craft beer industry report

WWW.IBISWORLD.COM Craft Beer Production August 2013 1

IBISWorld Industry Report OD4302Craft Beer ProductionAugust 2013 Agata Kaczanowska

Interest brewing: Increasing popularity will continue to drive revenue for craft beer brewers

2 About this Industry2 Industry Definition

2 Main Activities

2 Similar Industries

2 Additional Resources

3 Industry at a Glance

4 Industry Performance4 Executive Summary

4 Key External Drivers

6 Current Performance

8 Industry Outlook

10 Industry Life Cycle

12 Products & Markets12 Supply Chain

12 Products & Services

14 Demand Determinants

14 Major Markets

15 International Trade

17 Business Locations

19 Competitive Landscape19 Market Share Concentration

19 Key Success Factors

19 Cost Structure Benchmarks

21 Basis of Competition

21 Barriers to Entry

22 Industry Globalization

23 Major Companies23 Boston Beer Company

24 Sierra Nevada Brewing Company

26 Operating Conditions26 Capital Intensity

27 Technology & Systems

27 Revenue Volatility

28 Regulation & Policy

29 Industry Assistance

30 Key Statistics30 Industry Data

30 Annual Change

30 Key Ratios

31 Jargon & Glossary

www.ibisworld.com | 1-800-330-3772 | [email protected]


This industry includes microbreweries and brewpubs that produce beer for resale or consumption on premises. As defined by the American Brewers Association (ABA), a microbrewery produces up to 6 million barrels (186,000,000 US gallons) of beer a

year. Brewpubs brew and sell beer on their premises as well as prepare and serve food. A brewpub may also be considered a microbrewery if production has a significant distribution beyond the premises (75.0% based on the ABA’s definition).

The primary activities of this industry are

Brewing and selling Pale Ale beers

Brewing and selling Lager beers

Brewing and selling seasonal beers

Brewing and selling Stouts and Porters

31212 Breweries in the USThis industry primarily produces alcoholic beverages using malted barley and hops.

31213 Wineries in the USThis industry produces wines and brandies. These are then packaged in bottles or casks and sold.

31214 Distilleries in the USThis industry purchases a variety of ingredients, such as grains and sugar, and manufactures them into spirits (i.e. not beer or wine). These spirits are then bottled and sold.

42481 Beer Wholesaling in the USThis industry primarily purchases, stores, sells and distributes beer and other fermented malt beverages.

44531 Beer, Wine & Liquor Stores in the USThis industry sells alcoholic beverages for off-premises consumption.

Industry Definition

Main Activities

Similar Industries

Additional Resources

About this Industry

For additional information on this industry

www.brewersassociation.org Brewers Association

www.beerinstitute.org The Beer Institute

www.census.gov US Census Bureau

The major products and services in this industry are

Lagers

Pale Ales

Seasonal Beers

Stouts and Porters


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SOURCE: WWW.IBISWORLD.COM

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Revenue vs. employment growth

Products and services segmentation (2013)

41.0%Pale ales

27.9%Lagers

18.1%Seasonal beers

13.0%Stouts and

porters


Key Statistics Snapshot

Industry at a GlanceCraft Beer Production in 2013

Industry Structure Life Cycle Stage Growth

Revenue Volatility Medium

Capital Intensity Medium

Industry Assistance Low

Concentration Level Low

Regulation Level Heavy

Technology Change Low

Barriers to Entry Low

Industry Globalization Low

Competition Level Medium

Revenue

$3.9bnProfit

$378.0mExports

$46.9mBusinesses

2,439

Annual Growth 13-18

7.2%Annual Growth 08-13

10.9%

Key External DriversDemand from beer wholesalingPrice of coarse grainsPer capita alcohol consumptionPer capita disposable incomeAccess to credit

Market ShareBoston Beer Company 19.3%

Sierra Nevada Brewing Company 5.1%

p. 23

p. 4

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 30



Key External Drivers Demand from beer wholesalingWholesalers are a crucial link in the supply chain. Therefore, craft breweries need to carefully plan distribution to influence the level of product promotion within liquor wholesaling outlets in order to maximize market share. Many craft breweries only have local distribution agreements, which severely limits the availability of their products. Demand from beer wholesaling is

expected to increase slowly during 2013, posing a potential opportunity to the industry.

Price of coarse grainsThe price of coarse grains tracks the prices of barley, oats and sorghum. Grain is a major input for beer production, so this driver represents the dominant inputs for craft breweries. Increasing grain prices pushes up production costs,

Executive Summary

Despite an often limited distribution reach and high price points, craft beer has increased in popularity among US beer drinkers. Many craft beer operations are kept small to maintain a focus on quality. Because of their small size, however, they do not have the ability to negotiate larger supply or distribution contracts, forcing such breweries to charge higher prices. During the recession, a consumer shift to drinking at home rather than on premises benefited companies in the industry because it is easier to place products on retailer

shelves than in restaurants or bars that offer a limited selection of alcoholic beverages. As a result, IBISWorld estimates that industry revenue grew an annualized 10.9% to $3.9 billion during the past five years, including anticipated growth of 11.9% in 2013.

Increasing market acceptance and low barriers to entry make this industry attractive for new businesses. Minimal equipment is required to brew craft beer, and industrial equipment can be bought ready to use. A culture that emphasizes locally brewed craft beers has also

encouraged entrants into the industry. In the five years to 2013, the number of enterprises is anticipated to grow at an annualized rate of 10.9% to 2,439 firms. Rampant expansion has also led companies to seek new markets abroad. As a result, exports are estimated to increase at an annualized rate of 37.3% during the five-year period, reaching $46.9 million in 2013.

As a result of high demand justifying price increases, the industry is becoming more profitable. The average industry profit is expected to total 9.6% of revenue in 2013. Profitability varies between companies, however, because the price per unit manufactured decreases as craft breweries scale up production volume. The largest craft brewer, The Boston Beer Company Inc., has an estimated operating profit of 12.2% of 2013 revenue.

During the next five years, the industry is forecast to benefit from brand recognition and increasing disposable income. However, growth will slow as large brewers increasingly compete through new branding practices, as well as through acquiring craft breweries and thus directly removing them from this industry. As a result, IBISWorld projects craft beer production revenue to rise at a 7.2% annualized rate to $5.6 billion over the five years to 2018.

Industry PerformanceExecutive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage

High market acceptance and low barriers to entry have boosted operator numbers


Industry Performance

Key External Driverscontinued

and, in turn, decrease profit. The price of coarse grains is expected to increase during 2013, posing a potential threat to the industry.

Per capita alcohol consumptionAlcohol consumption can affect craft beer sales, either positively or negatively. Additionally, consumers’ cultural and attitudinal changes can alter demand for beer. For example, many people drink only in moderation due to personal beliefs, whether health- or religion-based, reducing alcohol consumption and, therefore, industry revenue. Per capita alcohol consumption is expected to increase slowly during 2013.

Per capita disposable incomeThe level of disposable income affects spending on industry products, which are generally more expensive than their

big-brewery counterparts. When people have more money, they are more likely to consume premium beer at higher price points, like craft beer, which translates to increased sales and higher margins for craft brewers. Per capita disposable income is expected to increase slowly during 2013.

