U.S. craft breweries saw a “varied recovery” in 2022, with volume returning to pre-COVID-19 pandemic levels, but not all channels bouncing back and margins tightening, according to the Brewers Association’s (BA) annual Year in Beer report.
“The maturing craft industry continues to grow more competitive, facing both internal business pressures and externally the continued growth of new beverage alcohol competitors,” BA chief economist Bart Watson said in a press release. “While these challenges are daunting, craft brewers are known for their innovation and flexibility, and will need both as they evolve to meet the next generation of beer lovers with new beers and new occasions.”
The report was published ahead of Thursday’s BA Collab Hour webinar, during which Watson will recap beer’s 2022 and give early predictions for 2023.
Beer’s Recovery Still ‘Long and Unsteady’
More than 9,500 breweries operated in the U.S. at some point in 2022, according to the BA. The trade group estimates more than 550 breweries opened during the year, while more than 200 closed. In 2021, an estimated 710 breweries opened while 176 closed, according to the BA’s 2021 report.
The numbers indicate slowing brewery growth, which is not entirely due to the COVID-19 pandemic, but rather a continued pattern of a “maturing industry,” Watson said during the Brewbound Live conference in Santa Monica last month.
While craft beer volume has returned to 2019 levels, not all channels have “bounc[ed] back equally,” Watson said in a video accompanying the Year in Beer report.
On-premise establishments have “continued their long and unsteady recovery in 2022,” and business has returned, but draft sales are still recovering.
In a similar sentiment, small and local brewpubs and taprooms have “proved nimble” and are faring well despite “continued supply disruptions,” while micros and regionals have struggled, tackling fights for shelf space “in an increasingly competitive distribution climate.”
2022 BA Highlights: State Tax Fights and Treasury Report
The BA highlighted its 2022 legislative and regulatory battles for small brewers, including several fights against lowered excise tax rates for spirits-based ready-to-drink canned cocktails (RTDs) in Arizona, New Jersey, Washington, Vermont, Illinois, New Jersey, California and Colorado.
Excise tax changes have been spearheaded by the Distilled Spirits Council of the United States (DISCUS), which argues that “alcohol is alcohol” and RTDs with a similar ABV to malt-based beverages should be taxed at the same rate.
The BA also applauded the U.S. Department of Treasury’s report on competition in beer, wine and spirits, published in February. The BA shared comments with the Treasury, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) prior to the report expressing concerns over “wholesaler consolidation, unfair state franchise laws, and restrictions on direct-to-consumer sales” and later applauded the report for its recognition of laws that “inhibited the growth and competitiveness of craft producers.”
The BA will continue to advocate for regulatory changes and against lower excise tax rates in 2023, as well as for the United States Postal Service (USPS) Shipping Equity Act (H.R.3287/S.1663), which would allow the USPS to ship alcoholic beverages. Bills were introduced into the House and Senate in 2021.
The BA also highlighted the continuation of its mentorship program, which has now matched 102 mentors with 124 mentees, as well as its mini grant program, which has donated more than $150,000 to diversity, equity and inclusion (DEI) organizations and advocates.
Additionally, the trade group celebrated the return of the Great American Beer Festival (GABF) after a two-year hiatus. More than 40,000 attendees celebrated the 40th anniversary of the event, held October 6-8, which featured 500 breweries and more than 2,000 beers. The first GABF in 1982 featured 24 breweries and 47 beers, according to the BA.
Looking Ahead: Supply Chain Challenges to Continue
Supply chain challenges will persist into 2023, as barley and hops face “unprecedented challenges created by climate change,” according to the BA.
“Although the 2022 harvest improved, the severe depletion of stocks in 2021 kept barley supplies and prices high in a very dynamic and changing market,” the BA wrote.
While the U.S. – which recorded the largest hop acreage in 2021 – is expected to record an average hop crop yield for 2022, Germany – which boasted the second largest hop acreage in 2021 – is expected to record a hop yield -20.4% below 2021 levels and -18% below its average yield, according to global hop supplier BarthHaas in an August report.
“As the economy ramps back up and on-premise beer and restaurant sales increase, so will demand for CO2,” the BA continued. “More brewers may feel the pain of facing curtailed production schedules or even full-scale shutdowns as some brewers did during the pandemic.”
BA’s 2023 Predictions
“2023 will be a reset for many brewers as the maturing craft industry continues to grow more competitive, facing both internal business pressures and externally the continued growth of new beverage alcohol competitors,” Watson said. “While these challenges are daunting, craft brewers are known for their innovation and flexibility, and will need both as they evolve to meet the next generation of beer lovers with new beers and new occasions. “
The BA’s predictions for 2023 include:
- Brewery openings in the U.S. will be “the lowest in over a decade”;
- “Distributed craft volume will not grow”;
- The supply chain “will remain rocky,” although average prices “will come down from 2022 peaks;
- And “total brewery employment will still grow.”