This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Why 2013 Could Be Last Call for Craft Beer

Under the Small BREW Act, law that allows brewers making fewer than 2 million barrels of beer annually to pay $7 per barrel on the first 60,000 barrels they produce and $18 per barrel on every barrel thereafter would be amended. Instead, the smallest brewers and brewpubs would pay $3.50 on the first 60,000 barrels. Once brewers grow to between 60,001 and 2 million barrels, the rate would hit $16 per barrel. Any brewer that exceeds 2 million barrels (about 1% of the U.S. beer market) would begin paying the full $18 rate. Washington-based lobbying group The Beer Institute, which is supporting the competing BEER Act, saw common ground between the two bills and made clear that any help the beer industry can get would be appreciated.

Overall U.S. beer sales had been in free fall since the recession. A 1.2% uptick in 2012 stopped losses dating back to 2007, but A-B sales increased only 0.7% while SABMiller/MolsonCoors joint venture MillerCoors watched sales slip 1.1% despite help from Blue Moon, Leinenkugel and other "craft" brands. Though craft beer's share of the industry has grown to nearly 7% of its volume and 11% of its overall sales, it's largely because drinkers are turning away from the big brewers' blander light lagers and either switching to craft beer or turning away from beer altogether.

Basically, "craft" and all it entails aren't making the beer industry grow, they're just helping it survive. Craft beer's buyer base is still overwhelmingly white and male, while just about every other demographic is shifting toward hard alcohol, malt beverages or ciders.

Craft beer has recognized this and is starting to widen its gaze beyond beer. Boston Beer's Alchemy & Science branch in Burlington, Vt., is acquiring other brands while its Angry Orchard cider line, which has become the top-selling cider in the U.S., has boosted the company's bottom line. Not to be outdone, Craft Brew Alliance (BREW) teamed with a cider maker in Eastern Oregon to launch its Square Mile line of ciders this year. Even this piece's beer-focused author gave home cidering a try this year.

This all made folks around the industry started to mutter about the "craft beer bubble." Can craft beer really sustain its growth? Will there still be enough demand? New Belgium Chief Executive Kim Jordan and Oskar Blues founder Dale Katechis thought so, with each speaking to us at length about expanding their Colorado operations to North Carolina. Even in beer-saturated Oregon, brewers including Pfriem Family Brewing's Josh Pfriem and Ecliptic Brewing's John Harris saw niches waiting to be filled. From Austin to the nation's capital, brewers have been finding ways to not only keep craft beer's momentum going, but to do so in creative fashion. They partner with corporate sponsors, they collaborate with other breweries and they're overall optimistic about the days ahead.

But there's a menacing shadow lingering over all of those good times. As Boston Beer surpasses 2.5 million barrels of production and Sierra Nevada in Chico, Calif., flirts with the 1 million barrel mark, their owners who have overseen that growth for 30 years or more are starting to consider succession. People ask if the craft beer bubble is going to burst not just because they know some cynical yokel out there is trying to build a garage nanobrewery to sell to the highest bidder, but because craft beer's pioneers are starting to consider retirement. While it was nice to see Kansas City, Mo.-based Boulevard Brewing get the big-brewer treatment at the Royals' ballpark this year, the brewery's sale to Belgian brewer Duvel Moortgat in October was a reminder that the first wave of microbrewers may not stick around much longer.

Right now, there is no question that there is a thirst for what continues to be called "craft" beer. The amount of people reading our coverage of it year after year and the evolving laws in states including Texas and Alabama -- the latter of which became the last state in the U.S. to allow home brewing after revising its laws this year -- suggest there's room for expansion. If quality remains high, access continues to open and all aspects of brewing and consumption become more familiar to the U.S. drinker, small brewers have room to open and thrive.

If brewers get too caught up in the numbers, pioneers sell to the highest bidder and new breweries concern themselves more with being acquired than brewing a batch people will love, then you'll see that term "craft" go flat in 2014.  

-- Written by Jason Notte in Portland, Ore.

>To contact the writer of this article, click here: Jason Notte.

>To follow the writer on Twitter, go to http://twitter.com/notteham.

>To submit a news tip, send an email to: tips@thestreet.com.

RELATED STORIES:

Stock quotes in this article: SAM, BREW, TAP, BUD 
Jason Notte is a reporter for TheStreet. His writing has appeared in The New York Times, The Huffington Post, Esquire.com, Time Out New York, the Boston Herald, the Boston Phoenix, the Metro newspaper and the Colorado Springs Independent. He previously served as the political and global affairs editor for Metro U.S., layout editor for Boston Now, assistant news editor for the Herald News of West Paterson, N.J., editor of Go Out! Magazine in Hoboken, N.J., and copy editor and lifestyle editor at the Jersey Journal in Jersey City, N.J.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 +2.54 0.14%
NASDAQ 4,095.5160 +9.2910 0.23%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs