More than 9,000 breweries operated in the U.S. in 2021, a 6% increase from 2020, according to the Brewers Association (BA) in the trade group’s Year in Beer 2021.
As 2021 comes to a close, the BA released an overview Tuesday of the challenges faced by craft brewers, and highlighted areas in which the industry has thrived. Despite still recovering from the economic effects of the COVID-19 pandemic, and the added challenges of supply chain and labor constraints, more breweries operated in the U.S. this year than ever before.
“Even amongst those challenges, breweries innovated in both flavor and business, with more breweries than ever before selling new beers to new customers in new ways,” Bart Watson, BA chief economist, said in the video that accompanied the report. “More work on rebuilding businesses and improving our industry for everyone remains for 2022, but the Year in Beer 2021 showed progress on that journey.”
The BA estimates 710 breweries opened in the country this year. Just 176 closed. The trade organization expects the increase in operating breweries to have a positive effect on the U.S.’s recovering economy, as small and independent craft brewers contributed $62.1 billion to the country’s economy in 2020, according to the BA. The industry also directly and indirectly provided more than 400,000 jobs, 140,000 of which were at breweries and brewpubs.
Restaurant Revitalization Fund Replenishment Act Still a Priority
The Restaurant Revitalization Fund (RRF) Replenishment Act is a core legislative priority for the BA after initial RRF money ran out.
“The program went into effect in early May, and the application process closed on May 24, 2021,” the BA wrote. “In that time frame, 372,000 applications were submitted, representing over $76 billion in requested funds, far surpassing the initial $28.6 billon Congress provided for the program.”
Bills to add an additional $60 billion to the RRF were introduced in the U.S. Senate (S.2091) and the House of Representatives (H.R.3807) in June. The bill has 42 co-sponsors in the Senate and 224 in the House.
The BA told Brewbound in September that about 1,600 craft breweries received about $450 million from the first run of RRF grants after the trade organization lobbied for the inclusion of breweries with onsite hospitality business models.
Other Legislative/Regulatory Updates
The BA’s other legislative priorities include the USPS Shipping Equity Act, which would grant the U.S. Postal Service the ability to ship alcoholic beverages. Only licensed private carriers such as UPS and FedEx are allowed to do so currently.
After President Joe Biden issued an executive order this summer calling for increased competition across several industries, including beer, BA president and CEO Bob Pease submitted two letters on the organization’s behalf to the Department of Treasury detailing the challenges small breweries face when bringing their products to market.
In the first letter submitted in August, the BA called for the Treasury’s Alcohol and Tobacco Tax and Trade Bureau (TTB) to enforce trade practice violations and update its regulations. After the deadline to submit comment was extended, the BA sent a follow-up letter in September that detailed other concerns, including:
- The highly concentrated nature of the U.S. brewing industry, despite more than 8,764 craft breweries in operation at the time;
- Wholesaler consolidation, which has created a duopoly in “most markets” leading to market access issues for craft breweries as larger wholesalers consolidate in new territories, giving them “unprecedented leverage over small suppliers and retailers” that “if left unchecked will eventually give a few companies virtually total control of beer distribution;”
- And restrictive state laws — including franchise laws, bans or limitations on self-distribution, restrictions on direct-to-consumer sales and more.
Supply Chain Impact To Carry into 2022
Several supply chain constraints plagued 2021, as the ongoing restrictions of on-premise locations had many brewers packaging their products for sale at off-premise retailers.
Cans now make up about 60% of independent craft packaged volume, according to the BA. With the addition of large beverage companies switching from plastic bottles to cans, can supply has been strained. In response to added demand, Ball, the world’s largest manufacturer of aluminum beverage cans, increased its minimum order requirement per SKU for printed cans from 1 truckload (204,000 cans) to 5 truckloads (more than 1 million cans), effective January 1, 2022.
“For small brewers, this is an additional aluminum supply change challenge coming after a year and a half of many such challenges,” the BA wrote in a post detailing the change. “Moving a large portion of small brewer aluminum can sales to brokers has the potential to increase prices for small brewers (through increased broker fees, additional labeling costs, and increased transportation cost), increase lead times, and potentially reduce the availability of cans for smaller brewers who can no longer meet minimums.”
Additional supply constraints have come from barley production, which declined -31% in 2021. The 118 million bushels produced this year is the smallest U.S. crop since 1934, and the smallest North American crop since 1949. While the U.S. Department of Agriculture predicted hop production in Idaho, Oregon, and Washington to reach 117 million pounds in 2021 in an August report – a +13% increase from 2020 – the BA said first-year hop yards and some aroma varieties were negatively affected by heat and droughts this year, which will have a continued effect in 2022.
“We’ve learned here that the supply chain is very interrelated and more fragile than we expected,” Watson said in BA webinar last week. “If I’m going to make a specific prediction, there’s going to be something in 2022 that we’re not talking about now that is going to pose problems for brewers. So the further out you can think about your supply chain and the more you can think about the weak points – if I don’t have X, it’s going to cause me real problems, and build some robustness there – the better.”
Female Gen Z Drinkers Outnumbered Male Gen Z Drinkers
While brewers were tackling challenges behind the scenes, they were still able to bring in new craft drinkers in 2021. The BA said the American beverage alcohol consumer is “increasingly diverse and female,” noting that female drinkers younger than 25 now outnumber male drinkers younger than 25 – a glimpse at how the craft consumer base could evolve with a growing group of Generation Z legal-drinking-age consumers.
To aid in the continued evolution of craft drinkers and craft culture, the BA has created a resource center with guidance on how to create an inclusive and diverse craft brewing community.
Predictions for 2022
Going into the new year, the BA detailed five predictions it has for 2022:
- Comparable craft production will exceed 2019 levels once again;
- On-premise sales will improve, but draft will still not return to 2019 levels;
- At-the-brewery sales will hit all-time highs;
- Operating brewery numbers will continue to climb, but at a lower rate than in previous years;
- Inflation will come to craft, as brewing and manufacturing cost increases will lead to a hike in average beer prices over recent years.
Watson detailed further predictions in his webinar last week.