The new year has just begun, which means it’s time to take stock and have a good hard think about what’s in store for the drinks world with a look at some potential drinks trends in 2015. 2014 was a fine vintage, and I confidently predict 2015 will be just as exciting, though potentially more explosive. There are a few “any day now” seismic shifts the whole industry has been expecting for years, and I think at least a couple will actually take hold this year. In 12 months we will have seen some big events.
With 3,200 breweries and over 650 distilleries joining the 8,400 wineries in the USA, it’s clear that the consolidation of the 20th century is in full reverse. (That’s right: over 12,000 drinks-producing sites overall, or one for every 10,000 US households.) In beer and spirits, craft – and we won’t argue about definitions here – is in no way losing its appetite for market share. Flavors, brands, SKUs, seasonals and variants are all multiplying like crazy. So in the midst of the chaos, what are the big trends that will steer the industry in 2015?
Here are my top five:
Craft beer will keep on trucking but craft spirits will become the headline
The Brewers Association predicts that the growth in volume of craft beer will rise in 2014 to +18% from +17.2% in 2013, and they report an extra 700 odd breweries have opened in 2014. There are permits/plans for an extra 1,300 breweries on the books, and only a fool would suggest consumer demand for craft beer is quieting down. 2015 will not be the year that craft beer starts losing heat. (That day will come however.)
But this year, I think everyone is going to start talking about craft spirits. It’s not like it’s come from nowhere – there were about 70 distilleries in the US in 2002, 200 in 2008 and the number is now 683 – but 2015 is the year the global industry will really sit up and take notice of American craft spirits.
It’s been a slow burn for a few reasons. Setting up a distillery is tough, arguably a lot tougher than a brewery. (Ever heard of home-distilling? No, it’s illegal.) It takes a long time to distill, and even longer to learn how to get it right. It’s also super-regulated, and for good reason. Getting a spirit licensed and into distribution is a slog. Finally, a lot of spirits need to age. To get a decently colored, flavored and aromatic whisk(e)y takes 3 years, and the good ones 12 years or more. But – using craft beer as a template – craft spirits are showing up in bars and liquor stores nationwide with gusto. Ignore them at your peril.
More big craft breweries will “get corporate”
Are Budweiser, Coors and Miller craft beers? No. Were Adolphus Busch, Adloph Coors and Frederick Miller once craft brewers? By any definition, yes. If you’re onto a good thing, you make good beer and you’re a savvy businessman, chances are you’ll keep growing, and at some point – no matter whether the Brewers Association keeps raising the ceiling of how much beer you can make and still be a craft brewer – you stop being a start-up and become an established corporation.
In the last 18 months there have been developments pointing towards the increasing “corporate-ication” of a few top tier craft brewers. In October 2013, KC’s Boulevard Brewing Co. was sold to Belgium’s Duvel Moortgat, creating in the process Duvel Moortgat USA (along with the already Duvel-owned Brewery Ommegang), which will manage Duvel imports and Boulevard and Ommegang brands out of New York. In October 2014 Steve Hindy formally passed control of Brooklyn Brewery to family friends the Ottaway brothers, and Sam Calagione appointed COO Nick Benz as CEO of Dogfish Head – not necessarily changing the style of the breweries, but beefing up the business know-how on the board. And then in December, Founders Brewing Co. sold 30% of its equity to Mahou San Miguel, the Spanish brewery.
All these are signs of maturing companies, which is inevitable as they grow and founders get older. In none of these cases do I see any hint of “selling out” or betrayal of craft values; they are simply business moves that will help great breweries prosper in the long run.
These trends will continue in 2015, and at an accelerating pace. And to my mind the biggest evolution in craft brewing will be the formal opening of Sierra Nevada’s and New Belgium’s second site breweries, both in North Carolina. It makes complete sense for brewers at this scale (both breweries are around the 1MM barrel per annum mark) to brew fresh for the east coast, and to increase the reach of their distribution. After all, with their ABI backing the Craft Brew Alliance has been doing it very well for years. And look for more breweries to open second or even third sites.
What will be the impact of the bigger players in craft beer turning corporate? Backlash of course, and we’ll potentially see a new definition of craft beer (already being called “Hipster Craft” in many circles) enter the lexicon in 2015. Craft breweries opening second sites – especially thousands of miles from their original location – challenges the concept of beer terroir, and goes against the “buy local” consumer motivation. We’ll see if it has an impact on sales.
