Craft-beer boom continues, but pie is getting sliced thinner

Pennsylvania is having no trouble attracting craft breweries.

The commonwealth leads the nation in craft-beer production with 3.7 million barrels per year. And it saw 60 new breweries open last year, second only to California and slightly ahead of Colorado and Ohio.

There are no signs of a slowdown, according to Bart Watson, chief economist for the Colorado-based Brewers Association, a national trade group for small and independent breweries. He spoke Thursday night to a crowd of 400 people at the Hershey Lodge, site of the Brewers of Pennsylvania’s annual Meeting of the Malts event.

In fact, he believes that the number of operating craft breweries in the U.S. — 7,346 — may jump to 10,000 in the next two years. New breweries are opening at a rate of three per day.

Existing breweries should be preparing their business models to adjust to more competition, he said. “This is where the hard work really begins for the craft industry.”

With 10,000 breweries, Watson said there would still be room for craft-beer producers to grow, as small and independents only account for 13.2 percent of beer sold.

The problem, he said, is there are more choices beyond beer, including wine and spirits. Cideries also continue to expand nationwide.

“There’s lots of opportunity out there, but it’s getting sliced up in more ways than ever before,” Watson said.

Small brewers nationwide generated one million additional barrels of beer in 2018 compared to 2017, pushing production to nearly 26 million barrels. He said half of the growth came from new breweries opening and scaling up in their first year.

The other 500,000 is split between other breweries, with many of those in just their third or fourth years and still figuring out their distribution plans and beer styles.

Half of the breweries in the country produce 400 barrels of beer or less in a year. A barrel represents 31 gallons of beer. To put that into context, Derry Township-based Troegs Brewing Co., the 27th largest craft brewery in the country, produces about 100,000 barrels per year.

“I think the challenge for everyone in the next two years isn’t just to take your slice of the pie, but try to grow the pie,” Watson said.

To do that, he said, craft brewery owners need to reach new communities and create unique products.

However, the overall beer market is losing market share to wine and spirits. Brewers also are contending with an aging population that drinks less beer.

But he also believes craft brewers could fare better than major domestic brands if millennials increase their beer consumption over the next decade.

Following Watson’s presentation, a panel of some of the biggest craft-brewery names in the country took the stage. They focused on product innovation and newer styles designed to attract a wider pool of drinkers.

Wendy Yuengling, one of four sisters now running D.G. Yuengling & Son in Pottsville, highlighted the company’s launch of its Golden Pilsner last year. Yuengling also is dabbling in new areas, including bourbon barrel-aged beers, as it looks to attract new drinkers.

Shaun O’Sullivan of 21st Amendment Brewery in California and Bryant Goulding of Rhinegeist Brewery in Ohio touted growing hybrid styles of fruit beers, including sparkling rose ales, that toe the line between beer and cider.

Goulding said Rhinegeist, which makes about 100 beers per year, now derives about 15 percent of its business from these lighter fruit-based beers.

“I think it piqued people’s curiosity,” Goulding said. Rhinegeist was just behind Troegs at No. 28 on the top craft brewers list. 21st Amendment was No. 26.

Brooklyn Brewery brewmaster Garrett Oliver said Bel Air Sour has become the New York-based brewery’s No. 2 beer after only a year on the market. It’s also one of the biggest sour beers in the country.

Brooklyn is No. 12 among the largest craft breweries in the country.

Oliver said every brewery has a “brewery religion,” or an idea of what styles they believe will make them successful. But, he added, every religion can change and that is happening in craft beer.

“Our religion as brewers is going to be challenged by all sorts of things,” he said.

John Trogner, co-owner of Troegs, said there is no silver bullet for growth. But Troegs, too, makes about 100 new beers a year and continues to push into fruity styles with cherries, nectarines and boysenberries, drawing on the strong fruit belt in Central Pennsylvania.

“I don’t think we did any searching for the non-beer consumer, but we’ve probably found some of those along the way,” he said.