Website design By BotEap.comCraft beer continues to grow as a segment of the total brewing industry. Like wineries, there is a craft brewery in all 50 states. Craft beer brewing, as a category in the alcoholic beverage industry, has only been around for about four decades; however, there is no specific event to outline an official genesis of the industry. In 1859, the Anchor Brewing Company in San Francisco began its brewing operations. Unfortunately, until 1965 the company had a sordid history of financial failure brewing fine beer. However, it has had a stellar record of success since 1965 and is now recognized as America’s premier craft brewery.

Website design By BotEap.comDespite the growth of breweries, the craft beer industry is experiencing significant problems. For example: constantly changing consumer trends; rapid expansion of the industry; growth in product offering (this includes new products such as hard cider); distribution restrictions; response to market trends; and imports. However, the new tax law came into effect in December and should free up capital to finance expansion and marketing programs without incurring debt. “CMBTRA (Artisan Beverage Modernization and Tax Reform Act of 2017) as part of the new tax bill is cutting the excise tax for the country’s small breweries in half,” reports Bart Watson, chief economist of the Association of Brewers. That’s a good chunk of capital for reinvestment. “There are also benefits for wine / spirits producers.”

Website design By BotEap.comPer capita beer consumption in the US has been stable for about a decade. However, and this is an important point, “craft beer” appears to have risen approximately 5% in 2017. The main concern in the “here and now” is the loss in shipments that occurred in 2017 for the industry as a whole. . Beer Institute economist Michael Uhrich notes that “the 2.2 percent decrease in shipments (through November 2017) is the largest percentage decrease in the annual volume of domestic beer shipments since 1954.” This begs the question: Does this indicate changes in the industry? Beer sales are reported by barrels shipped; Figures for 2017 indicate that 3.8 million fewer barrels were shipped. In 2017, American brewers produced 170 million barrels; Each barrel represents 248 glasses of beer. A beer keg holds 30 gallons versus 60 gallon kegs of wine. On the other hand, the artisan spirits industry registered a 4% increase and wine is expected to report a 2% increase in production.

Website design By BotEap.comBart Watson attributes the decline in domestic shipments in 2017 to consumers exchanging their domestic lager and light lager brand preferences for imported brands. Also, problems with marketing / branding, distribution, demographic changes, etc. they are also affecting the industry. “I expect this trend to continue in the medium term,” Watson writes. “In addition, the growth of wine and spirits in market penetration are two other reasons.” Craft brewers are leading the way in tackling new niches like style and marketing.

Website design By BotEap.comAmerican households that consume wine, beer and spirits (26 percent of households and 55 percent of adult beverage sales dollars) now outnumber those that consume just one or two of them, according to Nielsen figures. Homescan. A Harris poll conducted in January. 16-18, 2017 found that 39 percent go for beer first, while 29 percent go for wine, 27 for spirits, and 4 percent for hard cider. That’s more for the 21 percent wine that they said was their choice a decade ago, but for the 45 percent beer and 32 percent for spirits. This reflects a shift towards wine as millennials age.

Website design By BotEap.comYounger consumers don’t drink wine as often as older consumers, according to Nielsen Scarborough and the Wine Market Council.

Website design By BotEap.comIt is important to realize that the craft beer industry is producing more than 400 styles of beer; many are aimed at the preferences of regional drinkers. A demographic of craft beer consumers is:

Website design By BotEap.com44% have a household income of $ 100,000 + (90% of the household includes 2 or more people)

Website design By BotEap.com80% of craft beer drinkers are white

Website design By BotEap.com57% of the market is male between 25 and 54 years old

Website design By BotEap.com22% of the market is women between 25 and 54 years old.

Website design By BotEap.com50% have college and graduate degrees

Website design By BotEap.com81% have a college, university, or graduate degree

Website design By BotEap.com55% of the craft beer markets are on the West Coast and the Atlantic.

Website design By BotEap.comOne of the many things that have fueled the growth and interest in craft beer is the hobby of home brewing. My first experience of home brewing was in 1976 when I first tasted a home brew, it was exciting. Even in the wine sector, there is a cottage industry of people who produce some of their own wines. This includes people who buy vines and have their own mini vineyard.

Website design By BotEap.comQuite simply, beer and wine have had the advantage of being nurtured as a small batch hobby. This has allowed people to experiment with new beverage products. It is interesting to note that Fritz Maytag, who saved Anchor Brewing from one more bankruptcy in 1965, also entered the field of artisanal distillation in 1993 with Anchor Distillery. Anchor Distillery is now recognized as America’s First Artisan Distillery.

