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

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

  1. As I wrote in another thread a few months ago, I think that we are seeing a lot of artificial demand that is encouraging brewers to increase production. Here in San Diego County, every liquor store and grocery store now has a "CRAFT BEER" section and are storing hundreds of bottles of beer on their shelves. If you actually took an accounting of all of the product on the shelves, I would bet that there is 6-9 months of supply for some beers.

    Every new account that opens gives skewed feedback to the brewers.
  2. Arbitrator

    Arbitrator Initiate (0) California Nov 26, 2008

  3. aasher

    aasher Champion (900) Indiana Jan 27, 2010

    I foresee steady growth. There are more and more people turning 21 that have more and more non BMC options from day one.
    cavedave likes this.
  4. alanc

    alanc Aficionado (105) California Aug 13, 2009

    I would bet that there is 6-9 months of supply for some beers.

    Its been my experience the ones that sit are either year round available or not good. Last year at this time the hysteria that was Lagunitas sucks happened. An unknown went to "must have" status within a couple weeks. With sites like this one, a great product can't hide for long. It's the old 80/20 rule. The key is to be the breweries that are 20 percent of the market doing 80 percent of the business.
  5. The craft brewers better take a page from the Democratic Party and figure out how to cater to non-traditional craft beer drinkers.

    http://www.pewsocialtrends.org/2008/02/11/us-population-projections-2005-2050/

    • The Latino population, already the nation’s largest minority group, will triple in size and will account for most of the nation’s population growth from 2005 through 2050. Hispanics will make up 29% of the U.S. population in 2050, compared with 14% in 2005.
    • Births in the United States will play a growing role in Hispanic and Asian population growth; as a result, a smaller proportion of both groups will be foreign-born in 2050 than is the case now.
    • The non-Hispanic white population will increase more slowly than other racial and ethnic groups; whites will become a minority (47%) by 2050.
    AJacob81 likes this.
  6. jtmartino

    jtmartino Savant (470) California Dec 11, 2010

    Arbitrator likes this.
  7. I don't really get this statement. Yeah, a lot of people are jumping on, but it's not like if/when they fail they're going to fall under this bus and get squashed completely; chances are a different bus is going to swing by and pick them up. Eventually the micros that are a success are going to continue that trend by buying the assets of the ones that don't and up their production. It's how things work. Yeah, the rise to 2000 breweries (or whatever we're at right now) is probably unsustainable, but even if a quarter of them fail it's not like their sales are going to just vanish, they're going to go to someone else in the industry.
  8. Arbitrator

    Arbitrator Initiate (0) California Nov 26, 2008

    I'm beginning to wonder if you're me. Or maybe I'm you.
  9. robbrandes

    robbrandes Aficionado (245) Oregon Nov 30, 2010

    absolutely right. hops will never be the limiting factor. i've got a single mound of cascades that produced over 2lbs dry weight this year. that's enough hops for 25 gallons of IPA. that mound takes up about 10 square feet. 25 gallons of IPA would also require about 50 pounds of barley. based on what i've read, barley yield are something like 15~20 square feet per pound of harvest. so 750~1,000 sq feet needed for that same 25 gallons of beer.
  10. vurt

    vurt Savant (495) Oregon Apr 11, 2004

    Hangar 24? Really? Their bombers run from $5 to $8, their seasonal 4-packs are $8, and their 6-packs are generally $8-$9. The 750 mL Barrel Roll bottles are $20. I don't see how this puts them in the same category as the likes of Almanac, High Water, and Nebraska. These prices are comparable to Deschutes or Firestone.
  11. Arbitrator

    Arbitrator Initiate (0) California Nov 26, 2008

    I think over $6 a bomber or $8 a 750 mL are high for an unproven brewery, but YMMV.

    I'm glad we agree on Almanac, High Water, and Nebraska.
  12. vurt

    vurt Savant (495) Oregon Apr 11, 2004

    "Unproven" is a fair qualifier, though it does beg the question "What makes a brewery 'proven'?" Years in business? A certain production level? Awards? Beers that _you_ like?

    Oh hell yeah. I also agree completely that Ruhstaller and Iron Fist belong on that list. Wasn't there another California brewery called Iconoclast that only offered barrel-aged stupidly-expensive beers? Came and went a few years ago? It's hard for me to see Almanac, for instance, as anything other than a less expensive version of that same doomed idea.
  13. Arbitrator

    Arbitrator Initiate (0) California Nov 26, 2008

    I'd go with the latter two, but obviously it's a very subjective thing. What makes this harder is that I've only received Hangar 24 in trades, so we're talking about a filtered experience. Hell, I'm happy to be wrong if they turn out to be a quality brewery at a reasonable price point. My apology will come in the form of purchasing their beers.

