"Craft is winning the cultural war, but providing an alternative that most consumers don’t enjoy or consume far less of"

Today, beer has a problem. Total beer volume is either stagnant or in decline across Europe and the US (-7% and 3% respectively between 2010-2015*. To put that in context, in the same period, the hot coffee industry grew globally by over 28% and in the US by 30%**). Meanwhile, beer’s share of total alcohol consumption drops from over 90% in less developed countries to around 40% in mature markets, as people start to prefer drinking in a number of new environments (e.g. with food) and turn to wine and spirits to satisfy their needs.

However, beer does seem to have one ‘silver bullet’ at the moment – “Craft”. The hundreds and hundreds of micro-breweries opening shop every year in US, UK, Australia argue the complete opposite, claiming that they’re pushing beer forward and reinvigorating an increasingly consolidated and generic lager market.

It may seem odd then to propose that Craft is actually having an adverse effect on the industry, but in my opinion that is the reality in the longer term.

Short term wins: a new story

It’s hard not to be romantic about Craft beer. From the majority of what you might read or encounter, Craft is everything beer ‘should be’ – beer made with real passion by real people. As opposed to those greedy corporate machines that have been churning out light lagers for the past 50 years right?

And I can fully understand the optimism:

  • Growth: In the US, Craft now accounts for an impressive 12% of the beer market with 13% growth in 2015, the 8th consecutive year of double digit growth.
  • Trade support: Craft seems to be helping rejuvenate the on-trade (e.g. pubs) and drive higher margins through premium pricing, now accounting for >8% of the total on-trade ale market in the UK.
  • Education: It’s certainly getting people to think differently about the category and the role beer can play in their lives.
  • Excitement: Craft offers up a rich world of liquids, brands, bottles & innovations that create talking points and interest.
  • Community: It has developed a strong identity that has helped garner a strong cohort of people (both men and women) who bond over these shared experiences.

Sometimes I wish I could just surrender to the romanticism of the ‘next big thing’, but a combination of my day-to-day work and personal desire to suss out the true value of emerging consumer trends / behaviours doesn’t allow me to do this.

Whilst Craft serves up these short-term fixes for the industry to talk around, overall it carries with it some dangerous side-effects that from a commercial stand-point, could have long term implications for the whole category.

Long term damage: don’t drink that, drink less or none of this

The Craft movement has been very effective in portraying the mainstream beer market as unfashionable – “consolidated”; “profit driven”; “lacking in innovation”; “low quality lagers for the masses” – and worryingly it’s a story consumers are buying into. I say worrying because emerging, influential consumer groups (e.g. Millennials) are developing a negative perception of established lager brands and being encouraged to explore beer’s fringes instead, where four troubling realities lie:

  • Accessibility – The world of Craft was built by ‘beer enthusiasts’ and in the process has generated a perceived clique that many existing beer drinkers either feel excluded from or don’t have the desire to align with.
  • Taste – The majority of micro-breweries are run by ‘beer enthusiasts’ looking to flex their brewing muscles, producing wild and wacky flavours that may sound exciting but aren’t actually aligned with what most people want to drink. The fact that they also tend to be ales (due to relative ease of production) compounds this. Ales tend to have higher levels of bitterness, completely misaligned with global taste megatrends and unappealing to younger consumers. There is a reason the big players produce lighter refreshing lagers, people want them.
  • Quality: Big brewers actually make really high quality beer. They invest in the best technology and have recipes dating back hundreds of years. In fact it’s the Craft scene that has a quality issue given that many of the liquids are either homemade or small batch with little or no quality control. Bad quality experiences have implications for the whole beer category - especially given the relative consistency of wine and spirits. People are parting with their cash for the products after all.
  • Sessionability: For those who do migrate from mainstream brands to Craft, the reality is these aren’t beers that you can drink all evening (again due to product taste profiles). So, not only are people being driven out of the category by Craft, whoever does migrate are likely to drink less beer in one sitting (before moving on to a crisp wine for example). How often have you heard some sipping a craft beer and saying “I don’t mind that, but I couldn’t have more than one.”

In summary, Craft is winning the cultural war, but providing an alternative that most consumers don’t enjoy or consume far less of. If this continues and Craft and the mainstream can’t find a way to co-exist in a way that compliments each other (celebrating both the innovation of Craft and the heritage and / or quality of established brands), then I’m afraid there isn’t a huge amount to be optimistic about in developed markets long-term.

*Source: Euromonitor Statistics - Total Beer industry market size

**Source: Euromonitor Statistics - Hot Drinks, Coffee