Flatlining Foam: Craft Beer Market Slowdown Impact on Bars

Is your craft beer program facing its biggest challenge yet? With craft beer production plummeting 4% in 2024—the largest decline outside the pandemic—bar owners need to act fast to protect their profits.

For the first time in two decades, brewery closures (501) have outpaced openings (434). This seismic shift signals a transformation in consumer preferences and market dynamics that directly impacts your bar's bottom line.

In this episode, discover:

• How to transform your beer program to match evolving consumer tastes
• Strategic ways to maintain margins despite market pressures
• Innovative event programming that drives traffic in the changing landscape
• Expert insights on diversifying your beverage program
• Practical steps to position your bar for success in the new craft beer era

Ready to adapt your bar to these changes? Listen now to get actionable strategies you can implement immediately.

Learn More:
Schedule a Strategy Session
Bar Business Nation Facebook Group
The Bar Business Podcast Website
Chris' Book 'How to Make Top-Shelf Profits in the Bar Business'

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A podcast for bar, pub, tavern, nightclub, and restaurant owners, managers, and hospitality professionals, covering essential topics like bar inventory, marketing strategies, restaurant financials, and hospitality profits to help increase bar profits and overall success in the hospitality industry.

Transcript

Chris Schneider (00:01.162)
Last year, craft beer dropped 4 % in production in the United States. We're seeing more breweries today close than open. And overall, when we look at the landscape of the craft beer industry and consumers and how much craft beer they're drinking, there are changes. So as bar owners, what do we need to know? How do we need to react? What do we need to be aware of in order to make sure that our bars are set up for success now and into the future?

Today we're talking all about craft beer, the craft beer industry, and the changes that are going on right now. And essentially craft beer is on a decline right now. Craft beer is not doing as well as it historically has right now. Craft beer, in fact, is going to...

be an entirely different market in my opinion five, 10 years from now. So I want to talk a little bit about the history of craft beer, a little bit about what's going on today, and then look at some ways we can adapt. We can adjust to these changes around us and the changing tastes and wants of our guests. Now, before we launch into the history of craft beer, something that is always important, something that I say too much, and it's a little harsh, but it is also true. As a bar owner, no one gives a shit what you want.

No one cares what you like. And for that matter, nobody gives a shit what your bartenders like or want. No one gives a shit what anyone that works for you likes or wants. And so we always have to remember that we may have specific tastes. You may love sours. You may love IPAs. You may have a great love of craft beer. That might be part of the reason that you're in this industry, part of what inspired you to open a bar. But when everyone's tastes are changing, holding on to what you want.

at the expense of what your customers want is a surefire way to put yourself out of business. It's a sure way to decrease your profit margins. So when I say no one gives a shit what you want, I mean that no one gives a shit what you want, but also the deeper meaning there is we have to look at what the market wants in aggregate and adjust to it regardless of our personal taste.

Chris Schneider (02:16.472)
Because this is an industry where if you don't adjust to what's going on, it can be very, very difficult to move forward and to grow your business. So with that, let's talk a little bit about what's happened with craft beer over the last 25 years. So when we look at the early 2000s, know, 2000, 2007, craft beer, small niche. It was an alternative to some mass market stuff, right? But back then, for those of you old enough to remember, was, you know, Bud Light was the beer.

Miller Lite was the beer. It was light domestic beer. That's what people drank and slowly craft beer started to go in. In fact, in 2000, there were less than 1500 breweries in the United States and we compare that to say 2016, there were over 5000. So we're talking massive growth in a short amount of years. But when we're looking at the beginning of millennia, the beginning of the century, the beginning of the 2000s,

We have very few craft breweries in the United States. Now there's growing consumer demand that happens during that time. There's a focus on local flavorful products and people really want to get into food and particularly beer a lot more during this period. And so one of the big changes that we see happen in the early 2000s is changes in state laws that make it easier for brew pubs to exist, easier for taprooms to exist as we see this kind of growing demand for different

better local products. And so towards the end of the

first part of the 2000 through about 2016. So right before the teens and through most of the teens, we just see explosive growth boom years in the craft beer industry. And like I said, we go from about 1500 breweries in 2008.

Chris Schneider (04:10.222)
to 5,000 breweries in 2016, it's huge. Craft becomes a status symbol. Everyone is all about beer tourism, beer festivals, taprooms, all that stuff. I had a bar during this period. I switched over to craft beer. It was just wildfire. I could sell anything almost. The market was entirely dominated at that point by IPAs. And then, you know, a little bit with stouts and some lagers and some barrel aging. Some of that was trickling in. But IPAs were the beer that entire period of time.

