Breweries rebrand amid rising competition.
Many sectors would be happy with a 6% annual increase in sales.
That is the growth in volume of craft beer nationally in 2016. But for brewers, the number signals the probable end of a decade of annual double-digit growth, and the demise of a gilded age for craft beer.
Brewers blame the slowdown on the influx of new players, which have saturated the market.
Multinationals, such as Anheuser-Busch and MillerCoors, have bought several craft brewers in the Pacific Northwest over the past few years, including a couple of well-known names in Oregon. An explosion of small start-ups has also flooded the market.
A sector that was once known for small to medium local businesses focused on producing unique-tasting, well-crafted beers on a small scale has gone mainstream.
Today’s market conditions have left independent craft brewers searching for ways to maintain their identity in a sector increasingly dominated by large corporations.
“It is definitely a new era for the industry,” says Nikos Ridge, president and CEO of Eugene-based Ninkasi Brewing Company.
“Craft brewing has hit the mainstream.” (Ridge is stepping down as CEO this month, and COO Cheryl Collins is taking over as CEO.) Ridge sees the entry of the large breweries as the biggest threat because of their market power.
In Oregon two recent buyouts of craft breweries by multinational corporations stand out: Anheuser-Busch’s purchase of Bend’s 10 Barrel Brewing in 2014 and the sale of Hop Valley Brewing Company of Eugene to MillerCoors in 2016.
Missouri-based Anheuser-Busch — a division of Anheuser-Busch InBev, the maker of Budweiser and Bud Light, and the world’s largest brewing company — has bought several U.S. craft brewers since 2011.
Craft beer represents the fastest-growing segment in a market where growth in domestic beer sales overall has been declining for the past several years.
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“Small and independent brewers are operating in a new brewing reality still filled with opportunity, but within a much more competitive landscape,” says Bart Watson, chief economist of the Brewers Association, in a recent release.
The Colorado-based trade group, which represents small, independent craft brewers, says the large global brewers’ acquisitions of craft-beer makers “has been a catalyst for slower growth for small and independent brewers and endangered consumer access to certain brands.”
Ben Edmunds, brewmaster at Portland-based Breakside Brewery, says concern is growing among craft brewers that they will not see double-digit growth again for several years.
Brewers are wondering how they can compete with the large companies, which can more easily leverage their supply-chain relationships, sell kegs at lower prices and have unlimited marketing budgets, he says.
“There is limited shelf space. People feel that if they don’t have a [strong] brand, it will be lost quickly and won’t be restocked,” says Edmunds.
The hypercompetitive market conditions are forcing craft brewers to rethink their branding and marketing strategies. For some, this means going back to basics and focusing on their roots as craft-beer producers.
“We are going back to fundamentals,” says Ridge of Ninkasi Brewing Company. This includes focusing on producing quality flavors of beer and maintaining a local brand in the Pacific Northwest,where the company has good distribution, he says.
“Our goal is to better engage with retail partners,” says Ridge. He adds the brewery has no plans to open a brewpub, which some competitors have done to improve access to customers. “We are not in the restaurant business.”
Jim Prinzing, CEO of Pelican Brewing Company in Pacific City, says the explosion of producers has put pressure on brewers to be new and different.
“The challenge is larger because brewers are doing things that seem gimmicky in an attempt to get market share,” says Prinzing. Pelican’s founding brewmaster, Darron Welch, says he is focused on producing beers that have a consistent flavor and meet quality standards.
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In a competitive environment where brewers are under pressure to produce volume, it is important to explore “the integrity of the product so it doesn’t change based on how much you have to ship. It is an easy trap to fall into,” says Welch.
Some brewmasters are concerned about what they claim is a decline in quality of beer as a result of the sprouting up of new beer producers that lack skills. The number of craft breweries nationally jumped to 5,234 in 2016, almost double the number in 2010, according to new figures from the Brewers Association.
“I am concerned that there has been a decline in quality. Some startups don’t have knowledge and experience,” says Prinzing.
The shifting market conditions will put continuing pressure on craft brewers to produce a product that is the next new thing. But the new era for the industry is also providing an opportunity for beer makers to refocus their efforts on the craft of brewing.
“We focus on our identity as a brewery. We are not trying to be something we are not or have a style that is not true to our brewing roots,” says Prinzing.