Craft Beer Industry Report

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Craft Beer ProductionAugust 2013 1
Interest brewing: Increasing popularity will continue to drive revenue for craft beer brewers
IBISWorld Industry Report OD4302
Craft Beer Production

August 2013
2 About this Industry
2 2 2 2 Industry Definition Main Activities Similar Industries Additional Resources 15 International Trade 17 Business Locations
Agata Kaczanowska
29 Industry Assistance
30 Key Statistics 19 Competitive Landscape

19 Market Share Concentration 19 Key Success Factors 19 Cost Structure Benchmarks 21 Basis of Competition 30 Industry Data 30 Annual Change 30 Key Ratios
3 Industry at a Glance 4 Industry Performance

4 4 6 8 Executive Summary Key External Drivers Current Performance Industry Outlook
31 Jargon & Glossary
21 Barriers to Entry 22 Industry Globalization
23 Major Companies
23 Boston Beer Company 24 Sierra Nevada Brewing Company
10 Industry Life Cycle
12 Products & Markets

12 Supply Chain 12 Products & Services 14 Demand Determinants 14 Major Markets
26 Operating Conditions
26 Capital Intensity 27 Technology & Systems 27 Revenue Volatility 28 Regulation & Policy
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About this Industry

Industry Definition
This industry includes microbreweries and brewpubs that produce beer for resale or consumption on premises. As defined by the American Brewers Association (ABA), a microbrewery produces up to 6 million barrels (186,000,000 US gallons) of beer a year. Brewpubs brew and sell beer on their premises as well as prepare and serve food. A brewpub may also be considered a microbrewery if production has a significant distribution beyond the premises (75.0% based on the ABAs definition).
Main Activities
The primary activities of this industry are Brewing and selling Pale Ale beers Brewing and selling Lager beers Brewing and selling seasonal beers Brewing and selling Stouts and Porters
The major products and services in this industry are Lagers Pale Ales Seasonal Beers Stouts and Porters
Similar Industries
31212 Breweries in the US This industry primarily produces alcoholic beverages using malted barley and hops. 31213 Wineries in the US This industry produces wines and brandies. These are then packaged in bottles or casks and sold. 31214 Distilleries in the US This industry purchases a variety of ingredients, such as grains and sugar, and manufactures them into spirits (i.e. not beer or wine). These spirits are then bottled and sold. 42481 Beer Wholesaling in the US This industry primarily purchases, stores, sells and distributes beer and other fermented malt beverages. 44531 Beer, Wine & Liquor Stores in the US This industry sells alcoholic beverages for off-premises consumption.
Additional Resources
For additional information on this industry www.brewersassociation.org Brewers Association www.beerinstitute.org The Beer Institute www.census.gov US Census Bureau
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Craft Beer Production August 2013
Industry at a Glance
Craft Beer Production in 2013 Key Statistics Snapshot
Revenue
$3.9bn
Profit
7.2% $378.0m $46.9m 2,439

Exports Businesses
Revenue vs. employment growth
15 10
Annual Growth 08-13
10.9%
Annual Growth 13-18
Market Share
Price of coarse grains

350 300 250
Boston Beer Company 19.3%

% change
Sierra Nevada Brewing Company 5.1%
5 0 5
Index
07 09 11 13 15 17 19
200 150 100
Year 05 Revenue
p. 23
Year 04
50
06
08
10
12
14
16
18
Employment
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Products and services segmentation (2013)