Chris Schneider (04:42.958)
A lot of this has to do with generational changes. Your Gen X, your baby boomers, they were your domestic drinkers. Millennials want that more authentic small batch products, different experience, and that's what drove a lot of this. But after 2016, we entered a period of kind of stagnation and growth pre-COVID among breweries. The numbers of breweries got up past 7,000. So we're talking in 20 years, we went from under 1,500 to over 7,000. Huge growth.

And that greatly increased competition, the market became very crowded and in some ways became probably a little bit oversaturated.

And at the same time, there's a lot of consolidation going on. These people that have built these craft breweries, they're selling because they want to retire. Let's be honest, running a small brewery is just as hard as running a small bar. It's a sucky job. So people wanted to sell, they wanted to get out, they sold to Molson Coors. They sold to InBev, they sold to these larger beer companies. And that led to what happens anytime that a bunch of small companies start selling to large companies.

People question the idea of what is independent. What does make a craft beer? And you have this whole concept of craft washing that emerges where large companies, you know, is Goose Island a craft beer today? Goose Island, owned by ABNVeb, has been for like almost a decade, I think. Is that a craft beer? It's small batch. It's all that, but it's also Budweiser. I don't know. I'm not here to debate that. But a lot of the folks that were

staunch craft beer people had this craft washing that they were very against.

Chris Schneider (06:24.674)
And the other thing that happened is IPA overload, right? For too long, IPAs, was how crazy can I make this beer? How unbalanced can I make this beer? And a lot of people's taste was based upon an acquired taste for overly unbalanced toffee beers, which is fine if that's what you like. But it became so unattractive to a casual consumer. was so

different than a domestic beer that it kind of stifled growth there. And then also during the same period, you start to see RTDs ready to drink. Drinks come in hard. Seltzers start to come about. So really you start to see some very hard competition against craft beers and IPAs. I take this to pandemic. Now, obviously bars, taprooms, everything gets shut down during the pandemic. A lot of small breweries closed. More they sold out, they consolidated.

Those folks that were large enough to have scale distribution did fine through the pandemic, generally speaking. But you did see the smaller breweries die out during the pandemic and consumer behavior during the pandemic. We saw people go continuing towards hard seltzers, low ABV drinks, health conscious drinking. And quite frankly, as the Millennials faded away and Gen Z came in as your early 20s, big drinking

Generation, they don't drink as much. Not only do they not drink as much, but they're more willing to just hop around. They're less loyal to any specific brand or even type of alcohol. Now, the last couple of years, we've really seen a decline. The number of breweries hit a ceiling at around 9,500 to 10,000 in the last couple of years. And last year, we saw growth reverse, where we've seen this constant growth from 2,000, right? 1,500 to 10,000.

almost 10,000 in the last couple years. Last year we saw only 436 breweries open and 504 breweries close. So we're having more closures than openings. It's declining for the first time ever.

Chris Schneider (08:40.802)
And we're seeing more fragmentation. Hyperlocal breweries are doing very well with their local customer base.

Chris Schneider (08:51.726)
But we're also seeing the styles people like change. We're IPAs, we're the predominant. Now we're seeing lagers, non-alcoholic craft beer. Things of that nature really drive some sales. And so now this debate on what craft even means has gotten worse, right? And because you have not only craft beer, but you could have craft seltzers. You have things like hop water. Is hop water a beer product? Is it not? It's not alcoholic. It's just

hop water, like hop flavored water, but breweries make that they make money on it. What is craft? What is beer? What is what? It's all getting muddled.

And I'm not sure exactly what that means for craft beer in the long run. The big thing here is that there's been a consumer shift away from your IPAs, away from your stars, away from your, quite frankly, in my opinion, harder to drink things into your easier to drink things. And when I say harder to drink, that doesn't mean bad. Some of the best whiskey in the world. It's very expensive. I enjoy drinking it, but it's not easy to drink. It's not like sweet and it burns. Hoppy IPAs.

can be great, but they're very hoppy. Sours are just, well, they're sour. They're not always the best to drink. A lager, really easy to drink. So we're seeing people swift towards things that are easier to drink, whether that's the lagers, the hard seltzers. We're also seeing a growth in non-alcoholic beer and spirits. And another place where there's a lot of growth lately has been THC and CBD drinks. Totally different category, obviously, and depending on the state you're in, those may or may not be legal. You may or may not even have them.

as a worry. But it's differentiating the market. It's pulling consumers away from traditional alcohol and is a contributing factor to this decline that we're seeing in the craft market. So we talked about kind of what's happened the last 25 years, but what the heck does this mean for you as a bar owner? Well, it means a few things, and some of these are actually kind of scary and kind of structural.

Chris Schneider (11:00.108)
So the first thing it means is if beer doesn't sell as well, we now have inventory management challenges. And those inventory management challenges are one thing on bottle beer. Bottle beer, it's going to last a long time. You keep it refrigerated, you're kind of all right. Keg beer is the bigger challenge. Because the big thing on keg beer is you want your taps to move every month. If you have, if you cannot kill a keg every month on every tap, you have too many taps.

