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Market Watch: The Road Ahead For Craft Beer

May 28, 2021

Craft beer has been dramatically impacted by the Covid-19 pandemic. Indeed, many breweries—particularly those that rely on a taproom model with little retail distribution—have been crippled. Bart Watson, chief economist at the Brewers Association, estimates that craft beer volume dropped 9% last year, a performance that was much worse than that of overall beer, which declined 3% (excluding FMBs). As a result, craft’s share of the beer pie dropped to approximately 12% in 2020, from 14% in the year prior. Craft beer’s underperformance is largely due to the fact that sales skew more toward the on-premise, including draft, than overall beer.

Surprisingly, however, there have been far fewer brewery closings due to the pandemic than expected. Watson estimates 300 brewery closings last year, about the same as in 2019. Large infusions from the Paycheck Protection Program (PPP) helped craft breweries pay their bills, Watson notes, while extreme cost cutting, including staff layoffs, have helped keep the companies afloat.

“But we’re not out of the woods yet,” he says. And while Watson expects craft beer volume will increase this year, it’s not likely to top that of 2019. That may have to wait until 2022, he says. Market Watch takes a look at the road ahead for the craft beer segment.—Terri Allan

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