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Who is defying the beer sales slump?

June 13, 2018

Josh Lehner
Oregon Office of Economic Analysis

In honor of our value-added manufacturing, declining start-up trend bucking, homegrown Oregon breweries out there, I thought I should update our numbers of Oregon beer production. These figures come from the OLCC beer reports which only cover beer made in Oregon and sold in Oregon. So beer imported into the state from other breweries, and beer made here but exported to other states or countries are not included in these numbers. It also includes all Oregon breweries, regardless of ownership or brewing techniques. The goal here is not to get bogged down into defining what craft beer is. Rather it’s to look at Oregon beer production.

At the last check-in on these numbers we knew that over the past decade or so the number of Oregon breweries had tripled and beer production had doubled. So, for me, the biggest takeaway from this updated look is that start-up breweries, defined here as those that didn’t exist before 2005, now produce more beer made in Oregon and sold in Oregon than the older breweries combined. At this point it is well known that the larger, regional breweries have seen flat to down trends in recent years. You can see that in the national figures and the local numbers as well. However, production trends vary by brewery. Some have experienced massive declines, but most of the declines to date are relatively modest, or in a few cases nonexistent. At least in terms of their Oregon numbers. Right now it’s pretty easy to paint a dark picture for the larger breweries given the overall slowing market, some consolidation among distributors and retail outlets, and a small uptick in failures. Those are real issues. However, overall beer production in Oregon continues to increase, primarily due to the ongoing growth among start-ups, and expansions from a few of the older breweries as well.

Now, we also know that like a lot of markets, a handful of firms dominate overall sales. The 5 largest breweries in Oregon made 40% of the beer last year. The 20 largest made 75% of the beer. Given the typical brewery in Oregon produced just under 500 barrels of beer, this is not surprising. As such, we know that even a large portion of the start-up growth is due to a few breweries. One-third of the start-up production last year can be tied directly to 10 Barrel, Hop Valley, and Ninkasi. That said, if you take those three breweries out of the start-up numbers, the remaining start-up breweries in Oregon would still produce as much as the state’s legacy breweries.

Finally, it must be noted that we should take these figures will a grain of salt. In recent years a handful of breweries seem to have gone missing from the data. Most are relatively small and will not have much of an impact at these topline numbers. However, Craft Brewers Alliance (aka the makers of Widmer, Redhook, Kona and others) does move the needle since they were, and probably still are the largest brewery in the state. To arrive at these estimates I am pegging CBA’s Oregon beer numbers based on the CBA’s reported growth rates. To the extent that Oregon trends differ from the company’s national trends, then the estimates will over- or underestimate the legacy brewery trends over the last couple of years.

  
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