Back on April 6, 2021, the Brewers Association released their annual report assessing how craft brewers fared in 2020 a year disrupted by the COVID-19 pandemic. Not surprisingly, volume share, retail dollar value, barrels produced, brewing jobs, and volume change were all down.
Also noted in the report is that draught beer sales fell 40%. This is a direct impact of the pandemic shutting down bars, restaurants, and tasting rooms. But, the article also notes that the pandemic forced craft brewers to put on their thinking caps to find new and different ways to reach consumers.
Interestingly, in 2020, new openings of craft breweries outpaced closings. Although a challenging year to launch a new brewery, there were 716 openings and 346 closings. I am certain there is lots of pain in those closings, and while I am no expert, I would assume that the fallout from the pandemic will bring more closings in 2021.
When I check out the display cases in local grocery stores, I am amazed at the explosion of seltzers. I am not a seltzer drinker, but everyone seems to be pursuing that market share. This includes the big box brewers and craft brewers of all sizes. The upsurge in seltzers, parallels a decline in beer sales, and this makes me wonder what this shift means for producers of ciders?
If you doubt seltzers are hot, in a press release on February 5, 2021, Anheuser-Busch is investing $1 billion to modernize their plants, and $50 million will go to increase their ability to brew seltzers. Once again, this investment in seltzers can be linked to a decline in beer sales.
Also, I note in those display cases something I never thought I would see—craft brewers offering low calorie beers. A craft brewer brewing and selling a light beer seems so counterintuitive to one of their original passions— not to be like the big box brewers.
While I am disappointed that craft brewers are offering seltzers and low calorie beers, I recognize that these moves are about cash flow and in some instances survival.
And, in thinking about survival, I believe we must ask how many breweries can a community support?
Over the last few years in my community, Richmond, Virginia breweries have continued to open. They have opened at such a pace that I have not been able to visit these newbies. I often wonder if some might close before I have a chance for a visit.
And, yet, some experts believe that over saturation isn’t a problem. I wonder what the owners of a failed brewery might say to that reasoning?
For many years, Anchor Brewing in San Francisco has been a favorite of mine. I still remember my first Anchor Steam Beer from a trip to California in the summer of 1980. When our oldest daughter lived in Chicago, I could always find some different Anchor beers to sample that were not available in Virginia.
But, I was saddened when in August of 2017 Anchor was purchased by the giant Japanese brewer Sapporo. Now, I’m wounded a bit more with the January 26, 2021 announcement that all of the iconic Anchor labels are going away. New labels, new graphics will now grace bottles, cans, and packaging.
Anchor has been around for 125 years, tweaking packaging is one thing, I just hope they don’t tweak the beer recipes. This new packaging is all about marketing. The goal is to grab the attention of new beer drinkers in a different way from the previous iconic Anchor labels.
But also buried in this flurry of activity are several new beers including “Little Weekend” —Anchor’s move into low calorie beers. Again something I never expected to see, and a beer that I whiningly never plan to try.
And while on the topic of whining, I’ll come back to one of my pet peeves about craft brewers—the pricing of their products.
Recently, I was surveying the beer, cider, and seltzer displays inside the coolers in one of our local grocery stores. In case you haven’t noticed, most craft brewers have shifted away from single bomber bottles that offered 16 or more ounces of beer.
Those bomber bottles have been converted into 4 packs of cans that hold 16 ounces of beer a piece. I’m making the assumption that aluminum cans are more cost friendly to the brewer than the bomber bottles, plus they fit better on a display shelf.
I took note of four displays of 16 ounce cans by four different brewers. Three of the brewers were located here in Richmond, and one was an import. The pricing range was as follows: $5.99, $9.99, $12.99, and $13.99.
From those four beers, the average purchaser of beer might be surprised that the $5.99 beer came from Germany, the well known Bitburger Premium Pilsner.
That same average consumer might be astonished that the higher priced beers are brewed in their own backyard. It is an easy drive in Richmond to any of the three breweries.