Access to creditAccess to credit refers to the borrowing capacity advanced by a commercial bank to an individual, firm or organization in the form of loans, cash credit and overdrafts. Credit allows craft brewers, for instance, to invest in machinery and equipment to begin commercial operations or expand existing facilities. As access to credit increases, it enables more companies to expand operations within the industry. Access to credit is expected to increase in 2013.

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Demand from beer wholesaling


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Profit challenges Craft beer producers are often not able to take advantage of mass production and do not have the ability to negotiate the larger supply contracts that come with economies of scale. Therefore, they are disproportionately exposed to fluctuations in the supply of inputs, and must charge higher prices than big beer companies to stay in business. During the past five years, a shortage of hops and high, unpredictable grain prices aggravated this. In the five years to 2013, the world price of coarse grains is expected to grow at an annualized rate of 5.4%.

In response to increasing grain prices and enabled by rising demand, brewers increased prices of their products. Many brewers also boosted recycling and energy-saving efforts to cut costs. For example, major company Sierra Nevada Brewing Company installed solar panels in 2008 and continually recycles waste materials. As craft breweries produce a higher volume of beer, they are better able to negotiate bulk prices for inputs and can also afford to implement advanced technologies that decrease per-unit costs, which enabled profit to expand to 9.6% of industry revenue in 2013.

Current Performance

Increasingly knowledgeable and health-conscious consumers are trading up for higher-quality beers and other alcoholic beverages. Bulk beverage sales declined as a result of health-conscious individuals switching to high-quality products in smaller quantities. Therefore, although per capita alcohol consumption stayed relatively constant during the past five years, consumers shifted away from big-name beers like Budweiser, Miller or Coors and substituted them with regional and high-quality industry products. This trend has stimulated growth in the craft beer segment because consumers are willing to pay more for a smaller quantity of high-quality beer.

Although disposable income dipped in the past five years, it resulted in a shift toward drinking at home. This shift enabled many consumers to continue paying for higher-end beers because they did not have to tip servers or pay

higher on-premises prices. As a result, industry revenue is expected to grow at an annualized rate of 10.9% to $3.9 billion in the five years to 2013, including 11.9% growth in 2013 spurred by rising disposable income enabling higher prices and increasing industry production volume.

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Attractive opportunity

The craft brewing industry has consistently attracted new businesses thanks to low barriers to entry. Brewing

craft beer is a cottage industry, meaning it can be done from one’s living room. Although industry enterprises only



Trading up The industry is exposed to global trends through heightened trade volumes and an increasing share of foreign ownership with recent mergers among beverage giants, including AB InBev and Miller Coors. Higher import competition from big brands will characterize the industry, with imports estimated to hover at 1.6% of demand in 2013.

Nonetheless, a weakening US dollar and improved international distribution channels have driven export growth, a trend that even continued when consumer spending fell during the recession. Since 2008, exports have expanded at an annualized rate of 37.3% to $46.9 million. Exports in 2013 are expected to account for 1.2% of total industry

revenue, driven almost entirely by rapid growth in nearby Canada and Mexico. Shipping costs for relatively small quantities of heavy beer bottles

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Revenue Exports

Revenue vs. exports


Attractive opportunitycontinued

include businesses that sell commercially, the number is expanding as the number of people interested in the business of brewing beer continues to rise. Also, most craft breweries are smaller, regional entities that produce high-quality products and can rely on word-of-mouth promotion to generate adequate demand that matches their limited production capabilities.

During the past five years, the industry benefited from high unemployment, which reduced the opportunity costs of starting a brewery for some entrants. US unemployment increased at an average annual rate of 7.6% in the past five years and remains at a significant 7.6% of the workforce in 2013. A tight lending environment limited some business expansion, but overall access to credit rose at an annualized rate of 0.8% during the five years to 2013. The number of craft brewers is estimated to rise at an annualized rate of 10.9% annualized to 2,439 enterprises during the same five-year period.

As the number of craft breweries grew steadily during the past five years, many better-established companies implemented marketing tactics to boost their brand recognition and sales. Increased awareness also helped strengthen producer ties with distributors, especially for more-established companies that were eager to expand production capabilities. Examples of companies that expanded rapidly during the past five years include New Belgium Brewing Company and Dogfish Head Craft Brewery Inc. Although major players The Boston Beer Company and Sierra Nevada Brewing Company were already distributed on a national scale in 2008, most companies continue to distribute to regional outlets in 2013. Wider distribution networks and intensifying marketing and sales spending is justifying higher pay for employees; during the five-year period, wages are expected to rise an annualized 12.0% to $558.4 million in 2013.



Trading upcontinued

from craft brewers are prohibitive to building significant exports overseas, which supports exports’ share of the

industry’s revenue. In comparison, 2008’s share of export revenue was only 0.4% of total revenue.

Expanding operations To meet increasing demand, craft beer producers have plans to ramp up production capabilities. Industry companies, including relatively well-known craft breweries New Belgium and Dogfish Head, are continually expanding their on-site facilities. Additionally, New Belgium and Sierra Nevada are expanding into new brewing locations by 2014. Such expansion is expected to contribute to 5.9% annualized establishment growth to 3,300 in the five years to 2018. In turn, automation is decreasing the amount of employees involved in beer production. Despite facility expansion, the number of workers is estimated to rise at an annualized rate of 4.2% to 17,790 employees in the five years to 2018. Furthermore, speedier industry expansion will be offset due to acquisitions from major breweries that are expected to pull craft brewers out of this industry.

New companies are also expected to continue entering the industry to

compete. Increasing credit availability is expected to enable people that previously brewed beer as a hobby to enter into the industry. According to IBISWorld estimates based on data from the Federal Reserve, access to credit is projected to well exceed prerecession levels during the next five years. Access to credit is forecast to grow at an annualized rate of 5.4% in the five years to 2018, compared to just 0.8% annualized growth during the previous five-year period. New company growth will slow, however, because the market is more saturated than it was five years ago. The number of companies in this industry is projected to grow at an average annual rate of 6.1% to 3,287 in the five years to 2018.

Industry Outlook

The Craft Beer Production industry will benefit from increasing disposable income, access to credit and brand recognition in the next five years. Improving disposable incomes will enable more consumers to fit high-end products like craft beer into their budgets. To meet rising demand for craft beer, companies are expected to continue

increasing product prices and expanding their production capabilities. Easier access to credit will facilitate such expansion. IBISWorld estimates that industry revenue will grow at an average annual rate of 7.2% to $5.6 billion in the five years to 2018, including 13.0% growth in 2014 when disposable income growth is forecast to pick up.

To meet demand, craft beer producers plan to ramp up their production capabilities



Increasingly international

Exports are forecast to be a major source of industry growth during the next five years because neighboring markets are relatively untapped by craft breweries. A weak US dollar, especially compared to the Canadian dollar, is expected to benefit craft brewers as they expand distribution contracts with the northern neighbor. As a result, export growth is projected to continue at a 35.2% annualized rate to $211.7 million in the five years to 2018. Therefore, exports as

a share of revenue will more than double from about 1.2% in 2013 to about 3.8% in 2018.

