The craft beer industry is experiencing a downturn for several reasons, leading to the closure of breweries. Here are some opinions as to why craft beer consumption is declining. Of course, opinions are like preferences, everyone has at least one. Here are some key factors contributing to this situation:
- Declining Beer Consumption: Adult beer consumption has significantly decreased, dropping from 32.3 gallons per year in 1990 to 22.6 gallons in 2023. This decline in overall beer consumption affects all segments of the beer market, including craft breweries. We recognize that trends and times change. Relative to change, it is hard to find hula hoops nowadays.
- Production Dip: In 2023, there was a 1% decrease in overall beer production. This stagnation indicates that the rapid growth in previous years may have plateaued, leading to challenges for many breweries. According to the Brewers Association, the overall beer market shrunk by about 5.3% in 2023.
- Market Saturation: The craft beer market has become increasingly saturated, with many new breweries entering the market. This competition makes it difficult for existing breweries to maintain market share and profitability.
- Economic Factors: Rising interest rates have made it harder for breweries to secure financing. Translation: It takes money to upgrade equipment and facilities to keep up with market and product changes. Although there are predictions that interest rates may decrease, the current economic climate has put pressure on many craft breweries (large and small).
- Changing Consumer Preferences: There has been a shift in consumer preferences towards other alcoholic beverages, such as hard seltzers and ready-to-drink cocktails, which has impacted the demand for craft beer. Additionally, non-alcoholic beer brands are gaining acceptance.
- Brewery Closures: Specific examples of closures include:
- Tied House in Lititz, Pennsylvania, which closed abruptly in July 2024.
- Necromancer Brewing in Pittsburgh, which permanently closed in June 2024.
- Anchor Steam was a long-time staple in the Bay Area, and it closed.
- A total of sixteen breweries have closed in New Jersey since 2023, highlighting the struggles faced by local craft breweries.
These factors combined create a challenging environment for the craft beer industry, leading to a notable number of closures and a general downturn in the market.
In times of rapid industry growth, a few missteps at a brewery might not be fatal, but in times of downturns, errors in business decisions will become obvious and often too late to fix.
A famous line from a movie with a baseball theme was: Build it and they will come. Craft beer, within the total beer sector, cannot produce more beer and think they/customers will come in the doors or save the industry.
Breweries are showing signs of being more focused on their Tap Room venue as a point of contact with the customer and a way to focus on new products. A customer in a tap room is there for only one purpose: a craft beer. To take full advantage of a tap room there should be more to offer a consumer for their effort to drive to a brewery just for a craft beer. This point assumes a brewery needs to increase consistent visitors to the tap room. Unfortunately, the craft beer marketplace is impacted by regional and brand considerations. Winter in Reno is different than winter in Sacramento, entertainment on the tap room patio does not work during winters in Reno.
The brewery should be about building the brand. In the Craft Beer market sector brand starts with quality, customer satisfaction, the destination, community, value of experience, and entertainment.
Loyalty programs do not need to be expensive, however, if properly executed, such programs will enhance the feel of a tap room at a brewery by fostering a feeling of community, enforcing the perceived value of visiting a tap room and improving the perception of quality.
The one bright spot for breweries in the past year has been increased revenues from the tap room. Explore the options, a loyalty program will help build a brewery’s brand.
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