The slowdown in volume growth for craft beer coupled with a rise in new brewery openings (1,252 new breweries in 2018, an increase of 14% from year prior), and craft consumers’ desire for new products has led to stiffer competition among breweries trying to maintain their share against competing categories.
The challenge for craft brewers is how to differentiate themselves as the category becomes more and more crowded. Gone are the days when a solid core offering with seasonal innovation could maintain a brewery’s popularity. The beer category, which has lost volume share to wine and spirits over the years, is combating this by stepping outside traditional beer production styles to entice consumers to stay within the category. New products include hard seltzers, non-alcoholic CBD seltzers and beers, and crossover products such as rosé and cocktail-inspired beers.
Firestone Walker’s Rosalie Beer Rosé, a beer co-fermented with Paso Robles wine grapes, hopes to attract non-beer drinkers on the back of rosé’s growing popularity. Oskar Blues, Black Hog, and Two Roads are a just a few craft breweries getting in on the hard seltzer craze. Two Roads’ new line H2ROADS, uses 100% real fruit in the flavoring process in order to stand out among hard seltzers that generally rely on extracts. Otter Creek Brewing entered the CBD market with OCB CBD a non-alcohol, CBD infused peach seltzer providing 20mg of CBD per 12oz can, available for purchase only at their brewery. Funky Buddha Brewery’s Mixology Series Coquito Ale, a 10.3 ABV imperial cream ale made with coconut, cinnamon, vanilla, and aged in Caribbean rum barrels is a crossover beer inspired by the classic Puerto Rican holiday cocktail.
The beer category… [is] stepping outside traditional beer production styles to entice consumers to stay within the category.
It goes without saying, hard seltzers have been the most successful innovation so far with category leaders White Claw and Truly continuing with triple-digit growth rates into 2019. Hard seltzers as a category sold 2.4 million HLs in 2018. The industry is paying attention as not only do hard seltzers provide a substitute for beer occasions, they are also stealing share from vodka and soda occasions, If the hard seltzer category was included in the traditional beer category, the overall decline of -1.7% would soften to -0.8%. In fact, the success of Truly, owned by Boston Beer, the makers of Samuel Adams, has helped the company see an overall increase in sales even though its core beer brands are down in volume.
Support for innovation among craft brewers is being seen at the state-level. California recently passed a law allowing breweries to produce beers that use fruit juices, concentrates, honey and other fermentables not typically used in beers. This creates opportunities for beer crossover products. Under the previous law a brewery would also need a winemaking license to use these ingredients in the fermentation process, adding additional costs and legal paperwork for the brewery. Through this passage, consumers can expect to see heightened levels of innovation in the near future.
Considering the total number of outlets selling alcohol in the United States has increased from 531,705 in 2008 to 643,268 in 2018, breweries are finding it difficult to maintain loyalty, engage with and retain new customers. With the skyrocketing popularity of hard seltzer, rosé styled beer, and CBD beverages, look for more craft breweries to unveil offerings in these categories in order to maintain relevance in a category that is forecast to grow at a +2.9% CAGR between 2018-2023, down from +6.3% CAGR between 2014–2018.
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