For more than two decades, pints of lagers and ales flowed from the taps at 21st Amendment Brewery.

An early mover in craft brewing, the bar and restaurant flourished in San Francisco’s South Park neighborhood, near the financial district and the Giants’ Oracle Park, serving its own specialties like Hell or High Watermelon beer.

But after 25 years, 21st Amendment, named after the constitutional amendment that made alcohol legal after Prohibition, will say “last call” for the final time later this month as it shuts its doors.

What’s happened to 21st Amendment isn’t unique, as craft breweries across the country shutter or file for bankruptcy at a rapid rate.

Sales of craft beer fell 4 percent last year, according to the Brewers Association, the lobbying arm for small and independent brewers. There have been more brewery closings than openings over the past 18 months, the first time that has happened in 20 years.

And the big beer companies, which built or acquired smaller craft breweries during the industry’s heyday, are now jettisoning some of those brands. Last year, Molson Coors sold four of its craft beer companies to a cannabis company, Tilray Brands. Brewers and others in the industry say they’re in the midst of a broader shakeout that will probably push more smaller breweries over the edge.

“We’ve been suffering with declining sales since Covid. Our San Francisco restaurant has not made money since 2019,” said Nico Freccia, co-founder of 21st Amendment. “We kept waiting for San Francisco to get better and come back, but it didn’t happen.”

There are myriad factors behind the contraction. Some craft brewers expanded at the wrong time, borrowing piles of debt as interest rates started to rise. Others signed sky-high commercial real estate leases. Labor costs rose sharply. Higher prices for aluminum cans and some ingredients, both a result of tariffs levied by the Trump administration, are also pinching profits.

But the overarching issue facing the craft brewing industry involves a fairly simple imbalance between supply and demand. The number of breweries across the country exploded even as consumer demand for craft pilsners and ales began to wane. A decade ago, there were 4,800 craft breweries in the country. Today, there are more than 9,900, according to the Brewers Association.

“Yes, we’re seeing some bankruptcies. Yes, we’re seeing some closures, but that doesn’t mean the market is going away,” said Bart Watson, the chief executive and president of the Brewers Association. “We have a bunch of firms that weren’t prepared for the reality of today.”

Like restaurateurs who begin cooking for family and friends, many craft breweries had their starts in basements or garages where hobbyists threw a mix of malt, hops and yeast into a fermenter, and then returned a couple of weeks later to test their experiment.

Riding a wave of dissatisfaction among consumers with mass-produced beer, craft beer sales skyrocketed in the 2000s. The entrepreneurs played with hops imported from Germany. They added peaches, cherries and even watermelon purée to their ales and I.P.A.s. Some of the beer was aged in barrels that once held bourbon or chardonnay, drawing those flavors into the unique creations.

Various models emerged as well. Some brewers manage fairly small operations, offering a handful of beers sold in a taproom or to local restaurants and bars. Others run large brewpub restaurants and bottle or can their beverages. Still others, like Sierra Nevada, have expanded with massive manufacturing facilities, selling their beers all over the country.

But consumer preferences began shifting during the Covid-19 pandemic. Patrons, unable to visit local brewpubs or taprooms, began buying and consuming hard seltzer like White Claw and ready-to-drink cocktails like margaritas and Palomas from grocery and liquor stores. Later, as consumers embraced health and wellness trends, it led to a record low in the number of U.S. adults consuming alcohol, according to a survey this summer.

Craft brewers say they have seen a marked decline in sales in the last year as consumers, struggling with high prices at grocery stores and restaurants, are careful with their spending. Because craft beers are made in smaller batches, and oftentimes with unusual ingredients, they tend to be more expensive than mass-produced beer.

The entire alcohol industry is feeling the consumer shift. Beer and wine sales, measured by the number of cases sold, are in decline, according to data from research firm Circana.

“We have definitely seen the consumer pulling back,” said Justin Cox, the founder of Atlas Brew Works, a brewery and taproom in Washington, D.C. “The number of office workers and such coming into Washington, D.C., just never really came back after Covid. We’ve seen a slowdown in the wholesale side of the business, which touches many of the bars and restaurants in the district.”

Still, Mr. Cox is expanding his business, noting that the higher margins on the restaurant are propping up the squeeze happening on the beer production side.

Competition for the consumer’s shrinking wallet for craft beers and other alcohol is fierce.

When Paul and Kim Kavulak turned their home-brewing hobby into a business in 2007, Nebraska Brewing Company, based in La Vista, Neb., about 15 miles southwest of Omaha, it was the fifth brewery to open in the state.

“We were like, ‘Let’s be the leader in this journey and teach others in the state about craft brewing,’” Ms. Kavulak said. “But now, if you go to a grocery store in Nebraska, the beer section is overwhelming. It’s insane, the number of options.”

That heightened competition, combined with dwindling sales and a pricey commercial lease, pushed Nebraska Brewing to file for bankruptcy protection in April. It plans to close this month.

As an early entrant in the craft beer space, 21st Amendment saw huge growth between 2010 and 2016.

“We hit the Golden Age of craft beer perfectly,” Mr. Freccia said. Fan favorites were offered in bars and restaurants all over the country. Trader Joe’s and Whole Foods stocked its beers on their shelves.

Expecting demand to remain robust, 21st Amendment built a second location in the Bay Area, a taproom and a large production facility in San Leandro in 2015. “We thought we were looking at unlimited growth,” Mr. Freccia said. “Instead, when the doors opened, the craft industry had already started to level out, and increased competition had become a major issue.”

To keep limping along, 21st Amendment last year altered its beer-production facilities to make canned ready-to-drink cocktails and energy drinks for other companies. But then some of those companies pulled back, ordering less than expected.

This summer, 21st Amendment believed it had found a way to keep at least some of its operations going. It planned to bring in a new partner and start buying smaller craft beer brands that it would brew in San Leandro.

But in late August, the lender pulled the plug on that idea. In late September, 21st Amendment closed its flagship brewpub in San Francisco. The San Leandro location is expected to shutter by the end of this month.

“We were driven by our passion for craft brewing, and we got so caught up in it that we had blinders around what the reality is for craft brewing right now,” said Shaun O’Sullivan, a co-founder of 21st Amendment. “We’re a cautionary tale right now to anybody who wants to grind down and open up their own place. It’s just not a good time.”