Bart Watson, chief economist with the Brewers Association, delivers the annual state of the industry address at the Craft Brewers Conference.

The Brewers Association, the trade association representing America’s small and independent breweries, delivered its annual state of the industry address today. Bart Watson, chief economist with the Brewers Association, described it as a “challenging landscape.”

“There were some positives and some negatives,” said Watson during his address to thousands of brewers and industry professionals attending the annual Craft Brewers Conference, this year being held in Las Vegas, Nevada.

Craft beer production was down 1%. Categories within the industry saw various levels of growth and shrinkage. Taprooms were down 2%, brewpubs were down 4%, contract and alternating proprietorship beer companies were flat, regional breweries grew by 1%, while microbreweries were down 5%. Watson noted that there were breweries within all of those categories that have different levels of success. “44% of breweries found growth last year,” said Watson in his presentation.

The sector’s number of consumers is now quite stable in terms of its growth, says Watson, indicating that the rise of individuals drinking more craft beer now matches the decline. However, Watson continues that consumers remain willing to pay for beers they highly appreciate, with close to $30 billion spent on small and independent brewing last year.

Watson also points out that alongside the lack of growth, numerous breweries struggle with their finances due to the increasing cost of goods at a rate that surpasses the increase in prices. Successful breweries often focus on operations, sometimes through collaboration and partnerships to achieve economies of scale, whilst others succeed through finding innovative methods to distribute their craft beers and associating the drink with various occasions.

Watson provides an estimate that shows “125 million Americans who drink didn’t have a craft beer last month,” implying that there are still untapped avenues for breweries to explore for growth. Addressing brewers directly, he states that “Many of your customers are fiercely loyal. Breweries that are succeeding are finding ways to have customers drink their products on more occasions”.

“Craft beer as a category has seen fads in beverage alcohol come and go,” said Watson. “But craft is here to stay.”