Can Colorado’s beer scene craft a comeback?

The U.S. craft beer market is facing significant challenges, with domestic production volume declining 4% in 2023 and the total number of operating craft breweries falling for the first time in nearly two decades to 9,612. Despite maintaining a 13.3% market share amidst an overall shrinking beer market, brewers are grappling with persistent supply chain issues, rising input costs, tariffs, and evolving consumer preferences towards alternatives like hard seltzers and increased sobriety, which are compressing margins in a saturated environment. This signals a maturing market where industry players, including major producers like Monster Brewing Co. (a subsidiary of MNST), are shifting focus from volume growth to operational efficiency and experiential offerings to sustain profitability.

Analysis

Can Colorado’s beer scene craft a comeback? Celebrating 30 years of Northern Colorado Business Report and BizWest business coverage When BizWest published its 25th anniversary edition in the fall of 2020, the COVID-19 pandemic was in full swing. And while shutdowns largely prohibited Colorado’s craft breweries from serving pints inside their taprooms, people were drinking A LOT of beer at home. The five years that have followed have been tough ones for many local operators, as pandemic-era supply-chain problems and cost increases have stubbornly stuck around and changes in consumer behavior — from the rise of hard seltzers and ready-to-drink cocktails to and increased focus on sobriety led by Generation Z — have compressed brewers’ already sharp margins. But despite the industrywide challenges, the Boulder Valley and Northern Colorado remain among the nation’s craft meccas. SPONSORED CONTENT Longmont-based Monster Brewing Co. and Fort Collins’ Odell Brewing Co. were the only Colorado craft breweries to make the Brewers Association’s latest rankings of the nation’s largest craft producers. Monster Brewing, which was formerly known as Canarchy Craft Brewery Collective before rebranding last year in a nod to parent company Monster Beverage Corp. (Nasdaq: MNST), ranked 10th in beer sales volume. Monster’s portfolio includes Oskar Blues Brewing Co. and Tampa Bay’s Cigar City Brewing. Odell, which offers a diverse line of beers from the popular 90 Shilling Ale to a rainbow of fruity Sippin’ Pretty sours, ranked 27th. Kirin-Lion, a foreign-owned beer conglomerate that includes Australian-based beverage group Lion and Japanese beverage portfolio company Kirin Holdings Co. was the eighth-largest beer producer overall, including both corporate and independent craft brewers. Kirin-Lion acquired Fort Collins-based New Belgium Brewing Co. in 2019, making it no longer eligible for the craft beer rankings. Boulder-based craft beer trade group the Brewers Association releases its brewery-size rankings each year alongside its Annual Craft Brewing Industry Production Report. Domestic brewers of craft beer produced 23.1 million barrels last year, down 4% from 2023. But because the overall United States beer market shrunk by 1.2% in volume, craft’s market share “remained essentially flat at 13.3%, the same share as in 2023,” according to BA’s report. “In a mature market, not every year is going to be defined by substantial growth,” BA staff economist Matt Gacioch said in a prepared statement. “While progress may not come in additional production volume, it can still come in honing operations, business practices, and world-class beer. Even in this challenging environment, small brewers have demonstrated that they have the skills and resilience to fight through this period to be better positioned for the months and years ahead.” The potentially sobering figures represent “the new realities of a maturing market in a rapidly evolving environment,” the BA report said. A total of 9,612 craft breweries were in operation last year, a figure that included 1,934 microbreweries, 3,389 brewpubs, 3,695 taproom breweries, and 266 regional craft breweries. BA reported that 2024 was the first time in nearly two decades “that the overall number of operating craft breweries declined nationwide.” There were 9,747 breweries operating in 2023. Industry headwinds include “rising ingredient costs, shifting consumer preferences, and increased competition in a saturated market,” according to BA. “Tariffs on imported brewing equipment, steel kegs, aluminum cans, and key ingredients such as hops and malt only exacerbate these financial pressures. These added costs can be particularly challenging for small and independent breweries, which often operate on tight profit margins. As a result, many are forced to delay expansion plans, raise prices, or absorb losses — further compounding the headwinds already challenging the craft beer industry.” Craft beer drinkers on the northern Front Range want fun experiences, not just a lonely pint at the pub, local brewers said at a recent BizWest CEO Roundtable. Local craft brewers aim to foster the feeling of community belonging that customers crave. Whether it’s crafting a special collaboration beer and corresponding activities made specifically for a regional “beer week,” or writing up Harry Potter trivia night questions or putting together music bingo at the local watering hole, area brewers want to give them something unique. “There’s a need for gathering spaces and things to gather over,” Horse & Dragon Brewing Co. co-owner Carol Cochran said at the roundtable event. “Our tagline is, ‘Beer brings people together.’” See more 30th Anniversary stories. Wood: Fond memories of folding chairs in an attic 30 years that remade Northern Colorado Suburban, online retail overtakes malls A picture in time: Kodak’s rise and fall in Windsor Hewlett-Packard: A tale of three cities Can Colorado’s beer scene craft a comeback? Weld County continues to dominate state’s oil and gas scene The U.S. craft beer industry is navigating a significant structural shift, marked by maturation and contraction rather than growth. Domestic craft production volume fell 4% in 2023, outpacing the overall U.S. beer market's 1.2% decline, though craft's market share remained stable at 13.3%. This indicates sector-wide headwinds, not just a loss of relative share. For the first time in nearly two decades, the total number of operating craft breweries declined to 9,612, signaling market saturation. Brewers face dual pressures of rising operational costs from persistent supply chain issues and tariffs on key inputs, alongside evolving consumer preferences for non-beer alternatives and sobriety. In this environment, scale provides a distinct advantage, as evidenced by Monster Brewing Co. (a subsidiary of Monster Beverage Corp., MNST), which remains a top-10 national producer by volume. In response to margin compression, the strategic focus for many brewers is shifting from volume growth towards enhancing operational efficiency and creating experiential value to attract and retain customers.

Key Decisions for Investors

• Investors should exercise caution with exposure to the craft brewing sector, particularly smaller, independent brewers who are most vulnerable to margin compression from rising input costs and intense competition.
• For investors in Monster Beverage (MNST), the resilience of its brewing subsidiary, which ranks among the top 10 craft producers, suggests its scale provides a defensive advantage in a consolidating market.
• Monitor consumer trend data for shifts away from beer towards spirits and ready-to-drink cocktails, as this trend directly impacts the long-term total addressable market for all brewers.
• Anticipate increased M&A activity as the industry consolidates, which could present opportunities for well-capitalized strategic acquirers and pose an existential risk to smaller, undifferentiated players.