Craft Beer Market Slowing Down, says World’s Largest Brewer

After being the lone bright spot in an otherwise sluggish industry for years, the craft beer market is starting to get stale.

The proliferation of new brands all competing for attention hearkens back to the dime-a-dozen startups from the web’s early days resulting in slowing sales growth and the once-thriving brewers are laying off workers. Saying that the sector has been decelerating for more than three months, the slowdown for the first time was acknowledged by the world’s biggest brewer, Budweiser maker Anheuer-Busch InBev NV on Friday.

The cooling market isn’t welcome news for a brewing sector that’s desperate for growth as few analysts expected the category’s supercharged growth to continue unabated and even as many craft brands are still thriving. AB InBev now expects U.S. industry volumes to decline this year versus previous expectations of an improvement and mass-market beers such as Budweiser and Coors Light have been suffering for years.

“There’s a natural point where it can’t grow anymore and this might be it. Consumers are overwhelmed by too much choice; the industry has been swamped. There’s too many brands, too many styles, not enough quality,” Anthony Bucalo, an analyst at HSBC, said.

Starting to feel the pain are some of the early pioneers of the craft-beer movement in the U.S. Citing a less predictable business environment, about 5 percent of its 1,200 employees were laid off this month by Stone Brewing, the 20-year-old Escondido, California-based brewer of Stone IPA. The number of workers at its Woodinville brewery in Washington state was announced to be halved about two week ago by Craft Brew Alliance Inc., owner of the more than 30-year-old Redhook Brewery.

The sheer number of beer makers competing to entice drinkers is partly responsible for the stress. According to the Brewers Association, a trade body for the American craft beer industry, the volume of beer produced is growing at less than half the 18 percent rate it boasted two years ago even though a thirst for more local and flavorsome beers swelled the number of breweries in the U.S. to a record 4,656 in June. According to the group, there are more breweries compared to the high-water mark of 1873 in the U.S. at the present moment.

AB InBev Chief Executive Officer Carlos Brito said on a call with analysts Friday that the abundance of choices could put off some consumers and there’s only so much shelf space for craft beers to share.

However, earlier this month, Kirin Holdings Co. was not put off from buying a minority stake in Brooklyn Brewery due to the slowdown.

The faster-growing craft segment has attracted larger players whose brands increasingly have fallen out of favor with consumers amid a stagnant beer market. Building a roster of small brewers over the past two years that includes Devils Backbone Brewing, Breckenridge Brewery and Four Peaks Brewing, AB InBev has been serially acquisitive.

AB InBev Chief Financial Officer Felipe Dutra said Friday on a call with reporters that those brands, which are more local than national craft-beer makers, are still growing strongly.

Boston Beer Co. reported third-quarter revenue that missed estimates this month. It is the maker of Samuel Adams lager often considered the grandfather of the modern craft beer movement.

“We see a very recent slowdown in the craft industry; it’s still too early to say whether there’s a trend,” Dutra said.

(Adapted from Bloomberg)

Advertisements


Categories: Economy & Finance

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: