A Glance at the Beer Industry in 2024

The global beer market is experiencing significant growth, with an estimated expansion of $148.43 billion between 2024 and 2028. According to Technavio, this growth corresponds to a compound annual growth rate (CAGR) of 3.72% during the period. Key factors driving this surge include increasing demand in emerging markets, a global preference for premium and craft beers, and the ongoing consolidation of major players through mergers and acquisitions.

The Growth Trends

Emerging economies are fueling much of this growth, as rising disposable incomes and urbanization boost beer consumption. Meanwhile, premiumization—the tendency for consumers to spend more on high-quality or craft beers—is becoming a defining trend in developed markets. Consumers are drawn to innovative flavors, and craft breweries, in particular, are leading the way with their experimental offerings, which are especially appealing to younger demographics like millennials and Gen Z.

In North America, craft beer continues to gain traction despite a slight dip in production. In 2023, the U.S. craft beer market saw a 1% decline in volume, but this is juxtaposed against a 5.1% overall decline in the beer industry, illustrating that craft beer is maintaining, and even slightly growing, its market share. The U.S. market's resilience is also reflected in the growth of non-alcoholic and low-alcohol beer segments, which saw a 30% increase in 2023 as health-conscious consumers sought alternatives.

Globally, new product launches, such as Heineken Silver and Carlsberg's 0.0% alcohol offerings, are capitalizing on the expanding low-alcohol beer trend, particularly in Europe. Additionally, the rise of e-commerce and online retailing for beer is making it easier for consumers to access a broader range of products, further fueling market growth.

The Challenges

Despite these promising growth trends, the beer industry faces several challenges. Regulatory frameworks around the world are becoming more stringent, particularly with regard to production practices and alcohol content labeling. In markets such as the U.S., regulations like the Food Safety Modernization Act (FSMA) impose rigorous standards that can lead to hefty fines for non-compliance.

Environmental sustainability is also a growing concern. Breweries are increasingly adopting eco-friendly practices, including recycling initiatives and the reduction of carbon footprints. However, the shift to sustainable packaging, such as biodegradable materials, is costly and could strain profitability, particularly for smaller breweries.

The economic environment adds another layer of complexity. Inflation and rising operational costs are squeezing margins, especially for small and medium-sized breweries. Additionally, the beer industry faces stiff competition from alternative alcoholic beverages, such as ready-to-drink (RTD) cocktails, which are rapidly gaining popularity among younger consumers. This has prompted many breweries to diversify their offerings, exploring adjacent categories like hard seltzers and alcoholic teas.

The global beer industry is navigating a dynamic landscape, with both significant growth opportunities and considerable challenges ahead. The rise in premium and craft beer segments highlights evolving consumer preferences, while sustainability and regulation remain pivotal issues for the future. As the market continues to mature, especially in North America and Europe, breweries that successfully adapt to these changing conditions will likely lead the next phase of industry development.

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Headwinds for the National Market

Colorado's craft beer industry has long been a hallmark of the state's identity, boasting one of the largest craft beer markets in the U.S. With the fifth most breweries per capita and a $2.4 billion economic impact, the state's beer scene has been thriving for years. Yet, despite this historical success, recent trends suggest the industry is hitting a rough patch.

Nationwide, beer sales dipped by about 1% in 2023, but Colorado's craft beer market was hit even harder, with a 6% decline—the worst on record since the Brewers Association began tracking data in the late 1970s. This downturn may seem minor, but it signals potential trouble for smaller craft breweries that have long been a staple of Colorado's brewing landscape. Unlike the corporate giants, which can quickly adapt to market shifts, smaller players are feeling the brunt of rising costs and changing consumer preferences.

The Challenges of a Changing Market

The dip in sales can be largely attributed to shifts in consumer behavior. A growing number of younger consumers are drinking less alcohol or opting for non-alcoholic beverages. This trend poses a direct challenge to craft brewers, who have historically relied on a loyal customer base that now seems to be shifting its attention elsewhere. "There's definitely more competition in the marketplace as people start drinking other types of alcohol and lean towards non-alcoholic options," noted Adelson, president of the Brewer's Guild.

In addition to consumer shifts, the craft beer industry is grappling with rising production costs. Since 2019, prices for key ingredients like hops, yeast, and malt have surged by 20% to 50%. This is compounded by increasing labor costs due to new minimum wage laws and soaring packaging expenses, making it increasingly difficult for smaller breweries to maintain profitability without significantly raising prices.

Innovation and Adaptation: A Struggle for Smaller Breweries

Some Colorado breweries have managed to adapt by innovating and finding new ways to cut costs. For instance, Dry Dock and Great Divide Brewing have consolidated their production facilities, pooling resources to reduce overhead. This allows them to continue operating independent taprooms while mitigating the impact of excess capacity. However, not every brewery has been able to innovate this way.

Primitive Beer in Longmont, for example, has taken a drastically different approach to stay afloat. Facing high overhead costs and burnout, the owners closed their taproom and production facility at the end of 2023 after nearly seven years in business. They have since transitioned into a "nomadic" brewery model, surviving through limited-edition can distributions and pop-up bars. While this model has been successful in drawing superfans, it underscores the increasing difficulty for small breweries to sustain traditional business models in today's market.

The closure of breweries has become a worrying trend. In 2023 alone, over 30 Colorado breweries shut their doors, while only 25 new ones opened—a stark reversal from the industry's previous years of rapid expansion.

