A Specialty Beer Slump?

All those barrel-aged stouts and saisons that produce such high scores among avid raters have become a staple of brewery production—the prestige wing of a brewery’s offerings that excites beer geeks. They are slow and expensive to make, but command high prices that more than compensate for their trouble. Add to that the luster they offer a brewery in reputational terms, and they’ve been a no-brainer. Except now evidence mounts hinting that these programs aren’t the sure thing they were in 2017.

Yesterday, a tipster mentioned to me that a particular distributor was seeing dramatic declines in year-over-year demand for niche beers—a trend that started years before Covid scrambled the market, but is accelerating now. Since that person wanted to be kept far off the record, I threw it to Twitter—does this seem accurate to you? The rich responses paint a complex picture. If overall demand for specialty beers is down—and most seem to agree they are—the effect isn’t uniform. For some breweries, these beers still sail out of the warehouse. In other cases, the beers gather dust on shelves.

Flagships Are Not Dead

Many commenters observed that habits have been changing for a while, as consumers moved away from large-format, high-alcohol specialty beers to core beers. After a long period where consumers sought the next new thing, they have retrenched, looking for more drinkability and reliability. We’ve seen this in the massive flood of seltzers and FMB, and within beer the move toward lagers and low-ABV ales (usually hoppy ones), and ever more IPAs.

Sean Mossman, Director of Sales and Marketing for Coop Ale Works in Oklahoma City, concurred that things had gone south for specialty beers. He described what he’d seen with Coop’s sales. “We once sold our barrel aged stout, rye wine, wheat wine, etc. in 750 ml,” he said. “First the market for large format, high gravity [beers] started diving. Then, we moved all of our high gravity to 375 and it didn’t help. We discontinued our eight, annual barrel aged releases this year. I had a buyer for a large liquor store chain (do the math) tell me at dinner three years ago that this was happening and that they would consistently move shelf space to more approachable beer.”

David Macon, Chief Sales Officer at Firestone Walker, echoed this experience. “Very difficult retail market at the moment and distributors are refusing allocations, making the situation worse. We didn’t have an issue with the more popular releases like Anniversary or Parabola but everything else has been tough.”

Depends on the Channel

Many pointed out that these beers may still sell well on-site, as special taproom takeaways. Aaron Gore (I think!) from Fresh Pitch Beverage Consulting observed that “it's less a drop-off than a change in channels due to taprooms, and even more so a diffusion since those style categories are much more fragmented these days.”

The trouble comes when they go out in distribution. Warren Wills, the Operations Manager for Day one Distribution in Portland (and Craft Beer Scribe online), fleshed this out. “Grocery stores and some bottle shops don't buy them because they just don't move—usually [because of their] price point, but also sours and high ABV beers are harder to kill in one sitting (especially now). Fresh hop beers and the large format bourbon barrel aged stuff is often kept ‘on-site’ and distributors only want limited cases.”

That may explain why some breweries reported continued strong sales. As the tweets chirped around him, Astoria’s Fort George’s Brad Blaser was actively preparing waxed bottles of stout. (You know my position on wax, right Brad?) “Wax dipping some barrel aged stout today. Haven’t seen a drop off in packaged specialty and barrel aged, but a lot of the one-offs we do are draft. And that’s all but gone.” In the case of Portland’s West Coast Grocery, wonders if their success has to do with novelty. “We haven’t seen a decrease. However we are also introducing new barrel aged product into the market, so we may be an outlier. We are also self distributing this product.” These beers, sold at the taproom or pub, find a more receptive audience, especially among fans of the brewery.

Market Forces

Part of what looks like a shift from specialty beers may be a function of the incredible growth of new breweries making them, the sheer number of beers in this category, and the relatively stagnant number of consumers there are drinking them. Breweries sell more beer by getting customers to increase the number of purchases they make or by pushing into new markets or consumer segments. The reverse is happening as specialty beers flood shelves.

Firestone Walker’s experience seems revealing in this regard. A beloved annual release like Parabola is going to sell because people know it delivers, but other, new or lesser-known beers, even from Firestone, become part of that constant stream of new beer that causes customers’ eyes to glaze. It used to be that beer geeks were infected by FOMO, but now that no one can keep track of them, missing out is a necessity, not a problem. No one can keep up with all the “whales” anymore. (The status these beers once impart dims, too, when they are so broadly available.)

There’s another important dynamic at play. The craft beer segment has slowed down in recent years, but it does continue to expand. If specialty beer has been suffering, some category must be thriving. That would be IPAs. Consumers of craft beer are entering a mature phase. As in every region where drinkers have become sophisticated about quality and flavor, Americans have narrowed rather than broadened their focus. To the extent novelty still drives craft brewing, much is focused on hoppy ales.

Please consider this an invitation for further discussion/data collection. I’d love to hear from you. After listening to a bunch of smart people talk about this slice of the market, it seems that overall the specialty beer segment is declining among distributed beers, fueled by a surfeit of choice and supply. Strong, well-known brands still sell, if more slowly than during the heyday for these styles. As self-distributed or taproom-only products, breweries are seeing more interest, but this is clearly a limited market. No one weighed in on this point, but it’s worth noting since I recently spoke to Matt Van Wyk at Alesong about their sales: breweries focusing exclusively on these beers who have built up a customer base seem to be doing fine, as well.

Your thoughts?