Stouts and porters
Key External Drivers

Demand from beer wholesaling Per capita alcohol consumption Per capita disposable income Access to credit Price of coarse grains
13.0%
Seasonal beers
18.1%
41.0%
Pale ales
p. 4
27.9%
Lagers
SOURCE: WWW.IBISWORLD.COM SOURCE: WWW.IBISWORLD.COM
Industry Structure
Life Cycle Stage Revenue Volatility Capital Intensity Industry Assistance Concentration Level
Growth Medium Medium Low Low
Regulation Level Technology Change Barriers to Entry Industry Globalization Competition Level
Heavy Low Low Low Medium
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 30
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Industry Performance
Executive Summary
Despite an often limited distribution reach and high price points, craft beer has increased in popularity among US beer drinkers. Many craft beer operations are kept small to maintain a focus on quality. Because of their small size, however, they do not have the ability to negotiate larger supply or distribution contracts, forcing such breweries to charge higher prices. During the recession, a consumer shift to drinking at home rather than on premises benefited companies in the industry because it is easier to place products on retailer
Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage
High
market acceptance and low barriers to entry have boosted operator numbers
shelves than in restaurants or bars that offer a limited selection of alcoholic beverages. As a result, IBISWorld estimates that industry revenue grew an annualized 10.9% to $3.9 billion during the past five years, including anticipated growth of 11.9% in 2013. Increasing market acceptance and low barriers to entry make this industry attractive for new businesses. Minimal equipment is required to brew craft beer, and industrial equipment can be bought ready to use. A culture that emphasizes locally brewed craft beers has also
encouraged entrants into the industry. In the five years to 2013, the number of enterprises is anticipated to grow at an annualized rate of 10.9% to 2,439 firms. Rampant expansion has also led companies to seek new markets abroad. As a result, exports are estimated to increase at an annualized rate of 37.3% during the five-year period, reaching $46.9 million in 2013. As a result of high demand justifying price increases, the industry is becoming more profitable. The average industry profit is expected to total 9.6% of revenue in 2013. Profitability varies between companies, however, because the price per unit manufactured decreases as craft breweries scale up production volume. The largest craft brewer, The Boston Beer Company Inc., has an estimated operating profit of 12.2% of 2013 revenue. During the next five years, the industry is forecast to benefit from brand recognition and increasing disposable income. However, growth will slow as large brewers increasingly compete through new branding practices, as well as through acquiring craft breweries and thus directly removing them from this industry. As a result, IBISWorld projects craft beer production revenue to rise at a 7.2% annualized rate to $5.6 billion over the five years to 2018.
Key External Drivers
Demand from beer wholesaling Wholesalers are a crucial link in the supply chain. Therefore, craft breweries need to carefully plan distribution to influence the level of product promotion within liquor wholesaling outlets in order to maximize market share. Many craft breweries only have local distribution agreements, which severely limits the availability of their products. Demand from beer wholesaling is
expected to increase slowly during 2013, posing a potential opportunity to the industry. Price of coarse grains The price of coarse grains tracks the prices of barley, oats and sorghum. Grain is a major input for beer production, so this driver represents the dominant inputs for craft breweries. Increasing grain prices pushes up production costs,
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Key External Drivers continued
and, in turn, decrease profit. The price of coarse grains is expected to increase during 2013, posing a potential threat to the industry. Per capita alcohol consumption Alcohol consumption can affect craft beer sales, either positively or negatively. Additionally, consumers cultural and attitudinal changes can alter demand for beer. For example, many people drink only in moderation due to personal beliefs, whether health- or religionbased, reducing alcohol consumption and, therefore, industry revenue. Per capita alcohol consumption is expected to increase slowly during 2013. Per capita disposable income The level of disposable income affects spending on industry products, which are generally more expensive than their
Price of coarse grains
350 300
big-brewery counterparts. When people have more money, they are more likely to consume premium beer at higher price points, like craft beer, which translates to increased sales and higher margins for craft brewers. Per capita disposable income is expected to increase slowly during 2013. Access to credit Access to credit refers to the borrowing capacity advanced by a commercial bank to an individual, firm or organization in the form of loans, cash credit and overdrafts. Credit allows craft brewers, for instance, to invest in machinery and equipment to begin commercial operations or expand existing facilities. As access to credit increases, it enables more companies to expand operations within the industry. Access to credit is expected to increase in 2013.
Demand from beer wholesaling
2.0 1.5
200 150 100
% change
06 08 10 12 14 16 18
250
1.0 0.5 0.0 0.5
Index
Year 04
50
Year
1.0
07
09
11
13
15
17
19
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Current Performance
Increasingly knowledgeable and healthconscious consumers are trading up for higher-quality beers and other alcoholic beverages. Bulk beverage sales declined as a result of health-conscious individuals switching to high-quality products in smaller quantities. Therefore, although per capita alcohol consumption stayed relatively constant during the past five years, consumers shifted away from big-name beers like Budweiser, Miller or Coors and substituted them with regional and high-quality industry products. This trend has stimulated growth in the craft beer segment because consumers are willing to pay more for a smaller quantity of high-quality beer. Although disposable income dipped in the past five years, it resulted in a shift toward drinking at home. This shift enabled many consumers to continue paying for higher-end beers because they did not have to tip servers or pay
Industry revenue
15 10
% change
5 0 5
Year 05
07
09
11
13
15
17
19
higher on-premises prices. As a result, industry revenue is expected to grow at an annualized rate of 10.9% to $3.9 billion in the five years to 2013, including 11.9% growth in 2013 spurred by rising disposable income enabling higher prices and increasing industry production volume.
Profit challenges
Craft beer producers are often not able to take advantage of mass production and do not have the ability to negotiate the larger supply contracts that come with economies of scale. Therefore, they are disproportionately exposed to fluctuations in the supply of inputs, and must charge higher prices than big beer companies to stay in business. During the past five years, a shortage of hops and high, unpredictable grain prices aggravated this. In the five years to 2013, the world price of coarse grains is expected to grow at an annualized rate of 5.4%.
In response to increasing grain prices and enabled by rising demand, brewers increased prices of their products. Many brewers also boosted recycling and energy-saving efforts to cut costs. For example, major company Sierra Nevada Brewing Company installed solar panels in 2008 and continually recycles waste materials. As craft breweries produce a higher volume of beer, they are better able to negotiate bulk prices for inputs and can also afford to implement advanced technologies that decrease per-unit costs, which enabled profit to expand to 9.6% of industry revenue in 2013.
Attractive opportunity
The craft brewing industry has consistently attracted new businesses thanks to low barriers to entry. Brewing
craft beer is a cottage industry, meaning it can be done from ones living room. Although industry enterprises only
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Attractive opportunity continued
include businesses that sell commercially, the number is expanding as the number of people interested in the business of brewing beer continues to rise. Also, most craft breweries are smaller, regional entities that produce high-quality products and can rely on word-of-mouth promotion to generate adequate demand that matches their limited production capabilities. During the past five years, the industry benefited from high unemployment, which reduced the opportunity costs of starting a brewery for some entrants. US unemployment increased at an average annual rate of 7.6% in the past five years and remains at a significant 7.6% of the workforce in 2013. A tight lending environment limited some business expansion, but overall access to credit rose at an annualized rate of 0.8% during the five years to 2013. The number of craft brewers is estimated to rise at an annualized rate of 10.9% annualized to 2,439 enterprises during the same five-year period.
As the number of craft breweries grew steadily during the past five years, many better-established companies implemented marketing tactics to boost their brand recognition and sales. Increased awareness also helped strengthen producer ties with distributors, especially for moreestablished companies that were eager to expand production capabilities. Examples of companies that expanded rapidly during the past five years include New Belgium Brewing Company and Dogfish Head Craft Brewery Inc. Although major players The Boston Beer Company and Sierra Nevada Brewing Company were already distributed on a national scale in 2008, most companies continue to distribute to regional outlets in 2013. Wider distribution networks and intensifying marketing and sales spending is justifying higher pay for employees; during the five-year period, wages are expected to rise an annualized 12.0% to $558.4 million in 2013.
Trading up
The industry is exposed to global trends through heightened trade volumes and an increasing share of foreign ownership with recent mergers among beverage giants, including AB InBev and Miller Coors. Higher import competition from big brands will characterize the industry, with imports estimated to hover at 1.6% of demand in 2013. Nonetheless, a weakening US dollar and improved international distribution channels have driven export growth, a trend that even continued when consumer spending fell during the recession. Since 2008, exports have expanded at an annualized rate of 37.3% to $46.9 million. Exports in 2013 are expected to account for 1.2% of total industry
Revenue vs. exports

200 150
% change
100 50 0 50
Year
07
09
11
13
15
17
19
Revenue
Exports
revenue, driven almost entirely by rapid growth in nearby Canada and Mexico. Shipping costs for relatively small quantities of heavy beer bottles
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Trading up continued
from craft brewers are prohibitive to building significant exports overseas, which supports exports share of the
industrys revenue. In comparison, 2008s share of export revenue was only 0.4% of total revenue.
Industry Outlook
The Craft Beer Production industry will benefit from increasing disposable income, access to credit and brand recognition in the next five years. Improving disposable incomes will enable more consumers to fit high-end products like craft beer into their budgets. To meet rising demand for craft beer, companies are expected to continue
increasing product prices and expanding their production capabilities. Easier access to credit will facilitate such expansion. IBISWorld estimates that industry revenue will grow at an average annual rate of 7.2% to $5.6 billion in the five years to 2018, including 13.0% growth in 2014 when disposable income growth is forecast to pick up.
Expanding operations
To meet increasing demand, craft beer producers have plans to ramp up production capabilities. Industry companies, including relatively wellknown craft breweries New Belgium and Dogfish Head, are continually expanding their on-site facilities. Additionally, New Belgium and Sierra Nevada are expanding into new brewing locations by 2014. Such expansion is expected to contribute to 5.9% annualized establishment growth to 3,300 in the five years to 2018. In turn, automation is decreasing the amount of employees involved in beer production. Despite facility expansion, the number of workers is estimated to rise at an annualized rate of 4.2% to 17,790 employees in the five years to 2018. Furthermore, speedier industry expansion will be offset due to acquisitions from major breweries that are expected to pull craft brewers out of this industry. New companies are also expected to continue entering the industry to
To
meet demand, craft beer producers plan to ramp up their production capabilities
compete. Increasing credit availability is expected to enable people that previously brewed beer as a hobby to enter into the industry. According to IBISWorld estimates based on data from the Federal Reserve, access to credit is projected to well exceed prerecession levels during the next five years. Access to credit is forecast to grow at an annualized rate of 5.4% in the five years to 2018, compared to just 0.8% annualized growth during the previous five-year period. New company growth will slow, however, because the market is more saturated than it was five years ago. The number of companies in this industry is projected to grow at an average annual rate of 6.1% to 3,287 in the five years to 2018.
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Growing margins
Continued expansion will benefit craft beer producer profitability. Companies can take advantage of lower per-unit costs as the volume of production ramps up. Also, several larger players are planning to expand into new brewery locations, which will decrease distribution costs to nearby markets and thus enable the producers to implement price increases without boosting consumer prices. For example, California-based major player Sierra Nevada has plans to open a brewery in North Carolina that will produce the same beverages but primarily for distribution to East Coast consumers.
Continued
expansion will help brewers leverage scale, improving profitability

