California Craft Brewing: Future and Challenges Bart Watson, PhD bart@brewersassociation.org Chief Economist Brewers Association
Zeroing in on Industry Challenges 1. All Beverage Alcohol 2. All Beer 3. Craft Competition 4. What s Next
The Beverage Alcohol Market 3
1939 1945 1947 1949 195 1951 1952 1957 1958 196 1966 1969 1974 1979 1981 1985 1988 199 1994 1996 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 Percent who said Yes 8 Alcohol Consumption Over Time Do You Have Occasion to Drink Alcohol? 7 6 5 4 3 2 1 Source: Gallup Poll, 216.
U.S. Population By Single Age, 215 Hispanic and Non-Hispanic 5,, 4,5, 4,, 3,5, 3,, 2,5, 2,, 1,5, 1,, 5, 2 4 6 8 1 12 14 16 18 2 22 24 26 28 3 32 34 36 38 4 42 44 46 48 5 52 54 56 58 6 62 64 66 68 7 72 74 76 78 8 82 84 U.S. Hispanic U.S. Non-Hispanic Source: U.S. Census and NBWA 215.
2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 An Aging U.S. Population 2 to 215 74% 73% 73% 72% 72% 71% 71% 7% 7% 69% 69% 68% LDA Share 38. 37.5 37. 36.5 36. 35.5 35. 34.5 34. Median Age Source: U.S. Census Bureau (LDA = Legal Drinking Age Population)
Index Base = 1 Differences in Alcohol Consumption Across Generations in 215 13 12 11 1 9 8 7 6 5 4 Gen Y (21-29) Gen X (3-49) Boomers (5-69) Silent (7+) Liquor Past 7 Days Beer in Past 7 Days Wine Past 7 Days Source: Scarborough Research, 215
Gallons of Ethanol Per Capita (LDA) 3. Per Capita Consumption of Ethanol U.S. from 2 to 215 ABV for Beer 4.6%, Wine 11.5% Spirits 38% 2.5 2. 1.5 1..5-2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 Beer Wine Spirits
Pennsylvania Colorado Oregon Massachusetts Idaho Vermont Washington Montana Nebraska Maine Wisconsin New Jersey New Hampshire Michigan New Mexico Wyoming Connecticut Delaware California Iowa Hawaii Minnesota Illinois Ohio Georgia Arizona District of Columbia Virginia West Virginia New York Indiana Maryland Utah Missouri North Carolina South Dakota North Dakota Rhode Island Alaska Texas Tennessee Nevada Florida Kansas Kentucky Mississippi South Carolina Oklahoma Alabama Louisiana Arkansas 1% Craft Brewer/Beer Share of Beverage Alcohol By State 9% 8% 7% 6% 5% 4% 3% 2% 1% % Craft Other Beer Other Bev Alc
The Beer Market & Craft Brewing 1
1873 1876 1879 1882 1885 1888 1891 1894 1897 19 193 196 199 1912 1915 1918 1932 1935 1938 1941 1944 1947 195 1953 1956 1959 1962 1965 1968 1971 1974 1977 198 1983 1986 1989 1992 1995 1998 21 24 27 21 213 4,5 Number of Breweries, 1873-215 Sources: Brewers Association and Beer Institute 4, 3,5 3, 2,5 2, 1,5 1, 5
Domestic Imports Craft US Shipments All figures in s of bbls (1 bbl = 31 gallons) 1981 177,34 5,221 35 182,29 215 149,8 31,245 24,5 25,545 Change -27,234 26,24 24,465 23,255
5, Brewers Association Active Breweries, June 211-June 216 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5
1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 7, Breweries and Brewery Permits, 1995-215 6, 5, 4, 3, 2, 1,
12, Wineries in the US, 1993-214 1, 8, 6, 4, 2,
1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 35, Specialty Coffee Locations in the U.S., 1993-216 3, 25, 2, 15, 1, 5,
~6 active breweries 7+ State licenses ~8 Federal licenses
TTB Permitted Brewery Counts 6,8 as of December 215 State Count State Count State Count Alabama 3 Kentucky 48 North Dakota 11 Alaska 35 Louisiana 25 Ohio 187 Arizona 91 Maine 84 Oklahoma 21 Arkansas 29 Maryland 73 Oregon 281 California 788 Massachusetts 124 Pennsylvania 278 Colorado 352 Michigan 316 Rhode Island 15 Connecticut 59 Minnesota 142 South Carolina 51 Delaware 21 Mississippi 14 South Dakota 19 DC 13 Missouri 9 Tennessee 88 Florida 25 Montana 74 Texas 22 Georgia 54 Nebraska 39 Utah 29 Hawaii 26 Nevada 39 Vermont 66 Idaho 57 New Hampshire 63 Virginia 155 Illinois 21 New Jersey 71 Washington 383 Indiana 151 New Mexico 71 West Virginia 17 Iowa 71 New York 329 Wisconsin 189 Kansas 37 North Carolina 27 Wyoming 32 Source: NBWA and TTB, 216.
