaurants operate and prioritize draft sales, which could lead to future declines, Watson said. Analyzing draft sales as a percentage of total bar and restaurant sales, the “value of draft to retail” has been cut in half over the last six years.
“That’s worrisome, because in the long run, we can still sell beer without draft on-premise …but you start to worry that the infrastructure that’s built to support it doesn’t get built in the next generation of retailers,” Watson said. “If draft’s not going to be an important part, why would they put in as many tap handles? Why would they build in [draft] as much as cold space?”
Watson encouraged the beer industry to collectively address the problems with draft “head on,” or “risk a world where draft demand bounces back up, but we don’t have the infrastructure needed to really capitalize” on it.