Industry Diffusion: How the Smallest Craft Breweries are Driving Growth

The release of the top 50 brewing companies this week is a wonderful reason to toast the success of regional craft brewing companies. These breweries, which are the standard bearers of the craft movement, continue to grow, innovate and spread the message of fuller-flavored beer from independent breweries around the country.

That said, in many ways, the release of the top 50 may be less essential to the craft brewing movement than it once was. What do I mean by that? Well, when we travel back in time to 2005 (in craft beer, nine years ago is like the Cretaceous Period) the top 50 represented around 80% of total craft production. Since then, the top 50 has only grown in barrels, more than doubling from around 5 million barrels in 2005 to more than 10 million in 2013. So what’s your guess as to the percentage of the craft category that the top 50 represents today?

The answer may surprise you. In fact, the percentage of barrels produced by the top 50 has dropped sharply (Want the exact answer?  Check out The New Brewer May/June issue).  Given that they produced 5 million more barrels in 2013 than they did in 2005, this isn’t because the top 50 breweries are shrinking.  Rather, as the graph below shows, the growth of both the top 10 and the top 50 has come in a linear fashion [fun fact: in 2013, the collective production of the top 10 largest craft brewers was less annually than what Anheuser-Busch InBev produced globally in a week].  In contrast, the growth of the non-top 50 in recent years has been exponential. And although your last lecture on compound interest may have been a long time ago, let me refresh: exponential growth trumps linear.

 

 

I find this graph eye-popping for two reasons:

  1. The growth of craft breweries ranked 51+ is pretty insane (that’s a technical term)
  2. It hints that the best years of craft growth may in fact be ahead of us, rather than behind us

Together, what this suggests to me is that although the top 50 are a set of amazing, entrepreneurial companies, the power of 2700+ nimble, locally-based entrepreneurs is equally impressive. So, while the release of the top 50 breweries is a reason to toast the regional flag-bearers of the craft movement, equal consideration should be given in any toasts to the continued dynamism and growth of the sector’s smaller members.

Bart Watson, Chief Economist for the Brewers Association, is a stats geek and beer lover. He holds a PhD from the University of California, Berkeley, where in addition to his dissertation, he completed a comprehensive survey of Bay Area brewpubs one pint at a time.

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