Total Industry Volumes By Size CY 215 Brewers By Size of Tax Paid Withdraws 215 215 Share Share Volume in Barrels (31 gallons) Brewery Count Tax Paid Volume Brewery Count Tax Paid Volume <1 566 94,127 11.7% % 1-1, 3,97 772,833 64.2%.4% 1,1-7,5 812 1,9,256 16.8% 1.1% Small Breweries 4,475 2,767,216 92.8% 1.6% 7,51-15, 122 1,95,981 2.5%.6% 15,1-3, 7 1,31,825 1.5%.7% 3,1-6, 54 2,11,725 1.1% 1.2% Medium Breweries 246 4,517,531 5.1% 2.6% 6,1-1, 21 1,393,286.4%.8% 1,1-1,999,999 61 18,918,396 1.3% 1.8% Large Breweies 82 2,311,682 1.7% 11.6% 2,, - 6,, 6 23,12,416.1% 13.2% 6,,1 plus 15 124,544,161.3% 71.1% Extra Large Breweries 21 147,646,577.4% 84.3% Total Breweries 4,824 175,243,6 1.% 1.% Source: U.S. TTB, April 216.
3 25 # of CA Licenses by Size (215 data) 259 2 15 1 97 122 18 5 39 1 to 1 11 to 1 11 to 1 1 to 1K 27 1K to 1K 6 4 1K to 1M 1M+
3 25 2 15 1 5 # of CA Licenses, and % of Production by Size 97 39 122 1 to 1 11 to 1 259 11 to 1 18 1 to 1K 27 1K to 1K 6 4 1K to 1M 1M+ 1.9.8.7.6.5.4.3.2.1
Within 1 miles = 89.6% Within 5 miles = 78.7% Within 1 mile = 21.6%
CA as Many States Can t think of CA as a single market San Diego as OR/CO Central valley as NM or TX LA/Bay Area hard to compare Northern CA as rural parts of West
CA Markets for Craft Sales IRI defined markets Dollar Share Change vs YA Los Angeles, CA Food 15.5% 1.8% Los Angeles, CA - Multi Outlet + Conv 1.9% 1.2% Sacramento, CA Food 37.9% 2.4% Sacramento, CA - Multi Outlet + Conv 23.3% 1.7% San Diego, CA Food 37.% 3.5% San Diego, CA - Multi Outlet + Conv 25.9% 2.4% San Francisco/Oakland, CA Food 35.6% 1.1% San Francisco/Oakland, CA - Multi Outlet + Conv 25.5%.9% Total 4 Markets Food 23.5% 2.% Total 4 Markets - Multi Outlet + Conv 16.3% 1.4% Source: IRI InfoScan IRI FOOD Markets, YTD ending August 28, 216
How important is local in purchase decisions? 8 7 6 5 67 71 Nielsen Surveys: Sum of very/somewhat important Total 21+ 21-34 53 45 4 34 34 3 2 23 25 1 Craft Beer Wine Spirits Source: Nielsen Quick Query Omnibus Survey, 12-17, 215. (Base: LDA consumers who drink at least several times per year)
Broader BA Craft Source: IRI Group (216), MULO+C through 8/7/16 CA as a % of Volume Growth Growth Rate In CA Not in CA Overall CA Breweries 11.6% 12.9% -1.1% 5.4% Non-CA -.8% -1.8% 7.8% 7.5% CA Breweries 67.3% 16.3% 7.7% 12.% Non-CA 1.8% 4.6% 9.% 8.8%
1 9 % Sold in CA, by % of Breweries 94.7 8 7 6 5 213 214 215 4 3 2 1-9.9 1-19.9 2-29.9 3-39.9 4-49.9 5-59.9 6-69.9 7-79.9 8-89.9 9-99.9 1