Similarly, foreign craft brewers are forecast to enter the US market quickly. Consumers’ curiosity for exotic brews is expected to drive growth in this category during the next five years, especially as disposable income expands. As a result, imports are projected to grow at an average annual rate of 24.8% to $193.1 million in the five years to 2018.

Growing margins Continued expansion will benefit craft beer producer profitability. Companies can take advantage of lower per-unit costs as the volume of production ramps up. Also, several larger players are planning to expand into new brewery locations, which will decrease distribution costs to nearby markets and thus enable the producers to implement price increases without boosting consumer prices. For example, California-based major player Sierra Nevada has plans to open a brewery in North Carolina that will produce the same beverages but primarily for distribution to East Coast consumers.

Also benefiting producers’ bottom lines, the price of inputs is forecast to grow more slowly. For example, the price of coarse grains is projected to increase at an average annual rate of 2.5% in the next five years, compared with a 5.4% annualized spike in the past five years. This growth will help companies expand profitability to an estimated 10.2% in 2018.

Continued expansion will help brewers leverage scale, improving profitability


Industry PerformanceCraft breweries are ramping up production volume and seeking new markets

Companies often introduce new products and many produce seasonal varieties

The number of companies is escalating

Life Cycle Stage


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DeclineShrinking economicimportance

Quality GrowthHigh growth in economic importance; weaker companies close down; developed technology and markets

MaturityCompany consolidation;level of economic importance stable

Quantity GrowthMany new companies; minor growth in economic importance; substantial technology change

Key Features of a Growth Industry

Revenue grows faster than the economyMany new companies enter the marketRapid technology & process changeGrowing customer acceptance of productRapid introduction of products & brands

Breweries

Wheat, Barley & Sorghum Farming

WineriesSugar Processing

Distilleries

Craft Beer Production



Industry Life Cycle This industry is growing at a much faster pace than the overall economy. New product introductions and increasing market acceptance are propelling this growth. Craft beer’s popularity boosted its prominence on many store shelves, which further contributed to growing consumer awareness. Industry value added (IVA), which measures the industry’s contribution to the economy, is forecast to rise at an annualized rate of 8.1% in the 10 years to 2018. Meanwhile, GDP is projected to grow at an average annual rate of 2.1% per year.

Acquisitions within the industry are limited because most craft breweries do not want to be associated with big brewers and, instead, look to develop their own products. Yet, while many companies in the industry purposefully limit expansion to maintain quality, others are continually introducing new products to spur revenue growth. New companies are also entering into the industry to compete. The number of enterprises is forecast to grow at an annualized rate of 8.5% to 3,287 in the 10 years to 2018.

This industry is Growing


Products & Services Pale alesPale ales account for about 41.0% of craft beer sales and come in amber and IPA varieties. Pale ales are made through a warm fermentation process using a high proportion of pale malt, which gives it a lighter color. Different brewing practices and hop levels result in a range of tastes and strengths within the pale ale craft beer segment. Popular types of pale ale beers include amber ale and India pale ale (IPA). However, consumer substitution of these products with more exotic beers has resulted in a slight contraction in this segment in the past five years.

Amber ales have a slightly darker color than traditional pale ales, which can

range from amber to deep red hues. This color is traditionally achieved by adding colored malt to the basic pale ale. These beers involve slow fermenting and are considered somewhat richer than pale ale, with a medium body. The US Association of Brewers describes amber ales as having flavors determined primarily by hops. Most versions have a balance of toasty malt flavors and bitterness from the hops used.

IPA has a slightly darker color and an increased content of hops and alcohol. IPA originated in England and was exported for the British troops in India. It was brewed with extra hops, which are a natural preservative, to help it survive the voyage to India.

Products & MarketsSupply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations

KEY BUYING INDUSTRIES

42481 Beer Wholesaling in the US Distributors are an essential link in the market channel for breweries. Because of the three-tiered regulatory system in place for alcoholic beverages in most states, beer manufacturers are not permitted to sell beer directly to retailers or consumers.

99 Consumers in the US Consumers in the US purchase craft beer from industry operators that also operate pubs.

KEY SELLING INDUSTRIES

11117 Wheat, Barley & Sorghum Farming in the US This industry supplies grains like barley and hops, which are key ingredients in beer production.

31131 Sugar Processing in the US This industry supplies sugar, which is a key component in making beer.

32192 Wood Pallets & Skids Production in the US This industry supplies wood pallets used to transport beer to end users, such as retailers, bars and clubs.

32221 Cardboard Box & Container Manufacturing in the US This industry supplies paperboard containers used to package bottles and cans of beer for the purpose of transportation.

32311 Printing in the US This industry supplies printed labels for branding and marketing beer bottles and cans.

32721 Glass Product Manufacturing in the US This industry supplies glass bottles for packaging beer.

33131 Aluminum Manufacturing in the US This industry supplies aluminum cans used to package and distribute beer.

42451 Corn, Wheat & Soybean Wholesaling in the US This industry supplies grains including barley and hops.

Supply Chain


Products & Markets

Products & Servicescontinued

LagersA lager is a type of beer that is fermented and conditioned at low temperatures. Pale lager is the most widely consumed and commercially available style of beer in the world. Lager comes in two different varieties, namely dark and pale, of which the dark version is actually the original lager. The alcohol concentration in dark lager ranges from 4.5% to 6.0%. Pale lager is a golden-colored liquid with alcohol content of 5.8% or more. Noble hop is extensively used in pale lager; other ingredients include pilsner malt and adjuncts like corn and rice.

Within the craft beer market, the most popular lager beer type is amber lager. Amber lagers are darker in color, ranging from amber hues to copper hues, and generally more fully flavored than a standard pale lager. Caramel malt flavors are typical and hopping levels vary considerably from one brewery to the next, though they are frequently hoppier than the true Vienna lager styles on which they are loosely based. Lagers account for about 27.9% of revenue, which

represents a slight increase from five years ago.

Stouts and portersStouts and porters account for about 13.0% of revenue. These beers are generally very malty because they are made using roasted malts and barley. They are usually heavy bodied beers, due in part to unique ingredients like oatmeal, coffee, chocolate and milk. As consumers have become increasingly interested in the brewing process, this segment expanded slowly during the past five years.

Seasonal beersSeasonal beers are brewed during certain times of the year and are offered in limited selections. Within the craft beer market, seasonal beer sales have gained market share over the past five years and are expected to account for about 18.1% of revenue. Seasonal beers are often lighter in color and flavor for spring and summer, with darker, heavier brews for winter and fall. The beers are geared to match the weather as well as food choices, like summertime brats or wintertime stews.

Products and services segmentation (2013)

Total $3.9bn

41.0%Pale ales

27.9%Lagers

18.1%Seasonal beers

13.0%Stouts and

porters



Products & Markets

Major Markets Industry operators sell craft beers through wholesale distributors to restaurants, bars and liquor stores, as well as to supermarkets, warehouse clubs, convenience stores and drug stores. Many firms sell beer directly to consumers at brew pubs and breweries.

