BEND, Ore. — Competition for shelf space, health conscious consumers, consolidation and a wider variety of alcoholic beverages on the market have combined to drive down craft beer sales in Oregon and around the country.

These same conditions have affected sales for brewers even in Bend, a town whose 22 breweries celebrate beer in a variety of ways: ale trails, relay races and growler stations.

Beer lovers can even get a beer with a haircut.

They have witnessed the slowdown in sales in their revenue columns, but believe they can survive.

The reason is simple: the craft beer market is entering a new, more mature phase. One industry economist predicts the year will end for Central Oregon’s 30 breweries and brewers coast to coast with no growth to a negative 2% growth, according to a mid-year report by the Brewers Association, a Colorado-based trade organization.

“There’s not been any decline in the quality of great beer,” said Roger Worthington, Worthy Beer founder. “We’re breeding wonderful hops. The quality has only gone upwards. It’s just that the market is soft.”

Washington, Idaho and Oregon grow most of the hops in the U.S. The hops go toward small niche breweries and large national brewers.

In the first quarter of 2023, Deschutes County brewing operations employed 707 people who received $10.6 million in wages, said Nicole Ramos, Oregon Employment Department regional economist.

The number of employees has steadily risen since pandemic-related shutdowns, Ramos said, and the industry has been relatively stable since 2019.

“Deschutes County has historically played an outsized role in the statewide brewing economy,” Ramos said. “Despite the fact that in 2019, Deschutes County accounted for 5% of total statewide payroll employment, the county’s breweries accounted for 28% of total statewide brewery employment. And as of the first quarter 2023, it’s 27% of the total statewide employment.”

For at least two decades, craft brewers across the country experienced sales growth that ranged from high single digits to double digits. At the same time, the number of brewers exploded, from about 6,300 breweries in 2017 to 9,500 in 2022, the year data are most current, according to the Brewers Association.

“There’s a lot of competition from a lot of great beers,” Worthington said. “Shelf space is more limited with all the other types of alcoholic beverages. Revenues across the board are down.”

Consolidation is occurring

Competition is already affecting ownership, as brands consolidate. One large nationwide sale affected Bend’s 10 Barrel Brewing. After nearly a decade under the Anheuser-Busch label, 10 Barrel Brewing Co. was sold along with eight other craft brewers to a cannabis-focused company, Tilray. The acquisition, announced in August, makes Tilray the fifth-largest producer of craft beer by volume.

In 2021, Deschutes Brewery, the No. 11 largest craft brewer nationwide, snapped up Boneyard brewing. Deschutes, established in 1988, has hovered in the top 10 largest craft brewers, according to the Brewers Association ranking.

Shelf competition

Go into any grocery store and the shelves scream with brightly colored craft beer cans and bottles. Right next to those cans of beer are craft cocktails, hard cider, hard seltzer and even single-servings of wine.

That kind of shelf-space competition affects craft beer sales.

At Sunriver Brewing, sales are down, but about par compared to last year at this time, year over year, said Ryan Duley, Sunriver Brewing director of marketing.

“Our branding and quality has helped keep us stable,” Duley said. “We’re not seeing the double-digit growth like we’re used to. We knew that wasn’t sustainable. But we’re not suffering like some breweries.”

In fact, this year Sunriver Brewing opened a tap room at its brewing facility.

It now has five locations — in Sunriver, Eugene and Bend.

Sunriver, like many other craft brewers, distributes a steady stable of products to stores. But after 11 years in business, Sunriver is still a small craft brewer that likes to test out new brews in its taprooms and pubs, Duley said.

“We’ve been testing at our pubs and use that data when we decide what to put in a can next,” Duley said. “Our packaged products are pretty conservative.”

Shakeout occurring

Some breweries can afford to wait out the slow down in sales as the market levels out.

One brewery that didn’t was a Portland-area newcomer, Pono Brewing Labs. Just a couple weeks ago it posted on social media that it was shutting its doors as of Sept. 14 because of weak sales.

The Brewers Association reported that 549 new breweries opened in the United States this year and 319 closed. This is the second year that the number of newcomers has decreased, another sign of a maturing craft beer industry, according to the association.

Innovation keeps them fresh

The questions many are asking themselves in the brewing industry is what’s the next big thing and how to be innovative, Duley said.

“There’s still opportunity, but consumer palates have been drawn to the hoppy beer in an IPA,” Duley said. “But maybe there’s innovation in a malt forward beer, or lagers and pilsners will grow. We’re trying to open some doors with lagers and pilsners. We use our pubs to test out new beers.”

Andy Rhine, co-owner of Cascade Lakes Brewing Co., said a craft brewer can no longer settle for just making good beer.

“We understand the importance of both staying current and standing out on grocery store shelves,” Rhine said. “We’ve refreshed our labels a few times in the past few years. But we’re particularly proud of our most recent refresh with local artist Janessa Bork of Vivi Design.

“This new look has become key in differentiating ourselves.”

Cascade Lakes has also expanded its offerings, and now makes its own cider in addition to its beer.

“The business is changing rapidly,” said Bart Watson, Brewers Association economist. “What we’re seeing is a maturing market. It’s very competitive out there.”

The craft beer industry is still a long way from collapse, it’s just not going to grow like it has over the past decade, Watson said. The industry is now more like a normal business with ebbs and flows and openings and closings.

One segment of the market that breweries can court is the female, black, indigenous and people of color, Watson said. Craft beer has typically found home with white men. But no one strategy will work, Watson said.

“We’re seeing some innovation,” Watson said. “Where we see innovation, we see growth. It’s a great time to be an alcohol drinker. There’s a lot of choices, but there’s limited opportunity for the market to be sliced up in more ways.

“Craft brewers will need to reinvent themselves to stay fresh.”

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