By Anne Baye Ericksen, Contributing Editor
This past July, the Brewers Association announced it is issuing a certified independent craft brewer label seal, available to qualified producers. The upside-down beer bottle image symbolizes the upending effect the craft sector has had on the packaged beer market, and the fact that the product has been brewed by a smaller producer and possesses all the characteristics associated with craft blends.
The hope was the marker would stimulate more consumer awareness about micro- and regional brewers.
“This seal is a simple way to provide that clarity—now they know what’s been brewed small and certified independent,” said Bob Pease, Brewers Association president and CEO, at the time.
In a time when U.S. consumers are becoming even savvier and choosier when it comes to craft beer, this independent designation also could benefit convenience stores in that customers can more quickly distinguish craft beers among the national and import labels also housed on shelves and in coolers.
As the number of c-stores that continue to stock local and regional brews continues to grow, retailers are betting that the robust demand for craft offerings in the convenience channel won’t go flat anytime soon.
“Microbrews make up about 14% of our overall beer sales. They were at about 12% this time last year,” said Reilly Musser, vice president of marketing and merchandising for Robinson Oil Corp. The Santa Clara, Calif.-based company owns and operates 34 Rotten Robbie c-stores in California.
Because most microbreweries can’t compete with the national advertising abilities of Anheuser-Busch, MillerCoors and Pabst Brewing Co., they rely on word of mouth and a vibrant social media community. However, Musser makes sure she markets craft labels as heavily as other beers.
“We promote three types each month on our window signage: a premium beer (Bud/Coors) because that is still a major part of our sales, a microbrew and an import, because those are growing like crazy,” Musser said.
Total sales of craft beer in U.S. convenience stores for the 52 weeks ending July 16 registered approximately $1.1 billion, per Information Resources Inc. (IRI), a Chicago-based market research firm. That represents a 9.2% increase compared with the same period in 2016. Also, the number of craft beer case sales in c-stores climbed nearly 7%.
GROWING LOCAL ROOTS
Over the years, the craft beer sector has narrowed the sales gap between microbreweries and the major producers that have dominated the category for generations. In 2011, packaged craft beer represented less than 6% of the market share by volume. That more than doubled during the past six years. In 2016, packaged craft beer accounted for 12% of the total beer volume in the U.S., according to the “National Beer Sales & Production Growth” report released by the Brewers Association. In fact, last year marked a double-digit increase for all craft beer, including import craft labels.
“Craft has certainly grown and gained share. It’s been the growth engine of the beer category,” said Bart Watson, chief economist for the Brewers Association.
“The first wave of the craft beer trend was in the early to mid-‘80s, then in the late ‘90s, and every day since 2003. There’s been a huge increase of the amount of our shelf space going toward craft beer,” said Chris Groves, creative director and certified cicerone for Consumers Beverages Inc. The Buffalo, N.Y.-based beer/convenience retailer operates 17 stores throughout the state.
Retailers and analysts agree this current craze parallels the food movement that has focused on farm-to-table and greater consumer awareness of food sources.
“I do think the better-for-you trend is part of it. Consumers like seeing where their products are produced,” said Watson.
Despite this indie reputation, the craft element has taken charge of the industry. In 2016, there were 5,234 craft breweries in operation throughout the country. This represents 99% of all U.S. breweries. What’s more, the number of operating breweries increased last year by 16.6%.
“In the past three years, Buffalo has gone from five breweries to 25 breweries,” said Groves. “Places like Portland, Ore., Ashville, N.C., and Austin, Texas, I believe, are cities that have 50% of beer sold in the city produced by breweries located in the city. When you compare a city like that to us, with our population, there’s still a lot of room for growth here.”
Even within the craft sector, however, there’s distinction between local and regional. The Brewers Association indicates that the majority of craft beers is produced by microbreweries, with a total of 3,132, and another 1,916 craft brewpubs; whereas there are less than 200 regional craft breweries.
What’s not clear is if microbrewers remain localized because their size prohibits expanding distribution infrastructure and manufacturing capabilities, or if it’s more of a deliberate choice to maintain a local, indie profile.
“Three to five years ago, the regional beers were growing rapidly, while today it is more local. The craft beer market has become more local with tap rooms gaining greater momentum,” said Brian Sudano, managing partner for the Beverage Marketing Corp.
“San Diego may be the Napa Valley of craft beer,” he continued. “However, even beer from the San Diego area is not traveling outside of local markets as well as five years ago, but better than other regions.”
After several years of the craft beer segment exceeding growth expectations, some analysts caution there could be a slowdown soon due to some areas reaching market saturation as well as larger breweries attempting to strengthen their presence by acquiring smaller operations.
“National brewers are getting into the fuller flavor space. We’ve seen a wave of acquisitions over the last two or three years,” said Watson.
Still, Watson said the convenience store channel remains primed to profit from the current craft trend.
“C-stores have had a lower share of craft beer sales, but they’re experiencing more tremendous growth than other channels right now,” said Watson. “Craft beers have typically been in 12- or 22-ounce bottles, but we’re seeing them move into cans and different sizes. That makes it easier for c-stores to sell them. Also, craft beer is a great fit for small, local chains.”
AN EDUCATED ADVANTAGE
This time of year, craft beer promotions typically focus on Oktoberfest blends or introducing winter ales. While seasonal brews continue to be very popular, seasonality seems to be falling off as a key selling point. Rather, unique flavor blends are what continue to lure in customers all year round. Nielsen research reveals that nearly half (48%) of craft beer customers associate the segment with unique flavors, and an equal percentage identify it with featuring high-quality ingredients.
“I think consumers want to try new beers and want good quality beer. It’s kind of like wine; consumers are constantly trying new varieties and having fun doing it,” said Musser.
Unique flavor combinations, however, present stores an opportunity to connect with customers. Of course, that requires a deeper knowledge of the products. Groves often sends his staff to breweries so they can become familiar with the process and ingredients, so they can then confidently share that expertise with consumers.
“You have to educate yourself to stay in tune with customer wants and needs,” Groves said. “Every brewery has some kind of educational piece. After all, part of the craft movement is about educating people. And if you educate customers, they will be lifetime customers.”