The craft beer boom could mean the end for some brewers

Yahoo Finance

American craft beer can be found in every local watering hole and in mass-market supermarket chains like Whole Foods (WFM). Craft beer has become so popular that production volume has jumped 18% during the first half of the year, according to the Brewers Association, a trade group. There are 3,040 craft breweries in the U.S. as of June 30 and more than 1,900 breweries are expected to open in the near future. Craft beer shipments are on the rise, too: the industry shipped $28.4 billion cases of craft beer in 2012, an increase of nearly 33.6% since 2007.

Food & Wine’s Ray Isle says Americans are ditching traditional ales for craft beers because “we’re more interested in beers that have intensity in flavor and character and these beers have a lot of character to them.”

With so many craft beers to choose from, which are the best? Isle shared some of his favorites with Yahoo Finance:

Victory Summer Love: A light, seasonal beer that is "absurdly refreshing," says Isle.

Honkers Ale (Goose Island): Isle recommends this small brewery even though it was bought by Anheuser-Busch in 2011. "The big brewers kind of missed the train pulling out of the station with craft brews, so now they're trying to catch up by either buying established craft brewers or starting their own small-brand labels," Isle says.

Dogfish Head Kvasir: An experimental beer that is based on a 3,500 year-old recipe taken from a Danish drinking vessel. "It's an acquired taste," Isle says, because it contains lingonberries, cranberries, myrica gale, yarrow, honey and birch syrup.

Brewers have to meet three specific traits to be formally classified as a craft beer, according to the Brewers Association.

  • Annual production has to total less than 6 million barrels of beer
  • Less than 25% of the craft brewery is owned or controlled by an industry giant (such as Anheuser-Busch InBev)
  • The brewer employs traditional or innovative brewing ingredients

The craft beer market is valued at $14.3 billion – significantly smaller compared to the overall $100 billion American beer market. But sales of craft beers rose 17.2% in 2013 while sales of traditional beers slipped 1.9%.

The booming craft beer market has broader economic implications too: the price of hops – what brewers use to stabilize and flavor the beer – has skyrocketed. Last year hops cost $3.59 a pound -- up from $1.88 in 2004. Some hop merchants expect the higher-quality varieties to reach more than $10 a pound by the end of 2014, reports The Wall Street Journal. Only a select few states grow hops – most of the farms are in the Pacific Northwest – and the higher prices are good for farmers but could drive local, small craft breweries out of business.

Isle says the best-selling category of craft beer is the IPA (India Pale Ale), a very hop-forward beer that has hints of citrus and pine.

“It’s a problem of success,” notes Isle.

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