Craft Beer Industry Growth

At CO2Meter, we’ve seen an ever-increasing number of craft brewers contacting us for CO2 safety alarms for use in U.S. micro-breweries. We shipped dozens of our RAD-0102 Remote CO2 Storage Safety alarms to brewers in 2015, and expect that trend to continue in 2016. According to the Brewers Association craft beer industry group, there are more than 3,400 breweries in the U.S.

While the logic of protecting brewery workers and customers from accidental exposure to high levels of CO2 makes sense, it got us wondering how the trend in micro-breweries in the United States got started. Fortunately, a recent paper titled, “Craft Beer in the United States: History, Numbers and Geography” published by the Journal of Wine Economics helped to explain this trend.

The paper starts out by noting that the number of craft brewers today closely resembles the product differentiation and fragmentation found in the wine industry. They argue the reasons for this increase in craft breweries include:

  • Demographics: Craft breweries tended to start in states with higher incomes, a denser population, and a greater number of young adults. This trend began in California, where micro-breweries like Anchor Steam, New Albion and Sierra Nevada created upscale products designed to compete with expensive imported beers.
  • Market Opportunity: The paper states that “The homogenization of big beer provoked some consumers to search for new styles and taste signatures in beer.” This trend can be seen as a response to light beer, which dominates the sales of the largest U.S. breweries.
  • Regulatory: “State governments can influence craft brewer production and location by affecting the cost of doing business through excise taxes and state regulations,” the paper argues. In addition, in 1978, Congress legalized home beer brewing, and reduced the levy on small brewers to $7.00/barrel from $9.00/barrel for the first 60,000 barrels produced by breweries with less than 2 million barrels in total annual sales.

While craft beer’s market share continues to grow, it is still only a small portion of the industry. In 2014, nine companies controlled 90% of all beer sold in the U.S. According to MarketWatch, 1 in 5 beers sold in the U.S. is a Bud Light.

If you're a craft beer drinker, you should take a few minutes to read this paper. Although it is a scholarly article, it reads more like an early history of the industry, and it will make you appreciate how much effort (and a bit of luck) went into the craft-brewing industry we all enjoy today.

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