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Thursday, February 28, 2008

Keep Drinking Craft Beer, They'll Make More

The Brewers Association and the beer blogosphere is making a pretty big deal about the 2007 sales results for the craft beer segment. Craft beer sales are up 12 percent, a pretty big jump considering imports and non-craft domestics each reported a sales increase of 1.4 percent.

A few things to keep in mind when you look at these numbers:

-- Most people still prefer to pound back non-craft beers. The total U.S. beer market in 2007 was 211,489,982 barrels. The total domestic craft segment accounted for just 8,011,141 million barrels of that total -- about 3.8 percent of the total volume.

-- Contract brewing barrels were up 27 percent to 1,290,204. Depending on how you look at this number it is either good or bad. In some cases this is driven by small brewers who have out stripped the capacity of their facilities and need the contract space to keep up with demand. In other cases it might be some players either unable to raise the capital for their own brewery or who see a profit opportunity, but do not want to risk heavy investment.

-- The overall number of breweries in the U.S. was up by 12 last year to 1,449. Still 23 brewpubs and 17 microbreweries closed. For the most part these represent failed dreams, some poor management, tough marketing times and the challenges of making great beer. Still 44 brewpubs, 38 microbreweries, one regional brewery and one large brewery opened. More than a few of these are making some pretty darn good beer and will help fuel future growth.

-- Brewpub capacity growth lagged the overall craft category, up just 3 percent to 719,874 barrels. Brewpubs have always been the smallest part of the craft niche, but they are also often the closest to the consumer and the place where most Americans get the chance to see, smell and taste where beer is born. They should be serving the freshest beer in America. Slow growth in this part of the segment might signal a trend to watch.

-- The U.S. beer market is a $97 billion industry. Craft beer contributes $5.7 billion to that total. There is plenty of room for continued growth for the better players. The key will be consumer reaction to rising beer prices and whether shortages of key raw ingredients cause a shift in beer styles that has an impact on the craft segment's growth.

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