This is part of Pour One Out, a series about what’s happening to America’s famous appetite for suds—and what’s taking its place.
America has fallen out of love with beer, the story goes. Sales are down. Market share is shrinking. Spirits-based drinks are ascendant. And for breweries, a storm is coming.
That story is incomplete, at the very least. A seismic shift really is occurring within the beer industry, which weathered a pandemic that kept Americans out of bars and, before that, withstood the Trump administration’s trade war that put a 10 percent tariff on aluminum imports, and which now faces intense competition from hard seltzers like White Claw and Truly. Today American consumers have the most diverse array of alcoholic options, from the most diverse array of producers, in the country’s history. And while this may be great news for drinkers—especially those who don’t like beer-flavored beer—it may not be for brewers.
The overall business picture of beer is that it’s in decline. But the decline is not a free fall. Beer is still, by far, the most widely consumed alcoholic beverage by volume. In fact, overall alcohol consumption had actually increased in the past couple of decades leading into 2021. So, when alcohol industry analysts say beer is falling, they’re talking about beer losing market share of retail dollars. In 2022 spirit sales amounted to 42.9 percent, and beer accounted for 41.2 percent—its first year in second place.
Beer has actually been losing market share for some time. From 2011 to 2021, for example, Anheuser-Busch InBev—the conglomerate behind Budweiser, Bud Light, Michelob, Stella Artois, and more—fell from 46.9 percent of the market to 38.6 percent. But now Americans’ changing taste in alcohol has reached an inflection point, and it isn’t the Budweiser bottle that’s sweating. If your brewery is very large—or, perhaps surprisingly, if it’s very small—you’ll likely find comfortable shelter from the storm coming for the beer market.
It’s the brewers in the middle—the craft-beer makers that have a regional or national footprint, the non-Buds, the non-Millers, what you probably think of as the good beers—that could get soaked.
Making sense of the beer business can be like understanding American class structure: There are fewer people at the top than at the bottom. And the middle class, which once saw dramatic growth, is on the verge of contraction. Twenty years ago, there were 1,485 breweries operating in the United States, according to the Brewers Association. In 2013 there were 3,162. Last year, there were 9,709—but market share for regional beers dropped.
If trends continue, giants like Anheuser-Busch InBev and Heineken will likely ride out the bad weather just fine—as they have since their founding in 1852 and 1864, respectively. While Heineken dipped from a 4 percent market share in 2011 to a 3.2 percent market share in 2021, the company has 300 brands in 190 countries across the world, and it’s adept at responding to trends in the industry. Last year, its 0.0 product even became America’s No. 1 nonalcoholic beer brand. On the other end of the spectrum, there are thousands of tiny breweries that had been making things work without growing much, and who probably weren’t searching for White Claw market share anyway.
It’s the middle stretch of the industry—the part that’s been growing dramatically for a generation—that has debt to service and disaster to fear. After a couple of decades of growth, the Brewers Association now cites industry data that says regional brewers—companies making between 15,000 and 6 million barrels annually—were down 2 percent in 2022.
Comparing regionals with “taproom breweries” illustrates the dynamics of beer’s bear market. The Brewers Association defines taproom breweries as companies that sell more than 25 percent of their beer on-site and don’t offer significant food services. In comparison, these small brewers were up 9 percent by volume in 2022 over 2021. And in fact, taproom brewers are the biggest segment of the beer industry in terms of their number, with 3,838 craft brewery taprooms operating last year, up from 3,702 in 2021. But they keep it small. Collectively, the taproom brewers brewed over 2 million barrels in 2022, whereas the regional brewers collectively brewed over 15 million barrels last year. “The problem for midsized brewers is that there’s a whole massive, long tail of tiny breweries that’s even more agile than them,” says Dave Infante, who writes Fingers, a newsletter about drinking.
Infante believes that the best place to be in beer currently is a smaller brewery where you can make 70 to 80 percent of your revenue from taproom sales or “on-site carry-away sales.” If you can make a living doing that for you and your three employees, “do that all fucking day long,” he says. “Don’t get any bigger. Ever.”
A regional brewer, in comparison, may be paying off loans because it bought a new brewhouse, a canning line, or more equipment to make more beer. That growth may have made sense last decade, when craft beer was growing by double digits year over year, but now, as growth slows, you’re competing with a bunch of other breweries—local, regional, national—for shelf space. You’re also competing with hard seltzer and ready-to-drink cocktails. If you don’t have the scale, as there are always larger breweries, and you don’t have the price point, as there are breweries who can work with beer distributors to price their products lower than yours, then you are in a bad situation. In D.C. and its exurbs, brewers are closing. Larger breweries in the mid-Atlantic, like Guinness Open Gate brewery in Maryland, and smaller breweries in Napa Valley, California, are downsizing, laying off workers, or closing altogether.
Infante’s reporting over the past few years has corroborated this argument: “If you’ve got a successful nano brewery brand and you have a community that likes your beer and is willing to show up to the taproom, you’ve got probably one of the most viable models for brewing beer in this country in 2023,” he told me. As he wrote last month, “The craft brewing business has slowed down, qualified buyers are few, and wobbly breweries are plenty. So it goes.”
But something strange is also going on within the beer industry. When experts say beer is facing competition from “beyond beer” drinks like hard seltzer, they’re in part saying that beer is competing with itself. Take, for example, the “stronger” or “imperial” seltzers, with higher alcohol-by-volume points, that are on the rise. Pabst makes one: Pabst Blue Ribbon Stronger Seltzer.
In addition to stronger hard seltzers, nonalcoholic drinks are gaining share too. Both the no-/low-alcohol category and the hard seltzer categories are now billion-dollar market segments. According to Brewers Association data, Athletic Brewing Company, which manufactures solely nonalcoholic “near beer,” is the sixth-largest craft brewer in the Northeast. It was founded in 2017.
Roughly 85 percent of the hard seltzer market is dominated by two brands: White Claw (owned by the company that produces Mike’s Hard Lemonade) and Truly (which is made by Boston Beer Company, the brewer of Samuel Adams). But hard seltzer may also be coming from a brewery a few miles from you. From Fort Myers Brewing Company’s Spyk’d Hard Seltzer to DC Brau Brewing Company’s Full Transparency Hard Seltzer to Two Roads Brewing Company’s H2Roads Hard Seltzer in Stratford, Connecticut, craft brewers are making boozy seltzer all over.
The lines that once separated beer, spirits, and wine have blurred. In addition to seltzers, brewers also make ranch water (a cocktail typically made using tequila), which can be made from a malt base, meaning that the brewer doesn’t need a distiller’s permit. Many states don’t allow distilled spirits to be sold in grocery or convenience stores. As a result of this, malt-based ranch water is pushing the regulations to the limits but staying within a brewery’s legal right to make products likely unforeseen when the state’s legislation was drafted.
These limits have driven some brewers to apply for and receive distiller’s licenses. One brewery owner who got a distiller’s license estimated that a $500,000 investment in equipment would have been necessary to successfully manufacture hard seltzer. Breweries that can make spirits also manufacture ready-to-drink cocktails—what the industry calls RTDs—so instead of just brewing beer, they can also put strawberry lemonade and vodka into cans.
One result of these changes is that new drinkers—young people—are accustomed to harder beverages than the youth of yesteryear. You may not remember your first alcoholic beverage as a 21-year-old, but it’s something that big alcohol companies pay close attention to.
“Twenty years ago, the entry-level alcohol point was a 4.2-percent-ABV domestic lager,” says Bryan Roth, an analyst for Feel Goods Company and editor of the alcohol-industry newsletter Sightlines+. “Five years ago, it was a 5-percent hard seltzer. … People are drinking higher-alcohol products as an entry point. The growth from craft beer right now is heavily coming from high-alcohol brands.”
Roth points to New Belgium Brewing Company’s high-alcohol brand Voodoo Ranger Imperial IPA, which is currently the No. 1 chain-selling IPA in the country. It’s the first time a double IPA, in this case a beer that is over 9 percent alcohol by volume, has held that distinction. New Belgium, which started in Colorado, bought a brewery in Virginia in March to keep up with demand for its Voodoo Ranger line of products.
So, some beer brands are making more harder beers. But others have just gone all in on spirits.
Take Boston Beer Company. Its brands of Truly Hard Seltzer, Angry Orchard Cider, and Twisted Tea (its most popular brand) are all fortifications around the beer company. Sam Adams has diversified to the point that it now makes less beer than hard tea.
The storm the beer industry faces is getting rougher—but beer is the storm. Some breweries will adapt, while some may get swept away. Some, like AB InBev, will let it wash right past them. And some—maybe the nano brewery down the street—will stay just small enough to escape its fury.
