A True One-In-A-Million Story Helps Change The Food Industry Is the Pint Glass Half Full or Half Empty?

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Is the Pint Glass Half Full or Half Empty?

The data on beer from the TTB (Tax and Trade Bureau) for the first half of 2020 isn’t bad or good for craft beer, it is what it is. The largest brewers have noticed varying degrees of reduced demand in the first half of 2020, but the craft beer sector is somewhat stable. Nothing is perfect and much of the feelings about the environment today is subject to opinion. Obviously, curbside delivery is not looked upon as a solution to Covid19.

The TTB is only reporting data on tax receipts derived from spirits, wine, and beer production; but we are only interested in beer for the moment. Consumer tastes shift from time-to-time relative to their beverage of choice. This just adds to the complexity of understand the data. For example, hard ciders and seltzers have captured the attention of younger adults and this does impact craft beer.

Currently, Covid19 has taken center stage in forcing the craft beer industry to cut costs, delay some new product plans, thoughts about market expansion, packaging options and on/off premise marketing strategies. Covid19 impact started being felt for the craft beer industry in February 2020. The fact is that the craft industry always deals with market shifts, but the virus impact is a once in a 100-year disaster on a worldwide scale.

The TTB does not define or report beer production at a market segment level, i.e. Craft Beer, Brew Pub, etc. Their charter is to collect proper taxes from beer leaving a brewery based upon ABV. We will look at production reported by the TTB based upon size categories of barrel production. Although some market changes were being noticed in early 2019, Covid19 has had a major impact on economic health of the craft beer industry.

Statista reports that The Boston Beer Company produced 5.31 million barrels of beer in 2019. That compares to Miller/Molson/Coors 2019 production of 50 million domestic barrels. “Bear in mind, Anheuser-Busch today represents 49% of the U.S. market. To put that in perspective, of the 6,400 breweries in the U.S., 95% make less than 15,000 barrels of beer annually,” says Dr. Bart Watson, PhD-Chief Economist for The Brewers Association.

For the craft beer consumer, macro data is only important as a starting point to assess what is happening to our favorite brew. “Currently, the majority of the U.S. craft beer consumer lives within a 10-mile radius of a local brewery,” says Dr. Watson. This is important because it shows how important the health of the craft beer industry has on communities and consumers.

So, what does the TTB production data for 2019 versus 2018 and first half 2020 and 2019 indicating?

Total beer production in the first half of 2020 vs. 2019 was 88.3 million barrels and 91.6 million barrels, respectively. That represents a -3.6% loss of beer production in the first half of 2020 vs 2019. However, first half data for 2019 vs. 2018 shows a -4.4% decrease in production. This indicates a decline in production in kegs started in early 2019.

Some analysts point out that keg sales are decreasing which indicates the impact of Covid19; this is true as most kegs go to on-premises beer consumption locations. Keg sales in the first half 2020 were down 52%. Bottle/can sales were up +3.1%. (Data is based comparable keg volumes-31 gallons in a keg.) Source: TTB-Tax and Trade Bureau. Keg sales first half 2018 vs 2019 were 7.5 million barrels and 8.1 million respectively: a slight increase.

Now let’s analyze the market segmented by barrel production. In 2019 American brewers produced a total of 180 million barrels of beer. In 2018 the total production was 183 million barrels with 7% less breweries. A slight downturn.

All U.S. brewers producing more than 6 million barrels annually had a -4% drop in production and represented approximately 70% of total U.S. production. The 6 million and greater segment comprises 15 of the largest producers.

The Brewers Association reports 95% of breweries in the U.S. produce less than 15,000 barrels yearly. Numerically that is 5,947 of the 6,400 breweries in total. This segment produced 6.2 million barrels total in 2019. For perspective, compare that to the 5.31 million barrels attributed to The Boston Beer Company alone. Interestingly, this segment realized a +4% increase in production in 2019 vs 2018. Most of that increase can be attributed to the number of producers in the 1 to 15,000-barrel category which had a 7% increase in breweries.

Without a doubt the Covid19 virus has had an impact on the craft beer industry, however not to the extent some macro brewers have realized. Some have had a reduction of approximately 4% overall, but they are not in the ‘craft’ category. Full year data will tell a better story. Logic would tell us that the Brew Pub segment of the industry has been impacted the most. For example, 25% of their product is bought and consumed on premise.

The jury is still out on just how bad the economic and lifestyle environment has impacted the craft beer industry, but people still want quality that is most readily on display in craft beer. Brandon Gaille reported some research in late 2019 that note, 94% of beer consumers bough craft beer due to taste and 83% were also interested in craftmanship. Consumers. This indicates some level of research and product understanding goes into understand craft beer.

Cheers!

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