Hop Producers Fear an Oversaturated Market

​In recent years, Americans have tossed traditional favorites Bud, Busch, Miller, and Coors to the wayside in preference of more select brews. Craft beers have risen in sales and production in recent years. However, brewers fear that growth may be stalling. According to the Brewers Association, afer 15% growth in volume in 2015 and 18% growth in the two years preceding, volume growth slowed to 6% in 2016 and 5% in 2017. Last year, overall retail beer sales fell 1.2% and many suspect Americans’ alcohol preference is shifting from beer to liquor. 

“As the overall beer market remains static and the large global brewers lose volume, their strategy has been to focus on acquiring craft brewers,” says Bart Watson, chief economist at the Brewer’s Association. In fact, four breweries were removed from the Brewers Association 2016 Top 50 Craft Beer list because they sold stakes to larger, national beermakers, such as Anheuser-Busch InBev and Heineken.

Recently, mergers among craft beer peers have become commonplace. As the market has become increasingly competitive amid declining overall sales, craft breweries have been merging as a better way to compete on distribution to bars and stores. For example, Pennsylvania’s Victory Brewing and New York’s Southern Tier Brewing formed an alliance last year to create a new company: Artisanal Brewing Ventures. 

At the same time, beer drinkers are trending toward supporting their local small and independent community craft breweries. As a result, regional brewers relying on the broadest distribution face the most pressure.

​The slowdown is also having an effect up the craft beer supply chain. Hops are one of the most important ingredients for craft beers, giving them the unique flavors and aromas that make the beers interesting. Previous fears over a lack of hop supply are pulling back and fears of oversaturation are setting in. Earlier this spring, The Hop Growers of America cautioned U.S. farmers to avoid adding additional acreage in 2018. The trade group added that brewers should carefully contract for hops due to the “unpredictability of craft consumer demand and the recent slow-down of craft volume growth.”