And for a long time, this trend in bar design and bars was to have, you know, I want 20 taps, I want 30 taps, I want 60 taps. I'm not sure at this point today that that is still sustainable. Because the last thing you want is to have a bunch of taps and beer that hardly moves. A, your yields lower because when that beer doesn't get poured all the time, it's going to be foamy or there's going to be pressure that backs up into it. It's going to force carbonate. It's

going to cause you to have a lower yield. Two, you're not seeing varieties and changing on your tap as much as you would if you had fewer beers. And three, frankly, this is just me, if you can't move the product in a month, your inventory carrying time is getting too long. It's too hard to measure. It's just not particularly worth it, in my opinion.

So really what we want to look for here, ideally from the bar owner end, is that every tap we have, I can flip a keg on that every month. So if you have 12 taps, you should be going through at least 12 kegs a month, a keg of everything on tap. If you have something on tap that you're not selling in a month, then that probably means that's not a good beer to have on draft for your bar. But when you have multiple taps that are that way, or when you know the beers you're putting on are selling all poorly.

Either A, you did a really, really bad job creating your beer list, which is more likely than not the answer here. Right? Probably you did all right. But the real problem here is that you just have too many taps. So I think one of the things that we need to start thinking about as an industry is, is it time to reduce the number of taps we have in some bars? You know, maybe you have a small bar and you have 24 taps. You should probably have 12 if you're not doing the volume on 24. So maybe it's time to like...

Chris Schneider (13:24.95)
rather than increase taps or put in more to start dialing those back.

Now, the other thing that we're seeing is that you can't quite drive the sails that you used to in craft beer and things like tap takeovers. Not really doing as well as they used to. Flights, flight specials, not really doing as well as they used to. I mean, I have not seen as many people when I go out drinking yellow beer out of pint glasses.

in decades, right? That's what I see people drink now most of time. Yellow beer and pint glasses. When I say yellow beer, I mean your domestics, and then your wannabe domestics. Because where we have seen some growth, and this is just a side note real quick, but where we have seen some growth and some beers really catch on is like garage beer, which is owned by the Kelsey Brothers. It's beer to drink in your garage. It's good. Ain't nothing wrong with it.

but it's on par with like say Budweiser or banquet. So those is where, if that's where the growth is, that's a totally different place than where we used to be. And that's if you're drinking garage beer, you're not, hey, they don't, they make two beers, regular one and a lime one, but they aren't doing a tap take over like a craft brewery used to do with seven different styles of beer on. You're also not going to sell flights of that. You're going to sell pints of that. So that's where we're going.

Now there's the other piece here. As we've seen prices go up, as inflation has happened the last few years, craft beer has gotten way more expensive. And if you're pricing your beer mathematically, right, and what I tell most of my clients I like to do is 22 % based on a 90 % yield. So 22 % cost, but factor that we're losing 10 % of it, because then if we beat that yield, our cost is lower, we can play with that. That's always where I start.

Chris Schneider (15:30.158)
And if you're pricing mathematically like that, when you get a $300 half barrel.

Well, you're charging $12, $13, $14 bucks.

So domestic beer, it's cheaper. It's a better value. As prices go up, domestic beer goes up less per unit of volume than say a craft beer does. So domestic beer is the easier option for folks. And if people are price conscious, especially now that we're getting in tariffs and some different things going on, it can grow even more.

So what do need to do? Right. Craft beer is not doing what it used to do. We have these challenges. We have these potential problems. What as an industry do we need to do in order to ensure long term success? Well, the first thing I would tell you to do is don't get rid of craft beer. You still need every style of beer on your menu. You still want stouts and porters and IPAs and sours. You want all of that represented on your menu.

But what I would recommend that you do is if you have four sours and three of them aren't sun, go to one.

Chris Schneider (16:48.236)
If you have 15 IPAs and four hazies and none of it really moves that quick, cut it back.

Trim your fat and only stock your top sellers. And then, since we've now created some room in the cooler, let's diversify that with things that are growing in demand. So our non-alcoholic beer, mocktails, seltzers, stuff like that, your RTDs. Backfill your beer with those items and see if you can sell them. Now, does that mean they're necessarily going to sell them? No.

Right? Anytime, especially with RTDs, seltzers, mocktails, things like that. If you're not doing it now, should you? Yes. Is it necessarily going to be a great seller for you? Maybe, maybe not. It depends on where you are, what kind of guests you have, what kind of price point you're in. All sorts of things are going to determine whether or not that works for you. But try it. Gather that data. See what happens. And just understand that now when we talk beer, right? Liquor, beer.

