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John D. Varlaro Johnson & Wales University

John E. Gamble Texas A&M University–Corpus Christi

Locally produced or regional craft beers caused a seismic shift in the U.S. beer industry during the early 2010s with the gains of the small, regional newcomers coming at the expense of such well-known brands as Budweiser, Miller, Coors, and Bud Light. Craft breweries, which by definition sold fewer than 6 million barrels (bbls) per year, expanded rapidly with the deregulation of intrastate alcohol distribution and retail laws and a change in consumer preferences toward unique and high-quality beers. The growing popularity of craft beers allowed the total beer industry in the United States to increase by 6.7 percent annually between 2011 and 2016 to reach $39.5 billion. The production of U.S. craft breweries more than doubled from 11.5 million bbls per year to about 24.6 million bbls per year during that time. In addition, production by microbreweries and brewpubs accounted for 90 percent of craft brewer growth in 2016. 1

The industry had begun to show signs of a slowdown going into 2017, with Boston Beer Company, the second largest craft brewery in the United States and known for its Samuel Adams brand, experiencing a 4 percent sales decline in 2016 that erased two years of of growth. The annual revenues of Anheuser-Busch InBev SA, whose portfolio included global brands Budweiser, Corona, and Stella Artois and numerous international and local brands, remained relatively consistent from 2014 to 2016. However, the sales volume of Anheuser-Busch’s flagship brands and its newly acquired and international brands such as Corona, Goose Island, Shock Top, Beck’s, and St. Pauli Girl allowed it to control 45.8 percent of the U.S. market for beer in 2016. 2

Industry competition was increasing as grain price fluctuations affected cost structures and growing consolidation within the beer industry—led most notably by AB InBev’s acquisition of several craft breweries, Grupo Modelo, and its pending $104 billion acquisition of SABMiller—created a battle for market share. While the market for specialty beer was expected to gradually plateau by 2020, it appeared that the slowing growth had arrived by 2017. Nevertheless, craft breweries and microbreweries were expected to expand in number and in terms of market share as consumers sought out new pale ales, stouts, wheat beers, pilsners, and lagers with regional or local flairs.

The Beer Market
The total economic impact of the beer market was estimated to be 2.0 percent of the total U.S. GDP in 2016 when variables such as jobs within beer production, sales, and distribution were included. 3 Exhibit 1 presents annual beer production statistics for the United States between 2006 and 2016.

Year

Barrels Produced (in millions)*

2006

198

2007

200

2008

200

2009

197

2010

195

2011

193

2012

196

2013

192

2014

193

2015

191

2016

189

*Rounded to the nearest million. Source: Alcohol and Tobacco Tax and Trade Bureau website.

EXHIBIT 1

Barrels of Beer Produced in the United States, 2006–2016 (in millions)

Although U.S. production had declined since 2008, consumption was increasing elsewhere in the world, resulting in a forecasted global market of almost $700 billion in sales by 2020. 4 Global growth seemed to be fueled by the introduction of Page 262differing styles of beer to regions where consumers had not previously had access and the expansion of demographics not normally known for consuming beer. Thus, exported beer to both developed and developing regions helped drive future growth. As an example, China recently saw a number of domestic craft breweries producing beer as well as experimenting with locally and regionally known flavors, enticing the domestic palette with flavors such as green tea.

The Brewers Association, a trade association for brewers, suppliers, and others within the industry, designated a brewery as a craft brewer when output was less than 6 million barrels annually and the ownership was more than 75 percent independent of another non–craft beer producer or entity. The rapid increase in popularity for local beers allowed the number of U.S. brewers to reach almost 5,500 in 2016—nearly double the number in 2012. Of these breweries, 99 percent were identified as craft breweries with distribution ranging from local to national. While large global breweries occupied the top four positions among the largest U.S. breweries, five craft breweries were ranked among the top 10 largest U.S. brewers in 2015—see Exhibit 2 . Exhibit 3 shows the production volume of the 10 largest beer producers worldwide for 2014 and 2015. The number of craft breweries in each U.S. state are presented in Exhibit 4 .

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