Website design By BotEap.comCraft Distillation will not be a threat to brewers started by hobbyist distillers! Corie Brown writes for “Entrepreneur Magazine” makes an important point: “Distilling homemade stills is still illegal, a law that seems to be set in stone as much by fear of exploding stills and accidental poisonings as by aversion to demonic spirits.” “So the movement has grown much more slowly. There are no firm figures on the size or value of the craft spirits sector.”

Website design By BotEap.comAs of 2017, there were 8,800 (licensed) breweries in the US; 1,100 in California – many are not fully operational, however. A more realistic number is closer to 6,100 assets. On average there are about 150 craft brewers who lock their doors. (That’s a lower percentage failure rate than restaurants.) Of all the breweries, approximately 2,000 are considered breweries. Still, craft breweries don’t compare numerically to the nearly 10,000 wineries in the United States. But the only thing that beer and wine have in common; California accounts for about 50% of beer and wine companies.

Website design By BotEap.comWhat are the attributes of beer that are driving the craft brewing industry?

Website design By BotEap.comBeer is refreshing

Website design By BotEap.comThere may be some different scents

Website design By BotEap.comNumerous beer profiles / styles

Website design By BotEap.comAffordability

Website design By BotEap.comFlavor options can be easily achieved

Website design By BotEap.comProduct accessibility

Website design By BotEap.comUnique to craft beer is the need to understand customer and market demographics. Interestingly, new styles of beer can appear from one brewer in a relatively short time, whether it’s a seasonal beer, event-oriented, or shifting consumer preferences.

Website design By BotEap.comThe craft beer brand is not unique to anyone in the spirits industry, but it is intense due to the immediacy of the market. Branding is dictated by market (s), customer base, budgets, competition, dealer capabilities, interstate laws, and long-term strategies.

Website design By BotEap.comIn conversations with more than 20 craft breweries, all affirm that local tasting rooms and sales are essential to establish the brand and the credibility of the product; it is important to create an experience around the artisan product. Coronado Brewing Company in Coronado, CA has been effective in building a perceived experience between the consumer and the company.

Website design By BotEap.comDistribution in the alcoholic beverage industry is plagued with problems in building a customer relationship. At the end of the prohibition (in December 1933), the three-tier distribution system began; basically, producers discount the product to their sole distributor, who then sells that product to the retailer. However, over time, each state has refined its approach to beer distribution. California is one of those states that allow self-distribution and brewpubs. Again, each state has a slightly different approach to distribution regulations.

Website design By BotEap.comThe problem for a small brewery, if they find that the distributors are a better fit for their needs, the distributors are only interested in selling craft beers that can produce volume. Furthermore, this system means that a small producer is at the mercy of a limited number (due to consolidation) of distributors, even if they may also be working with a competitor.

Website design By BotEap.comIn conversations with consumers at a large brewery in the Sacramento area, I ask them how many craft breweries they had visited in the past year. The average was 6. The next question was, do you have a favorite? The answer surprised me because yes, they have favorites, but not because of the brand but because of the quality of the beer. Price was not the consideration, quality was the determining factor. Unsurprisingly, bad beer is a brand’s death sentence.

Website design By BotEap.comLooking ahead, the craft beer industry faces four major challenges:

Website design By BotEap.com· Greatness. Aggregators that generate market share (control) by eating up independent producers will put pressure on small producers who do not have access to capital or distribution.

Website design By BotEap.com· Over time, the prestige of “craft”, “estate” or “Select” may decrease and this will affect many existing brands.

Website design By BotEap.comThe cost of distribution will affect craft beer brands, customer exposure, margins, and business value; whichever channel is used.

Website design By BotEap.comAbility to recognize market changes and respond effectively. There are several prominent universities that have expanded their programs to address the craft beer market. UC Davis and Sonoma State in Rohnert Park, CA have recognized the importance of the beer category and have classes in beer fermentation, marketing and ingredients; all to help the industry anticipate and respond to change. They also offer outstanding research on all things beer.

Website design By BotEap.comLike all industries, they experience business cycles. Success depends on finances, product and courier, responsive to competition and trends, and a good deal of luck. The question remains: Is the craft beer industry overheated and heading for a retraction? Probably the best answer. Craft beer brewing is a business and therefore must be managed within all accepted disciplines pertaining to a business: finance, marketing, operations, legal, sales, distribution, and internal controls.

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