When Are Customers Willing to Pay More In the Mature Craft Beer Market

From the early 2000s until the pandemic, craft beer enjoyed an unfettered reign in the beverage industry. Craft breweries have become a neighborhood phenomenon during this time, with the sector enjoying double digit growth year-over-year. Craft beer offerings in the US alone have brought spectacular diversity in terms of styles and flavors giving established imported and domestic beers a run for their money.

However, as happens with any rise, the craft beer industry has begun to experience slower growth in the past 3-4 years. In 2023, the number of breweries opening and closing remained neck and neck. According to the Brewer’s Association, 420 craft breweries opened in the US, while 385 closed.

Many experts are saying the same thing, “the craft beer industry has matured.” The comparable number of breweries opening and closing is an indication of that. But what does this actually mean?

1. The industry is maturing and growth has become more uncertain. Breweries will need to pay attention to business trends and manage their decisions carefully to be successful in this maturing market.
2. Many external factors are becoming disruptors that have technically no relation to the beer industry, like ongoing wars on other continents. Breweries that can’t manage these challenges will fall prey to disruptions in the supply chain.
3. Customers who have supported the craft beer industry in the past are finding price increases unjustifiable. Despite the increase in the cost of raw ingredients, real estate, and labor, breweries can’t afford to lose customers by increasing the price of their beers.

The Brewer’s Association calls for “new strategies and innovation” to navigate these hurdles. What processes and marketing worked for the past 15 years are no longer working and will keep falling short. Now is the time to examine the entire craft brewery business and uncover ways to use technology, implement new processes, and create experiences for the consumer that keeps them loyal to your business.

The Qualities Customers are Willing to Pay More for in Craft Beer

Recent inflation has proved that passing the increased cost on to customers is no longer viable. The maximum amount customers will pay for craft beer depends on various factors, like demographics. But willingness to pay is a reflection of market demand. Currently, customers are spoiled for choice with new and innovative alcoholic beverages, like RTD cocktails, hard seltzers and other similar choices, pulling the overall demand for craft beer down.

On the other hand, knowing what the customers are willing to pay for is the most definitive way to figure out how brewers should evolve their brews, business processes, and branding.

Generally, customers’ willingness to pay more depends on:

• Perceived quality: They feel at ease about spending extra if it looks and tastes good.
• Reviews and recommendations: They are willing to pay more for a product with a high rating or personal recommendation from someone they know.
• Customer service: More than a few times, customer service has trumped other attributes in a customer’s willingness to pay a premium. For a local brewery, one of the reasons customers choose to pay higher is the care, company, and customer service they get there.
• A product they trust: Customers are willing to pay more for a product they trust, whether that’s because they know the people associated with the local brewery or because their friends shared about it.
• Local, artisanal product: Forbes found that customers are still very willing to pay more for locally produced artisanal beer that supports small businesses.

Top Things Customers Are Looking For When Buying Craft Beer

A 2020 study, “Measuring consumers’ preferences for craft beer attributes through Best-Worst Scaling,” uncovered consumer behavior and preferences in craft beer, their habits and perceptions surrounding it, and the attributes they valued the most.

The study found that craft beer is considered ‘communal’ and is shared with friends and colleagues in the taproom or pub. Craft beer is generally held to higher and more diverse standards. Consumers expect much higher quality and experimental flavors and brews than grocery store beers.

According to this study, the top values customers are looking for when purchasing craft beer in a brewpub are:

1. Taste and color
2. Certification
3. Country of origin
4. Recommended by someone they know
5. Use of special grains

These attributes clearly indicate how breweries can develop and market their products to meet customers’ expectations.

How Craft Breweries Can Increase Customer Willingness to Pay

Local craft breweries producing small-batch artisanal beers already have an advantage. Customers need an evident and direct value proposition for craft beer to splurge more on it. And, today, the most crucial factor distinguishing these breweries from their competitors lies in their unique qualities.

Beer brands can significantly influence consumer decision-making, especially when associated with high-quality, sustainable practices, fair labor, and health consciousness. These types of positive associations prompt consumers to pay a premium for their products.

Beer industry analysis published in the 2024 Beer Report found a few ways that craft brewers can stay ahead of the competition and keep their business profitable today:

• Brian Sudano, CEO and president of S&D Insights LLC, Norwalk, CT stated that innovation will be critical to the future of domestic beer. “Look for more new products with different types of flavors and ingredients. New product development focuses on different flavor trends, demographic trends, and beverage trends within the total market.”
• He also pointed out that “Consistency in branding remains a tailwind. This demonstrates that consumers aren’t moving totally away from traditional beer but require strong and consistent messaging.”
• NielsenIQ’s Jon Berg and Kaleigh Theriault noted the importance of innovation in flavors and packaging. “Line extension innovation around packaging and product characteristics continue to play a key role with this segment.”
• Ryan Toenies and Cara Piotrowski, client insights consultant for Circana, Chicago, said, “We are still seeing newer betterment offerings like Yuengling Flight have success in the past few years.”

Embrace Change, Uphold Quality, and Foster Community Connections

From understanding customer willingness to pay, to recognizing what customers value in their beer, breweries must prioritize quality, community, and trust. This means delivering exceptional experiences, fostering a sense of belonging, and staying true to their artisanal roots. As the market continues to mature, sustainability and fair labor practices emerge as critical factors, not just for the industry’s survival but for its long-term viability.

Sustainability practices like using regeneratively grown raw ingredients from local farmers, sourcing locally to reduce Scope 3 emissions, and managing water and energy expenditures not only reduce costs for the breweries but also result in a beer with a lower carbon footprint, better for the environment, and preferred by the customers.

From the customers’ point of view, fair labor practices have become a crucial factor in purchase decisions, whether that’s due to more awareness about social justice or because they want to support companies that support their employees. They’re also willing to pay a premium for craft beer that’s equitable.

Are you curious about ways the brewing industry innovates, adapts, and prioritizes sustainability and ethical practices?

Download our infographic “Crafting Community: The Impact of Sustainable Brewing”