    You're thinking of Mayfield Brewing, which named their 3 beers Iconoclast ______ . And yeah, they were abysmal, though the imperial stout (Iconoclast Nocturna) was decent. They quietly folded after a couple of years in business. I'm still not sure they ever sold a single bottle at their $43 price point. I completely agree that Almanac is looking to head down that same path of failure. I'm told the brewers don't like my comments on their beers, but fuck it -- I'm a few scotches in and feeling honest. Their beers suck, which makes their prices are an insult.
    vurt likes this.
  14. Gannon81

    Gannon81 Aficionado (185) Oregon Jan 5, 2012

    Earlier today, at some point during the stream of the VE tasting it was mentioned by one of the fellas at that table, Mr. Koch if I recall, that there were over 70 craft breweries in SD County alone. If that's true, then this foreboding Third World bus he speaks of is on a sprawling tour in his neck of the woods...but I don't think it's trudging through cross-country. And if it does, SFW? Shouldn't every state have several (legions, perhaps?) of their own signature, kick-ass breweries? Though I may be wrong, sounds to me like all the burgeoning competition's getting the brotha shook up.
  15. Broden

    Broden Savant (255) California Mar 22, 2010

    I think you hit it on the head. I think this article was very specific to SD county and I feel the quote was referring to the local beer climate and not the beer climate in other parts of the country.
    RichardMNixon, mattbk and cavedave like this.
  16. BeerKangaroo

    BeerKangaroo Initiate (0) Alaska May 30, 2011

    Perhaps a bit of sarcasm. It just seems I see these new breweries pop up with only two brews and they got these new big brewery buildings (just wondering, where the heck are they getting the money to build?). I'm not sure what motivates homebrewers to go that way (are they tired of their current jobs, do they think they can make better beer, do they think they need a new job, or maybe even try to get money pumped into their local economy?) Just some rhetorical questions.

    See, I try to homebrew and have no plans on taking my homebrewing to a professional level because I would rather not take the risk in an unsure cloudy economy.
  17. Flashy

    Flashy Advocate (525) Vermont Oct 22, 2003

    Unless we become a socialist nation (ahem) where the government tells you what you can and cannot drink (ahem- try getting a 20 oz soda in NYC). There are various market forces at work as you all know. Some businesses, no matter how good can't afford to stay in business (their owners run out of money). Some mediocre brands thrive (Magic Hat?), some goods ones make it. The public's tastes change, sometimes for the better. The weaker breweries will always go out of business, simply because the owners are tired of sinking their own money into them, I've been there and there is nothing worse. I experience the first bubble popping in the mind 90's. There were some great breweries and some people that should never have got involved in the first place (should I open a sports bar or a brewpub?- but from one such place came a couple of GABC medals and a couple of great brewers). There is also owner fatigue, where they get tired of doing it day after day and just sell or close the place.
    hardy008 likes this.
  18. cavedave

    cavedave Champion (930) New York Mar 12, 2009

    Who says Blue Moon isn't craft? That aside, the fact that Blue Moon, a very flavorful beer, sells well is good news for the flavorful beer industry. No one goes back to Natty if they get a taste for Blue Moon.

    There are mediocre examples of products in every industry, and the fact that there are, and that many of them will fail, doesn't mean we have a bubble, but that we have a consumer set who prefers quality. Like in all things.

    We fine beer lovers are 6% of the American market. Unless we doubt that others can join our love for fine beer there is no reason to believe we are on a "bubble", and every reason to believe that we are in the beginning stages of a fine beer revolution in this country.

    Do an experiment.

    1. For those of you old enough to remember back 20 years- picture the beer section in your local supermarket, and now look at the beer section in your present day supermarket. Remember back to the "beverage store" in your area, now look at the beverage store in your area.

    2. Stand and observe the beer section of your supermarket for ten minutes or so on a busy shopping day. Look at the folks walking out with intro craft beers. Lots and lots of them, right? Do you think there is any chance those folks are going back to just drinking crap beer after tasting what fine beer is like? Can you imagine it? I can't.

    3. Look at your local breweries. Are they expanding too fast? Or can they not keep up with demand? My locals cannot keep up, and all of them are expanding. Keegan Ales has no more room to expand and has to brew some at Olde Saratoga. Captain Lawrence had to quadruple its fermenter volume to keep pace. New guys like Rushing Duck and Sloop are going at full volume constantly to keep up.

    This is what being 6% of a market looks like. Who knows what the future will be exactly? Not me. But it ain't a future of the beer wasteland I knew when I was younger, and I think we will look back at now as the good old days when things were just getting started, not as the start of a "bubble".
    CWinchell, mattbk, hardy008 and 6 others like this.
  19. Flashy

    Flashy Advocate (525) Vermont Oct 22, 2003

    Over expansion cost us the late, great Catamount. I miss that place. As I recall another force that hurt Craft Brews back in the 90's was you would see a significant amount of out of code product on the shelf. John Q. Sixpack would try a then Micro Brew, get a bad sixpack and say "I'm not buying this crap again".
    hardy008 and hopfenunmaltz like this.

