Although we continued to see brewery openings throughout the land, the market has become overcrowded and stressed. Everyone is trying to figure out how to stay relevant in a saturated market.
The strategy they've come up with is brewing beers that are somehow unique...the idea being to keep consumers interested and engaged. That theme will surely carry on in 2020, with breweries chasing wild approaches and recipes, hoping something will stick, even if only briefly.
Beer quality was and is a casualty. I'm amazed at how many poorly executed beers I tasted in 2019. To me, that's the consequence of brewers being more focused on experimental recipes than quality. Plenty of those beers should have been sewered. How embarrassing.
Shifting Tastes
Demographics and lifestyle changes have altered the beer and alcoholic beverage landscape before. We watched it happening again in 2019, as some of the people who drove the growth of craft beer in recent years started looking for lighter choices, craft beer not generally being a light choice.
The most ominous sign of that shift may be White Claw and other hard seltzers. The volume growth of this stuff was off-the-hook last year and it will probably continue on that path. It isn't just millennials guzzling seltzer, though they were and surely are the primary marks for this junk.
Craft brewers responded to shifting tastes by offering lower ABV beers, even their own seltzers. On my travels through the year, I regularly came across lower ABV offerings. Some were memorable, some not. But the fact that they existed was a revelation.
The rise of craft lagers was surely related to the shift, though there may be more at work here. There are some fine lagers being produced by craft brewers, as if to prove that you can make a light-colored beer with aroma, flavor and character. A great trend and one that will likely continue.
Of course, lagers won't get craft beer out of the funk it's currently in. Why? Because those beers are more likely to be purchased and consumed by hardcore beer fans than by mainstream consumers who don't know or understand why these beers are special.
If craft lagers ever get as popular as IPAs, big beer will saturate the mainstream market (grocery and c-stores) with well-made industrial lagers selling for less than what good craft lagers sell for. They've already done that with most craft styles and would surely do it with lagers.
Stratification and Danger
One of the more serious developments I see in craft beer is the stratification that's occurring. It involves smaller, typically newer brewers and larger, typically older ones, as well as the crafty stuff produced by big beer. The picture continued to morph last year, and not for the better.
The little guys, of course, are catering primarily to the demand for local beer in pubs, taprooms and beer bars. They account for most of the growth that's happening across the industry, partially driven by the unending number of new openings. Beer fans love new breweries.
That trend led to saturation, hypercompetition (see above) and closures...we saw a lot of them in 2019. Closures aren't always related strictly to beer quality, but I expect we'll see more of them in the coming year, as poorly run or highly leveraged operations are forced out.
Larger (mostly regional) craft brewers can't really compete with the little guys in the local channel. They aren't as nimble or creative. They rose to dominant positions by making a few basic styles well and packaging them for retail distribution. That strategy is becoming increasingly problematic.
What's happening is that the regional breweries are being gradually squeezed out of that space by big beer, which has acquired enough craft breweries to achieve a dominant position in that channel. It's a tough time to be a regional brewer, which is partly why more of them sold in 2019.
Big names, like Colorado's New Belgium and Oregon's Craft Brew Alliance sold, the latter for a price that was significantly below what shareholders hoped. Even moderately-sized Laurelwood sold out. Instability in the market is the primary reason in each case.
This is a worrisome situation. Regional craft breweries formed the backbone of the industry for most of the last 30 years. They are now being assaulted from above and below, the result being declining sales and financial catastrophe. Big beer is the big winner.
I don't expect this situation to moderate much in 2020. We'll see more closures on the small brewery front and further financial distress among larger craft breweries, probably leading to more consolidation and additional power for big beer. Not ideal.
My Year
For the record, I'm glad 2019 is in the books. I gained a new knee (part of one, actually), but also lost a beloved dog. I'm not yet recovered from either of those events, but I'm hoping the year ahead is a good one. Hope is what keeps us going, I suppose.
Happy New Year!
Well done, Pete.
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