Craft Beer Boom Generates Unique Challenges
BMI View: Production of craft beer in the US has risen strongly in recent years, a trend that will continue as consumers continue to move away from mainstream varieties. This part of the market has attracted interest from small brewers and multinationals alike; however, growth will not be without challenges. US brewers could face a rise in the price of hops - a key input that adds flavour - as h ops are typically used in much greater amounts in craft beer production compared with mainstream beer.
We recently published an article examining why the mainstream US beer market outperforms the UK market in terms of profitability ( see ' Framework Shows Why US Beer Industry Is More Profitable Than UK ,' May 2). We also observed how per capita beer consumption in the US has been on the decline for a number of years. This is driven by two key factors: 1) an ongoing craft beer boom that has fuelled a growing indifference towards mainstream beer; 2) strong growth momentum in spirits, particularly whisky, among young Americans. The US craft beer industry is worth about USD14bn in sales per year, according to the Financial Times, representing about 18% of the consolidated beer market based on our value sales data for the US.
As the chart below illustrates, the production of craft beer has gone through the roof over the past few years, and we expect the pace of growth to remain strong over our forecast period to 2018. Beer drinkers are increasingly looking for authenticity, more flavour and sometimes more alcohol content in their beer, having grown tired of mainstream processed beer that is made on an enormous scale. This is a trend we do not believe is going away.
|Production Growth To Remain Strong|
|Mid-Year Craft Production Volume (mn barrels), 2009-2013|