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Why Craft Brewing Slowdown Won't Benefit Big Beer

The upscale drift of beverage markets in the developed world cuts the wrong way for big U.S. brewers.

Growth in the booming U.S. craft-beer industry is slowing. But don’t expect big brewers to benefit much.

For the past half-decade or so hoppy lagers and ales from niche brands have taken substantial market share from mainstream beers such as Anheuser-Busch InBev BUD 0.48 % ’s Budweiser and Bud Light. Craft brews now account for about 14% of the U.S. market by volume, up from about 6% in 2009, according to research house Sanford C. Bernstein. Since craft beer is more expensive, its share of the market’s value is closer to a fifth.

But growth rates, for years reliably in double digits, have slipped this year. According to new data from Nielsen, craft sales were up just 4.5% year over year for the three months through mid-August, down from a peak of almost 20% in 2013.

Bart Watson at the Brewers Association says this is in part because craft markets in early-adopting hot spots such as Portland, Ore., and Denver, Colo., have reached maturity, with roughly 40% of all beer sales. Another factor is limited space on supermarket shelves and bar counters: Beer retailers are unlikely to stock more craft brands than they already do.

So does this spell better times for big beer? Not enough to warrant reaching for the bottle opener.

Craft beer is still taking market share from mainstream U.S. lager, only less aggressively. For example, Americans drank 0.9% less ABI-brewed beer than in the comparable quarter of 2015, against a flat market. The best that can be said is that ABI’s market-share losses slowed slightly from the 2015 trend.

That is despite strong outperformance from ABI’s own U.S. craft portfolio, which increased sales 36% in the first half. After a spate of acquisitions, most notably that of Goose Island, ABI is the third-largest craft brewer in the country, Bernstein calculates. But that is more because craft brewing is by definition a highly fragmented industry than because the ABI business is so large: Craft beer accounts for just 1% of the company’s total volumes.

The U.S. craft-beer craze isn’t just a fad. It is part of a well-established trend across developed markets favoring a wider range of upscale drinks more generally.

In the U.S., wine and spirits have been growing faster than beer, even including craft, since at least the turn of the millennium. Bourbon is particularly popular among younger drinkers. At the pricier end of the market, the Hennessy cognac brand of French luxury giant LVMH LVMUY 0.22 % has been reporting double-digit U.S. growth.

Corporate strategy has nurtured this trend. All consumer-goods companies, including ABI, talk of “premiumization” in developed markets: steering consumers toward more sophisticated, higher-margin products. The problem for ABI’s U.S. business is that, as the incumbent market leader, the drift upmarket is a negative.

ABI’s effort to boost sales of Budweiser by temporarily changing its name to America didn’t fool anyone into thinking the beer suddenly had flavor. Turning around the company’s flagship U.S. brand is going to take more than a maturing market for craftily named ales.

Write to Stephen Wilmot at stephen.wilmot@wsj.com

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