The major markets for beer can also be segmented by consumer age group. As a share of the US population, younger people are a lot more likely to drink beer than those older than 50. The largest

growth segment for beer during the past five years has been the youngest portion of the population of drinking age: those aged 21 to 34. While all consumers cut spending, college students and young professionals continued spending on beer in the past five years. This age group has also increasingly been willing to explore a variety of premium and craft beers.

Consumers aged 35 to 54 have also switched to craft beers, but have been more likely to tighten their

DemandDeterminants

Consumer demand for luxury or perceived luxury goods, including craft beer, is generally sensitive to economic factors such as unemployment levels and per capita disposable income, which influence consumer spending. When income levels are down, people tend to spend less on discretionary purchases, including craft beer. Nonetheless, during the past five years, even as a rough economy and continuing competition from wine and spirits drove overall beer consumption down, the craft beer segment continued its growth and captured market share from the rest of the domestic market.

A number of other factors drive demand for craft beer, including changing consumer preferences, public attitudes about alcohol, per capita alcohol consumption and demographics. Although per capita alcohol consumption stayed relatively constant during the past five years, consumers shifted away from big-name beers like Budweiser, Miller or Coors and substituted them with industry products. Changing consumer preferences, driven in part by the buy-local movement and a political push against large corporations that stemmed from the financial meltdown, drove up demand for small breweries.

Changes in consumer preferences have a significant impact on this industry. If

the markets for wine, spirits or flavored alcohol beverages continue to grow, this could draw consumers away from the craft beer industry. Public opinions about alcohol also affect per capita consumption of alcohol. The alcoholic beverage industry has become the subject of considerable societal and political attention in recent years due to increasing public concern over alcohol-related social problems, including drunk driving, underage drinking and health consequences from the misuse of alcohol. These concerns could lead to restricted advertising by beer producers, additional requirements for cautionary labeling or packaging and renewed efforts to impose, at either the federal or state level, increased excise or other taxes on beer sold in the United States. This increased regulation would directly affect industry performance.

Demographics also play a role in driving demand. Per capita consumption of beer is higher among 21- to 35-year-olds than other age groups. The proportion of the population within this age range and its increasing disposable income will have a positive effect on demand for beer during the next five years.

Fluctuations in raw material inputs, including grains, have a direct effect on price. As the prices for grains increase, so does the cost of production, thus decreasing profit.


Products & Markets

International Trade The craft beer industry is increasing its participation in international trade. Exports are expected to account for about 1.2% of revenue in 2013, a considerable increase from 2008 when they accounted for 0.4%. Industry firms have increased production in order to meet growing demand for craft beer and have begun shipping popular products abroad in higher volumes. Canada remains the industry’s largest export market, largely as a result of increased demand for craft beer in British Columbia, Alberta and Ontario. The United Kingdom and Sweden represent the next two largest markets. These countries have a high level of beer consumption and increasingly demand craft beer brewed in the

United States. Despite decreasing purchasing power as a result of the economic downturn, importers and

Major Marketscontinued

budgets altogether due to financial strain throughout the recession. This age group has also gravitated towards wine and other spirits. During the next five years, the younger demographic will continue to be the main growth segment for craft beer, with older consumers spending their money on other kinds of beverages.

Although there are slightly more women than men in the US population, about 58.0% of beer drinkers are men while 42.0% are women. The share of women beer drinkers has increased gradually during the past five years and is anticipated to continue over the next five years thanks to the increased marketing and availability of certain craft beers.

Major market segmentation (2013)

Total $3.9bn

23.2%Consumers

aged 35 to 44

9.5%Consumers

aged 21 to 24

22.8%Consumers

aged 25 to 34

21.8%Consumers

aged 45 to 54

13.0%Consumers

aged 55 to 64

9.7%Consumers

aged 64 and older


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Exports Imports Balance

Industry trade balance


Level & Trend Exports in the industry are Low and Increasing

Imports in the industry are Low and Increasing


Products & Markets

International Tradecontinued

distributors in other countries have expanded their American craft beer offerings, even in emerging markets like Brazil and India.

Craft beer imports have remained largely unchanged in the past five years. In 2013, IBISWorld estimates

that imports will account for about 1.6% of domestic demand. As Americans embraced lower-priced local products post-recession, competition from imports of craft beer slowed early in the past five years but rebounded as a share of domestic demand since 2011.


Products & Markets

Business Locations 2013

MO2.3

West

West

West

Rocky Mountains Plains

Southwest

Southeast

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NJ1.1

DE0.6

NH0.9

CT0.8

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IA1.4

OH2.7 VA

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CO6.7

UT0.9

ID1.1

TX2.7

OK0.5

NC2.7

AK0.4

WY0.7

TN1.3

KY0.4

GA1.2

IL2.8

ME1.8

ND0.0

WI4.0 MI

4.8 PA4.3

WV0.3

SD0.2

NM1.2

AR0.2

MS0.1

AL0.2

SC0.8

LA0.4

HI0.5

IN2.0

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Mid- Atlantic

Establishments by region (%)

Less than 3% 3% to less than 10% 10% to less than 20% 20% or more

Great Lakes


Products & Markets

Business Locations The number of breweries in a particular state characterizes the geographic spread of this industry. In general, brewery locations correlate with the population of the state. This is likely the result of producers locating their production facilities closer to major centers of the population to minimize costs of transportation. Another influence on the geographic spread is the climate of the region. Warm climates are more conducive to the consumption of beer, so there is likely to be greater demand for beer in regions along the southern coasts or the Mexican border. Craft Beer production in particular tends to be concentrated on the coasts. Other factors that affect geographic spread include access to raw materials, ease of access to export markets and taxes levied at the state level.

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Establishments vs. population



Cost Structure Benchmarks

ProfitProfit margins vary considerably depending on the size of the brewery. On average, profit, measured as earnings before interest and taxes, is expected to account for about 9.6% of revenue in 2013. Profit margins have benefited from increased demand for craft beers during the past five years, which has allowed operators to charge higher prices. Fluctuations in raw material costs, including grains such as hops and aluminum, glass, corrugated cardboard and other packaging, have a direct impact on profitability, which squeezed profit margins for smaller operators in the past five years. Smaller breweries are disproportionately exposed to fluctuations in input costs because they may not be able to benefit from discounts associated with buying in higher

volumes. These operators may not be able to pass on higher input costs to consumers in the form of higher prices, hurting profit.

PurchasesThe largest costs to breweries are purchases of raw materials, which IBISWorld estimates will account for 61.2% of industry revenue in 2013. These raw materials include packaging: principally glass, aluminum and corrugated cardboard. Packaging costs have increased significantly over the past five years, particularly aluminum cans, due to commodity prices rising. Other raw materials include barley, sugar, malt, corn, rice, wheat, hops and preservatives, which are the critical ingredients required for brewing. The price of hops in particular reached a record high in 2008,

Key Success Factors Establishment of brand namesSuccessful branding through logo design and packaging, and advertising is critical to success in a brand-competitive market.

Control of distribution networksNew entrants must have access to distribution networks including wholesale distributors in order to get their beer sold at restaurants, bars and other retail locations.

Marketing of productsInnovative and offbeat branding, packaging and marketing help operators differentiate their craft beer from corporate brands.

