Is the craft beer market splitting?

BigCraft may be calving

The term as used here comes from the world of glaciers. Often preceded by little seismic indications, smaller parts of much larger glaciers suddenly depart their "mother," these "calves" often cascading spectacularly into the ocean. Product markets do this, too. Indeed, it's how craft beer came into its own, an offspring of the much larger BigBeer glacier.

In just the past few weeks, the craft-beer business has seen its own "little seismic events." They appear to be early warning of another market re-structuring.

A beer-marketing seismic tool

If something's changing in the craft-beer consumer market, the first place you'd expect to get hints would be in bars, clubs and restaurants. These hospitality accounts (where the alcohol served must be consumed "on premise") exhibit the strongest craft-beer sales, and they always have. Craft beer currently has a remarkable 31% share of beer volume in these on-premise accounts according to a reliable industry source. 

It used to be difficult to get a good fix on how competing brands were performing in this key retail channel. Back in the day, most share information was based on off-premise accounts like grocery stores, where data was easier to acquire. No more. Now, GuestMetrics accurately captures on-premise "seismic activity," as their website makes clear...

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"Despite the dawn of the Digital Age having begun more than three decades ago, the hospitality industry essentially functions the same way it did centuries before. GuestMetrics has cracked the code, turning billions of raw transactions into intelligible data that is fundamentally transforming the business operations of everyone from the independently-owned bar/restaurant on the corner, to multi-national chains, to the food & beverage companies that supply them."

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GuestMetrics' just-released 2014 data (reported this week by Beer Marketers Insights) captures some of today's craft-beer seismic activity:

- While craft-beer total share grew to the 31% mentioned above, the overall craft-beer growth rate has slowed to 2.9%

- The rate of craft-beer share gains that began 2014 at 2.2 share points, by year's end, fell by nearly half to just 1.2 share points

- The larger, top-20 craft brand families--as a group accounting for 35.5% of the segment--were basically flat for the year

- But smaller craft-beer brands are growing volume by 4.4%

What's behind craft beer calving?

So it appears bigger craft-beer families are beginning to plateau while smaller craft-beer brands are still growing at a good clip.

Okay, it's one thing to scour the data for seismic hints of change, but when a market actually breaks apart in the fashion of a glacier, there must be some underlying consumer reality powering the calving.

Recent informed industry commentary appears to get at the root cause.

A January article entitled "Wasted" in Boston magazine was premised upon the view that many craft beer drinkers have "abandoned" pioneer Jim Koch's Samuel Adams, the largest of the craft brands, because it had become the "establishment." 

A followup article published a week later in the same magazine coined the phrase "the current wave of cult breweries" as a counterpoint to bigger craft names. These brewers' cult beers would be the brands the GuestMetrics data shows as hot, accounting for the craft volume-growth.

A powerful consumer sentiment motivating a distinct group of craft-beer lovers is definitely at work.

Here's how two craft brewing pioneers--both now top-20 craft brewers--put it in a MarketWatch interview just out, identifying the trend they see working against their larger breweries:

"...there’s a consumer who just doesn’t like consistency and if we’re large and we’ve been successful, we can’t be cool anymore." -Gary Fish/Deschutes Brewery, Bend, OR

"...if you’re fortunate enough to be around a while and grow, you run the risk among a certain segment of beer drinkers of not being “cute” anymore." -Kurt Widmer/Widmer Brothers Brewing, Portland

Clearly, they've identified a body of craft beer drinkers for whom the extent of a brewer's success is inversely related to the desirability of that brewer's brands. Said another way, for these folks, simply because of their size, larger craft breweries will not get their business. These drinkers are concentrating their craft purchasing on smaller brands. To paraphrase Gary Fish, for these folks, when a brewery gets too successful, it's screwed. 

As surely as these craft drinkers originally eschewed BigBeer, they're now doing precisely the same to... BigCraft.

Could their small-or-nothing take on craft beer represent a calving of a segment, born of a lust... for little?

Gosh, that would be like history repeating itself.

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