Craft beer sales continue to be a force to be reckoned with in the industry, and Whole Foods Market (NASDAQ: WFM) plans to tap into this popularity by selling the beer brewed at its Houston brewpub at 10 additional area stores beginning in August.
According to the craft beer trade group Brewers Association, industry production volumes jumped 16% to 12.2 million barrels in the first six months of 2015, showing no let-up in demand for this niche. That is a substantial increase over the 10.6 million barrels sold in the same period last year, which itself was an 18% hike in production volumes recorded in the January-to-June period in 2013.
The Whole Foods brewery at its Oak Post store was the company's first foray into craft beer. Since opening last November, it has produced 38 different kinds of beer for a total of some 5,220 gallons. Whole Foods has since opened a second brewpub in San Jose, CA, and the Houston Chronicle reports that, at least initially, Whole Foods will not be selling packaged beer.
Ggrocery stores are fighting for a larger slice of a shrinking consumer pie. Although Whole Foods says organic products have grown on average over 20% annually for the past decade, making it the fastest growing segment of agriculture, plenty of competitors have entered the market since it first popularized the trend. From Trader Joe's and Sprout's Farmers Market to mass merchants like Wal-Mart and Kroger, which have invested substantial sums in building out their own organic produce sections, consumers have plenty of organic produce options.
Standing out from the crowd becomes an imperative, and piggybacking on the success of craft beer could be the next area of differentiation.
Kroger, for example, is adding 10 to 12 beer taps stocked with a host of brews at five of its southwest Ohio stores beginning in August. And while initially they will accommodate the growler refill market -- or reusable glass containers with a cap -- it plans to add more stores and taps in the future.
Whole Foods Market is not looking to get into competition with the local brewpub scene and is still a big supporter of the niche, but it does appear to be a way to help expand sales at a time when grocery store growth has been coming at a premium.
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Rich Duprey has no position in any stocks mentioned.