Effective quality controlQuality and taste are important competitive factors among craft breweries. Operators need to keep flavors consistent batch after batch and ensure top quality.

Market Share Concentration

The Craft Beer Production industry has a low level of market share concentration with the top four players accounting for about 33.5% of total industry revenue in 2013. Craft brewing is a relatively new industry and the number and diversity of craft brewers has significantly increased during the past five years in line with growing demand. Industry players have begun

consolidating in order to capitalize on distribution and marketing efficiencies, and larger domestic brewers have acquired smaller craft breweries and created separate craft-focused divisions in an effort to capitalize on the growing craft beer segment. This trend will continue in the five years to 2018, leading to an increase in market share concentration.

Competitive LandscapeMarket Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization

Level Concentration in this industry is Low

IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:


Competitive Landscape

Cost Structure Benchmarkscontinued

but it steadied in 2010. The price of grains increased in 2010 as a result of Russia’s export ban. Over the five years to 2018, prices of raw ingredients are projected to decline as farmers compensate for the shortages that occurred over the past five years.

WagesLabor is the next-largest cost to this industry, accounting for about 14.2% of industry revenue in 2013. The ratio of wages to revenue has increased slightly during the five years to 2013 from about 13.5% in 2008, as craft breweries have expanded employment of skilled marketing and sales exports to gain a competitive edge in the increasingly saturated market. Over the five years to 2018, more demand for craft brews is expected to lead to more jobs in the industry, but revenue growth is expected to outpace wage increases.

Depreciation, rent and utilitiesDepreciation varies considerably depending on the size of the brewery and type of equipment used. In 2013, average depreciation is estimated to be 2.8% of revenue. Generally, beer brewing is considered a capital-intensive process and depreciation of plants and equipment is significant. Depreciation is not forecast to fluctuate over the five years to 2018. Rent and utilities are estimated to account for about 3.8% of revenue in 2013. Rent prices declined when the housing bubble burst, and utility prices have fluctuated but are near their 2008 level. Over the next five years, rent is projected to increase gradually and utility costs will continue to fluctuate.

Other costsOther costs include taxes, administration and legal costs.

Sector vs. Industry Costs

■ Profi t■ Wages■ Purchases■ Depreciation■ Marketing■ Rent & Utilities■ Other

Average Costs of all Industries in sector (2013)

Industry Costs (2013)

0

20

40

60

Perc

enta

ge o

f rev

enue

80

1007.7

14.92.8 1.52.7

59.8

10.59.6

4.83.83.62.8

61.2

14.2




Barriers to Entry The barriers to entry into the Craft Beer Production industry are low to moderate. Basic brewing equipment can be purchased at a relatively low cost, and

many operators can access personal lines of credit to launch microbreweries. Gaining access to raw material inputs such as hops and packaging materials

Basis of Competition As beer lovers continue to gravitate toward unique, high-quality beers, more business owners are starting craft breweries, boosting industry competition. During the past five years, the number of craft breweries has increased significantly. Industry operators compete with each other primarily on the basis of quality, taste, branding, marketing and price. Big and small brewers alike must focus on quality and taste in order to create and sustain demand for their beer. Innovative and offbeat branding, packaging and marketing help operators differentiate their beer from corporate brands. Branding and packaging, including logo design and labeling, are essential to convey the uniqueness of craft beer. Combined with a successful marketing plan, effective branding and packaging help operators become well known among wholesalers, agents, restaurants, bars and the general public. To a lesser extent, operators also need to be price competitive. Raw material purchases (e.g. hops and packaging materials) are a brewery’s most significant cost, and fluctuations in input costs can negatively affect pricing for industry operators. Fluctuations in input costs disproportionately affect smaller breweries, which may be forced to charge higher prices.

External competitionIndustry operators compete with larger

beer brands and imported beers, as well as with other alcoholic and nonalcoholic beverages. Although there is significant loyalty to beer brands across the country, craft beers have been winning market share from corporate brands during the past five years. Competition for brand loyalty has intensified on a regional level, and many regional players have aggressively sought to expand their geographic market reach as a result. Nonetheless, craft beer breweries have been using marketing techniques like beer tastings and brewery tours to boost consumer awareness of their brands.

Competition from other beverages and beer imports is significant. In particular, beer imports are forecast to grow as consumer spending picks up during the next five years.

Other beverage industries are becoming more fragmented, offering drinks that are competing directly with beer. Not only is wine becoming increasingly popular with 21- to 35-year-olds, but there are also new “adult” drinks aimed at consumers in this age range who are looking to relax. These include low-sugar sodas that are marketed as healthy alternatives, such as GuS (Grown-up Soda), relaxation drinks and exotic juices that retailers, restaurants and other establishments are increasingly selling alongside beer. Cider is also gaining traction as an alternative to craft beer.

Cost Structure Benchmarkscontinued

Marketing costs are estimated to account for 3.6% of industry revenue in 2013. Industry operators must invest

significant capital in branding and marketing strategies that increase consumer awareness

Level & Trend Competition in this industry is Medium and the trend is Increasing



Industry Globalization

The Craft Beer Production industry has a low level of globalization due to its minor participation in foreign trade and a majority of domestically owned operations. Craft beers tend to be produced in small batches and consumed locally. The shop-local trend that grew out of the economic recession and shifting attitudes toward large corporations have propelled the local consumption of craft

beer. As domestic breweries expand production, branding and marketing efforts will lead to increased interest from foreign distributors, and exports of US craft beer will increase. Increased participation in foreign trade and the fact that foreign beer companies may increasingly acquire smaller US craft breweries will increase this industry’s level of globalization by 2018.

Barriers to Entrycontinued

(i.e. aluminum cans and glass bottles) is not significantly challenging, although smaller operators will be at a competitive disadvantage to larger operators who can benefit from economies of scale and can buy larger volumes of raw materials at a discount. Smaller breweries are disproportionately exposed to fluctuations in input costs and may be forced to charge higher prices for their products.

New entrants into the industry will need to secure distribution channels for their products and need to have significant branding and marketing capital to boost consumer awareness about their beers. Gaining access to distribution channels (i.e. wholesale distributors that handle craft beer) may be a significant barrier to entry due to

growing competition from craft breweries. New entrants may also be challenged by the significant degree of regulation governing sanitary, health and safety conditions during the brewing process, along with other marketing and labeling requirements.

Barriers to Entry checklist Level

Competition MediumConcentration LowLife Cycle Stage GrowthCapital Intensity MediumTechnology Change LowRegulation & Policy HeavyIndustry Assistance Low



Trade Globalization Going Global: Craft Beer Production 2002-2013

Expo

rts/

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200

150

100

50

0

200

150

100

50

0

Imports/Domestic Demand Imports/Domestic Demand0 040 4080 80120 120160 160

International trade is a major determinant of an industry’s level of globalization.

Exports offer growth opportunities for fi rms. However there are legal, economic and political risks associated with dealing in foreign countries.

Import competition can bring a greater risk for companies as foreign producers satisfy domestic demand that local fi rms would otherwise supply.