Again, my usual whining, this pricing makes no sense to me.
How can a beer brewed in Germany cost less than beers brewed in my own city? I know the craft brewer pushbacks—quality of ingredients, labor intensive, and the need for clever branding/advertising to sell the beer in an over saturated market.
Not that I want to support the German brewery, but simple math could make the choice easy for me. There is an eight dollar difference between the cheapest and the most expensive four pack.
Another interesting angle here is that the three local beers are all distributed by the local Anheuser-Busch distributor. And to add to this pricing factor, on this afternoon, there were only two four packs of the Bitburger left in the cooler, and the other three beers were in full supply. I wonder why, could it be pricing?
But, there are more questions to be asked about that tier of pricing. What is taken into consideration as the brewer and distributor wrestle with setting a price for a four pack of 16 ounce cans? Does the retailer have any say in making these decisions? More importantly, does the brewer, distributor, or retailer care what the consumer thinks about pricing?
I guess craft brewers know they can’t offer a $5.99 four pack of 16 ounce beers, and stay in business. So, they focus their energy on convincing a distributor and retailers that the quality of their local brewed beer is going to generate sells.
This possibly creates a purchasing dilemma for the consumer. The buyer wants to support local brewers, but the obvious difference in cost might eliminate any consideration to purchase a local beer.
I wonder if craft brewers understand this predicament? What might craft brewers learn by walking into a local grocery store to the beer aisle?
My hunch is craft brewers probably don’t think a lot about penny pinching beer consumers. Their data and demographics are linked to purchasers who don’t blink at a $13.99 price for a four pack. Plus, experience tells the craft brewers that some consumers will pay even more for a unique beer that is establishing a legacy among beer drinkers.
But, as craft brewers continue to steer into the future of the post-pandemic is a break in pricing something they should weigh more carefully? If a 2021 Brewers Association annual report continues to show a decline in the critical reporting categories, how will craft brewers respond, will an adjustment in pricing be considered?
As much as I whine about the pricing of craft beers, I still hold these brewers in high regard.
Back in April on a cool, but pretty Sunday afternoon, my wife, youngest daughter, and I drove to Ashland, Virginia to the Origin Beer Lab. This tiny brewery is an off-shoot of Center of the Universe, another Ashland based brewery. The concept behind the Origin Beer Lab is this brewery gives the Center of the Universe brewers a chance to experiment with different beer recipes and styles on a smaller scale.
Ashland is a postcard town. Its heart is split with an active railroad track in the center of the business district. Attractive storefronts, the campus of Randolph Macon College, and pretty restored homes are all a part of the charm.
At the Origin Beer Lab, visitors have three seating options— out front to catch the rumble of passing trains, a cozy inside, or a sunny back patio. Even with COVID-19 protocols in place, the gentle and knowledgeable staff was very hospitable as we found seats on the patio.
But there was an indication that someone at Origin or Center of the Universe had been thinking about pricing. On Sunday afternoons, all growler fills are half-price.
And in all my whining about beer, that’s all I’m asking: what will it take for the owners of craft breweries to re-evaluate how they price their well made beers?
If sales and market shares continue to fall, will craft brewers still be able to command higher prices for their products?
That is a tough question to answer, and perhaps the key to answering that question might just be in the taste buds of consumers.
Will consumers be loyal to traditional passions of crafter brewers, or will consumers continue to push brewers into non-traditional areas to soothe their fickle palates?
And, I can’t forget my friends at Anchor Brewing. It will interesting to see if sales increase with a new labeling profile and new beer offerings. I just hope they don’t forget the strength of their brewing roots.
As we move further into 2021, I suspect we will learn more about beer consumers their tastes and their wallets. Hopefully, we are on the cusp of an improving post-pandemic environment for craft brewers.
I say this even though I still find it hard to believe that craft brewers are brewing low calorie beers and seltzers.