Also benefiting producers bottom lines, the price of inputs is forecast to grow more slowly. For example, the price of coarse grains is projected to increase at an average annual rate of 2.5% in the next five years, compared with a 5.4% annualized spike in the past five years. This growth will help companies expand profitability to an estimated 10.2% in 2018.
Increasingly international
Exports are forecast to be a major source of industry growth during the next five years because neighboring markets are relatively untapped by craft breweries. A weak US dollar, especially compared to the Canadian dollar, is expected to benefit craft brewers as they expand distribution contracts with the northern neighbor. As a result, export growth is projected to continue at a 35.2% annualized rate to $211.7 million in the five years to 2018. Therefore, exports as
a share of revenue will more than double from about 1.2% in 2013 to about 3.8% in 2018. Similarly, foreign craft brewers are forecast to enter the US market quickly. Consumers curiosity for exotic brews is expected to drive growth in this category during the next five years, especially as disposable income expands. As a result, imports are projected to grow at an average annual rate of 24.8% to $193.1 million in the five years to 2018.
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Life Cycle Stage
Craft breweries are ramping up production volume and seeking new markets Companies often introduce new products and many produce seasonal varieties The number of companies is escalating
% Growth in share of economy
20
Company consolidation; level of economic importance stable 15
Maturity
Quality Growth
High growth in economic importance; weaker companies close down; developed technology and markets
Key Features of a Growth Industry Revenue grows faster than the economy Many new companies enter the market Rapid technology & process change Growing customer acceptance of product Rapid introduction of products & brands
10
Quantity Growth
5
Many new companies; minor growth in economic importance; substantial technology change
Wineries Sugar Processing

0
Breweries
Distilleries
Wheat, Barley & Sorghum Farming

-5
Decline
Shrinking economic importance
-10 -10
-5
10
15
20
% Growth in number of establishments

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Industry Life Cycle This industry is G rowing
This industry is growing at a much faster pace than the overall economy. New product introductions and increasing market acceptance are propelling this growth. Craft beers popularity boosted its prominence on many store shelves, which further contributed to growing consumer awareness. Industry value added (IVA), which measures the industrys contribution to the economy, is forecast to rise at an annualized rate of 8.1% in the 10 years to 2018. Meanwhile, GDP is projected to grow at an average annual rate of 2.1% per year.
Acquisitions within the industry are limited because most craft breweries do not want to be associated with big brewers and, instead, look to develop their own products. Yet, while many companies in the industry purposefully limit expansion to maintain quality, others are continually introducing new products to spur revenue growth. New companies are also entering into the industry to compete. The number of enterprises is forecast to grow at an annualized rate of 8.5% to 3,287 in the 10 years to 2018.
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Products & Markets

Supply Chain
KEY BUYING INDUSTRIES
42481
Supply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations
Beer Wholesaling in the US Distributors are an essential link in the market channel for breweries. Because of the threetiered regulatory system in place for alcoholic beverages in most states, beer manufacturers are not permitted to sell beer directly to retailers or consumers. Consumers in the US Consumers in the US purchase craft beer from industry operators that also operate pubs.
99
KEY SELLING INDUSTRIES

11117 31131 32192 Wheat, Barley & Sorghum Farming in the US This industry supplies grains like barley and hops, which are key ingredients in beer production. Sugar Processing in the US This industry supplies sugar, which is a key component in making beer. Wood Pallets & Skids Production in the US This industry supplies wood pallets used to transport beer to end users, such as retailers, bars and clubs. Cardboard Box & Container Manufacturing in the US This industry supplies paperboard containers used to package bottles and cans of beer for the purpose of transportation. Printing in the US This industry supplies printed labels for branding and marketing beer bottles and cans. Glass Product Manufacturing in the US This industry supplies glass bottles for packaging beer. Aluminum Manufacturing in the US This industry supplies aluminum cans used to package and distribute beer. Corn, Wheat & Soybean Wholesaling in the US This industry supplies grains including barley and hops.
32221
32311 32721 33131 42451
Products & Services
Pale ales Pale ales account for about 41.0% of craft beer sales and come in amber and IPA varieties. Pale ales are made through a warm fermentation process using a high proportion of pale malt, which gives it a lighter color. Different brewing practices and hop levels result in a range of tastes and strengths within the pale ale craft beer segment. Popular types of pale ale beers include amber ale and India pale ale (IPA). However, consumer substitution of these products with more exotic beers has resulted in a slight contraction in this segment in the past five years. Amber ales have a slightly darker color than traditional pale ales, which can
range from amber to deep red hues. This color is traditionally achieved by adding colored malt to the basic pale ale. These beers involve slow fermenting and are considered somewhat richer than pale ale, with a medium body. The US Association of Brewers describes amber ales as having flavors determined primarily by hops. Most versions have a balance of toasty malt flavors and bitterness from the hops used. IPA has a slightly darker color and an increased content of hops and alcohol. IPA originated in England and was exported for the British troops in India. It was brewed with extra hops, which are a natural preservative, to help it survive the voyage to India.
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Products & Markets
Products & Services continued
Products and services segmentation (2013)

Stouts and porters
13.0%
Seasonal beers
18.1%
41.0%
Pale ales
Total $3.9bn
27.9%
Lagers
Lagers A lager is a type of beer that is fermented and conditioned at low temperatures. Pale lager is the most widely consumed and commercially available style of beer in the world. Lager comes in two different varieties, namely dark and pale, of which the dark version is actually the original lager. The alcohol concentration in dark lager ranges from 4.5% to 6.0%. Pale lager is a golden-colored liquid with alcohol content of 5.8% or more. Noble hop is extensively used in pale lager; other ingredients include pilsner malt and adjuncts like corn and rice. Within the craft beer market, the most popular lager beer type is amber lager. Amber lagers are darker in color, ranging from amber hues to copper hues, and generally more fully flavored than a standard pale lager. Caramel malt flavors are typical and hopping levels vary considerably from one brewery to the next, though they are frequently hoppier than the true Vienna lager styles on which they are loosely based. Lagers account for about 27.9% of revenue, which
represents a slight increase from five years ago. Stouts and porters Stouts and porters account for about 13.0% of revenue. These beers are generally very malty because they are made using roasted malts and barley. They are usually heavy bodied beers, due in part to unique ingredients like oatmeal, coffee, chocolate and milk. As consumers have become increasingly interested in the brewing process, this segment expanded slowly during the past five years. Seasonal beers Seasonal beers are brewed during certain times of the year and are offered in limited selections. Within the craft beer market, seasonal beer sales have gained market share over the past five years and are expected to account for about 18.1% of revenue. Seasonal beers are often lighter in color and flavor for spring and summer, with darker, heavier brews for winter and fall. The beers are geared to match the weather as well as food choices, like summertime brats or wintertime stews.
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Products & Markets
Demand Determinants
Consumer demand for luxury or perceived luxury goods, including craft beer, is generally sensitive to economic factors such as unemployment levels and per capita disposable income, which influence consumer spending. When income levels are down, people tend to spend less on discretionary purchases, including craft beer. Nonetheless, during the past five years, even as a rough economy and continuing competition from wine and spirits drove overall beer consumption down, the craft beer segment continued its growth and captured market share from the rest of the domestic market. A number of other factors drive demand for craft beer, including changing consumer preferences, public attitudes about alcohol, per capita alcohol consumption and demographics. Although per capita alcohol consumption stayed relatively constant during the past five years, consumers shifted away from big-name beers like Budweiser, Miller or Coors and substituted them with industry products. Changing consumer preferences, driven in part by the buylocal movement and a political push against large corporations that stemmed from the financial meltdown, drove up demand for small breweries. Changes in consumer preferences have a significant impact on this industry. If
the markets for wine, spirits or flavored alcohol beverages continue to grow, this could draw consumers away from the craft beer industry. Public opinions about alcohol also affect per capita consumption of alcohol. The alcoholic beverage industry has become the subject of considerable societal and political attention in recent years due to increasing public concern over alcohol-related social problems, including drunk driving, underage drinking and health consequences from the misuse of alcohol. These concerns could lead to restricted advertising by beer producers, additional requirements for cautionary labeling or packaging and renewed efforts to impose, at either the federal or state level, increased excise or other taxes on beer sold in the United States. This increased regulation would directly affect industry performance. Demographics also play a role in driving demand. Per capita consumption of beer is higher among 21- to 35-year-olds than other age groups. The proportion of the population within this age range and its increasing disposable income will have a positive effect on demand for beer during the next five years. Fluctuations in raw material inputs, including grains, have a direct effect on price. As the prices for grains increase, so does the cost of production, thus decreasing profit.
Major Markets
Industry operators sell craft beers through wholesale distributors to restaurants, bars and liquor stores, as well as to supermarkets, warehouse clubs, convenience stores and drug stores. Many firms sell beer directly to consumers at brew pubs and breweries. The major markets for beer can also be segmented by consumer age group. As a share of the US population, younger people are a lot more likely to drink beer than those older than 50. The largest
growth segment for beer during the past five years has been the youngest portion of the population of drinking age: those aged 21 to 34. While all consumers cut spending, college students and young professionals continued spending on beer in the past five years. This age group has also increasingly been willing to explore a variety of premium and craft beers. Consumers aged 35 to 54 have also switched to craft beers, but have been more likely to tighten their
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Products & Markets
Major Markets continued
Major market segmentation (2013)

