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Monday, December 19, 2016

Bumps in the Road for Craft in 2016

As previously discussed here on more than one occasion, 2016 has been a tough year for craft beer. On the heels of several consecutive years of double-digit growth, there was a significant decline this year in the all-important retail channel.

Recent stats for grocery (in proprietary publications) show craft up just over 7 percent in dollars and 4 percent in volume for the year. The picture is worse for the 12 weeks through late November, which show dollar growth up less than 4 percent and volume under 2 percent.

There are reasons for everything, of course, and part of why craft is suffering in grocery is surely the brewery explosion. Local beer is more readily available to folks who didn't have easy access to it before. But that's only part of what's going on, I think.

Seasonal beers are another part of the story. Those beers are typically strong in retail and grocery stores between October and December. Not this year. Seasonals are down 8 percent for the year in multi channel retail, and down well over 9 percent in recent weeks.

The reality is that seasonals don't carry all that much weight these days. In our wacky craft beer world, "seasonal" is code for beer that is "old and tired." It's specialty beers consumers are chasing, beers that are rare and unique in some way. Tried and true seasonals are old hat.

Another pesky piece of the puzzle is imports, which have seen increased dollar and volume growth across all retail channels this year. That momentum accelerated throughout the year and reached double-digits in some retail channels over the last 90 days. Right where craft ought to be.

Could price differences be the reason for craft's decline and imports rise? Interesting idea. The average price per case (from a proprietary publication) of imports across a wide retail spectrum is about $30, compared to craft at about $36 per case.

I can't think of many mainstream imports I'd choose to buy instead of well-known crafts from places like Sierra Nevada and Deschutes. Even at a lower price point. I get that imports suggest more flavor and specialness than domestic macros. But most of the imports I see in grocery and convenience stores are seriously lacking.

If consumers really are turning to imports, maybe craft prices have gone too high. It's something I've wondered about since I saw six-pack prices at my local Fred Meyer pass through the $10 and $11 barriers. The notion of a $36 per case craft beer is pretty sketchy for non-sale beer. Seems low.

It's a pretty good bet that rising prices are a drag on craft growth. The gap between dollar and volume growth was fairly wide in recent years. Dollars stayed well ahead of volume because consumers accepted rising prices. But that's changing. The gap has narrowed, suggesting some (perhaps much) of current craft volume growth is fueled by discounting.

We face a lot of unknowns as we close out 2016 and move into the new year. That's as true of the beer industry as it is of the transition in Washington, D.C. Hang on.

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