Looking towards the Future

For some breweries, consolidation and innovation may provide a path forward. Others, like Grandma's House, are struggling with the realities of burnout and financial strain. After over a decade of business, the eclectic Denver brewery is closing its doors, with its owner citing a combination of landlord issues and personal exhaustion. Even if Grandma's House returns, it will likely look very different, possibly incorporating new trends like spirits, wine, and non-alcoholic options to stay competitive.

Not all hope is lost, however. Smaller breweries in less saturated markets, such as those opening on Colorado's eastern plains, continue to find success by establishing themselves as community gathering places. Meanwhile, others, like 4 Noses Brewing Company, are expanding, opening larger facilities and betting on taproom culture to sustain growth in an increasingly competitive market.

But even for those who are thriving, the path forward isn't guaranteed. The industry is shifting, and Colorado's beloved craft breweries must continue to innovate and adapt if they hope to weather the current storm.

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Navigating the Trends to Come

The global beer market is experiencing a period of both opportunity and challenge, with craft beer at the center of these dynamics. Colorado's craft beer industry, a longstanding leader in the U.S., is emblematic of these broader shifts. With over $2.4 billion in economic impact and one of the largest per capita brewery counts in the country, Colorado has long been a haven for craft beer lovers. Yet, despite this strong foundation, craft beer—especially from smaller, independent breweries—faces headwinds that could reshape the landscape.

Nationwide, craft beer production was down 1% in 2023, a trend mirrored in Colorado, where the market saw a 6% decline, the sharpest drop since tracking began in the 1970s. This decline is more than just a minor dip in numbers; it reflects deeper challenges tied to changing consumer preferences, rising costs, and intensifying competition. Bart Watson, chief economist for the Brewers Association, summed it up best during the Craft Brewers Conference, describing the current situation as a “challenging landscape”.

Headwinds for Smaller Breweries: Rising Costs and Stagnant Growth

The pressures facing smaller breweries have been mounting. Since 2019, the costs of key ingredients like hops, malt, and packaging materials have risen by 20% to 50%. Labor costs are also climbing due to new minimum wage laws, adding yet another layer of financial strain. For smaller craft brewers who operate on thinner margins than their corporate counterparts, these rising costs are hard to absorb. Many are struggling to raise prices in line with these cost increases without alienating customers.

Moreover, the market for craft beer is no longer expanding as it once was. According to Watson, the number of people drinking more craft beer is now equal to the number drinking less, signaling that the category is static in terms of its consumer base. This stagnation means that brewers can no longer rely on broad market growth to drive sales. Instead, they need to find ways to stand out in a saturated and highly competitive marketplace.

For some breweries, the answer has been to innovate their business models. Dry Dock and Great Divide Brewing, for example, have consolidated their production facilities to cut costs. Other breweries, like Primitive Beer, have embraced a nomadic model, forgoing costly taproom operations in favor of limited-edition can releases and pop-up events.

Yet, while these adaptive strategies work for some, they are far from a guaranteed solution. Brewery closures continue to outpace openings in Colorado, with 30 closures and only 25 openings in 2023.

The Role of Sales and Distribution in Revitalizing Craft Beer

As the industry grapples with these challenges, the role of sales and distribution teams has become more critical than ever. Brewers are increasingly finding that success lies not just in crafting great beer, but in finding new and innovative ways to get their products into consumers’ hands. This means identifying new drinking occasions, such as associating craft beer with events or food pairings, and expanding the reach of craft beer beyond the traditional taproom experience.

Distribution will play a key role in this evolution. As Watson noted, customers still spent nearly $30 billion on small and independent brewers in 2023, a clear sign that there is demand for craft beer. However, getting craft beer into new markets—whether through partnerships, expanded distribution networks, or creative marketing efforts—will be critical for sustaining and growing that demand. Larger breweries often have the resources and flexibility to pivot quickly, adapting to new consumer trends and scaling their operations efficiently. Smaller breweries, on the other hand, must be more strategic and dynamic, leaning on innovative sales tactics, community engagement, and perhaps even strategic collaborations to thrive in this competitive environment.

Crafting a Path Forward

The craft beer industry, particularly in regions like Colorado, stands at a crossroads. While the economic impact and cultural significance of craft brewing remain strong, the pressures of rising costs, shifting consumer preferences, and market saturation cannot be ignored. Smaller breweries, in particular, are feeling the pinch, as they struggle to compete with larger players who can more easily absorb these challenges.

Yet, there is a path forward. For craft brewers to survive—and thrive—in this evolving landscape, they must focus on innovation not just in their brewing practices but also in their business models. This includes being more dynamic in sales and distribution efforts, finding new ways to attract and retain customers, and possibly embracing new types of partnerships and collaborations.

The road ahead may be uncertain, but as history has shown, craft brewers are nothing if not resilient. By staying nimble and adaptable, the industry can continue to evolve, offering customers the high-quality, innovative beers they have come to expect while finding new opportunities for growth in a challenging market.

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Works Cited

Craft Beer Marketing & Distribution: Brace for Skumeggedon. Shinerunner Publishing, 2015.

National Geographic Atlas of Beer: A Globe-Trotting Journey Through the World of Beer. National Geographic Publishing, 2017.

"2024 State of the Beverage Industry: Beer Market Continues to Experience Unbalanced Performance." Beverage Industry, www.bevindustry.com/articles/96738-2024-state-of-the-beverage-industry-beer-market-continues-to-experience-unbalanced-performance. Accessed 23 Aug. 2024.

"2024 Midyear Survey: Market Check-In." Brewers Association, www.brewersassociation.org/insights/2024-midyear-survey-market-check-in/. Accessed 23 Aug. 2024.