Consumers aged 21 to 24
9.5%
Consumers aged 64 and older
9.7%
23.2%
Consumers aged 55 to 64 Consumers aged 25 to 34
13.0%
22.8%
Total $3.9bn
21.8%
budgets altogether due to financial strain throughout the recession. This age group has also gravitated towards wine and other spirits. During the next five years, the younger demographic will continue to be the main growth segment for craft beer, with older consumers spending their money on other kinds of beverages.
Although there are slightly more women than men in the US population, about 58.0% of beer drinkers are men while 42.0% are women. The share of women beer drinkers has increased gradually during the past five years and is anticipated to continue over the next five years thanks to the increased marketing and availability of certain craft beers.
International Trade
Level & Trend xports in the E
$ million
industry are L ow and I ncreasing Imports in the industry are L ow and I ncreasing
The craft beer industry is increasing its participation in international trade. Exports are expected to account for about 1.2% of revenue in 2013, a considerable increase from 2008 when they accounted for 0.4%. Industry firms have increased production in order to meet growing demand for craft beer and have begun shipping popular products abroad in higher volumes. Canada remains the industrys largest export market, largely as a result of increased demand for craft beer in British Columbia, Alberta and Ontario. The United Kingdom and Sweden represent the next two largest markets. These countries have a high level of beer consumption and increasingly demand craft beer brewed in the
Industry trade balance

300 200 100 0 100 200
Year 05 Exports
300
07
09
11
13
15
17
19
Imports
Balance
United States. Despite decreasing purchasing power as a result of the economic downturn, importers and
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Products & Markets
International Trade continued
distributors in other countries have expanded their American craft beer offerings, even in emerging markets like Brazil and India. Craft beer imports have remained largely unchanged in the past five years. In 2013, IBISWorld estimates
that imports will account for about 1.6% of domestic demand. As Americans embraced lower-priced local products post-recession, competition from imports of craft beer slowed early in the past five years but rebounded as a share of domestic demand since 2011.
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Products & Markets

Business Locations 2013
West
AK
0.4
New England Great Lakes MidAtlantic

MI
4.8
ME
1.8
WA
6.9
OR
6.8
Rocky Mountains ID
1.5 1.1
MT
ND
0.0
MN
SD
0.2
Plains
IA
1.4
1.6
1 2 3 NY 3.4 5 4 6 7 8
WI
4.0
PA
4.3
WY
0.7
West NV
1.1
NE
0.8
IL
2.8
IN
2.0
OH
2.7
UT
0.9
CO
6.7
KS
0.8
MO
2.3
KY
0.4
WV VA 2.1
0.3
NC
2.7
CA
13.7
OK AZ
1.7 0.5
AR
0.2
Southeast
1.3
TN
SC
0.8
NM
1.2
Southwest
TX
2.7
MS
0.1
AL
0.2
GA
1.2
LA
0.4
FL
2.2
West
HI
0.5
Additional States (as marked on map) 1 VT

1.2 0.8
Establishments by region (%) Less than 3% 3% to less than 10% 10% to less than 20% 20% or more
2 NH
0.9
3 MA
2.4
4 RI
0.2
5 CT
6 NJ
1.1
7 DE
0.6
8 MD
1.1
9 DC
0.2
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Products & Markets
Business Locations
The number of breweries in a particular state characterizes the geographic spread of this industry. In general, brewery locations correlate with the population of the state. This is likely the result of producers locating their production facilities closer to major centers of the population to minimize costs of transportation. Another influence on the geographic spread is the climate of the region. Warm climates are more conducive to the consumption of beer, so there is likely to be greater demand for beer in regions along the southern coasts or the Mexican border. Craft Beer production in particular tends to be concentrated on the coasts. Other factors that affect geographic spread include access to raw materials, ease of access to export markets and taxes levied at the state level.
Establishments vs. population

30
20
%
10 0 Great Lakes Mid-Atlantic New England Rocky Mountains Southwest West Southeast Plains
Establishments by region Population

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Competitive Landscape
Market Share Concentration
Level Concentration The Craft Beer Production industry has a low level of market share concentration with the top four players accounting for about 33.5% of total industry revenue in 2013. Craft brewing is a relatively new industry and the number and diversity of craft brewers has significantly increased during the past five years in line with growing demand. Industry players have begun
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization
in this industry is L ow
consolidating in order to capitalize on distribution and marketing efficiencies, and larger domestic brewers have acquired smaller craft breweries and created separate craft-focused divisions in an effort to capitalize on the growing craft beer segment. This trend will continue in the five years to 2018, leading to an increase in market share concentration.
Key Success Factors IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:
Establishment of brand names Successful branding through logo design and packaging, and advertising is critical to success in a brandcompetitive market. Control of distribution networks New entrants must have access to distribution networks including wholesale distributors in order to get their beer sold at restaurants, bars and other retail locations.
Marketing of products Innovative and offbeat branding, packaging and marketing help operators differentiate their craft beer from corporate brands. Effective quality control Quality and taste are important competitive factors among craft breweries. Operators need to keep flavors consistent batch after batch and ensure top quality.
Cost Structure Benchmarks
Profit Profit margins vary considerably depending on the size of the brewery. On average, profit, measured as earnings before interest and taxes, is expected to account for about 9.6% of revenue in 2013. Profit margins have benefited from increased demand for craft beers during the past five years, which has allowed operators to charge higher prices. Fluctuations in raw material costs, including grains such as hops and aluminum, glass, corrugated cardboard and other packaging, have a direct impact on profitability, which squeezed profit margins for smaller operators in the past five years. Smaller breweries are disproportionately exposed to fluctuations in input costs because they may not be able to benefit from discounts associated with buying in higher
volumes. These operators may not be able to pass on higher input costs to consumers in the form of higher prices, hurting profit. Purchases The largest costs to breweries are purchases of raw materials, which IBISWorld estimates will account for 61.2% of industry revenue in 2013. These raw materials include packaging: principally glass, aluminum and corrugated cardboard. Packaging costs have increased significantly over the past five years, particularly aluminum cans, due to commodity prices rising. Other raw materials include barley, sugar, malt, corn, rice, wheat, hops and preservatives, which are the critical ingredients required for brewing. The price of hops in particular reached a record high in 2008,
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Cost Structure Benchmarks continued
but it steadied in 2010. The price of grains increased in 2010 as a result of Russias export ban. Over the five years to 2018, prices of raw ingredients are projected to decline as farmers compensate for the shortages that occurred over the past five years. Wages Labor is the next-largest cost to this industry, accounting for about 14.2% of industry revenue in 2013. The ratio of wages to revenue has increased slightly during the five years to 2013 from about 13.5% in 2008, as craft breweries have expanded employment of skilled marketing and sales exports to gain a competitive edge in the increasingly saturated market. Over the five years to 2018, more demand for craft brews is expected to lead to more jobs in the industry, but revenue growth is expected to outpace wage increases. Sector vs. Industry Costs
Average Costs of all Industries in sector (2013) 100
Depreciation, rent and utilities Depreciation varies considerably depending on the size of the brewery and type of equipment used. In 2013, average depreciation is estimated to be 2.8% of revenue. Generally, beer brewing is considered a capital-intensive process and depreciation of plants and equipment is significant. Depreciation is not forecast to fluctuate over the five years to 2018. Rent and utilities are estimated to account for about 3.8% of revenue in 2013. Rent prices declined when the housing bubble burst, and utility prices have fluctuated but are near their 2008 level. Over the next five years, rent is projected to increase gradually and utility costs will continue to fluctuate. Other costs Other costs include taxes, administration and legal costs.
Industry Costs (2013)
7.7 10.5
9.6 14.2
80
Percentage of revenue
60
Profit Wages Purchases Depreciation Marketing Rent & Utilities Other
59.8
40
61.2
20
2.7
2.8 1.5 14.9
2.8
3.6 3.8 4.8

