In Response to “Peak Beer” A CBC Report

I recently read an Article titled “Peak beer? Why some are worried the craft-brewing craze could flood the market” on CBC yesterday and I wanted to take some time to address some of the issues that this article missed or did not fully explain correctly on the issue of “peak beer” in a Canadian context.

First off I want to address my opinion on the matter: Have we reached peak beer?

Yes and No… more so leaning towards no. Within the Canadian context, we are FAR from peak beer at this point. While some markets are starting to become more crowded (*Cough* Calgary *Cough*) I doubt we will reach actual peak beer for some time.

FOREWORD

For most of this article I will be referencing Alberta as it is my local market. I have worked in beer sales and marketing for the past 5 years in Alberta and I have a breadth of experience working for both Craft Brewers and for Molson Coors. I have also spent the last two years researching brewery saturation in this province as I am opening a brewery here next year. So with that out of the way let’s start…

IS THE ALBERTA MARKET CROWDED IN THE CONVENTIONAL SENSE?

Without a doubt this is a strong no; when compared to our US counterparts we are far from hitting saturation. When comparing Alberta to Colorado there is a staggering difference in the number of craft brewers. Alberta, as of 2016, had 56 brewers [1a] (or about 1.6 breweries to 100,000 people) compared to Colorado’s 230 [1b] (or about 4.1 to 100,000) with new breweries opening all the time in that highly flooded market! When Bart Watson (Chief Economist of the American Brewers Association) was asked about peak beer and and if there can ever be too many breweries he said [2]:

“Yes, but we haven’t seen any place that has really gotten there yet. Interestingly, the places with the most breweries are still the places we are seeing the most [brewing] license growth.”

So, if a market like Colorado’s, which is 250% more developed than our market, is still growing without a crash, then we can successfully say that our budding market has a way to go before it hits saturation in the most conventional sense.

MARKET PROTECTIONISM PLAYING A PART IN SATURATION

Another big factor about our Canadian beer market that make us even less prone to saturation when compared to our US counterparts is the protections placed within our markets from a Government level. Due to all the regional markets being governed by their own liquor control board (Alberta excluded), they have control over what is actually available in each market and tend to represent their own province while generally excluding other provinces’ products. It is, in fact, easier to sell into Europe or the USA then it is to sell into the Liquor Control Board of Ontario (from an Alberta brewers perspective). Alberta has created a grant program to counter this, as we are an open market and this gives local brewers an even playing ground as we do not have easy access to other provincial markets. This allows local brewers to compete on price while still allowing the external brewers to sell in our market. So, while one region in Canada might show signs of saturation (Ontario for instance), this does not mean saturation across the board, as products do not move evenly across the country and regionalism plays a big part of what is available to the average consumer.

DOMESTIC BEER SALES EXPLAINED

The article in question mentions that domestic beer sales are in decline by 1.6%, but that does not give a clear picture of what that means for the market. Within domestic beer sales there are actually 4 sub-categories:

• Premium (your Budweisers and Coors Lights of the wolrd),
• Value (Keystone and Old Mil),
• Above Premium (Shock Top, Rickards Red, and other craft “style” beers), and
• true Craft Beer.

So, while the domestic beer sales do see a decline it is actually a positive story for craft. In the summer of 2017 (from the data I can remember from SAP/NEILSON’S back when I worked at Molson/Coors), the trends were as follows:

• Value was significantly up
• Premium was significantly down
• Above-Premium was slightly down
• Craft was slightly up

In this overall picture, while domestic beer as a category was down (mostly due to increases in Ready to Drink Spirits and Wine sales), craft beer grew slightly and took a bigger pieces of the market share vs. previous years.

TRENDS OF SLOWING GROWTH WITHIN THE U.S.

Craft beer in the US has slowed its growth from previous years, but that is in comparison to a marked decline from macro breweries [3] in the US sales. This is showing that the craft beer market is making up more of the market share than ever before. Also, in previous years craft beer enjoyed year-over-year market growth of over 10% for many years in a row, so even though growth is slowing, it is still substantial.

More importantly than just the sales numbers is the retail dollar value of craft beer in the US, which increased by 10% over past years. This increase pushed craft beer’s market share by retail dollar value at just over 21% of the US beer market! This is a story of success for retailers and bar owners as people are buying higher priced beer over cheaper beer in quantity. Not only that, but craft beer is now at 12.3% market share in the US from 5.7% only 5 years ago [4].

NOW I WILL HAVE TO COME BACK AND FINISH THIS ARTICLE BUT I HAVE A FLOOR POUR AT ONE OF MY LOCAL LIQUOR STORES… Expect more later on tonight!