Export ExportGlobal Global

ImportLocal ImportLocalCraft Beer Production2002

2013

Level & Trend Globalization in this industry is Low and the trend is Increasing

Level & Trend Barriers to Entry in this industry are Low and Increasing


Player Performance Sierra Nevada Brewing Company was founded in 1981 and is headquartered in Chico, CA. It is a privately owned and operated brewery. In addition to the brewing and bottling facility, the

company runs a restaurant and concert venue on its premises. It is expected to employ nearly 600 people in 2013. The company’s main product is pale ale, which generates about 70.0% of total

Player Performance The Boston Beer Company Inc. was founded in the mid-1980s and is headquartered in Boston. Its other plants are located in Cincinnati, OH, and Lehigh, PA. The company employs nearly 1,000 people. In 2012, it sold about 2.7 million barrels of beer. Its core brands include Samuel Adams Boston Lager and Sam Adams Light, but it also produces a number of other flavors and seasonal beers, as well as cider and flavored malt beverages.

The Boston Beer Company competes within the craft segment and concentrates on product quality rather than engaging in price competition with

larger brewers. Its competitive strengths over other regional brewers include a number of awards for its products, distribution capabilities and scale relative to other smaller brewers.

Financial performanceThe company continues to grow after stagnant sales early in the past five-year period. The Boston Beer Company is on track to earn about $759.4 million in 2013. In the five years to 2013, the company grew at an estimated average annual rate of 11.1% as it increased prices to bolster profitability and offset rising input costs.

Major CompaniesBoston Beer Company | Sierra Nevada Brewing Company | Other Companies

75.6%Other

Boston Beer Company 19.3%

Sierra Nevada Brewing Company 5.1%


Major players(Market share)

The Boston Beer Company Inc. – fi nancial performance

Year*Revenue

($ million) (% change)Operating Income

($ million) (% change)

2008 449.6 N/C 14.1 N/C

2009 453.4 0.8 54.3 285.1

2010 505.9 11.6 81.2 49.5

2011 558.3 10.4 103.7 27.7

2012 628.6 12.6 95.6 -7.8

2013 759.4 20.8 92.8 -2.9

*EstimatesSOURCE: ANNUAL REPORT AND IBISWORLD

Boston Beer Company Market share: 19.3% Industry Brand Names Samuel Adams


Major Companies

Other Companies CraftWorks Restaurants & Breweries Inc. Estimated market share 4.8%CraftWorks Restaurants and Breweries Inc. owns about 200 restaurants that operate under 14 different brands and employs nearly 12,000 people. The restaurants feature beef, seafood and pasta items, along with a selection of handcrafted beers. Through its subsidiaries Gordon Biersch Brewery Restaurant Group and Rock Bottom

Restaurant and Brewery the company produces a wide selection of craft beers, which it sells at its brewpubs. The company brews small batches of beer on-site at its restaurant locations and uses authentic Weyermann malt and Hersbrucker hops imported from Germany. Craftworks has expanded rapidly during the past five years, growing both organically and through acquisitions. The sale of craft beer at its brewpubs has fueled this growth as

Player Performancecontinued

company revenue. Another 29.0% of revenue comes from seasonal brews, while other yearly products only generate about 1.0% of revenue.

In 2012, Sierra Nevada announced plans to expand into a second brewing facility. Production is expected to commence in Mills River, NC, in 2014. Because the company’s products are already distributed nationwide, the new facility will decrease company distribution costs to the East Coast and expand its production capacity.

Financial performanceSierra Nevada is a private company that does not disclose financial information; therefore, revenue figures are IBISWorld estimates and additional financial data is

not available. IBISWorld estimates that during the past five years, the company’s revenue grew at an annualized rate of 9.0%, including 11.1% growth in 2013 to $200.0 million. Growth has been stimulated by the company’s expanding agreements with distributors nationwide, which have enabled it to expand production. Increasing brand recognition is also contributing to rising demand for industry products. To further bolster its market presence, the company occasionally partners with other craft breweries to market and sell products; such as an upcoming variety 12-pack that will feature beers from 12 breweries, including Sierra Nevada, and coincide with the new Mills River brewery opening in summer 2014.

Sierra Nevada Brewing Company – fi nancial performance

Year*Revenue

($ million) (% change)Employees

(People) (% change)

2008 129.7 N/C 440 N/C

2009 139.1 7.2 445 1.1

2010 150.0 7.8 450 1.1

2011 162.6 8.4 475 5.6

2012 180.0 10.7 505 6.3

2013 200.0 11.1 595 17.8

*EstimatesSOURCE: ANNUAL REPORT AND IBISWORLD

Sierra Nevada Brewing Company Market share: 5.1%


Major Companies

Other Companiescontinued

demand for unique, locally made craft beer has increased. IBISWorld estimates industry-specific revenue will reach $169.8 million in 2013, up 7.5% from 2012.

Craft Brew Alliance Estimated market share: 4.3%Craft Brew Alliance is the union of three craft breweries: Redhook Ale Brewery, founded by Gordon Bowker and Paul Shipman in 1981 in Seattle; Widmer Brothers Brewing, founded by brothers Kurt and Rob Widmer in 1984 in Portland, OR; and Kona Brewing Co., founded by father-and-son team Cameron Healy and Spoon Khalsa in 1994 in Kona, HI. Breweries are located in Portsmouth, NH; Portland, OR; Woodinville, WA; and Kailua-Kona, HI. The company also owns five pubs, four of which are located adjacent to its breweries. In turn, the company is

partly owned by AB Inbev, a major brewer. The company benefits from an alliance with Anheuser-Busch’s distribution network, which has helped it establish a competitive edge over other craft beer producers.

Craft Brew Alliance offers a variety of distinct craft beer brands, which it sells through national distribution channels. It also benefits from its national sales and marketing reach, which has allowed the company to promote consumer awareness of its brands. Craft Brew Alliance has grown considerably over the past five years, with revenue expected to increase at an average annual rate of 13.5% to $150.6 million in 2013, including 3.4% growth in 2013. As demand for craft beer has increased during the period, Craft Brew Alliance has expanded operations and grown through acquisitions (including the acquisition of Kona Brewery in 2010).


Capital Intensity Craft breweries require substantial amounts of capital investment in the form of equipment and plants, although this varies depending on the size of the brewer. On average, firms spend $0.20 on capital for every dollar spent on wages. Brewing equipment, including stills, filtration systems, bottling lines and other machinery are bought when a plant is first established but require continuous maintenance and repair. The majority of the production process is mechanized and does not require a significant level of labor. On average, labor costs account for about 14.2% of industry revenue in 2013. Increases in automation, and

technological improvements in brewing equipment will continue to curb the industry’s reliance in labor.

Operating ConditionsCapital Intensity | Technology & Systems | Revenue VolatilityRegulation & Policy | Industry Assistance

Tools of the Trade: Growth Strategies for Success


Labo

r Int

ensi

veCapital Intensive

Change in Share of the Economy

New Age Economy

Recreation, Personal Services, Health and Education. Firms benefi t from personal wealth so stable macroeconomic conditions are imperative. Brand awareness and niche labor skills are key to product differentiation.

Traditional Service Economy

Wholesale and Retail. Reliant on labor rather than capital to sell goods. Functions cannot be outsourced therefore fi rms must use new technology or improve staff training to increase revenue growth.

