The number of craft breweries continues to grow rapidly, while the growth of the craft sector is slowing. Which means something has to give.
Jason Notte of Marketwatch.com predicts that 2017 will be the year of the turf war; there will be less mergers-and-acquisitions activity and more competition among breweries to claim shelf space.
This could be the year that craft breweries lay off workers and make other cuts in an effort to trim costs. Industry leader Boston Beer Company has been hit hard by shrinking sales of Samuel Adams Boston Lager; the company’s shares have tumbled 50 percent from their 2015 high.
We’re also likely to see more breweries bring in private-equity firms. Already this year, Victory Brewing Company and Southern Tier Brewing Company have formed such partnerships with such firms.
And we’re likely to see smaller brewers focus on taproom traffic and food sales and avoid the battle to get their products on store shelves and on bar and restaurant menus.
Notte believes that Oskar Blues is the brewery to watch because it has been the craft sector’s trend-setter for years. The brewery was the first to can its beers and the first to build a second facility in the eastern United States. Two years ago, it kicked off the private-equity trend when it sold a majority interest to Fireman Capital. It then used some of that money to acquire craft breweries in Michigan, Florida, and Texas; the latter two states are considered underserved beer markets. Oskar Blues also borrowed from the big national brewers’ playbook. It rolled out more mainstream beers, sponsored sporting events, and put an emphasis on brand recognition.
Notte concludes, “Whether drinkers benefit from [this] turf war or become victims of it remains to be seen.”
In the last couple of months, MarketWatch.com’s Jason Notte has seen disquieting trends in the craft beer industry:
Notte doesn’t think these developments mean the craft beer bubble has burst. He writes:
“If anything, it all begrudgingly recognizes that the players in all tiers of the beer industry have found themselves in the same predicament: Running a business in an environment where constant growth isn’t a given and where big decisions are often followed by unintended fallout.”