If you spent even part of 2017 in line for hazy IPA or waiting for the nation’s larger brewers to make their next acquisitions, you had time to ponder what this year is going to add up to for the beer industry.
We can’t know exactly what 2018 will look like for the beer business, but 2017 gave us a few clues. Sales of U.S. light lager continue to plummet even as its biggest producers spar over their pieces of a shrinking pie. The Brewers Association notes that this year will likely end with upwards of 6,000 craft breweries throughout the United States, even as sales growth slows and the trade organization gets mired down in squabbles over the definition of “independent” and makes some sort of joke/belabored point about wanting to “Take Craft Back.”
There’s still a lot of positive momentum in the craft segment, but that doesn’t mean it’s all good news. Boston Beer Co., craft beer’s largest entity under the Brewers Association’s definition of a craft brewer, had its share rating downgraded from “neutral” to “underperform” by Credit Suisse and from “neutral” to “sell” by Goldman Sachs. Credit Suisse cited the poor performance of the brand’s core Samuel Adams beer brands, as Credit Suisse analyst Laurent Grandet wrote in a note to clients, “although founder Jim Koch seems determined to turn the business around, we think the likelihood of a takeout goes higher if Samuel Adams rejuvenation efforts ultimately fail next year.” Boston Beer’s share prices are down 10%, with its overall sales projected to drop 15% this year and 5% in 2018.
That makes 2018 a make-or-break year for Boston Beer. As writer Bryan Roth warns, Boston Beer Co.’s actual beer production has fallen from 88.9% of its total output in 2010 to just 57.2% last year. Unless the Brewers Association changes the segment of its craft brewer definition that demands brewers produce a majority of their alcohol volume in beer, Boston Beer Co. could be out of the craft club by next year. Despite upgrading tasting facilities and finally committing to a New England-style IPA, all of the above may be a bit too late.
We say that because Boston Beer’s smaller competitors just keep coming, while the company’s larger foes are just getting started. Back in May, Anheuser-Busch InBev announced plans to spend $500 million on U.S. brewing, production and distribution this year alone and $2 billion through 2020. As the company points out, it has invested $2.5 billion here since 2011. The brewery announced plans to spend $82 million to beef up its distribution chain nationwide and build new distribution centers in Los Angeles and Columbus, Ohio; $10 million upgrade to its Baldwinsville, New York, brewery to start producing Teavana ready-to-drink teas in conjunction with Starbucks; $15 million to help its Fairfield, California, brewery make Space Dust IPA for the Elysian brand ABI purchased in 2015; $28 million to help its Fort Collins, Colorado, brewery dry-hop ales for other craft beer acquisitions; and $11 million to help its Merrimack, New Hampshire, facility bulk up craft offerings on the East Coast.
After laying off around 400 members of ABI’s The High End craft division earlier this year, High End president Felipe Szpigel told Forbes’ Tara Nurin that ABI may be done acquiring breweries. When he says “our focus is going to be organic,” however, he means that Anheuser-Busch InBev is adopting a strategy akin to that of other large brewers. Constellation Brands, which just acquired Florida-based brewer Funky Buddha this year (as well as a 10% stake in Canadian marijuana company Canopy Growth Corp.), just opened a tasting room in Virginia for its San Diego-based Ballast Point brewery and will be entering its first full year of production at its new Virginia brewing facility in 2018.
Heineken-owned Lagunitas will be entering its first year at its third brewery in Azusa, California, Green Flash will start 2018 with a new brewery (its third) in Lincoln, Nebraska, and Deschutes will start construction on its brewing facility in Roanoke, Virginia. Like Oskar Blues, Sierra Nevada, Stone, Brooklyn and others before them, they’ll expand their regional (and, in some cases, global) footprints and fill in spots on an ever-more-crowded map.
And they’ll have company. Scotland’s BrewDog just opened its first U.S. brewery in Columbus, Ohio, while iconic Diageo-owned Irish brewer Guinness will start the first full year at its Open Gate Brewery and Barrel House in Maryland. Everyone will be staking off their bit of turf, and even the big guys will be doing it for the same reason that Massachusetts brewer Tree House Brewing Co. did when it opened its $7.7 million brewery expansion earlier this year—because taproom sales are beer’s last frontier.
As shelves and bar taps are claimed and the biggest players box out space for their brands while expanding nationwide production, sales at brewery tasting rooms, taprooms and docks are crucial to brewery growth and survival. Yes, the folks waiting in line for cases of hazy IPA help, but so do those who take brewery tours, have meals at your pub, watch bands at your music venue, watch movies on your lawn or ride bikes in your races.
Though players like MillerCoors, Constellation Brands and Heineken’s Lagunitas brand may not be finished with their acquisitions, 2018 will be less about acquiring new brands for the portfolio and more about saturating markets. When conditions in retail and restaurants make it difficult to bring beer to the masses, brewers will bring the masses to the beer.
Jason Notte is a freelance writer based in Portland, Ore. His writing has appeared in The New York Times, The Huffington Post and Esquire. Notte received a bachelor’s degree in journalism from the S.I. Newhouse School of Public Communications at Syracuse University in 1998. Follow him on Twitter @Notteham.
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