Welcome to Craft Brewing’s ‘Could Be Worse’ Era

LAS VEGAS — A brewer from Southern California found himself talking to a reporter outside an afterparty at Beer Zombies, a brewery taproom hard by the I-15 due north of the Strip. It was the beermaker’s first time attending the Brewers Association’s Craft Brewers Conference. “I honestly thought there’d be more doom and gloom,” he said.

Same here. The 2024 edition of the annual industry confab unfolded over this past week here in fabulous Las Vegas, and dread over craft brewing’s sobering recent fortunes was conspicuously absent from the trade show floor. Spotted upon the the Venetian Expo Center’s millions of square feet of exhibition space: Hardware exhibitions! Software demonstrations! Maltsters and hop growers, wholesalers and hob-knobbers! And thousands of brewers, sipping beers and filling swag bags and generally carrying on like the business of selling craft beer to an increasingly apathetic, distracted, and abstinent American drinking public hasn’t gotten much harder in recent years!

Missing: the doom and gloom of it all. The anguish. Beer and loathing in Las Vegas? Not so much.

Make no mistake, times is tough and rough like leather for the American craft brewing business. It wasn’t so many conferences ago that “20% by 2020” — as in, market share of overall beer sold in the United States — was the battle cry electrifying the industry. For years, the ubiquitous question on brewers’ lips was “How much are you up?” That was then. Small, independent brewers as defined by the BA finished out 2023 down around 1 percent in volume and up 3 percent in dollars; the segment is 13.3 percent of an overall U.S. beer market that itself shrank over 5 percent by volume last year. More breweries opened than closed last year, but that margin was small, and it’s a good bet that ratio will finally flip this year.

There may come a day soon where IPA can no longer be relied upon for “Immediate Profits Ahead,” warned Bart Watson, the BA’s chief economist and vice president of strategy, in a general session Tuesday morning. “I actually measured IPA slightly down in 2023.” It’s a brave new world, and if that downward trend accelerates for the most important and lucrative style in the craft beer market, brewers will have to get a whole lot braver.

Still: Just under half of all respondents to the BA’s annual production survey notched increased production in 2023. Watson’s recent analysis of Tax and Trade Bureau (TTB) data shows that more than 600 breweries now also hold distilled spirits permits, indicating that brewers are newly willing to conceive of their businesses in a more flexible “total beverage” paradigm. Nonalcoholic drinks infused with hemp-derived tetrahydrocannabinol are posting compelling incremental sales for breweries that have been allowed by their states’ laws to move into the nascent segment. Said Watson, “Given all that context, the craft numbers aren’t what I would call good, but they aren’t what I’d call bad, either.”

The trade group’s longtime data don’s upshot was more or less summed up by a slide from his characteristically illuminating hour-long presentation Tuesday morning that favorably compared the 2023 brewery closure rate (around 4 percent) to leisure and hospitality businesses more generally (around 10 percent.) “COULD BE WORSE,” it read. If the individual brewers roving the Venetian these past few days felt otherwise, they weren’t wearing it on their hoodie sleeves.

The industry in aggregate has concerns aplenty, though, and they were discussed at length over three days’ worth of seminars, meetings, and after-hours drinks on and off the Strip. Direct-to-consumer shipping and franchise law reforms are top of mind for the BA’s policymaking double threat, general counsel Marc Sorini and senior director of federal affairs Katie Marisic, and potentially onerous nutritional labeling requirements from the TTB aren’t far behind. Bob Pease, the BA’s president and chief executive, made sure to flag “growing threats from neo-Prohibitionist groups” in his opening remarks on Monday, as did several other speakers throughout the week. There’s trouble in the hop market, trouble in the equipment market, and trouble in the capital markets, too.

Don’t forget the climate crisis, and beermakers’ social responsibility to stop making it worse. “It’s kinda hard to get away from the fact that we are literally in an industry that releases carbon dioxide into the atmosphere on a [regular] basis,” said Garrett Oliver, the venerable Brooklyn Brewery brewmaster, as he talked up the environmental imperative of adopting regenerative cereal grains like fonio and Kernza in a Wednesday session. Nervous laughter rippled through a too-big ballroom as brewers already struggling to defend margin and shore up volume contemplated whether more sustainable value propositions would actually make their businesses more sustainable. (The research is limited so far, but mixed at best.)