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Cost Structure Benchmarks continued Basis of Competition

Level & Trend ompetition C
Marketing costs are estimated to account for 3.6% of industry revenue in 2013. Industry operators must invest
significant capital in branding and marketing strategies that increase consumer awareness
in this industry is Mediumand the trend is I ncreasing
As beer lovers continue to gravitate toward unique, high-quality beers, more business owners are starting craft breweries, boosting industry competition. During the past five years, the number of craft breweries has increased significantly. Industry operators compete with each other primarily on the basis of quality, taste, branding, marketing and price. Big and small brewers alike must focus on quality and taste in order to create and sustain demand for their beer. Innovative and offbeat branding, packaging and marketing help operators differentiate their beer from corporate brands. Branding and packaging, including logo design and labeling, are essential to convey the uniqueness of craft beer. Combined with a successful marketing plan, effective branding and packaging help operators become well known among wholesalers, agents, restaurants, bars and the general public. To a lesser extent, operators also need to be price competitive. Raw material purchases (e.g. hops and packaging materials) are a brewerys most significant cost, and fluctuations in input costs can negatively affect pricing for industry operators. Fluctuations in input costs disproportionately affect smaller breweries, which may be forced to charge higher prices. External competition Industry operators compete with larger
beer brands and imported beers, as well as with other alcoholic and nonalcoholic beverages. Although there is significant loyalty to beer brands across the country, craft beers have been winning market share from corporate brands during the past five years. Competition for brand loyalty has intensified on a regional level, and many regional players have aggressively sought to expand their geographic market reach as a result. Nonetheless, craft beer breweries have been using marketing techniques like beer tastings and brewery tours to boost consumer awareness of their brands. Competition from other beverages and beer imports is significant. In particular, beer imports are forecast to grow as consumer spending picks up during the next five years. Other beverage industries are becoming more fragmented, offering drinks that are competing directly with beer. Not only is wine becoming increasingly popular with 21- to 35-yearolds, but there are also new adult drinks aimed at consumers in this age range who are looking to relax. These include low-sugar sodas that are marketed as healthy alternatives, such as GuS (Grown-up Soda), relaxation drinks and exotic juices that retailers, restaurants and other establishments are increasingly selling alongside beer. Cider is also gaining traction as an alternative to craft beer.
Barriers to Entry
The barriers to entry into the Craft Beer Production industry are low to moderate. Basic brewing equipment can be purchased at a relatively low cost, and
many operators can access personal lines of credit to launch microbreweries. Gaining access to raw material inputs such as hops and packaging materials
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Barriers to Entry continued

Level & Trend arriers to Entry B
in this industry are Lowand I ncreasing
(i.e. aluminum cans and glass bottles) is not significantly challenging, although smaller operators will be at a competitive disadvantage to larger operators who can benefit from economies of scale and can buy larger volumes of raw materials at a discount. Smaller breweries are disproportionately exposed to fluctuations in input costs and may be forced to charge higher prices for their products. New entrants into the industry will need to secure distribution channels for their products and need to have significant branding and marketing capital to boost consumer awareness about their beers. Gaining access to distribution channels (i.e. wholesale distributors that handle craft beer) may be a significant barrier to entry due to
Barriers to Entry checklist

Competition Concentration Life Cycle Stage Capital Intensity Technology Change Regulation & Policy Industry Assistance
Level Medium Low Growth Medium Low Heavy Low

growing competition from craft breweries. New entrants may also be challenged by the significant degree of regulation governing sanitary, health and safety conditions during the brewing process, along with other marketing and labeling requirements.
Industry Globalization
Level & Trend lobalization G
in this industry is Lowand the trend is I ncreasing

International trade is a major determinant of an industrys level of globalization. Exports offer growth opportunities for firms. However there are legal, economic and political risks associated with dealing in foreign countries. Import competition can bring a greater risk for companies as foreign producers satisfy domestic demand that local firms would otherwise supply.
The Craft Beer Production industry has a low level of globalization due to its minor participation in foreign trade and a majority of domestically owned operations. Craft beers tend to be produced in small batches and consumed locally. The shop-local trend that grew out of the economic recession and shifting attitudes toward large corporations have propelled the local consumption of craft
Trade Globalization
200 150 100 50 0 Local Craft 0 40
beer. As domestic breweries expand production, branding and marketing efforts will lead to increased interest from foreign distributors, and exports of US craft beer will increase. Increased participation in foreign trade and the fact that foreign beer companies may increasingly acquire smaller US craft breweries will increase this industrys level of globalization by 2018.
Going Global: Craft Beer Production 2002-2013
Export
Global
Exports/Revenue
200 Export 150 100 50 0 Local 2002 0
Global
Exports/Revenue
Beer Production Import

80 120 160
2013
40 80 120
Import
160
Imports/Domestic Demand
Imports/Domestic Demand
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Major Companies
Major players
(Market share)
Boston Beer Company | Sierra Nevada Brewing Company | Other Companies
Sierra Nevada Brewing Company 5.1%
75.6%
Other Boston Beer Company 19.3%
Player Performance Boston Beer Company Market share: 19.3% Industry Brand Names
Samuel Adams
The Boston Beer Company Inc. was founded in the mid-1980s and is headquartered in Boston. Its other plants are located in Cincinnati, OH, and Lehigh, PA. The company employs nearly 1,000 people. In 2012, it sold about 2.7 million barrels of beer. Its core brands include Samuel Adams Boston Lager and Sam Adams Light, but it also produces a number of other flavors and seasonal beers, as well as cider and flavored malt beverages. The Boston Beer Company competes within the craft segment and concentrates on product quality rather than engaging in price competition with
larger brewers. Its competitive strengths over other regional brewers include a number of awards for its products, distribution capabilities and scale relative to other smaller brewers. Financial performance The company continues to grow after stagnant sales early in the past five-year period. The Boston Beer Company is on track to earn about $759.4 million in 2013. In the five years to 2013, the company grew at an estimated average annual rate of 11.1% as it increased prices to bolster profitability and offset rising input costs.
The Boston Beer Company Inc. financial performance

