The Rise of Craft Beer

By Harrison Furman

The craft beer industry has reinvented itself over the last few years.

Before we go in-depth about the industry, we should understand what is considered a craft beer.

It is beer which is made at small breweries that make India Pale Ale (IPA), Pale Ale, Stouts, Pilsner, and many more. Their alcohol content is more then normal beers. They range from 5 percent to over 15 percent compared to the Big Three (Budweiser, Coors, and Miller), which are around 4.8 percent alcoholic.

The difference between craft beer and regular beer, like the Big Three, is the process of creating the beer in the beginning is the same, but the former add more grain or malt to raise the alcohol content while the beer is in vasts. Craft beer consists of added spices, fruit, and other flavors to change the flavor of the drink while the yeast and sugar blend to become alcohol, known as fermentation. Craft beers also add more yeast to have two or three fermentation processes to raise the alcohol content.

The craft beer industry is worth $23.5 billion, while the overall beer industry is valued at $108 billion. The former represents 21.75 percent of the overall beer market and continues to grow at about 9 percent annually.

As the craft beer industry grows, the Big Three brands diminish. Budweiser reported last quarter their beer sales fell 6.1 percent. Craft breweries grew rapidly from 5,300 breweries in 2016 to 6,000 breweries in 2017, an increase of 13.2 percent.

Some of the things the Big 3 has done is acquiring craft beer breweries in hopes of alleviating loses of the non-craft beers. In 2011, Budweiser bought out Goose Island and, in 2017, acquired Wicked Weed out of North Carolina.

This has prompted backlash and a campaign called “Take Craft Back” to crowdsource pledges of $213 billion. It has raised $3.8 million from under 12,000 donors, only .002 percent of their goal. The protest is that craft beer breweries should be able to grow and not be bought by the Big Three because of their own decline.

This is misguided. In the United States we believe in capitalism, so if companies have the money to purchase small breweries as an investment in their portfolio, they should be able to do so.

Rachel Murray of the Washington-based Atlas Brew Works briefly told The National Discourse the intricacies behind a craft brewery like her employer. “When you open a craft brewery it’s not an easy task,” she said. “There’s a lot of work that goes into keeping your brewery open so you can always see when someone comes in and offers you a lot of money, buy your brewery.”

The Big Three have the cash to grow by buying breweries to diversify their portfolio and market it more efficiently, compared to craft beer breweries. It will be interesting to see what happens in the next five years and if craft beer breweries maintain 9 percent growth.

However, Murray does not see Atlas Brew Works being added to any of the Big Three’s portfolio anytime soon. “I don’t think our team would ever decide to just cash out early,” she said.

“When you know you have a good product, you like to expand business yourself,” Murray elaborated. “You need some passionate people behind it that are willing to maybe make not as much money as they probably would if Budweiser was running things or handing us money to do something kind of nice to just be able to do that on your own. It’s not the passion to grow your own business without having to have corporate beer people come in and take over, tell you how to do things.”

Finally, the old model of beer selling has changed in recent years. Craft beer appeals to millennials to drink different beers from prior generations. Millennials would rather go to the bar with $20 and buy two craft beers than between three and five Big Three beers.

Moreover, the evolution of craft beer is generational, according to Murray. “I think there’s a lot of younger generations now [who] do have the ability to travel a lot of places and realize that there’s a lot [of] awesome more things out there,” she said. “There’s better taste, there’s better beer.”

“A lot of the big beer-producing countries [were] Germany [and] England,” she added. “America was nowhere near their level of beer [until] probably the last 20 years.”

She concluded, “So people are just waking up to the fact that there’s good taste out there. Things don’t have to be bland.”

About Harrison Furman 7 Articles
Harrison Furman is currently a senior financial analyst for MGM. He graduated from George Washington University with a bachelor's degree in Business Administration. He is studying to obtain his Masters in Business Administration from American University, which is expected to be completed by Spring 2019. Harrison was on the Board of Trustees for Atlantic Cape Community College and has served as an adjunct professor teaching business classes at the college.