Old Economy

Agriculture and Manufacturing. Traded goods can be produced using cheap labor abroad. To expand fi rms must merge or acquire others to exploit economies of scale, or specialize in niche, high-value products.

Investment Economy

Information, Communications, Mining, Finance and Real Estate. To increase revenue fi rms need superior debt management, a stable macroeconomic environment and a sound investment plan.

Breweries Wheat, Barley & Sorghum Farming

WineriesSugar Processing Distilleries


Capital intensity

0.5

0.0

0.1

0.2

0.3

0.4

SOURCE: WWW.IBISWORLD.COMDotted line shows a high level of capital intensity

Capital units per labor unit


ManufacturingEconomy

Level The level of capital intensity is Medium


Operating Conditions

Revenue Volatility The Craft Beer Production industry has a moderate level of revenue volatility. Demand for craft beer has increased in the five years to 2013 driven in part by the buy-local movement and a political push against large corporations that stemmed from the financial meltdown. The industry has benefited from strong revenue

growth even during the peak of the recession in 2009, when revenue grew 4.6%. The industry experienced double digit growth since, including a rapid 15.0% increase in 2012. As revenue growth slows due to market saturation and acquisitions by major brewers over the next five years, volatility is expected to further moderate.

Technology& Systems

Although the process of making beer has changed little throughout the years, technological advancements relevant to this industry primarily pertain to design, engineering and fabrication of brewing equipment. Quality-control improvements through computer automation in the brewing process are fast growing trends. Modern brewing plants are increasingly using brewing, fermenting and conditioning processes that are automatic-computer-controlled or semi-automatic-controlled via central-control panel. Increased automation allows brewers to more precisely control variables such as temperature and ingredient proportions during the critical phases of brewing (i.e. mashing, lautering, boiling and fermentation). Technological

improvements in monitoring equipment also allow for better quality control.

The use of solar technology to power brewing plants is also a growing trend. For example, Sierra Nevada Brewing Company generates about 19.0% of its total electricity needs with photovoltaic panels that use solar energy.

Technologies used to distribute, store, package and keep track of beer products are also changing constantly, giving an indirect boost to the industry by lowering final prices through decreasing middleman costs. From electric and hybrid fleet vehicles adopted by distributors to inventory management software used by warehouses, technology helps the industry provide consumers with lower-cost beer.

Level The level of Technology Change is Low


Volatility vs Growth

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Hazardous

Stagnant

Rollercoaster

Blue Chip

* Axis is in logarithmic scale


A higher level of revenue volatility implies greater industry risk. Volatility can negatively affect long-term strategic decisions, such as the time frame for capital investment.

When a fi rm makes poor investment decisions it may face underutilized capacity if demand suddenly falls, or capacity constraints if it rises quickly.

Level The level of Volatility is Medium



Regulation & Policy The Craft Beer Production industry is subject to various federal and state regulations that involve production, distribution, labeling, advertising, trade and pricing practices, credit, container characteristics, and alcoholic content. Federal, state and local governmental entities also levy various taxes, license fees and other similar charges and may require bonds to ensure compliance with applicable laws and regulations. Specific alcohol taxation is primarily a federal and state right although some states permit some additional local taxation. The brewing industry must also comply with numerous federal, state, and local environmental protection laws.

Bureau of Alcohol, Tobacco Firearms and Explosives (ATF)ATF is a law-enforcement agency within the US Department of the Treasury and is responsible for protecting the public, reducing violent crime and collecting revenue. ATF enforces the federal laws and regulations relating to alcohol, tobacco products, firearms, explosives and arson. As part of its alcohol responsibilities, the ATF approves labels and monitors advertising; regulates labeling, marking, packaging and branding of all distilled spirits, wine and beer sold in the United States; and regulates US production and the importation of all alcohol beverages, including distilled spirits, malt beverages and wine.

US Alcohol and Tobacco Tax and Trade Bureau (TTB)In 2003, the TTB published proposed regulations on the formulation, labeling and advertising of flavored malt beverages (FMBs). The final ruling was passed in 2005, which allowed for the addition of flavors and other nonbeverage ingredients but limited the alcohol contribution of such flavors to 49.0% of the alcohol content of the

product. For instance, beverages with alcohol content exceeding 6.0% alcohol by volume could contain no more than 1.5% of this alcohol from flavors and nonbeverage ingredients.

The TTB sends out publications to remind brewers and importers of limitations to the use of flavors and nonbeverage ingredients containing alcohol in the production of FMBs. When producers do not comply with the regulations, the beverage is classified as a distilled spirit and taxed at the much higher distilled spirits rate.

State regulationsThere are two types of regulatory environments in the United States where alcohol regulations are made on the state level: open and control states. In open states, brewers are allowed to sell beer and ale directly to independent distributors. In most control states, companies market their spirit products to state liquor control boards through a warehousing system, and from there, to state liquor stores. Beer distribution follows open states regulation across the entire United States.

Regulations vary from state to state for direct sales, brewery tours, brewpubs, microbreweries, excise, packaging and franchising and are usually more stringent throughout eastern states than those in the west. Of all the states, Florida and Georgia have the highest level of state excise, at 48 cents per gallon. The lowest state-based excise is in Wyoming, where excise is two cents per gallon. The US average rate is about 19 cents per gallon. In an effort to raise taxes and stimulate small brewery business, some states have relaxed regulations on where beer can be sold and under what conditions. One example of this is South Carolina, which recently started allowing breweries to conduct tours and sell a limited amount of beer directly to customers.

Level & Trend The level of Regulation is Heavy and the trend is Steady



Industry Assistance The Craft Beer Production industry benefits from tariff protection on certain imported products that compete with the industry. According to the latest information available from the International Trade Administration in the Department of Commerce, the general rate of import tariff on nonalcoholic beer is two cents per liter. For beer made from malt, there is no import tariff imposed. The industry is protected, up to a point, from imports by the high cost of transport given the weight of the product and the low value relative to this weight. However, favorable production conditions in Mexico and Canada have led foreign premium brands to set up shop in neighboring countries in order to produce beer for sale in the United States.

Other assistance is provided by organizations, including the Brewers

Association, which works to promote and protect small and independent craft brewers; the Small Brewers Caucus and Institute for Brewing Studies. The Small Brewers Caucus is composed of members of Congress who have an interest in the issues smaller brewers face. The aim of the caucus is to provide members with the opportunity to learn about the business and regulatory and societal issues relating to small breweries. The establishment of the caucus shows some recognition of smaller brewers’ significance in the industry and may give smaller brewers greater representation in Congress. It is supported by the Brewer’s Association, which is composed of small beer production companies. The Institute for Brewing Studies offers establishment and marketing assistance to existing and prospective microbrewers across the country.