Year* 2008 2009 2010 2011 2012 2013
*Estimates
Revenue ($ million) 449.6 453.4 505.9 558.3 628.6 759.4
(% change) N/C 0.8 11.6 10.4 12.6 20.8
Operating Income ($ million) 14.1 54.3 81.2 103.7 95.6 92.8
(% change) N/C 285.1 49.5 27.7 -7.8 -2.9
SOURCE: ANNUAL REPORT AND IBISWORLD
Player Performance
Sierra Nevada Brewing Company was founded in 1981 and is headquartered in Chico, CA. It is a privately owned and operated brewery. In addition to the brewing and bottling facility, the
company runs a restaurant and concert venue on its premises. It is expected to employ nearly 600 people in 2013. The companys main product is pale ale, which generates about 70.0% of total
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Major Companies
Player Performance continued Sierra Nevada Brewing Company Market share: 5.1%
company revenue. Another 29.0% of revenue comes from seasonal brews, while other yearly products only generate about 1.0% of revenue. In 2012, Sierra Nevada announced plans to expand into a second brewing facility. Production is expected to commence in Mills River, NC, in 2014. Because the companys products are already distributed nationwide, the new facility will decrease company distribution costs to the East Coast and expand its production capacity. Financial performance Sierra Nevada is a private company that does not disclose financial information; therefore, revenue figures are IBISWorld estimates and additional financial data is
not available. IBISWorld estimates that during the past five years, the companys revenue grew at an annualized rate of 9.0%, including 11.1% growth in 2013 to $200.0 million. Growth has been stimulated by the companys expanding agreements with distributors nationwide, which have enabled it to expand production. Increasing brand recognition is also contributing to rising demand for industry products. To further bolster its market presence, the company occasionally partners with other craft breweries to market and sell products; such as an upcoming variety 12-pack that will feature beers from 12 breweries, including Sierra Nevada, and coincide with the new Mills River brewery opening in summer 2014.
Sierra Nevada Brewing Company financial performance

Year* 2008 2009 2010 2011 2012 2013
*Estimates
Revenue ($ million) 129.7 139.1 150.0 162.6 180.0 200.0
(% change) N/C 7.2 7.8 8.4 10.7 11.1
Employees (People) 440 445 450 475 505 595
(% change) N/C 1.1 1.1 5.6 6.3 17.8
SOURCE: ANNUAL REPORT AND IBISWORLD
Other Companies
CraftWorks Restaurants & Breweries Inc.
Estimated market share 4.8% CraftWorks Restaurants and Breweries Inc. owns about 200 restaurants that operate under 14 different brands and employs nearly 12,000 people. The restaurants feature beef, seafood and pasta items, along with a selection of handcrafted beers. Through its subsidiaries Gordon Biersch Brewery Restaurant Group and Rock Bottom
Restaurant and Brewery the company produces a wide selection of craft beers, which it sells at its brewpubs. The company brews small batches of beer on-site at its restaurant locations and uses authentic Weyermann malt and Hersbrucker hops imported from Germany. Craftworks has expanded rapidly during the past five years, growing both organically and through acquisitions. The sale of craft beer at its brewpubs has fueled this growth as
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Major Companies
Other Companies continued
demand for unique, locally made craft beer has increased. IBISWorld estimates industry-specific revenue will reach $169.8 million in 2013, up 7.5% from 2012.
Craft Brew Alliance
Estimated market share: 4.3% Craft Brew Alliance is the union of three craft breweries: Redhook Ale Brewery, founded by Gordon Bowker and Paul Shipman in 1981 in Seattle; Widmer Brothers Brewing, founded by brothers Kurt and Rob Widmer in 1984 in Portland, OR; and Kona Brewing Co., founded by father-and-son team Cameron Healy and Spoon Khalsa in 1994 in Kona, HI. Breweries are located in Portsmouth, NH; Portland, OR; Woodinville, WA; and Kailua-Kona, HI. The company also owns five pubs, four of which are located adjacent to its breweries. In turn, the company is
partly owned by AB Inbev, a major brewer. The company benefits from an alliance with Anheuser-Buschs distribution network, which has helped it establish a competitive edge over other craft beer producers. Craft Brew Alliance offers a variety of distinct craft beer brands, which it sells through national distribution channels. It also benefits from its national sales and marketing reach, which has allowed the company to promote consumer awareness of its brands. Craft Brew Alliance has grown considerably over the past five years, with revenue expected to increase at an average annual rate of 13.5% to $150.6 million in 2013, including 3.4% growth in 2013. As demand for craft beer has increased during the period, Craft Brew Alliance has expanded operations and grown through acquisitions (including the acquisition of Kona Brewery in 2010).
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Operating Conditions
Capital Intensity
Level The level Craft breweries require substantial amounts of capital investment in the form of equipment and plants, although this varies depending on the size of the brewer. On average, firms spend $0.20 on capital for every dollar spent on wages. Brewing equipment, including stills, filtration systems, bottling lines and other machinery are bought when a plant is first established but require continuous maintenance and repair. The majority of the production process is mechanized and does not require a significant level of labor. On average, labor costs account for about 14.2% of industry revenue in 2013. Increases in automation, and
Capital Intensity | Technology & Systems | Revenue Volatility Regulation & Policy | Industry Assistance
Capital units per labor unit 0.5 0.4 0.3 0.2 0.1 0.0 Economy Manufacturing Craft Beer Production
Capital intensity
of capital intensity is M edium
Dotted line shows a high level of capital intensity

technological improvements in brewing equipment will continue to curb the industrys reliance in labor.
Tools of the Trade: Growth Strategies for Success

New Age Economy Recreation, Personal Services, Health and Education. Firms benefit from personal wealth so stable macroeconomic conditions are imperative. Brand awareness and niche labor skills are key to product differentiation. Investment Economy Information, Communications, Mining, Finance and Real Estate. To increase revenue firms need superior debt management, a stable macroeconomic environment and a sound investment plan.
Capital Intensive
Labor Intensive

Sugar Processing
Breweries Distilleries Wineries
Wheat, Barley & Sorghum Farming
Traditional Service Economy Wholesale andRetail. Reliant on laborrather than capital to sell goods. Functions cannot be outsourced therefore firms must use new technology or improve staff training to increase revenue growth.
Old Economy Agriculture and Manufacturing. Traded goods can be produced using cheap labor abroad. To expand firms must merge or acquire others to exploit economies of scale, or specialize in niche, high-value products.
Change in Share of the Economy
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Technology & Systems

