The Craft Beer Market Bubble

Yep, and they will still be wrong.

I saying I like is "the majority is always wrong." Its not literally true, but its a safe bet.

 

That isnt a bubble. I guarantee you that 2017 the amount of craft beer produced in San Diego County will be greater than the amount produced in 2012.

Want to bet on it? I will bet a six-pack of something local to me against a 6-pack of something Stone. Assuming they havent closed by 2017.

 

And this is where you are wrong. The constant reinvestment is necessary for growth, yes. But the scale thing has dramatically changed over the last few years, as nanos have found a way to be profitable.

It used to be true that a brewery couldnt be profitable below something like 1500-2000 bbls per year. If you were smaller than that, you were doing it as a growing stage. This is still somewhat true, depending on business model, but not nearly so true as it used to be. Its possible to be profitable somewhere south of 1000 bbls.

 

Unlike with session beer...amirite @cavedave?

 

Am I missing something?

Im sure I said something about session beer at sometime in the past, but no idea what you are referring to.

 

If you want to bet that the number of breweries in operation will be more than 82 on December 31, 2017, I will make that bet. If you win, I can send you some Perfect Crime, TBA or Saison du Buff since some of that will probably still be sitting on the shelves.

 

Number of breweries has nothing to do with a bubble. Im talking volume of craft beer.

 

...and my original post didn't mention production volume, only the number of breweries.

 

there's quite a few folks in this industry that I feel would be successful at anything they did. The beer is important, don't get me wrong. But being an adaptive and strategic risk taker on the business side of things is just as important.

I think Jim Koch, Greg Koch, Tony McGee, and many others would be just as successful wherever they could apply their passion.

I find Lagunitas business strategy and marketing fascinating. It makes no sense and works so well.


Also to the comments about the community being gone. It's there you just have to look for it. Crooked Stave is distributing tons of other breweries stuff that is direct out of market competition to themselves. Not just that it's craft but a similar niche and price point. Sure they make money distributing but not as much as by selling their own beer.

And Dale from O.B. has let other breweries use his canning line, sold canning lines to smaller breweries and taught the process to those guys who are direct competition in his own backyard.

 

I know, but the point is # of breweries has nothing to do with whether or not there is a bubble.

You said "There are definitely "local" bubbles already in place." And then said SD as an example. Im saying it isnt a local bubble because volume of production will increase.

 

in order for a bubble to occur (and burst) there must be a big spike in demand followed by a large and quick reduction in demand...there is still a huge market to be had by craft brewers and demand has shown little signs of slowing. it doesn't seem there will be a sudden dip in demand anytime soon so a bubble would be out of the question...http://www.cnbc.com/id/101124259...it may be easy to to go into a bottle shop and say there is too many options, but as pointed out before in this thread overall volume produced is what matters, not selection.

 

Restaurant Sciences Reports Craft Beer Growth in On-Premise Now Stalled
http://restaurantsciences.com/press...reports-craft-beer-growth-on-premise-stalled/

 

Is the craft beer market saturated already? Likely yes. When Deschutes goes into a new market, it's business likely cannibalizes other beers in the marketplace. Larger craft breweries can afford to compete on cost because of their economies of scale. This will drive out players in the market and there will be correction to the mean.

Will there be a fantastic correction like you've seen with tulips, trade companies, dotcoms, and housing markets? Maybe, maybe not. But anyone with with an elementary understanding of economics has to understand that the market in unsustainable especially when you don't have any type of M&A activity going on.

As the bigger players with greater brand equity become national, there will be a shakeout of younger players that aren't able to compete for tap or shelf space.

Sure, you may be able to convince 3,000 small business owners to be content with serving a finite market but given any indication of American entrepreneurship, I feel any personal with a slightest understanding of business will want to explore maximizing growth and maximizing profits. Brewpups aren't going to just turn into an industry like the pizza business.

 

I don't think we've hit that point yet. However the total number of breweries in the US is about equal to pre-prohibition numbers, so it remains to be seen how many of these get bought out just like the old local breweries.

Money is there to be made so I would expect more people who know nothing about beer sticking their greedy fingers in the pie and forcing more garbage like Red's Apple Ale and faux craft products at us.

Now if ten years from now craft beer makes up 50% of total sales I'll eat my hat, but never underestimate the lousy tastes of the masses.

 

We may see some beloved breweries fail. Some breweries will be destined to fail because of so so beer, poor business practices, etc. Business is a risk, but being a good business person and a being or having a really good brewer- or absurdly deep pockets- is a decent hedge against many risks. Not to mention location and a host of other highly relevant factors. I know of small breweries making OK beer that do a damned good job on the marketing and business end of things. I've known great brewers who had no business sense at all lose their ass. The demand for really decent local beer is a trend that I think will persist for a good while. To the brewery that folds the shake out has already occured.

 

You think 6-7% is saturated?

Is there a reason why you think that?

I have no idea where the point is, but I would think places like Portland suggest its much higher than 6%. Im not saying Louisville (to pick on my home town) will ever catch up to Portland's 30+%, but I would think that it isnt a factor of 5 worse.

I kind of think the national saturation point is maybe 1/2 of the top city saturation point, so Im figuring on 15% or so, for now.

 

[quote="kylelenk, post: 1996982, member: 672932" Brewpups aren't going to just turn into an industry like the pizza business.[/quote]

Why not?

Of the 2,347 total breweries operating at end of 2012, 1,132 (48%) are brewpubs. So half the industry is already brewpub.

Only 97 are regionals, making greater than 15k bbls per year.

That leaves 1,118 under 15k.

While a few micros move up to regional status each year, most chug along just fine in their small local markets. A few fail each year. That number might increase, buyouts and mergers will almost assuredly increase, but I dont see massive failures like some seem to predict.

 

And yet the numbers show it is still experiencing exponential growth. I'll go with the numbers instead of conjecture.

 

Are you taking credit for being wrong ? You eventually will correct but right now you are wrong

 

Bubbles growing and then bursting is the American way. America is a land of extremes, economic bubbles, and polarization.