The craft beer market, for years the lone bright spot in an otherwise sluggish industry, is starting to get stale.
Sales growth is slowing, once-thriving brewers are laying off workers and the proliferation of new brands all competing for attention hearkens back to the dime-a-dozen startups from the web's early days.
On Friday, the world's biggest brewer, Budweiser maker Anheuser-Busch InBev, acknowledged the slowdown for the first time, saying the sector has been decelerating for more than three months.
While many craft brands are still thriving, and few analysts expected the category's supercharged growth to continue unabated, the cooling market isn't welcome news for a brewing sector that's desperate for growth. Mass-market beers such as Budweiser and Coors Light have been suffering for years, and AB InBev now expects U.S. industry volumes to decline this year versus previous expectations of an improvement.
"There's a natural point where it can't grow anymore and this might be it," Anthony Bucalo, an analyst at HSBC, said by phone. "Consumers are overwhelmed by too much choice; the industry has been swamped. There's too many brands, too many styles, not enough quality."
Some of the early pioneers of the craft-beer movement in the U.S. are starting to feel the pain. Stone Brewing, the 20-year-old Escondido, California-based brewer of Stone IPA, laid off about 5 percent of its 1,200 employees this month, citing a less predictable business environment. The news came less than two weeks after Craft Brew Alliance Inc., owner of the more than 30-year-old Redhook Brewery, said it was halving the number of workers at its Woodinville brewery in Washington state.
The stress is partly due to the sheer number of beer makers competing to entice drinkers. A thirst for more local and flavorsome beers swelled the number of breweries in the U.S. to a record 4,656 in June, yet the volume of beer produced is growing at less than half the 18 percent rate it boasted two years ago, according to the Brewers Association, a trade body for the American craft beer industry. The U.S. now has more breweries than it did at its high-water mark of 1873, according to the group.
There's only so much shelf space for craft beers to share, and the abundance of choices could put off some consumers, AB InBev Chief Executive Officer Carlos Brito said on a call with analysts Friday.
The slowdown didn't put Kirin Holdings Co. off buying a minority stake in Brooklyn Brewery earlier this month.
Amid a stagnant beer market, the faster-growing craft segment has attracted larger players whose brands increasingly have fallen out of favor with consumers. AB InBev has been serially acquisitive, building a roster of small brewers over the past two years that includes Devils Backbone Brewing, Breckenridge Brewery and Four Peaks Brewing.
Those brands, which are more local than national craft-beer makers, are still growing strongly, AB InBev Chief Financial Officer Felipe Dutra said Friday on a call with reporters. Boston Beer Co., the maker of Samuel Adams lager often considered the grandfather of the modern craft beer movement, this month reported third-quarter revenue that missed estimates.
"We see a very recent slowdown in the craft industry; it's still too early to say whether there's a trend," Dutra said.
(c) 2016, Bloomberg · Thomas Buckley