Brewing trouble: Craft beer industry faces first downturn in over a decade

The craft beer industry has spent the last decade-plus in a state of economic boom, with new craft and microbreweries popping up left and right. In turn, the industry has seen exponential growth, but things are starting to regress. The craft beer industry last year experienced their first downturn in over a decade, with production dropping one percent, and sales dipping two percent.

Granted, sales have been stagnant for a few years, but they saw a decline for the first time in a while. But people are still drinking and going to bars. People still like to go out and socialize by having beers. So, why is the industry seeing such issues now?

Economist Hank Lewis says there is a variety of factors, the biggest of which is a bloated market.

"About 15 or 20 years ago, it was a trendy thing, and there was rapid expansion...to the point of oversaturation," he says.

You could name multiple craft breweries in Houston alone, and it is the same in every major city across the country. But it remains the first time, outside of the pandemic year of 2020, the industry has seen a decline since the numbers started being tracked.

Oversaturation might make you believe it has created competition, which might contribute. Which, it has, somewhat. But the real competition, according to Lewis, comes from the outside. That would be things like seltzers taking a large share of the market now. You could argue even that seltzers have become the craft beer of a decade ago. The new hip trend.

The overall economy plays a role as well. Production costs have gone up, and on the flip side, patrons are looking to save money, instead of spending it on an expensive craft beer.

This has led to what we will call 'mini mergers' happening across breweries, where they are even selling one another's product.

"They are doing this as a cost saving measure, and a self-preserving measure as well," he says.

There have also been people who simply do not want to drink beer because they want to lose weight. Which is a fair thing.

But as inflation continues, and more competition emerges, this trend of mini mergers is set to continue. It will take quite awhile to wring out the oversaturation, too.

"We will see people not serious about it or with bad financial backing going away, while the others surviving will have to form alliances and find ways to keep revenue coming in," he says. "It will settle down eventually, but it will take about a year before we see things stabilize again."