The beer business is currently experiencing what is often referred to as a “premiumization” trend, or a period where beer lovers trade up across the beer aisle. This isn’t the first premiumization trend beer has seen, as the dominant brands of today rose to prominence in a similar trend—hence the reason those brands are often referred to as the “premium” category.

Higher Price Point Beers Acquire Share

The graph below shows these trends over time, using a combination of data from R.S. Weinberg, Beer Marketer’s Insights, and the Brewers Association to show the volume share of three segments of the beer market from 1950 to today. As you can see, the rise of the upper end of the beer market going on today isn’t that different from the trend from 1960-1980 where the current dominant brands took over from previous market leaders.

These trends would be even more accentuated if they were presented in value terms, where the higher price point brand share is growing even faster than in volume terms. For example, I pulled the IRI scan data for every beer brand for the full year of 2011 and 2016 YTD and the changes are remarkable. Although the dominant four brands still account for the plurality of volume and dollar sales, their contributions have rapidly declined as the market has shifted upward under their feet. The table below shows share of dollar sales in scan in those two years. In 2011, the largest four brands were 44.6% of dollar sales and all brands priced above them were 31.4%. By 2016, the leading four brands had declined to 37.0% of dollar sales whereas brands priced above them were now 7.5 share points larger, at 44.5% of total dollar sales YTD.

Source: IRI Group, MULO+C YTD (through 11-06-16)

Premiumization within Craft Beer

Premiumization doesn’t just occur across beer categories, but within them as well. My final chart shows the growth rate for BA-defined small and independent craft brewer brands based on average case equivalent prices from $26 to $65. To keep the data cleaner, I only included dollar price ranges that included at least 250,000 case equivalents–the size of the bubbles represents the case sales size for each range. For example, $30 means all of the craft brands with average case equivalent prices of $30-30.99. $50, $55, and $60 are five-dollar ranges (from $50-54.99, for instance).

Now one big caveat with this data is that comparing such tight price ranges makes analysis difficult–changes from one price point to another can reflect price changes, consumer preferences, brand quality, and more. Nevertheless, I think the overall picture is pretty clear: higher priced brands are growing faster. Some of this growth is certainly due to reverse causality: all things being equal, a beer with a strong brand can charge more than a comparable beer with a weaker brand, and separating the direction of those causal arrows isn’t simple. Some growth is also likely due to smaller bases as the price moves up, but the percentage growth trends are pretty clear, and the volumes from $35-$45 have become a significant portion of craft’s overall volume.

Source: BA Craft, IRI Group, MULO+C YTD (through 11-06-16)

As you can see on the graph, much of the struggle for craft as a category this year has occurred in the $25-$35 range, which is an increasingly crowded segment of the beer market. In addition to a growing number of craft brewer brands, that range includes the growing premium plus brands from the large brewers, newly acquired brewers that are being scaled up, many import brands, and more. Brands that can position themselves above that range have found more greenfield space and have been on average more successful (albeit at lower volumes), as seen by the aggregated figures.

What does this mean for craft brewers? I’d argue that both the recent data and the longer-run historical experience show you can’t take your brand’s premium positioning for granted, and must constantly work to add value to your brand through quality, consistency, flavor, marketing, and customer interaction. The premiumization wheel has already turned multiple times in the beer industry and will continue to turn in the future. What the next cycle will bring is anyone’s guess, but brewers who proactively recognize that challenge and focus on what they can control (quality and consistency, for instance) will be better positioned to ride the wave rather than watch it crash over them.