There is a major trend within the craft beer industry – diversifying into other craft beverages. We at MARKS Design and Metalworks have seen diversifying of the brewery and the trend is accelerating as the craft beer movement is reaching a certain level of maturity. There are many factors driving brewers to take on new craft beverages. Reaching new customers, increasing brewery efficiency, expanding into new markets, assuring business diversification as one product may slow, and meeting the changing tastes of drinkers are all reasons to diversify. This past year of uncertainty has made having a diversified portfolio important for many breweries survival!
Perhaps the first reason expressed by brewers is to “have fun”! Craft brewers are creative artisans by nature. Each story MARKS’ engineers and consultants hear when working with a brewery who is interested in diversifying always starts out with a passion to try something new. As one said, “If I can ferment it, I want to try it!” We see that the successful foray into diversified alcoholic beverages starts with a curiosity about new recipes and experimenting with new ingredients.
Trends in the U.S. Alcoholic Beverage Industry
Brewers are joining the growing trend in the U.S. alcoholic beverage industry to develop and bring to market new beverages. Trends in alcoholic beverages, as reported by various sources, suggests that customers are asking about: anything in cans (including wines and spirits), craft hard seltzers, organic and sustainable products, low-ABV, ‘healthy’ alcohol, ready-to-drink “to go” cocktails, bubble tea, fermented drinks for health, CBD infused drinks, and wines, especially light and “clean”. Nielson group reports that the “healthy” trend is rising with continued interest in wellness and alcohol-alternatives with hard seltzer and kombucha crossover products set to increase considerably. Alternatively, the Brewers Association reports that craft beer is slowing to single digits after years of double-digit growth. While craft beer is still among the most talked about by consumers, it significantly trails discussions about wine and distilled spirits.
Beverages in kegs became a real liability in 2020, with a complete turnaround to cans and bottles. Breweries that survived the best of lockdowns and slowed in-person business were those that put their product into a can or bottle. As one major brewer told MARKS, I used to do 80% kegs and 20% cans, now I do 80% cans and 20% kegs and I don’t see that changing.
Given all these forces, smart brewers are looking at diversifying their product line to assure continuing access to customers and new markets.
Diversifying the Brewery
Diversification is the process of expanding into new product offerings, expanding sales to the same customers, or reaching out to new customers. Diversification can be useful when one area of the business is experiencing stagnation or declining sales. It allows for adding variety on more options for the craft beer product. Industry diversification can boost the original brand’s image and company profitability. Market diversification can be defensive, protecting the brewery from competitors (wineries or spirit companies diversifying into beer).
Opportunities through Diversification
There are many paths a brewery can take to diversify. MARKS has talked to several our partner customers to ask what led them to diversifying their brewery. We further asked about their challenges and successes. The brewers also give advice to others who are considering moving along the path of product diversification. The case studies include brewers that have diversified, are in the process of building a new product line, or who are in the discovery process. Learn about some of our partner customers’ challenges and successes in these case studies:
Tastes are changing. Hard core craft beer drinkers are a small percentage of overall drinkers. Pulling in other segments is important. Craft breweries must compete with an endless variety of beverages out in the marketplace. People are into “healthier” lifestyles and are looking for low or no calorie drinks. The shift is to low-calorie beer, but with the craft beer taste or to hard seltzer. In a diversified pub or tasting room, couples, where one is a craft beer drinker, can bring their partner who may prefer wine, hard seltzer, or a ready-to-drink cocktail and join in on the experience. And for some who brew in certain states or Canada, experimenting with infusing the craft beverage taste with the properties of CBD or cannabis will appeal to a growing number of consumers.
Given the slowing of growth in the craft beer market, the changing trends in the craft beverage market, and the need to improve efficiency and profitability for most breweries, the importance of product diversification for your brewery is certainly a trend to consider.