Craft Brew Kicking Ass and Taking Names

Earlier this week, the Brewers Association released craft brewing sales figures for 2006.  Another year of steady growth with an increase of 11.7% across the category.  Within craft, microbreweries grew at a 17% clip.  That is absolutely amazing considering the beer category as a whole is more or less flat and maybe even shrinking.  Is this growth linked 100% to changing tastes with American consumers?  Or is it also the result of a healthy economy?  Could craft brews weather an economic downturn?  Has the "trade up" to richer, fuller flavor beer become the norm?

Now I am not an expert on consumer behavior within the beer industry, but I do analyze beer sales performance as part of my 9 to 5 job.  In my opinion, there has been a fundamental shift in consumer tastes that will continue even if the economy were to turn south (let's hope that doesn't happen though!).  It doesn't take an expert to notice that we now have hundreds of choices in soda flavors, isotonic beverages (Powerade and other sports drinks), bottled waters, teas, and even coffee varieties.  Americans have become accustomed to this variety and ability to try new flavors and even walk a little on the "wild side" with their culinary choices. 

In beer specifically, a new generation of legal drinking age consumers is entering the market with a plethora of beer, wine, and liquor brands on the shelf.  While value may drive their purchase choices 80% of the time, they are sure to experiment with some of the higher end offerings as well.  Who is more brand conscious and status aware within the legal drinking age community than people in their early twenties?  Drinking a high end craft brew shows sophistication and refinement among their peers.  Of course it helps that the beer tastes great and they actually enjoy the flavor!  As they then move into the work world and gain access to higher incomes, value may no longer drive their purchase decisions.  Why not treat yourself to a great beer after a hard week of work!

Craft brewing also has another advantage that will help protect current sales volumes: Innovation.  Pioneers at breweries across the US continue to create new styles, experiment with new ingredients, and push the limits of existing styles.  New beers excite consumers while also helping to build the reputation and brand value of a brewery. 

Craft brew is not completely recession proof or non-cyclical but these changes in consumer tastes will help retain a certain baseline sales volume.  Those breweries that are well established and have wide distribution would probably fare the best in a downturn.  Stores would want to make sure that every brand they stocked moved off shelves quickly and that would probably lead them to focus on the Sam Adams and Sierra Nevadas of the world.

With all of this growth within the craft category, what are the Big Three Brewers thinking?  Time to get in the game to try and capture the higher margins.  Can they effectively compete in this niche?  Check back for another article exploring their efforts and my thoughts on whether they will be successful.

Time to go try the 2007 Bigfoot I just bought at the store today.