One of the great growth stories through the recession and today is the expansion of the craft beer industry in the United States. In 2009, craft beer sales increased by 12% while the industry as a whole fell by more than 2%. The trend continued through the first half of 2010 as craft beer sales were up again 12% by revenue and 9% by volume, while total beer sales were down nearly 3%.
American consumers are beginning to realize that real beer actually tastes good and that there are more tasteful and well-crafted options than the mass-marketed brews produced by Anheuser-Busch InBev
A tough sell
I recommended Boston Beer Co.
Today, the craft beer movement is being led by smaller breweries such as Stone in California, Bell's in Michigan, and Dogfish Head in Delaware. The latter has earned an even greater cult following thanks to a weekly television documentary on the Discovery Channel about the brewery and its off-center founder Sam Calagione. These brewers don't have the marketing dollars that the big boys have; in fact, most of their marketing is of the viral or social kind. Instead, customers are won over by product quality.
So then, why are Walgreen and SUPERVALU adding more cheap beer instead of craft beer options? Retailers began to boost private-label options as a result of the recession. Store-branded private label products offer retailers higher margins, and consumers cheaper product alternatives, and these beers are cheap. At one store in Chicago a six-pack of Walgreen's Big Flats 1901 were spotted for $2.99, and placed strategically next to a sixer of Bud Light selling for $6.99.
Aside from the fact that outside of craft beer, industry sales are declining, beer drinkers are also very loyal to their favorite brands because of the amount of marketing and an association with good times. Beer in this format is mainly a social drink, and it's just not that cool to walk into the party with a case of cheap Walgreen or SUPERVALU beer.
These retailers get it
Whole Foods Market
Opportunities abound in the beer industry for retailers that are able to capitalize on this growing trend, but so far it appears that there aren't many that are ready to embrace the consumer's desire for more craft beer. The massive marketing machines will help ensure that the big brands always stick around, but the growing importance of social media has allowed many small craft breweries to go viral. At the end of the day, consumers want a high-quality product, and as craft beer continues to catch on nationwide, they won't have to search hard to find it.
Andrew Bond owns no shares in the companies listed. Boston Beer, Costco, and Whole Foods are Motley Fool Stock Advisor picks. Costco and Molson Coors are Inside Value selections. Motley Fool Options has recommended buying calls on SUPERVALU. The Fool owns shares of Costco, Molson Coors, and SUPERVALU. You can follow Andrew on Twitter @Bond0 or on his RSS feed. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy.