Breweries feel changing landscape, demographics in post-pandemic world

CLEVELAND, Ohio — With more than 400 breweries in Ohio, the craft brewing business is especially strong. But make no mistake about it: The industry across the country and across the country is still feeling the economic residual effects of the restrictions imposed by the corona pandemic and competitive pressure.

But the country’s breweries are chugging on. Ohio has 420 breweries – a very healthy number. 44 were opened in 2022. Currently, 75 breweries are in the planning stages, and 73 out of 88 counties have breweries.

“We’re everywhere,” said Mary MacDonald, executive director of the Ohio Craft Brewers Association.

Despite Buckeye state’s healthy state, Brewers Association chief economist Bart Watson painted a cautionary tale Tuesday.

“Sales growth is slowing, changing, and fragmenting,” Watson said at the association’s annual conference in downtown Cleveland. The distributed tap of craft breweries has also slowed, as has the total number of permits issued nationally.

“Covid happened, but going back to trend wouldn’t result in double-digit growth,” he said.

“What really matters in the beer business is the neighborhood level,” Watson said. Downtown Cleveland has come back more slowly than other downtown areas, and the positive effect may be that tertiary neighborhoods have benefited from people moving downtown earlier.

A key point, Watson said, is demographic change.

“Customers will change. Demographics are changing. We’re going to get new drinkers, we’re going to get rotating drinkers,” he said.

Brewing growth is slowing statewide while Ohio is trending up. At the national level, “we’re starting to get that balance in terms of the number of breweries.”

Watson sees the brewing industry as viable but facing challenges and changes. Some of his observations and insights:

• Draft never came back. Keg production volume had a strong five-year run, then Covid put the brakes on that segment of the market. Draft accounts for 30% of the craft market, he said.

• Heated craft competition. “We’ve seen an explosion of new beverage options over the last few years,” he said. “The main reason people are drinking less craft is because they’re drinking something else.” It’s more about flavor options than dry lifestyles, income levels or inflation concerns, Watson added.

• Local sales — those in breweries — “have recovered better than (those in) bars and restaurants.”

• Ship distribution is struggling, ship volumes are declining and the proportion of packaged products is also declining. Store shelves are still sagging, but less so due to craft offerings. “At the top there aren’t many craft brands, but rather ready-to-drink cocktails, ‘better for you’ macro lagers and other things that are growing in parts of the country like cheladas.”

• In the previous evolution towards craft beer, a consumer would typically start with Bud Light and then perhaps gravitate towards Great Lakes Brewing’s Dortmunder Gold before moving on to an ale such as Chillwave, an Imperial India Pale Ale. Now, a drinker could start with hard seltzer before moving on to a ready-to-drink cocktail like Cutwaters Vodka Soda from a can before trying a specialty flavored IPA. “People are getting older and they’re drinking a much wider variety of things, and a lot of people are coming in who never drink beer at all. A Truly or White Claw drinker may never have developed a taste for beer. I think that’s a threat.”

• Flavor is the number one reason people drink craft beer. At this point, the flavors change. Fruit beers and the like have grown in popularity. Untappd — an app that allows drinkers to check what they’re drinking — shows that spice, herbal, veg, and fruit beers have a higher proportion statewide than Ohio. And aging artisans gravitate toward lighter styles.

• 55 percent of craft beer drinkers are college graduates.

But over time, the positive balance is the growth rate of the industry.

“What’s odd is that in the last 10 years, everyone’s opened and nobody’s closed,” Watson said. “That will not happen.”

Brewing has its lowest failure rate in a decade, according to the Small Business Administration, he added.

“That’s awesome. It’s a testament to the hard work in the industry that everyone in this room has built. But it’s not normal either.”

The conference has bounced between cities, from Wooster to Dayton, Cincinnati and others. It will be two days of seminars on topics endemic to brewers, with a trade exhibition and networking opportunities.

The OCBA waves the flag for the brewing industry, lobbying and promoting it through legislative initiatives and other endeavors. In recent years, the association has successfully achieved lifting the 12 percent alcohol limit on beer, allowing to-go drinks during the pandemic, easing restrictions on downtown outdoor refreshment areas, and facilitating Sunday sales for breweries .

It is a collection of success stories in an ever-changing landscape. And in the futuristic version of that landscape, people will drink less and spend more, Watson said.

After spending the best part of an hour crunching and translating numbers, Watson’s conclusion boiled down to a glass full of points: Distributed growth becomes difficult. The numbers shift to a static level. Demographics are changing, but that opens up opportunities. Brewers should keep their focus and not rely on industry shifts or worry too much about the economy, he said.

“There are opportunities for growth,” Watson said, “but it’s targeted growth. It’s in little bags.”

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I am online cleveland.com‘s life and culture team and cover topics related to food, beer, wine and sport. If you want to see my stories Here is a directory on cleveland.com. WTAM-1100’s Bill Wills and I usually talk about food and drink on Thursday mornings at 8:20 am. Twitter: @mbona30.

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