The Brewers Association announced that in the next 5 years they expect to see their current 11% market share in the $100 billion US beer market jump to 20%. But what will craft beer look like if that were to happen? Currently, The Brewers Assocation defines craft brewers like this
Annual production of 6 million barrels of beer or less (approximately 3 percent of U.S. annual sales). Beer production is attributed to the rules of alternating proprietorships.
Less than 25 percent of the craft brewery is owned or controlled (or equivalent economic interest) by an alcoholic beverage industry member that is not itself a craft brewer.
Just last year the definition of craft beer was changed to include the likes of Samuel Adams, Yeungling and Straub. These are huge breweries producing upwards of 2 million barrels a year. All craft breweries pay dues to the Brewers Association based on production levels. It’s these larger companies that produce the most money that go to fund things like the Brewers Association’s new DC lobbyist.
We’re already seeing the current trend of breweries to remain small (most craft breweries make less than 1,000 barrels a year) and centralized – a growing trend towards farm breweries, where breweries grow their own ingredients. But we’ve also seen various acquisitions lead to concerns that there is a consolidation of breweries, that could lead to diminishing diversity – the very thing that will keep craft beer thriving. Elysian and 10 Barrel both purchased by AB/InBev. Full Sail, Abita, Magic Hat, Pyramid, Stillwater and others have been purchased by private equity firms. Sticking to it’s guns, the Brewers Association, stripped Founders of it’s craft beer title when it sold a 30% share to a Spanish brewery company. But it’s not just craft beer being bought out by Big Beer and private equity firms. Craft beer is buying craft beer. For instance, Oskar Blues is already looking at using it’s relative size to purchase smaller breweries.
To boot, former craft brewers are building companies that will purchase yet more breweries. The founder of Harpoon Brewery, Rich Doyle, has started a private equity firm, Enjoy Beer, that will buy up smaller faltering breweries.
Enjoy Beer will create partnerships with additional top craft brewers who wish to preserve their local independence, while gaining shared resources in areas such as marketing, sales, purchasing, logistics, and finance in order to compete with large-scale corporate competitors.
Last year marked the fewest closings of both Brewpubs and microbreweries in recent history as well as the most openings. Perhaps Enjoy Beer is positioning itself to be the go to private equity firm, if and when the craft beer bubble bursts.