Craft-Beer Industry at a Crossroads in Face of Market Saturation
George Guidoni
The breathtaking growth of the craft-beer industry has been one of the most celebrated business success stories in Canada, and the U.S. for that matter, for much of the first-quarter of the 21st Century.
With double-digit growth rates in sales, volumes and market shares, North American craft brewers have proved to be a highly creative and enterprising bunch of entrepreneurial upstarts who, among other things, have elevated the importance of packaging excellence as a key marketing competence to unprecedented levels—especially on the labeling side of the business.
By introducing a multitude of exciting, offbeat new taste profiles and eye-catching packaging formats, the industry has enjoyed a charmed existence over the years in a generally flat overall beer market by taking away marker share from established traditional mass brewers at an astounding pace—creating a fairly significant economic growth engine in its own right on both sides of the Canada-U.S. border.
Sadly, it appears that this Golden Age of craft brewing is coming to its inevitable conclusion, as the combination of market saturation, changing consumer preferences and demographics, and fierce competition from many other new beverage products being introduced into the market are starting to the shine off what was once a glorious growth opportunity not so long ago.
Ironically, this change in industry fortunes is in many ways a case of getting a taste of its own medicine, whereby craft brewers are starting to lose their hard-gained market share to a new crop of craft spirit producers using many of the same tricks of the trade—namely packaging and labeling—that once drove the craft-beer business to its lofty heights.
This new reality is vividly underscored in a new market report recently put out by PMMI, The Association for Packaging and Processing Technologies.
“While the craft-beer and craft-spirits industries may seem very different and are often in direct competition with one another for consumers’ attention, they actually share more similarities than differences and in many ways their fates are inexorably intertwined,” the PMMI study, titled Craft Beer and Spirits: Success through Packaging, observes.
“One key differentiator between the two industries at the moment is the overall momentum of sales: while craft beer has been challenged in recent years and is struggling to find avenues for growth, craft spirits are riding a wave of popularity propelling the industry to new heights.”
In the U.S., sales of craft beer product recorded a two-percent decline in 2023, PPMI points out, which was actually a comparatively bright spot in the context of a three per cent decline in total beer sales south of the border.
“This does not come as a surprise to the industry,” the report notes, “with wholesalers telegraphing declining sales numbers in early 2023, when they predicted a 15-to-20 per cent of drop in overall orders.”
In stark contrast, overall sales of craft spirits surged by 10.4 per cent in 2022, according to PMMI, while the number of craft distilleries climbed to over 2,500. While that is still some way off the estimated 9,456 craft brewers operating in the U.S. at the time this report was conducted, the near-term outlook definitely seems stacked in favor of the craft-spirit producers.
“Buoyed by the ascendant spirit-based, pre-mixed cocktail segment and harnessing a shift in consumer preference away from beer and malt-based drinks, craft spirits are expected to continue healthy growth for the next several years, with sustained double-digit CAGR (Compound Annual Growth Rate) predicted,” the report states.
“A key achievement for the craft spirit industry has been successfully taking share within the larger alcohol category away from craft-beer—a feat that the craft beer industry has not quite figured out how to reciprocate.”
Like it or not, that’s the new reality, and as many craft beer makers are belatedly coming to accept, reality bites.
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