"We are in a time of irrational exuberance in craft brewing" - Greg Koch

Discussion in 'Beer News' started by Levitation, Nov 15, 2012.

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  1. Levitation

    Levitation Initiate (0) Aug 7, 2009 California

    http://www.utsandiego.com/news/2012/nov/15/tp-craft-beer-at-a-crossroads/?page=1

    “We are in a time of irrational exuberance in craft brewing,” said Greg Koch, co-founder and CEO of Stone Brewing. “We are like a Third World bus, with all these people hanging on to the roof. Sooner or later, we are going to hit a bump in the road.”

    interesting. i'm forced to agree, but i'm surprised to hear someone in the industry say it, especially as they're leading the forefront of the expansion...
     
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  2. pwoody11

    pwoody11 Savant (1,188) Nov 23, 2009 Delaware
    Trader

    I've been thinking the same thing for a while. The bubble has to pop eventually, right? Is it possible to over saturate a market like this? I've seen it happen with other products before, but is beer the same?
     
  3. Beerontwowheels

    Beerontwowheels Initiate (0) Nov 22, 2009 Maryland

    Interesting article. Thanks for sharing.
     
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  4. pwoody11

    pwoody11 Savant (1,188) Nov 23, 2009 Delaware
    Trader

    ...and if it does pop, the Stone's of the industry will be the survivors and benefactors.
     
  5. crunkchiggin2002

    crunkchiggin2002 Initiate (0) Oct 1, 2009 Georgia

    Definitely a bubble.
    Look at the hype machine. Look at the trading forums. What percentage of beer that is traded is actually consumed vs. sitting in someone's basement accruing "value".

    We have growler shops in my state. Sell the same beer as the beer store up the street, but for more $$, and some make you use only their glass ( readily available for a small fee.)

    Opportunity begets opportunists.
     
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  6. leedorham

    leedorham Initiate (0) Apr 27, 2006 Washington

    I can't really speak for SD county, but nationwide there is no bubble. We are working towards the way it should have been all along. Every city in the US (that isn't run by stone age thinkers) can easily support one brewery for every 30,000 people and some do even better (Bend). That means we could easily have something like 10,000 breweries and all of them could turn a nice healthy profit.

    There are also well over double the number of wineries in the US compared to breweries and almost none of them are going out of business.

    Edit: I'll also point out that all of this "irrational exuberance" is still happening during a recession.
     
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  7. BeerKangaroo

    BeerKangaroo Initiate (0) May 30, 2011 Alaska
    Deactivated

    probably too many people who homebrewed and all of their neighbors hyped up their beers and their egos, and the next thing you know they're taking out loans from the banks who are trying to get the economy going again somehow since no one's buying houses or anything else.
     
  8. crusian

    crusian Pooh-Bah (1,989) May 14, 2010 Oregon
    Pooh-Bah

    Been saying this about the Dallas market now for a few months. Every time I turn around I hear of another opening up. Last year at this time Dallas had 0 breweries. now we have ~15-20. That is too much too fast. not to mention that they are all mediocre. Dallas can't support this many IMO.
     
  9. Hanzo

    Hanzo Initiate (0) Feb 27, 2012 Virginia

    Isn't Koch one of the bus drivers in his analogy?
     
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  10. leedorham

    leedorham Initiate (0) Apr 27, 2006 Washington

    The DFW metroplex is one of the largest in the US. They could probably support 15-20 VHS rental stores.
     
  11. Daktah

    Daktah Initiate (0) Apr 13, 2011 Illinois

    Exactly. Stone will survive and pick up some of the demand currently being served by breweries that do not reach/maintain viability. Same for the other major players. A bubble has definitely formed and the clearest sign for me is the number of new breweries. The local aspect is nice in a lot of ways, but as discussed elsewhere on this forum, the demand is not there for average/mediocre beer just because of proximity. It's reached the point where the novelty of the "local" beer seems to be more touted than the beer itself, which isn't sustainable if you're selling a product where differences in quality are readily apparent.
     
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  12. plaid75

    plaid75 Grand Pooh-Bah (3,438) Jan 13, 2005 New York
    Pooh-Bah Society Trader

    A
    The same sort of situation existed in the mid to late 90s where everyone and his brother had a beer label. That burst. I feel that there is a healthier demand for the product now, but on the other hand there are a lot more brewers too.
     
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  13. pwoody11

    pwoody11 Savant (1,188) Nov 23, 2009 Delaware
    Trader

    Would that mean that all 10,000 would have to be of equal size? I mean, if my town of 60k has two breweries, but most of those people prefer one, the other will go out of business. I'll use myself as another example. I owned a Philly soft pretzel bakery. We were voted Best in Philly. Well, after two years or so, there were now 3 companies similar to mine. One, had deep pockets and eventually pretzel shops were everywhere. Slowly but surely, all the small guys began to shrivel up. People who were driving 10 miles to my store before, didn't have the need to.
     
  14. leedorham

    leedorham Initiate (0) Apr 27, 2006 Washington

    If the overall median brewery size remained the same, I believe the US could support that total number of breweries.

    Another way you could look at it - pre prohibition there were ~1700 breweries in the US, which at that time had a population of ~100 million. So project that out to today's population and you get about 5,000 breweries. Not quite the grand figure I presented in my first example, but still over twice the current number.
     
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  15. myspoonistoobig

    myspoonistoobig Initiate (0) Jan 25, 2009 Massachusetts

    I think it's telling that this thread is going on at the same time that there's a live stream of a Stone beer tasting on the homepage. What it's telling, I'm not sure. But it's telling something.
     
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  16. crusian

    crusian Pooh-Bah (1,989) May 14, 2010 Oregon
    Pooh-Bah

    Yes and no. remember the clientele, and also that a lot of breweries went out of business to the point where Dallas had zero. none. for many many years. There had to be a reason for that.
     
  17. leedorham

    leedorham Initiate (0) Apr 27, 2006 Washington

    To quote my favorite line from I love you Phillip Morris - "Fucking Texas."
     
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  18. Retsinis

    Retsinis Maven (1,486) Sep 25, 2009 Arizona

    Yes and no for me. I agree as far as San Diego goes, that city is possibly at a tipping point in how many breweries it can or wants to support. Nationally, and I'm sure someone has the actual figures, I believe in just the last 10 years we've only recently exceeded the brewery numbers pre-prohibiton, and yet the national population went from about 106 million in 1920, to over 308 million in 2010. We can suppot what we have now, and probably a bit more imo.That's not to say many won't fail, they will, for a variety of reasons. There will also be expansion & consolidation. The crash part though, given the boom, despite the great recession, (nearly a depression) to me says otherwise. When the economy improves, sales may grow even more too imo.
     
  19. NiceFly

    NiceFly Initiate (0) Dec 22, 2011 Tajikistan

    I was thinking the same thing!
     
  20. jesskidden

    jesskidden Grand Pooh-Bah (3,071) Aug 10, 2005 New Jersey
    Pooh-Bah Society Trader

    Using the pre-Prohibition number of breweries/US population as a template for the potential number of breweries now kinda ignores the obvious fact that two companies, AB and MC, account for close to 90% of the beer brewed in the US.

    When AB, Pabst and Schlitz all hit the million barrel mark in the period 1890-1900, that was only about 2.5% (each) out of the total US production of around 40m bbl.

    It also ignores the fact that imports now make up 13% of the US beer market. Crown's (Corona) US market share today is about the same as Schlitz's was in the late '40's when they were the #1 brewer in the US.
     
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