Frontman of the musical group Black Eyed Peas, rapper, singer, songwriter and record producer will.i.am is quoted for saying: “Pop is the most competitive form of music there is. You are always fighting to be adopted and accepted by the masses, and it’s always shifting.”

Similarly, the current U.S. craft beer market is shifting as brands are looking to appeal to a broader consumer base.

“Brands are looking for ways to diversify their offerings to appeal to a wider audience while also keeping their loyal customers happy,” says Mitch Madoff, head of retail partnerships at Keychain, New York. “As more consumers prioritize health and wellness, they’re seeking out more lower-calorie, lower-alcohol options. With these shifts in preferences, craft beer brands are figuring out how to jump on this wellness wave while continuing to cater to their usual customer base.”

As this market grows and consumers have more options to choose from, brands need to be strategic in how they position themselves and cater their products to their target demographics.

Madoff adds that, as craft beer has become more segmented with national brands and the regional/local players, national brands have the advantage of widespread availability, as well as the resources to adapt to larger trends in the market.

“As this market grows and consumers have more options to choose from, brands need to be strategic in how they position themselves and cater their products to their target demographics,” he says. “In terms of keeping up with other national brands, craft brewers can use a tool platform like Keychain to leverage its features to stay on trend with product innovation and customer preferences and find the perfect manufacturers that meet their needs.”

Ryan Toenies, consultant and client insights at Circana, Chicago, explains that national craft brands are looking to use their distributor network to keep shelf space.

“Also, brands like New Belgium Fat Tire Voodoo Ranger are expanding into single-serves in traditional craft and FMBs,” he says.

According to Circana data for the last 52 weeks ending Sept. 15, the national craft brand dollar trend was down 0.2%. Meanwhile, the regional craft brand dollar trend was down 5.9% in total U.S. multi-outlets with convenience, Toenies notes.

“Regional craft brands continue to underperform compared to the beer category due to a lot of swapping on shelf and net shelf space lost at retail,” he explains.

Toenies adds that, overall, the U.S. craft beer business remained soft for the 52 weeks ending Sept. 15, noting that the dollar trend was down 3.1% and the three-year compound annual growth rate (CAGR) was down 3.5%, losing 0.3 points of the beer category dollar share.

“Craft beer is still over a 10 dollar share of the beer category and did $4.6 billion in Circana tracked channels in the last 52 weeks,” Toenies says. “The beer category dollar trend was minus 0.2% and the three-year CAGR was plus 0.6%.”

Brian Sudano, CEO at S&D Insights LLC, Norwalk, Conn., describes the current state of the U.S. craft beer market as mixed.

“Overall the market is declining but there are some successful trends in larger brewers like New Belgium/Bells and Sierra Nevada,” he says. “In addition, some local players continue to do well while closings are beginning to accelerate.

“The large national successful craft brewers are leaning into beer style trends such as hazy IPAs,” Sudano continues. “They will continue to move into popular styles using strong labels to expand their audience. Today, nostalgic styles like West Coast lagers are gaining momentum.”

As far as how well regional craft brands are faring, Sudano says that most are struggling.

“Tilray has bought most of the regionals. This led to both Molson Coors and ABI to exit the craft beer business,” he says. “So strong local brewers are expanding into multiple states, e.g., Maine Brewing Co., but remain in only a few markets — somewhere between local and regional.”

Keychain’s Madoff points to regional brands as having the advantage of appealing to local consumers through niche marketing efforts.

“Many consumers are drawn to supporting local businesses, and regional breweries often capitalize on this by emphasizing their local roots and ingredients,” Madoff says. “Some regional brands show off that sense of community by prioritizing personalized interactions with their customers or hosting events that bring the community together.”

Facing headwinds

As consumer trends continue to impact the craft beer segment, experts highlight how brands are navigating current shifts in the market.

Circana’s Toenies highlights how some craft brewers are moving into the beyond beer and non-alcohol spaces to help generate growth.

“New Belgium drove $24.5 million in dollar sales growth in the last 52 weeks with expanding into the FMB space,” he says. “Four of the Top 10 [non-alcohol] (NA) growth brands have craft roots and they account for 55% of NA beer net dollar growth in the last 52 weeks.”

S&D Insights’ Sudano notes that lower per capita consumption of alcohol is impacting craft beer as well as the broader market, with “occasion erosion, cannabis expansion, beyond beer, etc.,” all playing a factor.

Circana’s Toenies echoes similar sentiments, noting that trends like betterment and moderation are not only impacting the beer category, but also total beverage alcohol sales.

“Craft beer is no different and it is creating headwinds for the segment,” Toenies says.

Keychain’s Madoff notes that while some craft brands are creating their own non-alcohol brews, other craft brewers are doubling down on their marketing efforts to emphasize their unique stories, brewing processes and community involvement.

“As technologies continue to grow in this industry, all players in the supply chain are encouraged to leverage these emerging databases, tools and platforms to better understand what kind of trends are taking place among consumers,” he says. “But in the end, consumers are seeking experiences over products. Breweries are responding by creating immersive taproom experiences, hosting events and offering brewery tours to engage customers.”

Madoff also considers eco-friendly production methods and ingredients to be another significant trend impacting craft beer.

“Many craft breweries are adopting sustainable brewing processes, sourcing local ingredients and focusing on reducing their environmental impact,” he says. “Something we often see on Keychain is manufacturers taking advantage of our data to source local suppliers in order to reduce transportation emissions and their carbon footprint.”

Eyes on the ball

As craft brands and breweries explore innovations that will draw consumers’ attention, experts weigh in on the beer styles and packaging trends that are impacting the market.

S&D Insights’ Sudano notes that the market continues to be dominated by various IPA styles although sessional beers are expanding. “From a packaging perspective, it remains mostly cans but also we are seeing a movement to larger sized packages, 19.2-ounce and small 7.5-ounce,” he says.

Circana’s Toenies also notes how IPA styles are dominating the craft beer market, with a 51% share of craft beer dollars.

“IPA style drove the largest absolute growth at $48.5 million in the segment or a plus 2.1% dollar trend,” he says. “The 19-ounce single can is seeing significant growth with a plus 26.5% dollar trend in the last 52 weeks. Key brands driving this are New Belgium, Goose Island and Sierra Nevada.”

Toenies notes that taprooms and on-premise also are having a positive impact on the craft beer market.

“Taprooms continue to help craft brewers connect with consumers and help with sampling of product,” he says. “They also are giving consumers an experience when they visit.”

Keychain’s Madoff highlights how taprooms and on-premise play a crucial role in driving sales, building brand loyalty and enhancing the overall strength of the craft beer industry.

“Since there’s a social aspect to breweries, craft beer brands can use taprooms to their advantage and focus on the in person experience,” he says. “Many consumers — especially Gen Z — are also more inclined to support local businesses and are likely to buy their favorite local brews to have at home if it’s offered.”

Looking forward, Madoff suspects that non-alcohol options will dominate the market as consumers opt for more “better-for-you” alternatives.

“Brands will need to adapt to this shift in the industry and understand where they can lean into these trends,” he says. “Some craft beer brands have already started to make non-alcoholic options and we can expect to see more of this going forward.”

S&D Insights’ Sudano anticipates that the biggest challenge will be how to navigate a declining overall beer market and shrinking consumer occasions.

“Craft brewers remaining true to core values while not chasing volume will be key to succeeding,” Sudano says.

Circana’s Toenies expects that brands will need to continue to fight for shelf space at retail.

“The economy/inflation looks to be having an impact on the beer category slowing in general and craft beer will be no different,” he concludes.