Innovation Flows in Craft Beers

June 23, 2010

n the flat world of domestic beer sales, heady growth is the high life of just one innovative segment:

In the flat world of domestic beer sales, heady growth is the high life of just one innovative segment: craft beer. These premium brews often pair well with food, thanks to distinctive flavors born in ingredients such as coffees or fruits, and brewing processes that are relatively low volume (less than two million barrels annually per craft brewer) and that aim to build loyal followings rather than appeal to the masses.

Since the rise of craft brewers in the 1980s, their numbers approached 1,600 in 2009, reports The Brewers Association, noting that most Americans live within ten miles of one of these European-inspired tastemakers. Craft brewers tend to be involved in their communities, and often succeed in rallying regional support for their brands in bars, restaurants and retail stores.

That may be a pivotal edge for them in 2010, since a recent AlixPartners survey reported that 89% of consumers plan to spend the same or less on alcoholic drinks (beer, wine, spirits) this year, noted Reuters. Another relative plus: high unemployment among 21- to 35-year-old men has some "saving their consumption for a special occasion by splurging on craft-style beers," said Ad Age.

Of a U.S. beer market that exceeded 205 billion barrels in 2009, craft brewers accounted for about 9 billion barrels sold, BA figures showed. The association's market development committee acts as liaison between members and off-premise and on-premise buyers, and has a goal to help members attain 5% market share.

Their retail share is tinier, but their dollar sales trend is far more positive than the beer category overall.  For example, beer sales for the 52 weeks ended April 3, 2010 in U.S. food, drug, liquor and convenience stores and other select channels rose 1.3% to $26.8 billion according to Nielsen data. By contrast, dollar sales of craft beers and microbrews jumped by 14.0% to $1.6 billion in the latest 52 weeks in these same channels.

On a case volume basis (288-ounces), movement figures told a similar story for the same period. Beer cases slid by 0.8% to 1.4 billion cases during the past year in these same channels, while the velocity of craft beers and microbrews accelerated by 10.8% to 51.6 million barrels for the same 52-week period in the same outlets, noted Nielsen.

Despite the recession's pinch on consumer wallets, beer manufacturers managed to impose price hikes over the past year. According to Nielsen, the average case price for beer rose by 2.2% to $19.38 in the 52 weeks ended April 3, 2010 in these same channels. By contrast, the average case price for craft beers and microbrews bumped up by 2.9% to $31.06 over the same time period.

Of all the beer segments tracked by Nielsen, the craft beers/microbrews segment was in the Top 7 of lofty prices. Heading the list were: Belgium import, $40.64 per case; Ireland import, $33.29; Cider, $33.10; Asia import, $32.73; England import, $32.47; Flavored malt beverages, $31.16; and Craft beers/microbrews, $31.08.