As the number of U.S. breweries has grown to around 8,000 and competition has increased among those companies for consumers, it might be time to pull the advertising lever, particularly as they start to compete with a growing number of local wineries and distilleries.
“In a world of intense competition, marketing and branding is more important than ever,” said Bart Watson, the Brewers Association’s chief economist. Speaking at the Beer Marketing and Tourism Conference last week in St. Petersburg, Florida, Watson also addressed changing consumer habits around beer tourism as part of the growing need to differentiate.
According to Watson, an average of two breweries open daily, and there are now 11,500 brewery permits filed with the Alcohol and Tobacco Tax and Trade Bureau (TTB), which he said has historically been a strong indicator of the brewery count over the next two years.
“Anyone who thinks this explosion in the number of breweries is going to end sometime soon, I think they’re deluding themselves,” he said. “It’s going to end at some point, but most of the data suggests we’re not there yet and that there are a lot of breweries going to open. And some of these are second locations.”
The headwinds for craft brewers aren’t limited to their growing ranks, but also the stream of local wineries and distilleries opening across the country.
“You’re going to have to compete with people trying to attract people to their distillery tasting room, to their winery tasting room,” Watson said. “We’re seeing those numbers increase at similar rates to what we’re seeing in brewing.”
Another challenge for craft brewery owners is an aging craft consumer demographic and a growing number of consumers who do their shopping from their homes.
“We’re at peak 21- to 34-year-olds right now, but we’re going to get a lot more of 35- to 44-year-olds,” Watson said.
The young, variety-seeking consumers who once bought brands they didn’t know or lined up for can releases will likely begin to settle into different patterns in the coming years, including cutting back on the number of shopping trips and the number of brands they purchase.
“When people are making fewer choices about what they’re buying, it’s more important that you capture their share of mind,” he said, adding that brands need to resonate with consumers making split-second decisions when their children are crying or throwing tomatoes in the supermarket.
In addition to cutting back on the number of brands they purchase, there are signs that “fewer people who are committing their lives to going to a brewery every weekend as they age and they change their habits,” Watson said.
“We’re getting more people visiting breweries, but then, on average, they may be visiting breweries slightly less, which makes sense,” he added. “Anything that goes more mainstream, you’re going to have a less committed core.”
Meanwhile, millennial consumers are changing where they drink, shifting their occasions from traditional locations to so-called “third spaces,” experiential venues where drinking occurs but isn’t the main focus, such as concert venues, ax-throwing bars and other experienced-based locations.
Third spaces make up a quarter of drinking occasions for millennial consumers, Watson said, adding that he counts brewery taprooms and tasting rooms among third-space outlets.
“We’re going from a country where we used to go places specifically to drink, to now a country where you can drink everywhere you go, but fewer of them are specifically about drinking,” he said. “This creates real marketing challenges when the activity isn’t about drinking itself, it’s about this experience.”
For craft breweries, though, those experiences are often taking place within their own four walls and they’re capturing “beer tourists,” people who have traveled to a brewery within two hours of their home.
In 2019, 55 million people visited a brewery that is more than two hours from their home, up from 37 million in 2015, Watson said.
“We’re seeing a pretty strong growth in the number of brewery tourists,” he said. “Even if the average visits are going down a little bit, the total number of brewery tourists has steadily increased.”
The increased number of brewery tourists has led to increased at-the-brewery sales. Watson, citing preliminary figures, estimated that about 3.5 million barrels of beer was sold directly to consumers at brewery taprooms and tasting rooms in 2019, which Watson called “fairly strong” growth from the 3.1 million barrels of at-the-brewery sales in 2018.
“This is probably your best opportunity to influence somebody,” he said.