There was a “bad cop” to Watson’s “good” at CBC 2024, and it was Scott Metzger of Craft ‘Ohana, the parent company of Maui Brewing Co. and Modern Times Beer + Coffee and the country’s 26th-largest craft brewer by volume last year. The West Coast firm’s chief operating officer spit tough love in a Wednesday afternoon session entitled “Your Brewery Is A Business, Not A Hobby,” arguing that lifestyle breweries built during the segment’s boom last decade had to toughen up for the lean years they are now grinding through.

“Craft beer got too easy, and it stayed too easy, right up until the point when it wasn’t,” said Metzger. “We are not essential. … Our whole category can be replaced. We don’t have to have a pity party about this, but every single day and every single moment, we have to continue to earn our place in this industry, earn our place in the minds of our customers.”

“They don’t owe us anything, but we owe them our value proposition,” added Metzger. He’s right, and he should say it — I just wish more of his colleagues had stuck around until the afternoon on Day 3 to hear it.

Your humble Hop Take columnist stuck around even longer than that, and had the treat of taking in the first annual ​​”State of the Black Brewery” presentation by the National Black Beer Association (NB2A). The new-last-year org claimed in a pre-conference press release that its constituents — the nation’s 85 Black-owned small and independent breweries — have notched 20 percent annual growth over each of the past two years even as the overall craft brewing industry has plateaued. How? “It is exactly the same recipe that helped craft beer grow before,” crowed executive director Kevin Asato to a packed anteroom, surrounded by intergenerational Black brewing luminaries like Garret Oliver, Celeste Beatty (the first Black woman to own a craft brewery, Harlem Brewing Co.), and Marcus Baskerville (of Weathered Souls Brewing Co. and Black Is Beautiful fame.) “It is authentic to the community.”

Of course, the recipe that helped craft beer grow before also led it into its current malaise, and while it’s a nice idea to imagine an enormous host of Black drinkers suddenly finding themselves thirsty for craft beer (thus growing the pie for everyone), a more likely short-term scenario is that these brewers, like the rest of those in attendance at CBC, will grow at the expense of their colleagues — or vice versa. The rising tide that once lifted all boats has ebbed, and everyone can’t stay afloat on a trickle of beer sales. It could be worse, sure, but it could be better.

Still, if it’s a reporter’s job to look at this industry with a pint glass half empty, this year’s conference affirmed that many brewers still take a different view. Why not? After all, in Vegas, the doom and gloom can always wait ‘til tomorrow, and optimism is forever en vogue.

🤯 Hop-ocalypse Now

Does Hop Take influence federal labor policy? Probably not. But… maybe? Earlier this week, the Federal Trade Commission voted to ban most non-compete clauses, rendering old ones unenforceable and new ones verboten for roles beneath the executive level. (Unclutch those pearls, capitalists: The arch-conservative U.S. Chamber of Commerce has already filed suit to overturn it.) Earlier this year, you may recall, I published a column in favor of regulatory solutions to curb a certain large craft brewery’s notorious, competition-hindering, and just-plain-corny enforcement of its non-competes. Coincidence?! I mean, yes, obviously. On the other hand…

📈 Ups…

Crown and Hops and Full Circle Brewing entered a “strategic alliance” to become the largest Black-owned craft brewing outfit in the country… Russian River Brewing Co. donated an entire damn 20-barrel brewhouse to the NB2A, yeesh… Congrats to all this year’s World Beer Cup winners… Congrats to all the mixologists on the 50 Best Bars of 2024 list, please consider at least doing an off-menu Rothaus or something…

📉 …and downs

Anheuser-Busch InBev has started cycling through the annual comps on Bud Light a year after the conservative boycott began, and the brand is still down… Kroger is trying to force F.T.C. to “litigate the fix” on its troubled merger with Albertsons by divesting another 166 stores… Faubourg Brewing Co.’s nearly new, $30-million plant in New Orleans is expected to be liquidated for just $2 million in June… R.I.P. Foxtrot, the bougie market concept of the future that went bankrupt this week…

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