I've recently written some posts on the craft brewing industry relative to the macrobrewers like InBev-owned Anheuser Busch and MillerCoors. While the cheaper macro brews have been hurting as of late, the more expensive craft brews have seen remarkable growth. See here, here, here and here.
Here is another article focusing on the brewing industry along the Front Range of the Rocky Mountains, particularly the Boulder and Longmont, Co area. Like their counterparts in other parts of the country, they have seen their business, and their industry, expanding. Most of the numbers reported by the author, Alicia Wallace, for the industry are the same: overall beer sales in 2009 were down 2.2% and the sales of imported beer fell by 9.9%.
But Wallace notes:
Last year's performance by 1,508 craft brewers outpaced that of 2008, when 1,459 craft breweries reported increases of 10.1 percent by dollar sales and 5.9 percent by volume sales. Craft breweries also gained a little more market share to 6.9 percent in dollar sales and 4.3 percent in volume sales, the association said.
It's important to realize that growth rates depend on the size of the industry (or portion of the industry in this case) is a driver of growth rates. The craft brew market is small which is partly driving the large growth rates. But it's nice to see more brewers set up shop. And talk about a competitive market!
Wallace writes about the canned craft beer market. Most craft beers have been sold in bottles, partly due to a snob affect*. But that trend has been bucked of late by brands such as Oskar Blues in Lyons, Co. and Surly Brewing in the Twin Cities of Minnesota. The nice thing about canned beer is that you can take it to softball parks and other areas where cans are allowed but bottles aren't. That opens up another segment of the market for beer.
Compare all this to the American wine industry where the premium brands, such as those in the Napa valley, are in a world of hurt (note the implicit attention given to derived demand).
Napa winery and vineyard loan defaults rose fourfold to 18 in the 12 months through January, according to San Diego research firm MDA DataQuick. In the survey by Silicon Valley Bank, whose clients are mostly high-end West Coast wineries, 71 percent of respondents said credit is harder to get.
The recession has set in motion a "secular change," with budget-conscious consumers trading down to less expensive wines, said Peter Kaufman, managing partner at Pleasanton' Bacchus Capital Management LLC, a private-equity fund that provides mezzanine, or short-term, financing to wineries.
The dollar value of U.S. retail wine sales dropped 3.3 percent to $29 billion in 2009 after rising every year and almost tripling from 1991 through 2008, according to Gomberg, Fredrikson & Associates in Woodside. Though consumption increased 1.9 percent to 323 million cases last year, people are buying less-expensive labels, the industry consultant said in a report Friday.
Sales of super-premium bottles - priced more than $15 - declined 10 percent last year, and those over $30, defined as ultra-premium, fell at least 15 percent, according to Rabobank Nederland NV, the Netherlands bank that finances agriculture businesses. Napa and neighboring Sonoma County are the top U.S. producers of premium wine, the bank said.
Also, see this article in Business Week.
All this raises an interesting question. Why is it that the premium types of beer are selling like hot cakes at a time when premium wines are seeing their market contract? I imagine that there is an InBev backlash in the beer industry. In addition, the craft brew market is a younger market while the wine industry has reached some sort of maturity where the inefficient get weeded out. Are government subsidies given to wineries, which tend to prop up the weakest firms in the industry, part of the equation?A related question: how are the wineries in atypical locations, like Minnesota and Iowa, faring these days?
Lastly, some of the wineries north of San Francisco, like this one in the Russian River Valley, sit on land that was once used to grow hops for beer. Although it is easier said than done, don't be surprised if some of these struggling wineries can move some land to growing hops to help meet the demand for craft brews.
*Update: here's some interesting information on why craft brewers have, until recently, stayed away from canning their beers. Here's some information on why homebrewers don't can their beers (it's expensive).