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Heady prediction: Craft beer sales to double by 2020

By: Peter Rowe - Date: 12/06/2013

As a craft beer industry analyst, Charles Dickens was only half right. These are the best of times and the best of times.

At a one-day craft beer conference in San Diego last week, industry insiders agreed that the good times will continue to roll. There was widespread consensus that “craft” — ales and lagers made by traditional methods — will more than double its share of the beer market, from 7 to 15 percent, by 2020.

“The future is so bright,” said Danny Brager of The Nielsen Company, “I don’t see any reason for less than double-digit growth any time soon.”

That’s true even if these dramatic gains have been uneven, with these brews making few inroads among women and minorities. Success has also required brewers to tackle thorny financing and production problems when they’d rather be fine-tuning double IPAs.

But throughout the “Brewbound” conference, there was a heady sense that the honeymoon between craft beer and its fans is just beginning.

“The beer IQ of consumers is off the charts now,” said Dogfish Head founder Sam Calagione, “compared to where it was in the ‘90s.”

Willing and able

Dogfish Head opened on the Delaware coast 18 years ago. In craft beer terms, this was eons ago.

“That was before people had cool names for what were doing, like ‘nanobrewery,’” Calagione said. “Most people just said what we were doing was stupid.”

In 1995, there were about 500 American breweries, including the major industrial operations like Anheuser-Busch and Miller. Today, there are more than 2,700 — and another 1,700-plus in the planning stages.

To succeed, Calagione said, newcomers will have to make great beer consistently — and then, because so many breweries already do this, find ways to stand out in this crowd. Dogfish Head partnered with several apparel companies for a line of casual clothing, and now operates the Dogfish Inn. Escondido’s Stone, which already runs two large restaurants, also plans to open a boutique hotel.

Whether marketing hot sauces or spirits, Calagione warned, breweries must ensure that these products reflect their values. Every brewery, he said, needs a well-defined personality, a quality that differentiates it from its competitors.

Who's buying craft?

Men: 71.6 percent of sales

Affluent consumers: 58.9 percent report annual incomes of $75,000 or more

Millenials: 35.5 percent of sales are to people aged 21-34

Whites: 83 percent of sales

Source: The Nielsen Company

“Mine,” said Bill Warnke, who plans to open Bitter Brothers in San Diego next year, “will make beers that are food-oriented.”

Even in San Diego County, home to 80-plus breweries, there’s seems to be room for more beer. Many Americans, noted Nielsen’s Brager, have yet to embrace craft beer. While these brews are hot with young white males, they’re not catching on in certain communities — Hispanics, say, who make up nearly 15 percent of the national population and account for almost 17 percent of U.S. beer sales, but only 7 percent of craft sales.

Buyers of craft beer are diverse, at least, in their shopping habits. About 76 percent also buy wine, Nielsen reported, while 55 percent purchase spirits and 45 percent pick up imported beers.

Who's not buying craft?

Women: 28.4 percent of sales

Low-income consumers:
 11.7 percent of sales to people with annual incomes of $30,000 to $49.999

Greatest Generation: 8.6 percent of sales to people who are 65 or older

African-Americans: 2.7 percent of sales

Asian-Americans: 4.7 percent of sales

Hispanics: 7 percent of sales

Source: The Nielsen Company

And in a finding sure to please brewers, sales of the priciest beers are growing the fastest.

“The consumer,” Brager said, “seems to be more willing and able to spend more money on good beer.”

Lots of money

Making a great beer is a great accomplishment, but it doesn’t guarantee great success. New breweries, like Los Angeles’ Golden Road and San Diego’s Societe, need to acquire equipment, supplies and staff, a shopping list that often stretches them to their financial limits.

“We opened with $2,000 in the bank,” said Doug Constantiner, Societe’s co-owner. “That was pretty scary.”

Soon after Societe’s May 2012 debut, though, it turned a profit — which may make it an attractive target for larger brewing concerns. In October, Belgium’s Duvel Moortgat bought Kansas City craft brewer Boulevard for a reported $100 million.

“We’re just starting to see this sort of consolidation,” said Craig Farlie, an investment banker from Florida. “There’s a lot of money to be made here.”

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