Reported Gallons Reported Gallons Reported Gallons Reported Gallons 4,, 3,5, 3,, 2,5, 2,, 1,5, 1,, 5, 9, 8, 7, 6, 5, 4, 3, 2, 1, Changing On Premise Landscape Brew Pubs and Tap Rooms - DTC California 213 214 215 Texas 213 214 215 1,8, 1,6, 1,4, 1,2, 1,, 8, 6, 4, 2, 7, 6, 5, 4, 3, 2, 1, Florida 213 214 215 Iowa 213 214 215
Changing On Premise Landscape % Premises Use (213-215).4.35.3 Still 38% with 8%+ premises use.25.2.15.1.5 213 214 215 % More than, less than 1% 1%
Bbls (215) On-Site vs Outside the Brewery Sales By Brewery Type 25,, 22,538,834 2,, 18,854,78 15,, Onsite Distribution 1,, 5,, 3,32,63 1,75, 9, 381,991 625, 225, Brewpub Microbrewery Regional Total Craft
25,, 2,, 15,, 1,, 5,, TTB Data, Premises Use vs Kegs 6.3% 8.3% 1.8% 2.5% 25 21 215 215 (adjusted) Premises Kegs Premises Use Share 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% %
A Changing Market 33
Growth Rate (%), Comparable Base 2 18 16 Annual and Average Growth Rate, 27-216 (Mid-Year) 15 18 18 14 12 12 12 13 13 1 8 6 6 7 8 4 2 27 28 29 21 211 212 213 214 215 216 (MY)
3,5, Craft Barrel Domestic Barrel Additions, 27-216 3,, 2,5, 2,, 1,5, 1,, 5, 27 28 29 21 211 212 213 214 215 216
2, Average Barrels Added, Production Breweries 1,8 1,6 1,4 1,2 1, 8 6 4 2 27 28 29 21 211 212 213 214 215 216
Styles (aka the IPA Show) 37
3. IPA Volume Share of Craft, 211-215 ~2X 211 25. 2. 15. 1. 5.. 211 212 213 214 215
25,, 2,, IPA Cases, IRI MULO+C, 211-215 ~4X 211 15,, 1,, 5,, 211 212 213 214 215
IPA vs Non-IPA Growth, 211-215, IRI MULO+C IPA Growth Non-IPA Growth 36% of Volume Growth
IPA vs Non-IPA Growth, 216 YTD, IRI MULO+C 95% of Volume Growth IPA Growth Non-IPA Growth
4,, Volume Change, IRI MULO+C YTD (7-31-16) 3,5, 3,, 2,5, 2,, 1,5, 1,, 5, -5, -1,, -1,5, Source: IRI (216)
Craft IPA Sub-Styles Overview Total US Food Channel Fruit/Veggie/Spiced IPA s remain the fastest growing IPA Sub-Style. Dollar Sales Dollar Sales % Chg YA Dollar Share of Craft IPA Dollar Share Chg YA American Imperial Session Fruit/Veggie/Spiced English Belgian White Other Black $6,64,31 $23,256,891 $22,86,69 $1,248,716 $6,793,466 $1,987,378 $1,383,763 $25,44,963 15.8% 61.8% -3.7% 6.9% 18.2% -2.7% 32.4% 7.%.5% 662.8% 6.9% 5.8% 55.3% 3.1%.6% 6.7% 2.% -.3% 33.3%.6%.% -15.6%.4% -.2% Source: IRI InfoScan Total US FOOD, YTD ending July 1, 216
Questions? Bart Watson, PhD bart@brewersassociation.org Chief Economist Brewers Association