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2011 Rewind & Beer Industry Predictions for 2012

2011 is in the books, and it was an eventful one for the beer industry as the craft segment continues to explode and the traditional powerhouses continue to cling to market share. My list of the year’s top stories looks something like this, in no particular order:

Without question, there are a lot of other huge stories that I’m not addressing as was a busy year. There was some major projects for me personally as well: I was involved in an (unsuccessful) legislative effort, (unsuccessfully) attempted to open another brewery 200 miles from where I live, was a witness on a high profile industry lawsuit, began installing a bottling line at our existing brewery. Fit that in between teaching at the University, serving on two Brewers Association committees, giving a TEDx talk, and the whole “running a business” thing. Despite two major unsuccessful ventures, I consider 2011 to have been a smashing success and I’m looking forward to 2012.

Speaking of which, here are my Beer Industry Predictions for 2012:

  • Craft Beer Will Simultaneously Become More National and More Local. The continued growth of Craft Beer brings with it some growing pains. We will see an increasing number of breweries “pulling back” from markets on the outer reaches of their distribution territory in order to keep up with demand closer to home. Some of this newly available shelf space will be filled by an increased proliferation of the “big” craft brands like Sierra Nevada, New Belgium, etc. and imports. Simultaneously, some of the shelf space will be filled by local brands, either new breweries or existing ones finding increased access to market.
  • Setbacks for Start-ups. Despite the optimism of some of my peers in the industry, I share the cautious skepticism of others who wonder if the market can support what amounts to a 50% increase in the number of breweries in America (if all the “in planning” came fruition). My personal feeling based on anecdotal evidence as someone who has given multiple Start-up talks at national conventions & gets a lot of inquires for advice is that the growth of the industry has once again drawn the attention of a lot of people who really shouldn’t get into the industry. I’m not suggesting there are or should be “rules” on who can start a brewery; but I do have a (completely unsupported by anything like empirical evidence) feeling that start-ups backed by people who see a breweries as nothing more than investments for the potential for high-return fail at a significantly higher rate than those of us who got into this business for the love of the industry. That isn’t to say that every start-up doesn’t have someone who loves the industry (though I know that isn’t the case), but there is a certain corrosive element that having the wrong people involved in a start-up can bring and it is becoming increasingly common. I think we’ll see some quick, and even high-profile with shiny new equipment, failures in the coming years.
  • Natural Selection. I also predict an increased number of closures of established breweries in 2012 as competition becomes more intense. There are a lot of newbies (5 years old or less) making incredible beer pushing established breweries to up their game, or fade away into history. The result will be excellence on a more consistent basis from craft breweries. You’re favorite brands will either continue to get better, or they’ll just go away.
  • A Glut of Equipment. The good news about my last prediction, is that if you are a start-up there should be a glut of equipment coming available as breweries fail. Some free start-up advice from yours truly: be a contrarian! If there is no used equipment available, it’s a bad time to start a brewery, because it means everyone else is starting breweries.
  • Despite These Factors, Craft Continues to Blow Up. Based on the Wall Street Journal growth numbers quoted above, Craft Beer should enter 2012 with a market share around 5.1% by volume and 8.0% by dollars. I predict another year of high-teens growth, maybe even 20% as craft beer becomes increasingly mainstream, and craft will enter 2013 with dollar share of 10%.
  • Distributors Start to Play Nice. In many states, there has long been an uneasy relationship between brewers and distributors, especially in the legislative arena where distributors feel empowering breweries puts their place in the 3-tier system at risk. I see 2012 as the year distributors in lagging states “see the light” and drop their opposition to legislative changes that would help small brands. Operationally, I predict increased pressure from InBev on its distributors to focus on their brands and wouldn’t discount the possibility of threats on those distributors if they don’t focus on InBev’s portfolio. Even so, I see craft beer & brand promiscuity accounting for an increasing percentage of wholesalers’ portfolios.
  • Texas Will Change in 2013, and We’ll Know About it in 2012. Before the end of the year, craft brewers, distributors, retailers, consumers & lawmakers will have agreed upon legislation that allows production brewers to sell directly to consumers on the brewery premise and for brewpubs to sell their beer to distributors for resale. Texas will be free from the shackles of the past… which leads me to:
  • BONUS 2013 PREDICTION: Texas experiences a craft beer Renaissance. Some of you may already think we are there, with all the new brewers popping up around the state… but by the end of 2013, you’ll look back and realize that we hadn’t seen anything yet.

Cheers,

Scott

 

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  1. Pingback: The year in beer – Off the Kuff

  2. Pingback: Freetail Brewing founder’s 2011 recap and 2012 predictions | Beernews.org