  20. So, the multi-billionaire mayor of NYC, Michael Bloomberg, who made his fortune on Wall Street, believes that the workers should own the means of production? :eek: Who knew? (Or knows how that relates to banning +16 oz. soda pop servings).

    So, with that logic, the ultimate example of "...the government tell(ing) you what you can and cannot drink..." - US Prohibition - under Presidents, er, Comrades Harding, Coolidge and Hoover* was also socialistic?

    (* Wilson, too, I guess - but at least he vetoed the Volstead Act).

    Damn - and here ol’ hard-drinking Gene Debs went to his grave thinking he lost in 1920.

    "Ahem", indeed. There are nanny-statists of all political stripes. ;)


    Edit- Somebody will have to "report" me for a making a non-beer rant. I gotta go out and cut up some more trees downed by Sandy...
  21. Hop shortages have been a factor in the past if you look into the history of hop growing. Right now there are 30,000 acres of hops in the USA. There are a lot of fields fallow in the Yakima valley, as there were 40,000 acres strung just after the last shortage. They can increase quickly, but there will be shortages of certain varieties.

    Barley acreage in just ND looks to be in the 2,000,000 acre range. Barley has agranomic issues. If there is another crop that makes more money, the farmer will plant that crop. Malting barley is contracted by the maltsters so that they have a supply of malt quality barley.
    jesskidden likes this.
  22. The Founders owners have been saying they are trying to place themselves so that they can still thrive when the shake out comes (was in the Michigan Beer Guide last year). Greg Koch is not the first to say this.
  23. robbrandes

    robbrandes Aficionado (245) Oregon Nov 30, 2010

    good point, i should've been more specific. both hops and grains are subject to the agranomics, but i was coming from a purely 'how much acreage does the (planet) have left' standpoint. the other distinction to make - hops do have the disadvantage of needing probably 3 season to get to full production/acre. i'm guessing barley is one season?
    i do remember those hop shortage days at the homebrew shop; the guy's policy was 'you gotta buy XX amount of grains if you want to buy more than 2oz of hops'. one of the big reasons i started growing my own. now if i could just get my hands on some citra rhizomes...
  24. They say that in the Yakima valley, first year hops can give a 50-80% yield. The weather, soil, irrigation and farmers that know what they are doing all help.

    Your or my chance of getting Citra rhizomes is little to none.
  25. leedorham

    leedorham Champion (835) Washington Apr 27, 2006

    Asshole homebrew shop owners have been pulling that shit for years. If I were you I'd take my business elsewhere.

    Brewers contract for hops in advance of the growing year so shortages will likely never be that big a deal. Hops are also a comparatively low acreage/yield crop since they grow vertically. Good growing regions get 1200-1500# per acre.
    writerLJBerg likes this.
  26. robbrandes

    robbrandes Aficionado (245) Oregon Nov 30, 2010

    sadly true. i wonder if citra plantations get people covertly digging up the rhizomes. given their difficulty to obtain, i wouldn't doubt it!
  27. robbrandes

    robbrandes Aficionado (245) Oregon Nov 30, 2010


  28. Bingo! There are simply too many options and 75% of them (or more) are mediocre. I just had this conversation with the owners of a local distributor where I live. From the horses mouth...There are too many brands that simply don't move. My prediction is that in 5 years, many of these new breweries will either be gone or brewing in a very small geographic footprint, which is perfectly fine. There will be a handful (i.e. Stone, Founders, DFH, New Belgium et al) that will have the capital to grow and expand. The Russian Rivers of the world are the future business model. Do really well in your local market and be very, very selective about expansion. There is no doubt that craft beer has amazing momentum and will continue to steal some market share from BMC, but you're going to see it grow nationally for a select few and locally for everyone else. Just my 2 cents.
    CWinchell, jgagne and cosmicevan like this.
  29. rlcoffey

    rlcoffey Savant (480) Kentucky Apr 20, 2004

    THERE IS NO BUBBLE.

    That word does not mean what you think it means.

    Do you really think craft beer sales is gonna drop from 6% to 3% some year? Or the price plummet thru the floor?

    No. Neither is gonna happen. Will there be contraction and consolidation of number of breweries? Maybe. But even if that happens, that isnt a sign of a bubble, that is the sign of a market maturing.

    And we have a long way to go before the power law is filled in. The power law fit the beer industry well prior to the beer wars, and it will fit again, but we aint close yet.
    CWinchell and mattbk like this.
  30. rlcoffey

    rlcoffey Savant (480) Kentucky Apr 20, 2004

    But, was there a pretzel bubble in Philly?