The big blue chips will actually start to learn and apply the lessons of craft
Seen the most recent commercials for Miller Lite or Bud Light? See any girls in bikinis, dudes hi-fiving at a football game or zany stunts? Nope, but plenty of focus on the beer. Not that I think Bud Light is about to fill coverage of this year’s Super Bowl with stories of hop farmers or maltsters, but I firmly believe these are the tip of the iceberg.
And not just in beer – you’ll see the likes of Diageo, Pernod Ricard and Bacardi start behaving more like craft distillers in their marketing too. What do I mean by this? Much more emphasis on the product, highlighting the people who brew/distill the product and much higher levels of consumer education rather than “brand immersion”. (Next time you stumble upon a Crown Royal or Miller sampling event in a bar expect to be given a leaflet explaining the virtues of the liquid rather than a branded key chain.)
This is for a simple reason: craft is growing and mainstream brands are suffering. And for the first time in a long time, the big companies behind the mainstream brands are suffering too – in the last few years refining business models and product launches have shored up profits, but that can’t last forever. As the corporate giants enter new fiscal years in 2015 after what look to be difficult 2014 performances expect the marketing departments’ cries of “Boss, we need to start doing things differently!” to reach the boardroom and be acted on.
For an example of what I think is going to start happening, look no further than this excellent Guinness commercial from Ireland.
(And of course several craft breweries and distilleries will be bought by big companies this year. But you already knew that.)
The rest of the world will show its appetite for American craft
Seguing neatly from the fact that the global giants of the drinks industry will pay serious attention to why the craft scene is growing, we can also expect to see other countries (mainly Europe and Australia) doing two things in reaction to the success of craft in the States. They’ll start buying a lot more of it (the Brewers Association reported 280K barrels of craft beer were exported in 2013, up +49% on 2012 – I predict more like +100% in 2014/15) and they’ll start making a lot more of it themselves.
The seeds have already been planted abroad, with Brooklyn Brewery opening New Carnegie in Stockholm, Sweden last year in partnership with Carlsberg (brewing both the Brooklyn and New Carnegie brands) and Stone Brewery currently building a brewery and restaurant in Berlin, Germany. However, the success of American craft breweries and distilleries has sparked a “comeback” of small scale, localized brewing and distilling in several countries in which the sectors were in decline. “Craft beer” is now a recognized term in Britain, Ireland, Canada and Australia.
2015 will be the year we’ll see numerous partnerships between American and foreign craft producers, and we’ll also see an explosion of the kind of cross-pollination we saw in wine in the late ’90s, with brewers and distillers visiting America to see how it’s done, and a LOT of American brewers and distillers being poached to go work in Europe and elsewhere.
As Steve Hindy at Brooklyn Brewery commented, it’s like Madonna’s criticism of Green Day: they’re an American band that sounds like a British band trying to sound American. American craft brewing was started by beer enthusiasts visiting the UK, and now the brewing scene in the UK is dancing to an American tune.
Talent will be in high demand
The craft sector is acutely aware that it is something of a supernova within beer and spirits. Its growth is occurring in a flat market, ie. people are not drinking more beer and spirits. This means that any given craft producer’s growth is somebody else’s decline – either coming from an established brand or from a fellow craft producer.
As the consumer becomes better educated, and in a market increasingly being driven by product quality over “brand association” this implies that the better brewers and distillers will win out. As they should. And this means that prosperity will come to the best-run companies with the most talented brewers and distillers. Think you can become a successful craft brewer just by throwing a ton of hops in an IPA, putting a colorful label on the bottle and relying on your distributor to sell it for you? Not anymore buddy.
I think 2015 will be the year when the industry will see tense competition for the best people. Top craft brewers and distillers have been looking for talent from the big players for some time, but I think we’ll even start to see that process go into reverse gear this year. Mainstream players will start hiring guys from the craft scene, and mid-sized craft companies will start recruiting from each other. Up until now most craft brewers and distillers “learned by doing” – they were essential hobbyists turned professional. But the competition in craft is so intense now that the room for error is greatly reduced. You want to make great beer? You need to hire a great brewmaster. Struggling to land distributors outside your home state? Why not poach the sales guy who made it happen for a craft distillery upstate a couple of years ago.
So those are my big thoughts for 2015. All about trends in or involving craft, I know, but that’s because the craft scene is in the driving seat right now. Disagree with me? Have any suggestions of your own? Please comment below!