Craft Beer is Surging
Paul Gatza, Director of the Brewers Association, opened by talking about general industry trends. Over the past five years, the beer industry as a whole has been contracting, while the craft beer segment has been expanding rapidly at the expense of the large "macro" breweries. We've seen recently that regional craft breweries, such as Green Flash and New Belgium, have decided to build second breweries in other parts of the country to meet high demand and to facilitate the distribution of their products from coast to coast. Gatza speculated that we will see more of these satellite breweries in the months and years to come.
Gatza also mentioned the development of a new Brewers Association website, KegReturn.com, designed to help brewers avoid profit loss through lost kegs. There is an estimated cost of $5-15 million when kegs, owned by the breweries who fill them, go missing. (Read the press release here.)
Craft Beer Guides a Sustainable "New Economy"
Before passing the mic, Gatza brought up the increased awareness and desire for sustainability in the brewing industry, stating that the craft beer industry is leading US manufacturers towards a "new economy" that truly values environmental stewardship. To aid this trend, the BA has produced three manuals covering energy and greenhouse gases, water and wastewater, and solid waste, to be used as public resources for anyone wanting to learn more about how to make their brewery more sustainable. These sustainability tools are available for free on the BA website and include guides, checklists, and spreadsheets to facilitate brewery sustainability programs.
Next, Bob Pease, COO of the Brewers Association, spoke about two ongoing projects of the Brewers Association: government affairs and export development.
On the government affairs front, the BA's decision to hold this year's Craft Brewers Conference in DC was a deliberate one. They used this opportunity to advocate on behalf of craft brewers and on Tuesday, organized the largest craft brewery Capitol Hill climb to date. More than 230 brewery owners and CEOs visited 340 offices on Capitol Hill, meeting with senators and representatives to show them the impact that craft beer is having on the US economy. The main objectives for the hill climb were:
- To develop relationships on Capitol Hill, sharing the story of craft beer and educating representatives about the challenges of running a small business.
- To support federal excise tax legislation, introduced on February 5, 2013, which would reduce the per-barrel tax rate for the first 60,000 barrels of production, thus making it easier for small breweries to open and operate.
- To connect with the Small Brewers Caucuses in the House and Senate. (Rep. Patrick McHenry of North Carolina is vice chair of the House Small Brewers Caucus.)
- To oppose federal excise tax increases, which would "devastate" a growing industry.
- To invite government representatives to visit breweries so that they can see the businesses that are responsible for over 100,000 jobs in the US.
Craft Beer Export Development
Pease then spent several minutes talking about the BA's Export Development Program. Though American craft beer exports are small, it is a segment that increased by 72% last year, reaching an industry record.
Explaining the trend, Pease said, "The word is out that America is the best place for beer culture and beer innovation." As such, the US Department of Agriculture is supporting the Export Development Program through federal grants, which total nearly $500,000 this year. Last year, craft beer exports generated $49 million in sales.
As part of the program, the BA has published a quality control brochure, intended to promote craft beer exports, but ensure that quality is maintained when beer is shipped overseas. This brochure is available to all BA members. Additionally, the BA will use government grants to help fund American entries into beer competitions overseas and to invite importers and international journalists in BA events. These efforts are expected to help grow revenue from American craft beer exports. The top importers of American craft beer are Canada, Sweden, the UK, Japan, and Australia.
Looking to the Future of American Craft Beer
Several journalists raised interesting questions about the trajectory for the American craft beer industry. Gatza called it "dangerous" to speculate about specific growth numbers, but cited good reason for optimism. As for market saturation, he wasn't very concerned about that.
One reporter, also a brewer, asked about the availability of raw materials, due to recent shortages in malted barley and popular varieties of hops. The recommendation from the BA is for brewers to contract in advance their needs for hops and grain. To help growers plan for demand, the BA conducts surveys and communicates results to growers and suppliers.
Keys for Continued Growth
Before wrapping up the conference, Gatza and Pease mentioned a few of the reasons craft beer has been successful, which should continue if the craft beer industry is to sustain its rapid growth:
- Education for consumers, brewers, suppliers, and government representatives about what makes craft beer unique;
- Networking among industry groups to address issues and concerns;
- Demand from consumers for craft beer, specifically asking for it at bars, restaurants, and retailers;
- The ability of craft brewers to make real connections with their fans through social media, something the large breweries have not been able to achieve;
- The pride surrounding local producers of a premium product, which Gatza cited as being a large part of the success of craft brewers.
Clearly, the craft beer industry is speeding ahead and showing no signs of slowing down. I'll drink to that!
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The BA supplied slides that went with the presentation. Please feel free to contact me for a copy.