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Friday, December 22, 2017

Trends and Bends in the Year that Was

As is the case every year, we're beginning to see the usual end-of-year reports summarizing what happened. It was another interesting year in beer. There were some positive and problematic developments. Below are some of the most significant ones in my view.

Craft Cans
I first mentioned the benefits of cans here several years ago. At the time, cans represented a fraction of what was showing up on store shelves. Six-packs of 12 oz bottles and 22 oz bombers dominated the retail market. That's changing.

What started as a trickle became a tsunami in 2017, as more and more craft brewers adopted aluminum cans. Bombers, once the chosen packaging of small craft brewers, are the biggest losers in this transition. Their shelf presence is in decline. Even 12 oz bottles are taking a hit.

While it was once difficult and costly to can beer, mobile canning systems and generic cans that can be labeled on site are making canned beer economically attractive. Brewers see that cans are less expensive to ship, less susceptible to breakage and better at protecting beer than glass.

Of course, what's good for brewers isn't always accepted by consumers. Cans, once the dominion of crap macro beer, for decades carried a negative stigma. That's changed, in large part because cans are now filled with quality product. It's also true that the cans themselves are better, not to mention lighter, less bulky and easier to transport than bottles. Consumers are seeing the light.

The growing popularity of cans will likely continue, arguably a good thing. That doesn't mean bottles are going away entirely. I suspect 12 oz bottles will be around for quite some time and some beer styles are a better fit for large format bottles due to conditioning and cellaring considerations.

Local Beer
The Brewers Association just reported that there are now more than 6,000 breweries in the United States, some 98 percent of them small and independent. More consumers have access to locally made beer than at any time in our history. Period.

While that's been good for consumers and small breweries, it has not been good news for large craft brewers. National and regional stats through the year suggest that many, though certainly not all, large craft breweries lost sales volume in 2017.

Here in Oregon, we see that in dramatic losses by Deschutes, Portland Brewing and Bridgeport (see Jeff Alworth's recent post on this subject). If we could see the numbers for Widmer, they would depict a similar story of significant decline with no end in sight.

Why are large craft brewers having a tough time? It's quite simple, I think. Not that long ago, beer consumers bought the bulk of their beer in grocery stores. We just didn't have great access to quality, local beer. It wasn't widely sold in stores and there weren't that many breweries.

Things have flipped. With so many more breweries, local beer is far more accessible. That's not just draft beer. Thanks to better packaging options, like cans, local beer is now available in more places, even stores. Given the choice, consumers seem to prefer buying local. That has hurt many large craft brewers.

This trend is likely to continue for the time being. But big beer is working to push all independent craft beer out of mainstream retail channels. If that happens, consumers who want local beer will be forced to buy it directly from breweries or at taprooms and specialty shops.

Price Escalation
Every year I see reports suggesting that craft beer prices have been relatively stable. Every year my personal travels tell me prices are rising, virtually across the board. I suspect this has a lot to do with consumers being willing to pay more for perceived quality. But there's clearly more involved.

The other night, I saw an $18 four-pack (16 oz cans) for the first time. This was a hazy IPA. Nearby, single cans of similar beers were available for more than $7 each. Various barrel-aged and mixed fermentation beers are regularly priced at $25 and above. The $12 six-pack is a regular thing.

Part of me wonders if the escalation, particularly with cans, is somehow connected to the raging fad that is hazy IPA. Since they started showing up en masse, hazies have been expensive. But seeing an $18 four-pack was shocking. Can a $20 four-pack be far behind? Shhhh!

Anyway, there's clearly an escalation happening. Consumers are dumb enough to pay crazy money for beer; breweries and retailers are more than happy to take advantage. The higher profit per piece shelved and sold is nice for everyone...except dumb consumers.

Will this trend continue? Craft beer has achieved cult of personality status in recent years. It occupies cultural space once owned by music and film. That won't last forever. Eventually, consumers are going to reject exorbitant prices. Eventually, the haze craze will moderate or go away. Eventually.

Event Madness 
Back in the dark ages, about five years ago, a few of us were talking about event fatigue. Beer centric events were happening at a rate of one or two a week and it was getting hard to keep up. Little did we know what was coming.

Driven largely by social media, the pace of events has turned into a tsunami. Release parties, tap takeovers, festivals and mini-festivals litter the calendar. Breweries and pubs are constantly looking for ways to promote their beers and brands. Someone stub their toe in the brewery? Organize a party to celebrate their return to action. Festival hype is off the charts.

You can't fault breweries, pubs and festival organizers for using social media. Traditional print and electronic media are virtually worthless as a means of promoting beer brands and events at the local level. Social media can reach a targeted audience in minutes.

My problem with this arrangement is that these events often aren't events at all. In many cases, they're a joke. Yet you have event whores who organize their schedules around scurrying from place to place fixated on what's next. Attention spans and conversational drinking take a beating.

The event crush and social media circus will certainly continue into 2018 and beyond. In fact, they're likely to intensify. Sad to say, this is the nature of craft beer until a new way of promotion comes along. When will that be? Sorry, I don't have a crystal ball.

Happy Holidays!

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