Despite the lingering effects of the pandemic-induced shutdowns, craft beer industries have begun to return to normalcy in the last year. It was the first time that production declined by 9% in the modern craft era, caused by the pandemic. However, the industry still faces some challenges.
It is no longer the case that breweries and brands are introduced seemingly endlessly, as they have done for much of the past century. There are issues that the industry must deal with daily, such as: future shutdowns, supply chain problems and the sudden rise of the RTD category and beyond beer (think hard kombuchas, seltzers, ciders, pops and juices).
The outlook isn’t all bleak, though.
Breweries that specialize in craft beer add variety to the beer market. As the industry grows, there will likely be several challenges and opportunities during 2022. Here are some challenges craft breweries may face in 2022.
Combat these Challenges Craft Breweries May Face:
Most craft breweries are concerned about the importance of maintaining a clean, adequate water supply local to their operations. Due to the nature of this industry, it is incredibly dependent upon regional environmental conditions. The water used in many fine craft beers must contain certain mineral combinations. As much as seven gallons of water are used to produce one gallon of craft beer. Therefore, it is imperative to consider the quality of water when making craft beer.
It’s getting hot out here – literally. For brewers, this heat can pose an issue! Another growing environmental challenge we’ve seen in the past few years is the impact of heat waves and drought on the crop yield for hops and barley. An increase in heat and drought means a decrease in barley production.
Having so many craft breweries results in a small business sector with a diverse cross-section. Some companies sell the same types of beers in restaurants and brewery showrooms. Different types of beers are produced on a variable schedule by other breweries. In addition to marketing to local restaurants and retailers, several craft breweries have begun to market their products nationally.
Some of these enterprises face daily operational challenges because of the variety of craft beer production schedules. According to the Brewers Association, over 6,000 craft breweries produced over 20,000 brands in the United States alone. It is difficult for marketers to distribute these products widely on a predictable schedule due to the limited production of some lines. The result? Lower sales. And we all know that nobody wants that!
Product Development to Stay Relevant
Despite the challenges of producing consistent beers in a market like this, consumers often enjoy sampling different craft beers casually. Consumers tend not to be loyal to specific brands over the long run. According to some analysts, craft breweries are under pressure to develop new original beer flavors continually.
The appeal of craft brewers differs from that of larger beer producers who market their products to national audiences. Although some craft brewery customers may be loyal to Budweiser, Miller or Coors brews, most of them enjoy sampling brews from different breweries. Small businesses are compelled to introduce trendy products to local markets to survive.
Breweries are fighting to stay relevant by including seasonal favorites, collaborations with other breweries and/or limited edition “squeeze plays” that are only available for a short time to influence a scarcity or “FOMO” mindset amongst consumers. Because let’s be real here, we all know that we’re more compelled to purchasing something if we know it’s only here for a limited time.
Distribution & Point of Sale Issues
A growing number of small brewers have been distributing to retail and restaurant outlets to compete within the $26 billion craft beer market in the United States. However, this trend has also created new challenges. Among them is a reduction in wholesale margins.
Further, brewers who market in a larger geographic area may need to invest in attractive packaging and displays for their products. These materials bring prospective customers into contact with the brand. Manufacturing these materials is, therefore, more costly.
Breweries need to communicate their value to loyal customers to make up for these increased costs. Perhaps your craft brewery creates the most incredible fan-favorite flavors that aren’t available anywhere else. Or maybe you donate a portion of the proceeds of each can to a local charity. Whatever your strategy, be sure to be creative and fully committed!
Dealing with a Saturated Marketplace
One of today’s most significant challenges is the explosion of craft beer companies starting in the late 1980s. As a result, there is a heightened competition to produce the best product while providing value to consumers.
The increase in competition also includes increased demand for talented employees. With today’s fierce competition, breweries must aim to differentiate their brands to attract new, passionate, and gifted individuals in the industry.
How to Make 2022 “Your Year” of Success
Today, craft breweries vary significantly in financial stability and business operations. In the coming year, companies that can address challenges will likely prosper. The current saturated market may pose challenges for other, less-equipped breweries in 2022.
Taproom and brewpub beer shifted out of the draft and into packaged beer last year. Thankfully, we’ve seen a remarkable rebound in craft beer sales this year, helping craft beer recover from the blow 2020 dealt. The industry is forecast to grow by at least 5% in 2022. Even if we don’t reach the levels we had before COVID, we will be close to doing so.
Fortunately, the number of brewery closures was lower than anticipated. It is inspiring to see craft breweries persevering. Their small size allows them to be agile and adaptable while quickly discovering new business opportunities. This is what makes them successful. Closings have slowed, and we are optimistic about the industry as a whole.
As always, our goal at The 5th Ingredient is to help brewers focus on the quality of their beer. With our Beer30 software, breweries of all sizes can reap the benefits of real-time data at their fingertips and combat the above issues.