Report
Cracking the code
Can blockchain boost the craft
brewing industry?
This trend toward industry consolidation
is not isolated to beer, as is evident
at the supermarket, with only ten
large food companies being responsible
for a large majority of the 100,000
SKUs in a supermarket, despite the
perception that these separate brands
are manufactured and distributed by
different companies.
Retailers have grown, not through an
assortment of product variety
through a myriad of suppliers, but
rather through supply chain efficiency
via large manufacturers with a
wide portfolio of their own product
offerings. This has led to a synergistic
supply chain relationship between
large manufacturers and retailers to
distribute products at the highest
quality, the lowest cost, and the most
efficient information system transactions.
In supply chain, we call this a
frictionless supply chain, growth
through improvements in how products
are forecasted, ordered, and distributed.
While a limited number of
craft brewers can beat the odds
through getting their products on the
shelves of the largest retailers through
their distributors, the distributor can
only make so many small bets on craft
beer, with a larger mindset focused
toward safer, higher volumed transactions
of larger brands with its retail
partners. For example, Walmart has
over 4,600 grocery stores in the U.S.
out of the almost 40,000 in total, and
it commands 26% of the total grocery
volume. Craft breweries have a difficult
time winning in these consolidated
supply chain and retail systems.
What, if anything, can craft brewers
do about this? Since 2005, the craft
beer industry has grown significantly,
over 300%. But more recently that
growth has stalled, and even fallen,
with a 9% decline from 2019 to 2020,
and a market share drop from 13.6% to
12.3%.
Yet, despite the limited growth in the
present and possibly into the future,
there are 9,000 craft breweries, a lot
of providers within a shrinking market.
This topic of “what to do about
craft?” has been one of great concerns
in the sector, with most opinions focused
on restoring Craft originality
and authenticity. This seems like a
logical response, and yet, at the same
time, it is nearly a mathematical impossibility
to achieve a restoration of
Craft’s roots when there are now 9,000
breweries rather than just a few hundred
or so.
The sense of originality and authenticity
is leading to an expansion of
product offerings beyond Hazy IPAs
and Chocolate Porters to Double Barrel
Aged Sour Ales or Imperial Stouts
because the industry grumbles that
its millennial consumer “won’t drink
the same beer twice.” Predictably,
while most craft brewers see themselves
as going after the 87-88% of the
market commanded by the big brewers,
unless they adjust to the new
world of frictionless supply chains
they may find themselves fighting for
the much smaller share of the pie currently
attributed to Craft.
The moral of the story is this: craft
brewers need to develop strategies to
focus on transactional efficiencies, or
a so-called frictionless supply chain as
a way to competitively grow market
share, as much, if not more than creating
the next unique beer offering. I
know that this sort of statement is a
form of heresy to many in the craft
sector, but the numbers don’t lie: the
market, enabled by the present state
supply chain system, may have hit
Peak Craft in the year 2020.
Before concluding that the craft beer
sector is relegated to being a niche
player in the U.S. beer market due to
these challenges, think again: what if
there is an emerging solution that
could level this transactional playing
field, enabling the 9,000 craft breweries
to compete with the largest manufacturers
in the world? There is such
a solution on the horizon called blockchain,
a decentralized centralized
ledger system to enable companies to
transact across their supply chains
more fluidly.
A solution that has become popular
relating to cryptocurrency, such as its
use as a payment method that the
Threes Brewing in Brooklyn has
launched, or Downstream Beer, based
in Ireland, that offers the self-proclaimed,
“world’s first blockchain
beer” through full traceability of its
brewing methods. Both of these ap-
Despite the growth of craft breweries over the past 15
years, the global beer market worldwide is largely defined
by its consolidation; according to a Business Wire
article, the 2021 global beer industry is valued at nearly
a half a trillion dollars, with the four largest brewers
equal to approximately a quarter of the total volume.
32 BREWING AND BEVERAGE INDUSTRY · 2/2022