Is the beer market tapped out or headed for a comeback?
Beer is a staple of the global economy. In fact, it is the third most popular beverage (after water and tea). Nonetheless, it has not been immune from the ongoing pandemic.
Although alcohol consumption has increased over the past two years, global supply chain challenges have impacted almost every aspect of the business — including the availability of ingredients, packaging, staffing, and distribution. As a consequence, the number of breweries in the US — about 9,000 by some estimates — is not likely to increase much this year.
The craft beer segment, which has seen large increases over the past decade, has been particularly hard hit. Profits have fallen and many have been plagued with supply chain and distribution challenges. The independents were also impacted by a disastrous 2021 barley crop brought on by a drought and decreased acreage in production. As such, taking an independent local craft brewery national today is practically impossible.
Instead, many are selling to the larger national brands which — though boring — have diversified supply chains and economies of scale that enabled them to withstand recent market forces. They are also awash with cash.
Case in point: Anheuser-Busch, with $101 billion in global sales and marquee brands such as Budweiser, Stella Artois, and Beck’s, snapped up craft breweries like Devil’s Backbone, Elysian, and Goose Island.
So while I love a local brew, from an investment and business standpoint, the independent beer market isn’t what it was a few short years ago. But I fully expect it to bounce back. While supply chain and distribution challenges may be relatively short-term issues, a quality product at a reasonable price backed by good marketing is timeless.
In any language — Prost, Skol, or Cheers — there will always be a market for really good beer.
Danilo Diazgranados is an independent investor in the global food and wine, financial services, real estate, and the hospitality sectors.