U.S. beer companies are bracing for a shakeout after years of strong gains
Some of the country’s biggest craft brewers are struggling with falling sales, hurt by a glut of competitors crowding retail shelves and moves by megabrewers to scoop up some of their rivals.
“It is more competitive than it has ever been,” said Ken Grossman, founder and chief executive of Sierra Nevada Brewing Co., the No. 2 U.S. craft brewer by volume.
His company’s retail-store sales were off 7.5% this year as of July 16, according to Beer Marketer’s Insights. The brewer’s shipment volumes fell 6.9% in 2016—its first decline since Sierra Nevada was founded in 1980. Just two years ago, the Chico, Calif., company logged record sales after opening a second brewery in North Carolina.
After years of strong gains, American craft brewers are now bracing for a shakeout. Shipments are falling for many independent brewers stuck in the middle between local niche brands and competitors that were bought by heavyweights such as Anheuser-Busch InBev BUD 0.22% and Molson Coors.
Besides Sierra Nevada, those losing ground include Sam Adams maker Boston Beer Co. , the biggest independent brewer, as well as smaller producers such as F.X. Matt Brewing Co., which brews Saranac in upstate New York, and Abita Brewing Co. in Louisiana, according to Beer Marketer’s Insights.
Benj Steinman, president of the tracking firm, said many craft brewers trying to push into regional and national markets are finding they hit a wall once they surpass 100,000 barrels. Some have stretched themselves too thin and lost ground in their home markets, while others took on too much debt to expand brewing capacity, brewers said. As they expand, they also lose the cachet of being a local brand—something many consumers seek out.
“They used to say a rising tide lifts all boats. And it is definitely not that now,” Mr. Steinman said. His firm estimates that shipment volumes declined for 16 of the top 36 craft-style U.S. brewers last year.
The troubles have continued this year. Retail-store sales of craft-style beers—from brewers big and small—fell $143 million to $2.3 billion in the first half of 2017, according to data from Nielsen. Craft beer shipments grew for years in the double digits, even as overall beer sales fell. But craft demand began to decelerate in 2016.
“We really had to put our big-boy underpants on and up our game,” said Sam Calagione, founder and CEO of Dogfish Head Craft Brewery in Milton, Del. The company’s volumes were flat in 2016, but have grown 27% so far this year, he said. “Is it too crowded, the market? We’re almost at the pace of two new breweries a day. That pace isn’t sustainable.”
There were 5,562 total breweries in the U.S. as of June 30, up roughly 900 from the previous June, according to the Brewers Association.
Shipments are still rising for many of those craft brewers that sold themselves to industry heavyweights, including Lagunitas, which was bought by Heineken in May; Goose Island, owned by AB InBev since 2011; and Ballast Point, which was purchased by Constellation Brands Inc. for $1 billion in 2015. Those brands benefit from their parent companies’ distribution networks, capital and marketing.
‘Local is still growing, and the larger ones are having problems’
—Ryan Sentz, co-founder of Funky Buddha Brewery