Level The level
of Technology Change is L ow
Although the process of making beer has changed little throughout the years, technological advancements relevant to this industry primarily pertain to design, engineering and fabrication of brewing equipment. Quality-control improvements through computer automation in the brewing process are fast growing trends. Modern brewing plants are increasingly using brewing, fermenting and conditioning processes that are automatic-computer-controlled or semi-automatic-controlled via central-control panel. Increased automation allows brewers to more precisely control variables such as temperature and ingredient proportions during the critical phases of brewing (i.e. mashing, lautering, boiling and fermentation). Technological
improvements in monitoring equipment also allow for better quality control. The use of solar technology to power brewing plants is also a growing trend. For example, Sierra Nevada Brewing Company generates about 19.0% of its total electricity needs with photovoltaic panels that use solar energy. Technologies used to distribute, store, package and keep track of beer products are also changing constantly, giving an indirect boost to the industry by lowering final prices through decreasing middleman costs. From electric and hybrid fleet vehicles adopted by distributors to inventory management software used by warehouses, technology helps the industry provide consumers with lower-cost beer.
Revenue Volatility
Level The level
of Volatility is M edium
The Craft Beer Production industry has a moderate level of revenue volatility. Demand for craft beer has increased in the five years to 2013 driven in part by the buy-local movement and a political push against large corporations that stemmed from the financial meltdown. The industry has benefited from strong revenue
A higher level of revenue volatility implies greater industry risk. Volatility can negatively affect long-term strategic decisions, such as the time frame for capital investment. When a firm makes poor investment decisions it may face underutilized capacity if demand suddenly falls, or capacity constraints if it rises quickly.
growth even during the peak of the recession in 2009, when revenue grew 4.6%. The industry experienced double digit growth since, including a rapid 15.0% increase in 2012. As revenue growth slows due to market saturation and acquisitions by major brewers over the next five years, volatility is expected to further moderate.
Volatility vs Growth
1,000
Hazardous
Rollercoaster
Revenue volatility* (%)
100 10 1 0.1

Stagnant
30 10 10 30 50
Blue Chip
70
Five year annualized revenue growth (%)

* Axis is in logarithmic scale
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Regulation & Policy

Level & Trend he level of T
Regulation is Heavyand the trend is S teady
The Craft Beer Production industry is subject to various federal and state regulations that involve production, distribution, labeling, advertising, trade and pricing practices, credit, container characteristics, and alcoholic content. Federal, state and local governmental entities also levy various taxes, license fees and other similar charges and may require bonds to ensure compliance with applicable laws and regulations. Specific alcohol taxation is primarily a federal and state right although some states permit some additional local taxation. The brewing industry must also comply with numerous federal, state, and local environmental protection laws. Bureau of Alcohol, Tobacco Firearms and Explosives (ATF) ATF is a law-enforcement agency within the US Department of the Treasury and is responsible for protecting the public, reducing violent crime and collecting revenue. ATF enforces the federal laws and regulations relating to alcohol, tobacco products, firearms, explosives and arson. As part of its alcohol responsibilities, the ATF approves labels and monitors advertising; regulates labeling, marking, packaging and branding of all distilled spirits, wine and beer sold in the United States; and regulates US production and the importation of all alcohol beverages, including distilled spirits, malt beverages and wine. US Alcohol and Tobacco Tax and Trade Bureau (TTB) In 2003, the TTB published proposed regulations on the formulation, labeling and advertising of flavored malt beverages (FMBs). The final ruling was passed in 2005, which allowed for the addition of flavors and other nonbeverage ingredients but limited the alcohol contribution of such flavors to 49.0% of the alcohol content of the
product. For instance, beverages with alcohol content exceeding 6.0% alcohol by volume could contain no more than 1.5% of this alcohol from flavors and nonbeverage ingredients. The TTB sends out publications to remind brewers and importers of limitations to the use of flavors and nonbeverage ingredients containing alcohol in the production of FMBs. When producers do not comply with the regulations, the beverage is classified as a distilled spirit and taxed at the much higher distilled spirits rate. State regulations There are two types of regulatory environments in the United States where alcohol regulations are made on the state level: open and control states. In open states, brewers are allowed to sell beer and ale directly to independent distributors. In most control states, companies market their spirit products to state liquor control boards through a warehousing system, and from there, to state liquor stores. Beer distribution follows open states regulation across the entire United States. Regulations vary from state to state for direct sales, brewery tours, brewpubs, microbreweries, excise, packaging and franchising and are usually more stringent throughout eastern states than those in the west. Of all the states, Florida and Georgia have the highest level of state excise, at 48 cents per gallon. The lowest state-based excise is in Wyoming, where excise is two cents per gallon. The US average rate is about 19 cents per gallon. In an effort to raise taxes and stimulate small brewery business, some states have relaxed regulations on where beer can be sold and under what conditions. One example of this is South Carolina, which recently started allowing breweries to conduct tours and sell a limited amount of beer directly to customers.
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Industry Assistance
Level & Trend he level of T
Industry Assistance is L owand the trend is S teady
The Craft Beer Production industry benefits from tariff protection on certain imported products that compete with the industry. According to the latest information available from the International Trade Administration in the Department of Commerce, the general rate of import tariff on nonalcoholic beer is two cents per liter. For beer made from malt, there is no import tariff imposed. The industry is protected, up to a point, from imports by the high cost of transport given the weight of the product and the low value relative to this weight. However, favorable production conditions in Mexico and Canada have led foreign premium brands to set up shop in neighboring countries in order to produce beer for sale in the United States. Other assistance is provided by organizations, including the Brewers
Association, which works to promote and protect small and independent craft brewers; the Small Brewers Caucus and Institute for Brewing Studies. The Small Brewers Caucus is composed of members of Congress who have an interest in the issues smaller brewers face. The aim of the caucus is to provide members with the opportunity to learn about the business and regulatory and societal issues relating to small breweries. The establishment of the caucus shows some recognition of smaller brewers significance in the industry and may give smaller brewers greater representation in Congress. It is supported by the Brewers Association, which is composed of small beer production companies. The Institute for Brewing Studies offers establishment and marketing assistance to existing and prospective microbrewers across the country.
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Key Statistics
Industry Data
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Sector Rank Economy Rank Revenue ($m) 2,014.0 2,141.9 2,102.9 2,174.3 2,349.2 2,456.1 2,720.5 3,062.4 3,520.4 3,938.0 4,449.9 4,863.8 5,036.6 5,192.4 5,566.2 201/414 816/1293 Industry Value Added ($m) 518.0 537.9 613.0 532.0 671.6 640.6 763.9 803.5 936.1 1,046.5 1,153.3 1,320.5 1,351.4 1,376.4 1,463.5 203/414 842/1293 Establishments 1,263 1,297 1,344 1,400 1,459 1,549 1,742 1,970 2,347 2,483 2,742 2,968 3,044 3,108 3,300 38/414 594/1292 Enterprises Employment 1,255 8,360 1,291 8,622 1,337 9,395 1,395 9,037 1,453 9,424 1,543 10,223 1,734 10,893 1,868 11,518 2,165 13,101 2,439 14,490 2,730 15,919 2,956 16,916 3,032 17,031 3,096 17,070 3,287 17,790 34/414 167/414 531/1292 801/1293 Exports ($m) 0.1 1.2 3.4 6.6 9.6 11.4 12.6 24.2 33.7 46.9 64.7 84.6 112.1 156.0 211.7 345/384 397/443 Imports ($m) 0.6 11.0 32.4 37.4 28.2 30.3 22.7 38.8 49.7 63.9 81.4 98.2 120.0 154.2 193.1 341/384 390/444 Wages ($m) 309.8 309.2 371.2 316.8 316.3 353.7 401.9 446.3 506.1 558.4 622.3 670.9 685.3 696.8 736.8 200/414 848/1293 Domestic Demand 2,014.5 2,151.7 2,131.9 2,205.1 2,367.8 2,475.0 2,730.6 3,077.0 3,536.4 3,955.0 4,466.6 4,877.4 5,044.5 5,190.6 5,547.6 209/384 245/443 Price of Coarse Grains (Index) 99.7 91.6 110.2 165.6 206.4 132.5 153.2 249.0 258.9 268.7 286.5 274.3 301.0 291.9 303.6 N/A N/A
Annual Change
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Sector Rank Economy Rank Revenue (%) 6.4 -1.8 3.4 8.0 4.6 10.8 12.6 15.0 11.9 13.0 9.3 3.6 3.1 7.2 12/414 53/1293
Industry Value Added (%) 3.8 14.0 -13.2 26.2 -4.6 19.2 5.2 16.5 11.8 10.2 14.5 2.3 1.8 6.3 13/414 69/1293
Establishments (%) 2.7 3.6 4.2 4.2 6.2 12.5 13.1 19.1 5.8 10.4 8.2 2.6 2.1 6.2 20/414 88/1292
Enterprises Employment (%) (%) 2.9 3.1 3.6 9.0 4.3 -3.8 4.2 4.3 6.2 8.5 12.4 6.6 7.7 5.7 15.9 13.7 12.7 10.6 11.9 9.9 8.3 6.3 2.6 0.7 2.1 0.2 6.2 4.2 6/414 7/414 23/1292 33/1293
Exports (%) 1,100.0 183.3 94.1 45.5 18.8 10.5 92.1 39.3 39.2 38.0 30.8 32.5 39.2 35.7 1/384 2/443
Imports (%) 1,733.3 194.5 15.4 -24.6 7.4 -25.1 70.9 28.1 28.6 27.4 20.6 22.2 28.5 25.2 3/384 5/444
Wages (%) -0.2 20.1 -14.7 -0.2 11.8 13.6 11.0 13.4 10.3 11.4 7.8 2.1 1.7 5.7 11/414 50/1293
Domestic Demand (%) 6.8 -0.9 3.4 7.4 4.5 10.3 12.7 14.9 11.8 12.9 9.2 3.4 2.9 6.9 20/384 23/443
Price of Coarse Grains (%) -8.1 20.3 50.3 24.6 -35.8 15.6 62.5 4.0 3.8 6.6 -4.3 9.7 -3.0 4.0 N/A N/A
Key Ratios
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Sector Rank Economy Rank IVA/Revenue (%) 25.72 25.11 29.15 24.47 28.59 26.08 28.08 26.24 26.59 26.57 25.92 27.15 26.83 26.51 26.29 199/414 812/1293
Imports/ Demand (%) 0.03 0.51 1.52 1.70 1.19 1.22 0.83 1.26 1.41 1.62 1.82 2.01 2.38 2.97 3.48 372/384 419/443
Exports/Revenue (%) 0.00 0.06 0.16 0.30 0.41 0.46 0.46 0.79 0.96 1.19 1.45 1.74 2.23 3.00 3.80 377/384 430/443
Revenue per Employee ($000) 240.91 248.42 223.83 240.60 249.28 240.25 249.75 265.88 268.71 271.77 279.53 287.53 295.73 304.18 312.88 310/414 648/1293
Wages/Revenue (%) 15.38 14.44 17.65 14.57 13.46 14.40 14.77 14.57 14.38 14.18 13.98 13.79 13.61 13.42 13.24 201/414 797/1293
Employees per Est. 6.62 6.65 6.99 6.46 6.46 6.60 6.25 5.85 5.58 5.84 5.81 5.70 5.59 5.49 5.39 403/414 933/1292
Average Wage ($) 37,057.42 35,861.75 39,510.38 35,055.88 33,563.24 34,598.45 36,895.25 38,748.05 38,630.64 38,536.92 39,091.65 39,660.68 40,238.39 40,820.15 41,416.53 352/414 864/1293
Share of the Economy (%) 0.00 0.00 0.00 0.00 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 203/414 842/1293
Figures are inflation-adjusted 2013 dollars. Rank refers to 2013 data.
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Jargon & Glossary
Industry Jargon
CRAFT BEERBeer made by small independent brewers with annual production of 6 million barrels of beer or less. LAGERA type of beer that is fermented and conditioned at low temperatures. Pale lager is the most widely-consumed and commercially available style of beer in the world
PALE ALEA type of beer made through a warm fermentation process using a high proportion of pale malt, which gives it a lighter color.
IBISWorld Glossary
BARRIERS TO ENTRYHigh barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry. CAPITAL INTENSITYCompares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor. CONSTANT PRICESThe dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the real growth or decline in industry metrics. The inflation adjustments in IBISWorlds reports are made using the US Bureau of Economic Analysis implicit GDP price deflator. DOMESTIC DEMANDSpending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports. EMPLOYMENTThe number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry. ENTERPRISEA division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control. ESTABLISHMENTThe smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise. EXPORTSTotal value of industry goods and services sold by US companies to customers abroad. IMPORTSTotal value of industry goods and services brought in from foreign countries to be sold in the United States.
INDUSTRY CONCENTRATIONAn indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%. INDUSTRY REVENUEThe total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded. INDUSTRY VALUE ADDED (IVA)The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industrys contribution to GDP, or profit plus wages and depreciation. INTERNATIONAL TRADEThe level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%. LIFE CYCLEAll industries go through periods of growth, maturity and decline. IBISWorld determines an industrys life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industrys products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services. NONEMPLOYING ESTABLISHMENTBusinesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by selfemployed individuals. PROFITIBISWorld uses earnings before interest and tax (EBIT) as an indicator of a companys profitability. It is calculated as revenue minus expenses, excluding interest and tax.
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Jargon & Glossary
IBISWorld Glossary continued
VOLATILITYThe level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than 20%; high volatility is 10% to 20%; moderate volatility is 3% to 10%; and low volatility is less than 3%.
WAGESThe gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure.
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Craft Beer ProductionAugust 2013 1