    No, no there wasnt.
  31. Arbitrator

    Arbitrator Initiate (0) California Nov 26, 2008

    Or they'll switch to equally flavorful things like spirits (e.g. whiskey) which can offer a better value. I haven't had a craft beer in a month.
  32. rlcoffey

    rlcoffey Savant (480) Kentucky Apr 20, 2004

    Except you are wrong. It didnt burst. Sales stayed flat, but the weak and the underfunded didnt survive, and the strong grew.
  33. stupac2

    stupac2 Initiate (0) California Feb 22, 2011

    Uhh, basically everyone says Blue Moon isn't craft. Whatever body defines craft definitely excludes it based on production numbers and being owned by Coors. I also happen to think blue moon is garbage, but that may be more due to the fact that I don't like wits.
    jacksback likes this.
  34. interesting. would it be fair to say that you live a witless existence?
    hardy008, cavedave and ShogoKawada like this.
  35. MagillaGriller

    MagillaGriller Savant (315) Aug 20, 2012

    What goes up....
  36. That would include the generally-accepted definition from the Brewers Association.

    But accepting that definition seems difficult for some... since GI was bought out.

    I'm still amused... AB used to get bashed incessantly on this site. Until they took ownership of GI. Now they're routinely thanked by "BA"s.
  37. jgagne

    jgagne Savant (320) Kentucky Feb 23, 2011

    I agree. Only a handful of these breweries can become extremely large and be a national or even international brewery. But this so called "bubble" will never pop if brewers are more realistic with their goals. Stay in your local segment, produce great beers on a smaller scale and you will be in good shape. Don’t worry about distributing across the country. I believe things like this website, trading and GABF gets these breweries names out there. Let the people come to you or trade for your beers. A brewery to look at is Swamphead in Gainesville Florida, where I went to school. They have expressed they have no intenstions of ever distributing anywhere besides Florida. It allows them to focus on things that matter, you know like brewing, instead of expanding to sell beer in a state thousands of miles away. Local breweries that stay local have the benefit of having loyal, dedicated customers. They treat these breweries as their own. I believe this business model is the way to go.
  38. pwoody11

    pwoody11 Savant (445) Delaware Nov 23, 2009

    YOU DON'T HAVE TO YELL. Haha. Maybe I am using incorrect economic terminology, and if so, for that, I apologize. When I use the example of a bubble, I am picturing this object being filled to the point where it can hold no more, and popping. What I am saying is, I don't believe the industry can or will sustain this growth. What my comments have anything to do with crafts market share of the entire beer industry, I have no idea, and I really don't understand where you are getting I think that.

    I mentioned it a couple of times in this thread already, but I will explain it again. If you put a brewery on every corner, not all of them will live. Most will perish and only the strong will survive. The ones with deep enough pockets to stay in. Where is the shelf space for all of these breweries? If one gets good ratings on BA, the others in the area, average, then people will go to the one with the good ratings. If there is only one brewery in town, people will go to it just because. Will farmers be able to keep up with hop production? I don't think they will. There are shortages already. Craft will continue to increase it's share of beer sales, but for how long will the Stone's, Rogue's, Sam Adams', Sierra Nevada's, etc., still be considered craft (under 6 million bbls according to the Brewers Association)?

    Again, I was in the market, I owned a business in the market. Margins were close for all of us, but we were the only game in town. Then folks saw what we had was working, and other pretzel shops starting opening up on every corner, before I knew it, sales started to go down and when I looked around, there were shops everywhere. There just wasn't enough, in-store customers, schools and little leagues around for us to share, so the one guy who had the deepest pockets, and could hang in the longest, and just eat losses until his competition went out of business, is left standing. Anyway, not beer related. Before stores started closing
  39. Well, let's take a quick look at the facts....

    * Our restaurant has 32 beers on tap. Generally 8-10 are Stone, the rest are guest craft & specialty beers. Of our 130+ bottle list, maybe 10 or so are Stone.

    * Stone Distributing represents about 35 great craft & specialty brands in the five counties of Southern CA. For the majority of them, we're either their #1 or #2 wholesaler volumetrically. And we've been growing them dramatically over the years, at a pace that far outpaces the industry growth averages.

    * I created vids such as I Am A Craft Brewer and Craft Beer Profitability to show my appreciation of the industry and to help craft brewers grow, and retailers to grow their craft beer profitability.

    My "irrational exuberance" comment is not scared, nor is it threatening. It is cautionary. Please, if you get into craft brewing, make sure you make great beer, have solid business practices, and be an active part of your community. When the bump in the road comes...and there's ALWAYS a bump in the road...the better a craft brewer does those things the better they'll be poised to handle it, survive, and hopefully thrive. For some however, it will be messy.

    Cheers,

    Greg
  40. Ricelikesbeer

    Ricelikesbeer Savant (350) Colorado Nov 29, 2006

    cosmicevan likes this.

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