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The Global Craft Beer “Revolution” Properly Dissected

Is it really a craft revolution or is the market just returning to an equilibrium state consumers were always happiest with?

Is it really a craft revolution or is the market just returning to an equilibrium state consumers were always happiest with?

The press is constantly abuzz with news of the great craft beer revolution.    In late 2014, the big scoop was that craft beer had passed up Budweiser, America’s third most popular brew. Let’s ignore that this was the sum total of everycraft beer produced in the USA compared to just a single beer.   The Brewer’s Association in the USA reported in 2015 that there were 3,739 breweries in operation, a jump of 699 breweries in just the prior year, with another 1,755 breweries planned for the coming year. 

For the same year, the UK could count 1,424 breweries, the highest since the 1930’s, a jump of 204 breweries from the previous year. This was more than 10% growth for three years running.   That’s a total of over 11,000 real ales, which puts the UK in the position of having the most breweries per capita and the greatest range of beers on the planet. 

France isn’t thought of as a beer brewing country. In the 1970’s, France had well below 100 breweries. Presently, it has more than 500. In the mid 2000’s, Paris had zero craft breweries. Now it has a dozen and eight specialty beer shops.

How about Australia, a land composed of big drinkers (97 liters per capita annually) but tipplers of Fosters, Tooheys, and Victoria Bitter? There are about 150 craft breweries in Australia, most of them in the state of Victoria. The Warners at the Bay and Bottle-O bottleshops sell over 1,000 different beers from 40 different countries.     

New Zealand’s picture is even more robust.  Craft beer grew by 40% between 2014 and 2015 and comprised 111 craft brewers, two-thirds the amount of Australia with only a fifth of the population and twenty-three times Japan’s count per capita. The number of breweries in Wellington more than doubled between 2010 and 2013. Exports of New Zealand beer to Asia have doubled in the last two years.

Ireland? Microbreweries more than tripled since 2012 to 63, 48 of them producing beer right on their own premises. Production in 2015 alone increased by more than 70%. 

Even India, a country which doesn’t even consume 2 liters of beer per capita, has shown an interest in microbrewing. The IT hub of Bangalore has always been the country’s pub capital and today Bangalore has almost 20 brewpubs/microbreweries, kicked off by the Biere Club in 2010.  A boom is all relative.  39 craft breweries are classified as a boom in India where market leader Kingfisher holds 50% of the market. In Jordan, a country comprised of 97% Muslims, a ream of taxes and obstacles to brewing licenses and dominated by Amstel  for over 50 years, all it takes is one microbrewery, Carakale. 

Yeast expert Alltech conducted a a survey on global craft brewing in 2015 and found that there were more than 10,000 craft breweries worldwide. North America and Europe, with roughly an equal number, make up 86% of the total. The Asia-Pacific region has about 6%, a third of those located in Japan. 

The word ‘revolution’ has been tossed around so often with the phrase ‘craft beer’ that it’s almost a cliché by now. How revolutionary is craft beer really when the entire world is blindly embracing it?

Britain’s Campaign For Real Ale (CAMRA) was established in 1971 well before any craft beer revolution was underway anywhere. CAMRA’s initial aims were simple.  They were against massive brewery consolidation and the homogenization of beer. This trend wasn’t unique to Britain.  In 1887, the United States had 2,011 breweries. This dropped to a low of 89 in 1979.

We could pick any brewing country at random and see a dwindling of nationwide breweries over the progression of the twentieth century, with an upturn only starting in the 1980’s to 2000’s, depending on how small business and beer friendly the nation is. 

We needn’t restrict this topic to beer. We could be talking about automakers. Between 1896 and 1930, there were over 1,800 automobile manufacturers in the United States. Including minor automakers, there are less than 40 today.   Four companies control over 80% of the steer slaughtered annually in the USA.  Almost two-thirds of worldwide PC’s are shipped by just five companies. Consumers prefer this consolidation more times than they don’t, as consolidation leads to economies of scale and lower prices. 

This has happened in the beer industry, too.  When there were more breweries and more styles in a more crowded marketplace, no one beer could sell 16m barrels like Budweiser managed to do in 2013 or 50m barrels in 1988. Beer could only reach economies of scale by there being fewer breweries manufacturing fewer styles and selling more of each unit. Consumers never demanded this. The logistics of capitalism do – cut manufacturing costs and increase profits. 

At some point, the beer industry had consolidated past the point of optimal consumer satisfaction.  Prices were low, but there were too few styles left and too few brands to choose from. 

The average consumer didn’t know this yet, of course.  You don’t know what you don’t know.  Mr. Consumer just continued selecting cluelessly among the few beers he was offered. At some point – around 1975-78 in the USA, a bit later in the UK, individuals disillusioned with the taste of the current slate, motivated by a tasty beer they may have tried in Belgium or Germany or a remote brewpub in a small town, made up their minds to setup a small brewery to brew the kinds of beers they personally wanted to drink. Which is how consumers, over the past few decades, eventually re-learned what they’d already known a hundred years ago.  Some consolidation is good; too much bores people to tears.    

While sales might be declining in all countries in the macro beer segment, most consumers still prefer these cheap beers with simple taste profiles. Craft beer only constitutes 2% of the beer market in New Zealand, 2.5% in the UK, 3.5% in Australia, and 8% in the US.  India’s and Jordan’s craft beer percentage is too small to bother counting.

Some revolutions are nothing grander than market corrections.  

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