IBISWorld Industry Report OD4302

Craft Beer Production

30 Key Statistics 19 Competitive Landscape

3 Industry at a Glance 4 Industry Performance

31 Jargon & Glossary

21 Barriers to Entry 22 Industry Globalization

10 Industry Life Cycle

12 Products & Markets

www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

Craft Beer ProductionAugust 2013 2

About this Industry

Craft Beer Production August 2013

7.2% $378.0m $46.9m 2,439

Annual Growth 08-13

Annual Growth 13-18

Price of coarse grains

Boston Beer Company 19.3%

Sierra Nevada Brewing Company 5.1%

200 150 100

Products and services segmentation (2013)

Key External Drivers

Growth Medium Medium Low Low

Heavy Low Low Low Medium

Craft Beer ProductionAugust 2013 4

Key External Drivers

Craft Beer ProductionAugust 2013 5

Key External Drivers continued

200 150 100

1.0 0.5 0.0 0.5

Craft Beer ProductionAugust 2013 6

Craft Beer ProductionAugust 2013 7

Attractive opportunity continued

Revenue vs. exports

Craft Beer ProductionAugust 2013 8

Craft Beer ProductionAugust 2013 9

expansion will help brewers leverage scale, improving profitability

Craft Beer ProductionAugust 2013 10

% Growth in share of economy

Company consolidation; level of economic importance stable 15

Craft Beer Production

Wineries Sugar Processing

Wheat, Barley & Sorghum Farming

Shrinking economic importance

% Growth in number of establishments

Craft Beer ProductionAugust 2013 11

Industry Life Cycle This industry is G rowing

Craft Beer ProductionAugust 2013 12

Products & Markets

KEY SELLING INDUSTRIES

32311 32721 33131 42451

Products & Services

Craft Beer ProductionAugust 2013 13

Products & Markets

Products & Services continued

Products and services segmentation (2013)

Craft Beer ProductionAugust 2013 14

Products & Markets

Craft Beer ProductionAugust 2013 15