Level & Trend The level of Industry Assistance is Low and the trend is Steady


Key StatisticsRevenue

($m)

Industry Value Added

($m)Establish-

ments Enterprises EmploymentExports

($m)Imports

($m)Wages ($m)

Domestic Demand

Price of Coarse Grains

(Index)2004 2,014.0 518.0 1,263 1,255 8,360 0.1 0.6 309.8 2,014.5 99.72005 2,141.9 537.9 1,297 1,291 8,622 1.2 11.0 309.2 2,151.7 91.62006 2,102.9 613.0 1,344 1,337 9,395 3.4 32.4 371.2 2,131.9 110.22007 2,174.3 532.0 1,400 1,395 9,037 6.6 37.4 316.8 2,205.1 165.62008 2,349.2 671.6 1,459 1,453 9,424 9.6 28.2 316.3 2,367.8 206.42009 2,456.1 640.6 1,549 1,543 10,223 11.4 30.3 353.7 2,475.0 132.52010 2,720.5 763.9 1,742 1,734 10,893 12.6 22.7 401.9 2,730.6 153.22011 3,062.4 803.5 1,970 1,868 11,518 24.2 38.8 446.3 3,077.0 249.02012 3,520.4 936.1 2,347 2,165 13,101 33.7 49.7 506.1 3,536.4 258.92013 3,938.0 1,046.5 2,483 2,439 14,490 46.9 63.9 558.4 3,955.0 268.72014 4,449.9 1,153.3 2,742 2,730 15,919 64.7 81.4 622.3 4,466.6 286.52015 4,863.8 1,320.5 2,968 2,956 16,916 84.6 98.2 670.9 4,877.4 274.32016 5,036.6 1,351.4 3,044 3,032 17,031 112.1 120.0 685.3 5,044.5 301.02017 5,192.4 1,376.4 3,108 3,096 17,070 156.0 154.2 696.8 5,190.6 291.92018 5,566.2 1,463.5 3,300 3,287 17,790 211.7 193.1 736.8 5,547.6 303.6Sector Rank 201/414 203/414 38/414 34/414 167/414 345/384 341/384 200/414 209/384 N/AEconomy Rank 816/1293 842/1293 594/1292 531/1292 801/1293 397/443 390/444 848/1293 245/443 N/A

IVA/Revenue (%)

Imports/ Demand

(%)Exports/Revenue

(%)

Revenue per Employee

($’000)Wages/Revenue

(%)Employees

per Est.Average Wage

($)

Share of the Economy

(%)2004 25.72 0.03 0.00 240.91 15.38 6.62 37,057.42 0.002005 25.11 0.51 0.06 248.42 14.44 6.65 35,861.75 0.002006 29.15 1.52 0.16 223.83 17.65 6.99 39,510.38 0.002007 24.47 1.70 0.30 240.60 14.57 6.46 35,055.88 0.002008 28.59 1.19 0.41 249.28 13.46 6.46 33,563.24 0.012009 26.08 1.22 0.46 240.25 14.40 6.60 34,598.45 0.012010 28.08 0.83 0.46 249.75 14.77 6.25 36,895.25 0.012011 26.24 1.26 0.79 265.88 14.57 5.85 38,748.05 0.012012 26.59 1.41 0.96 268.71 14.38 5.58 38,630.64 0.012013 26.57 1.62 1.19 271.77 14.18 5.84 38,536.92 0.012014 25.92 1.82 1.45 279.53 13.98 5.81 39,091.65 0.012015 27.15 2.01 1.74 287.53 13.79 5.70 39,660.68 0.012016 26.83 2.38 2.23 295.73 13.61 5.59 40,238.39 0.012017 26.51 2.97 3.00 304.18 13.42 5.49 40,820.15 0.012018 26.29 3.48 3.80 312.88 13.24 5.39 41,416.53 0.01Sector Rank 199/414 372/384 377/384 310/414 201/414 403/414 352/414 203/414Economy Rank 812/1293 419/443 430/443 648/1293 797/1293 933/1292 864/1293 842/1293

Figures are inflation-adjusted 2013 dollars. Rank refers to 2013 data.

Revenue (%)

Industry Value Added

(%)

Establish-ments

(%)Enterprises

(%)Employment

(%)Exports

(%)Imports

(%)Wages

(%)

Domestic Demand

(%)

Price of Coarse Grains

(%)2005 6.4 3.8 2.7 2.9 3.1 1,100.0 1,733.3 -0.2 6.8 -8.12006 -1.8 14.0 3.6 3.6 9.0 183.3 194.5 20.1 -0.9 20.32007 3.4 -13.2 4.2 4.3 -3.8 94.1 15.4 -14.7 3.4 50.32008 8.0 26.2 4.2 4.2 4.3 45.5 -24.6 -0.2 7.4 24.62009 4.6 -4.6 6.2 6.2 8.5 18.8 7.4 11.8 4.5 -35.82010 10.8 19.2 12.5 12.4 6.6 10.5 -25.1 13.6 10.3 15.62011 12.6 5.2 13.1 7.7 5.7 92.1 70.9 11.0 12.7 62.52012 15.0 16.5 19.1 15.9 13.7 39.3 28.1 13.4 14.9 4.02013 11.9 11.8 5.8 12.7 10.6 39.2 28.6 10.3 11.8 3.82014 13.0 10.2 10.4 11.9 9.9 38.0 27.4 11.4 12.9 6.62015 9.3 14.5 8.2 8.3 6.3 30.8 20.6 7.8 9.2 -4.32016 3.6 2.3 2.6 2.6 0.7 32.5 22.2 2.1 3.4 9.72017 3.1 1.8 2.1 2.1 0.2 39.2 28.5 1.7 2.9 -3.02018 7.2 6.3 6.2 6.2 4.2 35.7 25.2 5.7 6.9 4.0Sector Rank 12/414 13/414 20/414 6/414 7/414 1/384 3/384 11/414 20/384 N/AEconomy Rank 53/1293 69/1293 88/1292 23/1292 33/1293 2/443 5/444 50/1293 23/443 N/A

Annual Change

Key Ratios

Industry Data



Jargon & Glossary

BARRIERS TO ENTRY High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry.

CAPITAL INTENSITY Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor.

CONSTANT PRICES The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the “real” growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator.

DOMESTIC DEMAND Spending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports.

EMPLOYMENT The number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry.

ENTERPRISE A division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control.

ESTABLISHMENT The smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise.

EXPORTS Total value of industry goods and services sold by US companies to customers abroad.

IMPORTS Total value of industry goods and services brought in from foreign countries to be sold in the United States.

INDUSTRY CONCENTRATION An indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%.

INDUSTRY REVENUE The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded.

INDUSTRY VALUE ADDED (IVA) The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industry’s contribution to GDP, or profit plus wages and depreciation.

INTERNATIONAL TRADE The level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%.

LIFE CYCLE All industries go through periods of growth, maturity and decline. IBISWorld determines an industry’s life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industry’s products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services.

NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals.

PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax.

Industry Jargon

IBISWorld Glossary

CRAFT BEER Beer made by small independent brewers with annual production of 6 million barrels of beer or less.

LAGER A type of beer that is fermented and conditioned at low temperatures. Pale lager is the most widely-consumed and commercially available style of beer in the world

PALE ALE A type of beer made through a warm fermentation process using a high proportion of pale malt, which gives it a lighter color.


Jargon & Glossary

VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.

WAGES The gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure.

IBISWorld Glossarycontinued

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