The Great Fragmentation of Beer

A new world is emerging in which being local and targeted drives volume growth, but price competition in craft drives a need for scale and efficiency. We look at ways for small and large brewers to borrow from each other’s playbook.

A New Beer Market: More Local, More Competitive

Once a monoculture of light lager, the U.S. beer industry is now a symphony of styles and flavors—and innovation is coming so fast that even avid fans are struggling to keep pace. Beer has become ever smaller and more local over the last 15 years. In the U.S., the market share of the top-five beer brands by volume was 54.8 percent in 2008—and it has fallen by about 1 percent per year, to 45.7 percent in 2016.

Small breweries are where to find growth. In 2016, the Brewers Association reported taproom volume up 15 percent and microbrewery volume up 27 percent, while regional/national craft brands only grew 1 percent. And this came in an overall market with flat volume. Drizly reports that nearly 50 percent of beer volume on its platform is local (in-state)—and this number is growing.

The challenge for bigger brewers is to tap into growth that is going to small/local brands. There are many ways to do this, from tighter demographic marketing to local advertising and packaging to acquisitions in key markets. Perhaps large brewers first need to acknowledge the death of the ‘national, appeals to everybody’ brand, instead targeting brands to specific groups and occasions.