Brewdoku: Craft by the Numbers (Issue 30)

IRI Worldwide is a market research firm which tracks category-wide sales trends of beer sold in numerous retail outlets and then produces a monthly report of its findings. These findings can be used to provide realtime insight into the ever-changing beer marketplace, both craft and macro. To save you the spreadsheet trawling, we've pieced together the most important changes in the world of beer over the first quarter of 2017. These findings can help you make more informed choices as a consumer, and can help commercial brewers adapt to the marketplace. Sometimes, it's just fun to see what's hot and what's not. 

Before we begin, here are a few things to keep in mind – these numbers are on a national level, and may not represent specific states accurately. The numbers also do not represent beer sold on-premise, which would likely skew the numbers in the favor of smaller brewers, who are far more likely to see profits from onsite sales. They track sales of packaged beer only, from a few different sources, including convenience stores (think gas stations), a general "food" category (grocery stores, etc.), and a combined multi-outlet and convenience (MULC) store category (a combination of grocery, drug, Wal-Marts/Sam's Clubs, dollar stores and military stores, among others). We will focus on the MULC category. While not all-encompassing, it's a great, well-rounded resource. Let's look at total beer sales.

Right off the bat, it's clear that IPAs remain at the top of the heap. As of March 19, the IPA category's dollar sales are up 17.1 percent year to date. Craft brewers acquired by big beer have seen extraordinary growth in this category, which may be contributing to the gradual simmer of recent craft growth, which saw single-digit growth in 2016 (6 percent volume share) for the first time in many years. The consensus is that double-digit growth was unsustainable, and while the slowing of growth is not a cause for alarm, it should be taken into account when making business decisions.

There are a few reasons IPAs remain thunderous in general. For one, they're an extremely broad style, with a wide palette of flavor to paint onto your palate.

Brewers Association Chief Economist Bart Watson pointed out that “IPAs are white, black, and red. They’re American… English, Belgian, and German. They’re hazy, clear, and everything in between. They come with fruit now. They range from 4% (or less) to 12% (or more).” Watson continues, "If IPA were a single brand, it would be the eighth largest by dollar sales in IRI Group scan data [year to date].” 

Undoubtedly, big brewers are as hip to this fact as the rest of us, which explains why just about all of the growth from big beer's craft brands are coming from IPA's. They compete on all levels, and help turn the tables back on craft, which has been steadily pulling market share from the stalwart domestics with flavor and character. The numbers seem to indicate this strategy is working, at least in the short term. Elysian's Space Dust IPA has more than tripled its sales in the past year.

Just about all growth from big beer's craft brands are coming from IPA's. Elysian's Space Dust IPA has more than tripled its sales in the past year. (Photo Courtesy Elysian Brewing Co.)

Perhaps it's hard to keep track of who's "legit" in the craft world, and who's macro-backed but cloaked in micro-sheep's wool, but it's likely that the people buying macro-backed craft could care less. After all, if it tastes good, many don't care where it's coming from. If nothing else, it may be in the interest of craft brewers to pursue styles other than IPA, as variety and adaptation have always been strong points of the smaller, independent brewer.

There are a few categories showing strong growth that might be good places for microbrewers to jump into, if they haven't already. Golden Ales are up 47 percent in dollar sales year to date, and in the first quarter of 2017. This increase is a combination of more category entrants, more volume and more consumer interest, but the majority of growth is coming from newly introduced brands, indicating that craft beer palate is shifting in favor of this style.

In a similar vein, the "Other Pale Lagers" category, which encompasses a variety of less common lager styles, is up 15 percent year to date, with both new and existing brands showing growth.

From a bird's-eye view, the growth of these categories demonstrates that the lines between hop-heavy brews and smooth drinking lagers are being blurred. These styles, along with craft pilsners, account for the majority of craft growth outside of IPA's, and represent fertile ground for craft brewers. Just as big beer is honing in on IPA, craft can occupy the smooth, light-drinking ground commonly associated with big beer.

Of large craft brewers, the most notable changes have come at the expense of large craft brewers like Sierra Nevada and Sam Adams, all of which saw significant revenue loss. The companies are down 7.7 and 13.1 percents respectively. For the record, IRI does not place the same distinctions of what is and isn't craft as the Brewers Association. Therefore, brands such as Goose Island IPA (up almost 40 percent this quarter) are considered craft.

On the other hand, well-established, financially backed brands such as Lagunitas, Firestone Walker and Founders are up double digits – (13.7, 27.8 and 42 percents.) Stone and Bell's are showing similar upward trends, making a strong statement for savvy distribution, placement, and strategic growth. 

Variety and seasonal pack sales are down significantly, which could point to a heavier focus on building individual brands, and/or a shift in consumer interest and knowledge. From a firsthand perspective, variety packs aren't as exciting or varied as they used to be, often featuring "afterthought" beers that don't sell well individually, or multiple variations of IPA, rather than representing a balance of dark, light, strong and sessionable styles.

Though fruited varietals continue to bolster sales of many different styles, the flavored cola trend seems to be fizzling, marked by a near 70 percent dip in sales of Not Your Father's Root Beer, and similar numbers for AB's Best Damn Root Beer. We can all breathe a collective sigh of relief.

So what can we take from all of this? Craft brewers should keep experimenting, because variety can breed success, keeping in mind where consumer's tastes currently reside. New categories can see extreme, rapid growth, only to tail off just as quickly. Fruit and hops in places they may not be expected have potential, as the average palate has expanded, but variety must be rooted in reality.

Craft beer is still thriving, but it must continue to adapt to consumer interest, and to big beer strategies designed to own tap and shelf space. To this end, creative, authentic and agile production and marketing initiatives are the friend of the small brewer. Partner with a local sports team or arts venue. Build loyalty through consistency and humanity. Commune directly with your constituency. If it all works out, you might have a place in state politics (Hickenlooper, anyone?).

And for the consumer? Keep drinking what interests and excites you, because when it comes to number crunching, your wallet trumps words.