Has Craft Beer Peaked?

Rob Kalesse

Rob Kalesse

, Uncategorized

Hardly. Over the next two years, another 1,500 breweries are expected to join the burgeoning $15 billion industry

It’s been 30 years since Jim Koch decided to branch out and make his own beer under the Boston Beer Company name. His grassroots campaign consisted of simply going from bar to bar and trying to convince owners and bartenders to put his Samuel Adams Boston Lager on tap.

Today, the industry that Koch started is thriving. Beer bars, brew pubs and gastropubs dot the dining and drinking scene. The more than 3,000 craft breweries represent a $14.8 billion industry, and while they have captured just 7.3 percent of the market, that promises to increase rapidly. According to the Brewers Association, more than 1,500 new craft breweries are on the way. They hope to appeal to the more educated palate of beer drinkers, to whom Citra, Cascade and Willamette hops are household names.

But where does it go from here? Is there any concern about oversaturation? Is there such a thing as brand loyalty anymore? Are there so many IPAs available that drinkers’ heads are spinning before they even take their first sip?

State of the craft

The Brewers Association reports that craft sales increased by 17.2 percent for the first half of 2014. That spike is just one reason why the number of craft breweries is expected to increase by 50 percent over the next year or two. In fact, sales are so robust that if craft brews didn’t come in so many colors, this could be called the golden age of beer.
Once the deluge of new breweries happens, however, there is some debate over where the chips will fall and who will be left standing.
Don Russell, who for nearly two decades has written the “Joe Sixpack” column for the Philadelphia Daily News, believes the industry is growing and will continue to do so for some time. He also believes that 3,000 number put out by the Brewers Association is deceptive.

“A lot of those breweries are brew pubs, where most of the beer is consumed on the property,” Russell says. “If the brew pub makes bad beer, or the restaurant falters, that doesn’t affect the industry, in my opinion. It’s the smaller production breweries trying to break through that will have the toughest climb. At the end of the day, however, if they make bad beer, they’ll go belly up. It’s just that simple.”

Russell believes craft will continue to grow because for the first time in our history, the newly christened beer drinkers (i.e., 21-year-olds) are already familiar with craft beer. “People in their 20s have grown up with craft; it’s what their parents drink, in a lot of cases. They don’t have to go through the learning experiences most of us did. For them, it’s always existed; the craft beer language is part of their vocabulary.”

Even though craft sales are still less than 10 percent of the total market, I don’t see it going anywhere but up from here.

-J. Burke Morrison

J. Burke Morrison, former director of the Craft and Specialty Imports Division for Standard Distributing, sees a “bifurcation of the craft segment into regional and craft brands” developing, wherein national brands like Goose Island, Sierra Nevada and New Belgium will start losing their “craftiness” due to overproduction.

“It’s really hard to be ‘craft’ on a national level,” Morrison says. “Goose Island in Chicago and Blue Point in New York have already been purchased by Anheuser-Busch InBev, and people who know that are already looking on those brands with pessimism.”

Naturally, Morrison hopes a more farm-to-table approach, if you will, begins to show in the craft market. After all, he left his position with Standard to start Flint Hill Farm Distillery, near Landenberg, Pa. The company will brew its own beer and make its own whiskey, rye and vodka, among other spirits, with 2015 as a target opening date.

“Even though craft sales are still less than 10 percent of the total market, I don’t see it going anywhere but up from there,” Morrison says. “It’s the localization of craft that will help sustain those smaller breweries in the long run. The pie will get bigger, but the individual pieces, economically speaking, will likely get smaller.”

Timely specials

When Iron Hill Brewery & Restaurant first opened its doors in Newark in 1996, and for several years thereafter, they featured six “house” or flagship beers, with one or two seasonal or special brews on tap, typically based on the time of year. Eventually, customer demand for something new and different on each visit meant seasonals would become more prevalent. The spring Maibock, the summer Hefeweizen and the autumn Oktoberfest, among others, began to make a regular appearance on tap.

Brian Finn, now head brewer at Iron Hill Wilmington, was there during the early days and remembers how those special beers first started to make a dent in the house beer rotation. Nowadays, the specials and seasonals are just as important—if not more so—than the five house beers he keeps on tap at the Riverfront location.

“It’s the brewer’s call on what seasonals to run, but we’re told to not waste tank space or time with the house beers,” Finn says. “I have the luxury of being able to call the West Chester or Newark location if I need a keg or two of our Ironbound Ale or Pig Iron Porter, but the addition of more specials and seasonals, although the brewer’s call, really comes down to what the customers want.”

This time of year, it’s hard to visit any microbrewery and not see a pumpkin beer on tap. We as a foodie culture have gone gonzo for gourds, as in the pumpkin spiced latte, pumpkin pie and pumpkin muffins and doughnuts. So is it a trendy brew that appeals to pumpkin fans, or is it a flat-out moneymaker?

