* Big beer duo’s U.S. beer market share 75 pct and slipping
* U.S. craft beer segment approaching 10 pct of market
* Small new producers limiting big beer’s growth
* Craft revival spreading across globe
By Anjali Athavaley and Philip Blenkinsop
NEW YORK/BRUSSELS, Jan 21 (Reuters) - At Top Hops on Manhattan’s hip Lower East Side, drinkers can choose from 20 beers on tap from Dark Penance to Devil Dancer and over 600 more in bottles.
The bar is tapping into the surge in demand for craft beers and finds only the occasional customer opting for Budweiser or other brands of the two major brewers Anheuser-Busch InBev and MillerCoors .
While the majors still make three-quarters of all beer drunk in the United States they face a continued decline of market share. Their efforts in the last few years to push into richer flavoured craft beer, which can easily sell at a 50 percent premium to standard lager, is failing to compensate.
Craft consumers have a vast number of over 3,000 small and local producers from Aardwolf to Zythum to choose from.
Industry body the Brewers Association says craft brewers caught $14.3 billion of a total U.S. beer market of $100 billion in 2013. Yet it also insists craft brewers must be small, independent and traditional and dismisses the likes of AB InBev’s Goose Island or MillerCoors’ Blue Moon as impostors.
“As I’ve gotten older, if I want to spend calories on beer, I want to drink something I like,” said 29-year-old Conor Griffin, singling out local breweries like SingleCut Beersmiths and Barrier Brewing Co as favourites. “I’m pretty picky.”
The big brewers point out that some of their craft brews score well on rating websites, but between them, the pair had only a 20 percent share of the craft segment in 2013, with brands including Blue Moon and Shock Top, according to Beer Marketer’s Insights.
“It’s nowhere near fast enough to make up for the loss of mainstream, such as Budweiser or Bud Light,” said Societe Generale’s Andrew Holland.
Chris Shepard, assistant editor at Beer Marketer’s Insights, said growth of AB InBev’s Shock Top and Goose Island had slowed sharply since national roll-outs, in the case of Shock Top to a high single-digit percentage last year, compared to an average rate of 15-17 percent for a craft beer.
Blue Moon and Leinenkugel together reported no growth in the last three months of 2014, according to SABMiller on Wednesday.
AB InBev, the world’s largest brewer, has responded in the past year with the purchase of two more small craft producers on the east and west coasts - Blue Point and 10 Barrels.
AB InBev’s November purchase of 10 Barrels in craft hot house Oregon prompted a burst of comment on social media, some calling it a “sellout” and threatening to boycott its brands, including its flagship Toasted Lager.
U.S. store sales of craft beer surged 11.8 percent in the year to late December and gained 2.7 points of market share in four years, while the largest beer markets, economy and premium light, have fallen by 4.0 and 2.3 points respectively, said Andrea Riberi, senior vice president at research group Nielsen.
The attraction of higher margins and double-digit percentage growth is obvious for the majors, who do have a few trump cards.
They can guarantee supplies such as malt barley at lower costs than smaller brewers would pay, boost advertising spending, ensure widespread distribution and make some of the brews in their own plants, making it easier to ramp up volumes. But they still have to convince consumers.
“If you try to make it too big, it carries the seeds of its own destruction. If it’s too ubiquitous it loses some of its appeal,” said Societe Generale beverage analyst Andrew Holland.
U.S. distributors are also not tied to the majors and so are free to buy other craft brands.
Joe Menetre, national sales director at New Belgium Brewing in Colorado, says competition with big brewers is nothing new and that distributors are far more open to craft than in the late 1990s when some would not take calls from small players.
“It’s more challenging than ever before, but not because of the big players. There are so many new beers that it’s hard to build a brand,” he said.
The craft brewing boom is not unique to the United States.
“What is happening is a global revival for tasty, interesting beers,” said Tim Webb, co-editor of the World Atlas of Beer, whose forthcoming 2015 edition will list at least 65 countries with a craft revival, from 42 in 2012.
Craft drinkers are typically younger, more knowledgeable about the industry and also less likely to stick to one brand.
“It’s hard for a single brand to attain too large a share. People are changing around, experimenting,” said Shepard from Beer Marketer’s Insights.
AB InBev’s Chief Executive Carlo Brito believes craft will follow imported beer trends in the U.S., with a top five or six brewers dominating the market. In craft, the top six have a share of just over a third.
Jim Koch, the founder and chairman of Sam Adams maker Boston Beer Company disagrees and says he sees even more craft breweries opening and does not expect in craft the kind of consolidation seen in the import and mainstream segments.
“I think craft beer is much more of an individual passion.” (Additional reporting by Martinne Geller; Editing by Elaine Hardcastle)