Three categories every buyer has always had. Now we have liquor, beer, wine, and other stuff in cans, whether that's seltzers or RTDs or CBD drinks. We have our liquor, beer, wine, and then our other drinks that may or may not be able to alter your mental state and may or may not contain alcohol.

Look at your pricing and positioning as well. So as you move from volume to really curating, you know, I have one hazy, one killer stout, one really funky, cool seasonal beer on my menu.

Chris Schneider (18:35.756)
really dial in those prices. Make sure that your prices are in line with the market and that you're getting what you need, but focus very hard on curation. Right? Not volume anymore. Not how many beers can I have, but can I have the best set of beers possible?

Now, the other thing I would recommend doing in pricing and kind of how we position things is to look at creating mini tasting experiences. So rather than just a flight of beer, because flights of beer maybe don't work as well anymore. You can always do

Chris Schneider (19:14.328)
beer recommendations with food. So you don't see this a lot in lower end bars and restaurants, but it actually works if you go to a high end restaurant, right? A lot of your high end restaurants today, they're like, hey, here's this wonderful sea bass we have and here's the perfect wine. Have this Pinot Grigio with our sea bass, it pairs perfectly. All right, great. You can give those recommendations with beer and maybe use that to help you push some beer out there, give you a little bit of a different approach than other people are taking.

by tying your beer and food together and using that to push it a little bit. The other thing that you can always look at here is to make sure when you're doing beer things, whether it's beer nights or a tap takeover or whatever that happens to be, that it's something different, that it's outside of the mold. Whether you're doing something with barrel-aged beers or you're doing a beer dinner, right? Let's...

We talked about tasting experiences where it's like an appetizer and here's a recommend beer, but you can do a whole beer dinner. That's something different. It's interesting. You can look at Fusion Brews. You can do if you have a local company that is making, say, beverages and it's legal for you to sell, you can do a CBD tap takeover. Right. But look at these different options that exist around you.

And another thing to do is to...

look at your marketing around beer. Because if we know if the beer market is changing, if how people react to beer is changing, if what people want in beer is changing, then how we market should change. Now that's going to be different from location to location, from market to market, because what's going on is a little bit locally based.

Chris Schneider (21:01.838)
So with all that said, let's talk a little bit about what I see as potential for the future. Now, does this mean that I'm guaranteeing this stuff happens? Heck no. But these are things we can look at that may happen as we move forward. First thing is, I'm still saying as we look at our canned bottle drinks, non-alcoholic growth will continue to trend. You know, right now, non-alcoholic drink sales are up about 31 % in the industry year over year.

I think that continues to trend up. So we need to stay on top of this non alcoholic trend. I'm curious to see if it sticks around. I'm not sure that the non alcoholic trend is a lasting one, but the mocktails and your non alcoholic beer, things like hop water, those are hot right now. So we need to be bought into that and understand that it's going to continue. How long it continues, though, is not quite clear.

The other thing here, I think we're going to start to see a lot of, especially as these breweries start to close and there are more and more problems with these breweries. We're going see more consolidation. We're see the big players and medium sized regional players start to soak up the smaller players in the craft market. And probably, you know, if we peaked at like 10,000 breweries, we're probably going to see that come down significantly over the next decade as this consolidation happens. And I think the other thing that we're going to see.

And this is going back to the real roots, the real roots back in the early 2000s, return to a hyperlocal focus. So we're talking about, you know, what brewery is down the street for me? What brewery is five feet from me? Where can I go and experience something cool locally? So I think we'll see more of

Now, to kind of wrap this all up, know what does this mean for you? What should you as a bar owner be thinking about when it comes to your beer program? Review your current beer program. Make sure you're analyzing your sales data. Look at your P mix. Look at your P mix over time and see what categories for you are growing or declining. Everything I talked about is United States market overall statistics. Well, if you have a bar in London, maybe nothing I said is correct, except for this last part.

Chris Schneider (23:18.51)
But pay attention and just look at what your beer program is doing, what's going up, what's going down. Look at it over the last two, three years, because that's going to give you a really good indication. And then if you've had the bar, say, last decade, if you had a bar pre-COVID and you still on the same bar, pull some of those 2019 numbers, compare them, because that's going to give you a really good idea of the overall shock and what's really happened here. And potentially again.

What's getting better for your store? What's getting worse for your store? Where can you push? Obviously, the things that are working well for you double down on them. The things that aren't working that you've seen a decline in, get out of them as quick as you can. But implement those changes based on your own data and your local market and make sure that you have set yourself up for success. Because the bottom line here is regardless if the beer industry gets better or worse, regardless if ready to drink becomes popular or not, regardless if we all switch from selling alcohol based drinks to CBD based drinks.

You have a business that will survive. You just have to make sure you give your customers what they want. And what they want is not necessarily what you want. So rely on the data to understand your customers, to make choices that will make your business more profitable and bring you into the future.