“We’ll look at our numbers all year long, and there are spikes in sales with certain seasonals,” says Finn. “But we don’t see any rise in sales like we do with the pumpkin beers we brew. People come out and line up for pumpkin beer like no other seasonal or special. Brewers make the decision of what to brew and when, but there are certain seasonals—like the Oktoberfest and Dry Irish Stout in March—that always sell and just make sense to have on tap.”

Eric Williams, president of the year-old Mispillion Brewery in Milford, is respectful of the popularity of seasonal brews and the pumpkin craze that has followed. But he also feels that attention paid to seasonals and special, one-off brews can be overdone. He also refuses to brew a pumpkin beer.

“There are four seasons in a year, yet we’re brewing 12 ‘seasonal’ beers a year? To me, that doesn’t make a whole lot of sense,” says Williams, a former home brewer-turned-entrepreneur. “As a younger brewery, we have to pay attention to our core brews as we try to corner the market in terms of accounts, because those bars and restaurants that purchase our beer to sell on tap need to know that they can expect the same level of quality with every keg.”

As an alternative to the pumpkin craze, Mispillion brews its Miss Betty, a brown ale brewed with 160 lbs. per batch (a batch is 15 barrels, or 465 gallons) of sweet potatoes, nutmeg, cinnamon, vanilla beans and pecans. Williams won’t go so far as to say he’s “anti-pumpkin,” but he also won’t join the race to get a pumpkin beer or autumnal seasonal available in late August, when they’re meant to be enjoyed in October and November.

Have IPAs jumped the shark?

Don Russell recently wrote a Joe Sixpack column about how IPA “no longer means just India pale ale.” The piece talked about how American brewers have helped change the style into something much more ambiguous, and featured a doctored photo of a bottle of beer with a label that read, “Bud Light IPA.”

While Anheuser-Busch InBev has yet to create a Bud or Bud Light IPA, Russell believes it’s just a matter of time. The IPA has become such a staple on beer menus and at breweries across the country that it’s simply a matter of economics. As Russell points out, “IPAs are selling and they’re popular, so it’s almost inevitable that Bud or Miller or Coors will produce an IPA in the near future.”

So if the “Big 3” are considering making a standardized IPA for the macrobrewery fans out there, does that mean the IPA has officially jumped the shark? Are its days numbered as one of the most popular styles of craft beer? Is it time for beer drinkers to put down the IPA and stop obsessing over hops?

“I think some people could use an intervention,” says Russell, laughing. “My wife is a huge fan, and that’s the only thing she’ll drink.” Russell says just about every brewery he comes across in his “research” features an IPA in some way, shape or form, and some even note how overblown the style has become.

“Look at 21st Amendment out of San Francisco,” he says. “They just sent me a press release about their new Bla Bla Bla IPA. I mean if that doesn’t underscore the point that we’ve been saturated by IPAs, I don’t know what does. I love hops and IPAs as much as the next guy, but my concern is that breweries are backing off other styles in favor of brewing sometimes two or three different India pale ales.”

Tim Crowley, general manager of Kelly’s Logan House in Wilmington’s Trolley Square, agrees with Russell. “There are a lot of great styles out there you are missing,” he says. “Always drink what you like, but don’t be scared to try something different. You may be pleasantly surprised.”

The Logan House features an army of IPAs on tap, in the bottle and in the can. It even has an IPA Happy Hour dedicated to hop heads, during which pints of any of it four IPAs on draft are $3.75, and 4-oz. samplers of all four sell for $6.

But not all beer geeks are anti-IPA. Take Iron Hill’s Finn, who favors Belgians, but is all-in when it comes to IPAs because, as he puts it, “It’s what Americans do best because our hops are the most pungent and some of the best in the world.”

Finn couldn’t care less if customers demand and drink IPAs because it might be trendy. As a brewer, he sees the IPA, and what American brewers have done with the style, as a reason to be proud on the global beer stage.

“This is not a bad thing, to be so good at brewing a particular style that brewers around the world are trying to copy us now,” Finn says. “Microbreweries in the U.S. used to try and copy the classic German, English and Czech styles, but now they’re copying us in many ways. We’ve come full circle in that respect.”

One thing all the experts we talked to agree on is that most craft beer drinkers tend to seek out their favorite style, rather than their favorite label. IPA drinkers will try any IPA at least once, Morrison says, whether it’s from Lagunitas, Dogfish or the brewery right around the corner.

“Styles over brands is definitely a bigger factor in the consumer’s thought process these days,” Morrison says. “That hits right to the point that if the customer wants a particular style, you as a brewery or distillery should be accommodating them. The ones that do it well on a consistent basis are the ones that will survive.”

So, what do you think? Please comment below.