Brewed in the U.S.A.

This post is an entry for our $25,000 scholarship contest. The post was created by Kevin Giffels and may not always reflect the views of JW Surety Bonds.

craft-brew

Photo by M Theirry, available under CC Attribution-ShareAlike License

“For we could not now take time for further search our victuals being pretty much spent, especially our beer.” -Mayflower Ship Log, 1620

Nearly four hundred years after the Pilgrims landed – due to a lack of beer, of course – Americans are faced with a sluggish economy, living wage debates and persistent unemployment when they turn on the headlines. At a time when the American dream seems far away for many, it remains alive and well in one industry. Craft brewing – defined as small, independent breweries producing fewer than two million barrels per year according to the Brewers Association – has embodied the bootstrapping, can-do attitude mixed with just the right amount of bravado that has endowed generations of Americans. And don’t look now, but it is working. Small upstarts from the Pacific Northwest to New England are gaining a following while traditional beverage giants struggle to maintain market share.

Despite a lethargic economic recovery on a national scale, the craft brewing industry has been a growing niche. While the United States experienced paltry 0.7% annualized growth in GDP from 2008-2013, the craft brewing industry roared to an average annualized growth rate of 10.9% over the same period. According to industry analysts, this growth is projected to continue at a clip of 7.2% through 2018. To make this growth even more dramatic, it is occurring while the overall beer industry is only projected to expand by 1.0% annually through 2017.

This considerable growth rate bodes well for both existing breweries as well as homebrew entrepreneurs hoping to turn their hobby into a career. Unlike the conventional brewing industry where major players MillerCoors and Anheuser-Busch InBev control over 75% of the market, the largest two players in the craft industry – Boston Beer Company and Sierra Nevada Brewing Company – control less than 25% of the market. This leaves nearly three thousand small breweries competing for a share of the lucrative $14.3 billion craft beer market and overall $100 billion beer market.

Growth in any industry bodes well for communities across the country, but few offer the positive economic impacts of craft brewing. Numerous other industries are supported from refrigeration to agriculture, transportation to bottling. The surety bond industry, for example, will receive a substantial boost from this growth as regulations require both brewers and wholesalers to post bonds. Each new brewer represents a new client, while expansion in existing breweries will result in larger bond denominations to comply with federal guidelines. This extensive network resulted in more than 360,000 jobs being supported in 2012 and a total economic impact of $33.9 billion. According to the Chicago Tribune, these businesses tend to build locally. Hops, yeast, even honey is purchased locally and feature prominently in new craft recipes. This local growth is why Bloomberg calls craft breweries “all-American success stories” that have tangible benefits on Main Street. By serving a local demographic, craft brewers are able to become masters of their market and optimize their business. From hops in the field to the barkeep serving up a cold one, this growth is both sustainable and local.

As the nation continues to recover from financial duress and consumers gain access to increased disposable income, craft breweries – and their surety bond partners – seem poised to capitalize on this resurgence. Domestic growth has been strong in recent years and this trend is expected to continue over the next decade. This is further complemented by the potential for successful breweries to export their blend to consumers across the globe. American craft brews are not mainstays in the strong beer markets of Europe, however the industry experienced a 49% growth in exports during 2013 when compared to the prior year. Continued growth abroad on the back of homegrown products can only work to further develop and strengthen these all-American success stories.