This story originally aired on “Marketplace” on May 22. Listen to Marketplace each weekday at 6:30 p.m. on Vermont Public.
Pour one out for the craft brewing industry.
What was once a booming market, adding breweries by the hundreds every year, has now stagnated.
Last year, for the first time in two decades, more breweries closed than opened in the U.S and craft beer production fell by nearly 4%, according to the Brewers Association, an industry trade group. That’s pushing surviving breweries to rethink their business models as they navigate a changing market.
A decade ago, the craft beer boom was solidly in the cultural zeitgeist. When Avery Schwenk of Brattleboro, Vermont, quit his job as a paramedic to start a brewery with his friend, he said his sister sent him a card that read, “Congratulations on quitting your job. Now go open that boutique microbrewery you have always wanted to.”
It wasn’t a card she made, she’d found it at a store. "This just was a thing that people were doing,” he laughed.
This was, after all, 2014, a year when the number of breweries in the U.S. grew by 850, to just over 4,000.
The kinds of beer breweries were making was growing too: Hazy IPAs, stouts, porters, amber ales. Schwenk and his friend got in on the trend with their business, Hermit Thrush Brewery, making exclusively sour beer.
“It really is focusing on kind of those bright, citrusy notes, and oftentimes also some funk,” he said. Sours can even have woody or mushroom-y flavors. “It's definitely not typically beer for beginner beer drinkers.”
But at the time, there was a market for that. Hermit Thrush had a taproom in downtown Brattleboro, and by 2019, Schwenk said, it was available in seven states and Washington D.C. He and his business partner had plans to triple production and double their staff.
“And I would say that the pandemic put a big damper on our plans.”
The brewery held on for a few more years, but sales dropped and never recovered. Hermit Thrush shut down last summer.
Its rise and fall pretty closely parallels the stories of many breweries.
“I think the 2010s was really a perfect storm for all of these openings,” said Bart Watson, president and CEO of the Brewers Association. “You had cheap capital, you had relatively inexpensive cost of goods, and most importantly, you had expanding consumer demand.”
In the last few years, all of that has flipped, Watson said. Interest rates are higher, so borrowing is more expensive. The cost of beer ingredients, like hops and barley, has risen too. So has the cost of aluminum cans. And consumers just don’t drink as much craft beer as they did in the 2010s.
“The word, the euphemism that we're using, is maturing,” Watson said.
The industry itself is growing older, but so are craft beer consumers. Millennial beer drinkers who came of age during the craft beer boom (including this reporter), just can’t down as many IPAs as they could in, say, 2017.
While craft breweries were a hit with Gen Xers and millennials, they haven’t had the same pull with Gen Z, according to Jim Watson (no relation to Bart), who analyzes the beverage industry at Rabobank.
“This is, I think, seen by the newest cohort of drinkers as kind of a dad's drink,” he said.
Watson said there’s some evidence Gen Z is drinking less overall. They can't afford as much alcohol, and when they do drink, they have other choices like hard seltzers.
“All of a sudden, kind of starting in ‘18, ‘19, you had this explosion of other options available for consumers, some of which were much lower calorie as well,” Watson said.
[Craft beer] is, I think, seen by the newest cohort of drinkers as kind of a dad's drink.Jim Watson, beverage industry analyst
Those beverages compete with craft beer for limited space in bars and on grocery store shelves. That makes it harder for breweries to expand their distribution. But, Watson said, there is one business model for craft breweries that can still work well: Selling directly to customers in their own taproom.
Levi and Christie Kraemer are putting the finishing touches on a new taproom in an old farmhouse in rural North Hero, Vermont.
The husband and wife team started their brewery, Kraemer & Kin, in 2020 in their own garage. They quickly expanded, eventually operating from a large restaurant space at a golf course. Now, Heather Kraemer said, they’re scaling back.
“It was a 100-seat restaurant, so full service, and we learned a lot,” she said. “But bringing it back to a real taproom feel where, yes, it is very quaint and cozy, but also where we're really bringing it back to the beer.”
They’re hoping to rekindle the vibe their business started with: A few taps, and a place where locals can hang out.
“We can still have maybe even better margin and bottom line with a more simplistic business design,” Kraemer said. That’s a business model she hopes can weather the ups and downs of the “mature” craft beer industry.
