I have been promising it for over a month now and it has finally arrived. Today is the first part of the 2025 State of the Industry report. This segment is one of the more ambitious topics that has been covered on the page so far and I really hope it helps shed some light on the challenges facing the craft beer industry as we are kicking off the year 2025.
I know that a lot of you have probably noticed an increasing amount of brewery closures over the last few months. It feels like every week now I am doing a new post about one of our beloved Michigan breweries deciding to close up shop. Unfortunately this is going to get worse before it gets better. 2025 will see some new breweries open, but it will see a lot more closures than openings. 2024 is the first year that there were more brewery closures than openings in the United States in the last 15 years. Michigan was by no means immune to this statistic, our breweries have been dropping like flies lately.
Why is this happening? There are a multitude of factors that are contributing to these seemingly sudden and abrupt closures, but trust me there is nothing sudden or abrupt about the closures at all.
Craft beer experienced a boom like no other during the 2010’s. For example, the brewery where I spent my first 3 and a half years being employed in the industry, Liberty Street Brewing Company, opened in 2008 and was the 82nd brewing license issued for the State of Michigan. During the 2010’s that number exploded to just over 400 brewing licenses in the state. Likewise the same exact thing happened all across the United States of America. As a whole the United States had almost 10,000 breweries from coast to coast by the end of the 2010’s. This bubble eventually had to burst, and we are seeing that play out at the very moment.
The beginning of the bubble bursting happened in 2020, with the COVID-19 lockdowns. We saw an initial wave of breweries that couldn’t afford to be shuttered as long as they were bowing out of the industry. Some were already struggling previous to COVID. COVID and the restrictions that came along with it, just reinforced the idea that it was time to shut down.
I know that during the first series of COVID shutdowns, some of your local small town breweries saw an initial bump in business. When we were all locked down in our homes, some of us were making any excuse we could to get out and get some fresh air, even if it was just for a moment. Breweries that were selling beer to go in cans and growlers had people coming out to support their local businesses and the people that ran them. We saw this in full force at Liberty Street Brewing Company.
Once people were allowed back in taprooms though, people were a little more wary of going out to their local breweries and businesses where they were coming in close contact with other people. By the time the second COVID shutdown happened, the short lived bumps in business were a thing of the past, and every brewery was struggling. Most breweries that are in operation at the moment are doing numbers that are significantly lower than they were pre-COVID.
Inflation is another factor that hasn’t helped breweries be able to keep their doors open. You have seen it in your everyday life, groceries, gas, home supplies, basic necessities, eating out, everything costs more these days. The brewing world is no exception to that trend, costs have gone up for most breweries approximately 25-30% from 4 years ago. This leads to breweries having to charge more for their products, thus creating less traffic in taprooms as people have to make choices as to what they are going to spend their hard earned money on. Craft beer is a luxury item and when people have to choose between necessities in their lives, and luxury items, in most cases the necessities are always going to win.
Another factor that has contributed to this downturn in the industry, the way people drink has changed over the last few years. Craft beer, instead of trending upwards like it did for the 2010’s, has begun to decline. Craft beer sales have been going down on a year to year basis since 2021. We are losing a 1 to 3 percent market share every year, which doesn’t sound like a lot, but it is very significant. Consumers are spending their money differently, canned cocktails, non-alcoholic beers, legalized marijuana and less consumption of alcohol among younger people of drinking age are all examples of different ways that the craft beer consumer is now spending their money or their time.
Last but not least, I mentioned having almost 400 breweries in the State of Michigan alone earlier in the article, seemingly every small town in Michigan has a brewery now. This simply is not sustainable, there are too many breweries competing against each other for the same customers. As painful as it is to see some of our beloved breweries close up shop (Some of them really do hurt a lot), it is absolutely necessary if we want our industry to survive in the long run.
I may not have covered every problem that is contributing to the craft beer downturn at the moment, these are just some of the major problems that are contributing to the situation that we are currently seeing in the brewing industry. In the second part of this post, we will get into what will play out over the next couple of years in the craft brewing industry and why some of our beloved breweries will continue to unfortunately fall by the wayside. Until then as always, drink local, support your local breweries and Cheers!
#cheers #drinklocal #craftbeer #brewery #brewerylife #michiganbeer #stateoftheindustry
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