Yahoo Finance: Problems for craft brewers

Neither.

It was primarily due to taking on debt that the growth of craft beer couldnt sustain. And a few years of flat growth really really hurt them.

Debt is death to small businesses.

Edit: I realize "not enough growth" probably fits into the "not enough people" category. But they had enough people if they hadnt expanded and/or been in debt.

 

That does make a lot more sense. Although I still think that a properly regulated market should be able to adjust to that potential issue. I guess depending on a specific situation one would have to look closer at what's going on/what is possible.

 

Some economists disagree as to whether an economic bubble is a real phenomenon. And strictly speaking, a bubble is more specific than natural market contraction. Rather, it has to do with speculative trading/pricing based on investing in a given type of industry. What you're referring to is pretty standard--with growth comes strain on raw materials, which acts as a barrier to entry (or a strain on newly entered or struggling companies).

Right now we're seeing demand and supply both grow. The fact that they may not be growing at the same rate is not enough to declare that we are seeing a bubble. And the bottom line is that in spite of the growth of the "craft beer" industry, we're not seeing an investment rush, because ultimately, the brewery business model is the same as it always was. Compare this to the so-called "dot com bubble", where investment in any company that labeled it self a ".com" or "e-something" business went wild because of speculation that the internet was some magical vehicle that wasn't bound by the same rules of economics that brick & mortar businesses were.

Or, this.

 

Truer words were never written. Journalism is at the same stage as television programming; most of the outlets of both cater to the lowest common denominator.

 

I live in west central Minnesota, and growing up, I was always annoyed when watching the weather as the weatherman would literally spend the entire duration of his segment standing IN FRONT OF THE ENTIRE WESTERN HALF OF THE STATE so he could show the viewers what the weather would be doing for the next few days in the only part of the state that matters - MPLS/STP...

This issue has since improved.

 

are we mad because the article is poorly written or because we don't think there's some truth to the idea that there could be a pullback/decline in growth?

 

How is criticism an indicator of "being mad"? (that pseudo-equation is probably one of my least favorites)

 

Maybe the BMC guys will go away with their synthetic and false marketing hype approach to craft beer...ie..Blue Moon and Shock Top

 

There is an enormous market for breweries to continue opening and doing well for the time being. The problem will come when the economy takes another dive, which will happen in the next 1-2 years in my opinion. While alcohol might be a non-cyclical commodity during rough economic times, there's no way breweries will be able to survive when a bottle or glass of beer costs as much as they do now at most micro-breweries. The market will determine what happens with those breweries, the smart ones that adapt will survive, and inevitably a lot will fail, it's the way of the world.

 

I live in the NYC suburbs and although there's plenty of coverage of local events [and sometimes too much] in both local and regional media outlets, I feel your pain.
My pet peeve is broad generalizations and people who can't believe that others do not think like they do. And to keep it beercentric, my pet peeve also refers to macro drinkers who think that macro lagers are the only and best beer around.

 

There are already too many choices

 

The thing is, there wasn't a crash. The rate of growth slowed, and a few under-capitalized brewers closed. Many of the lost brands were things like Bad Frog, and Three Stooges; contract brewed beers that tried to stand apart by image, rather than quality products.

 

That's what local radio is (was) for (I also grew up in a rural area.)

Back to the topic: Are economic bubbles ever recognized on the front end? Don't bubbles tend to be when everybody and his brother tries to rush in to cash in, and investment out-paces the natural market?

As things stand now, I have to pace myself just to sample the various options on certain relatively unpopular styles (relative to IPAs, for example). Locally, I'm attempting to sample the choices for ESB/Bitters available here in the Mpls/StP metro. Even that takes awhile. Heaven forbid if I was trying to sample all of the local IPAs or Pale Ales in general!

Is this an bubble (in the economic sense)? Probably not yet, especially since it is a minority of beer consumers who are sampling a style. Most just want a nice place to have good beer, or a selection of good beer to take home.

Supply and demand things like the so-called hops shortage will self-correct. If the owners of the proprietary hops restrict the market, then the beers using them will become more expensive, which will slow down demand for those beers compared with the less expensive beers using "public domain" hops varieties.

 

Amen. I also get annoyed with craft drinkers who scoff and shake their heads at those that enjoy macros. To each their own - especially if they've given the alternative a chance.

 

So....an increase in hop prices is going to wipeout some breweries. That makes as much sense as saying an increase in the price of leather will put luxury car makers out of business.

 

I disagree with this assessment. Hops is a vital component to even lesser brewers. Luxury car makers can deal with it when one of the most minor of their products components goes up in price - but your typical craft brewery is hardly a cash cow - and hops is one of the 4 ingredients in your basic beer. I don't believe leather is in the top 4 concerns for makers of top-tier automakers.

 

Note to self: next time I post my "recurring beer thread" list ("What's your top lawnmower beer in a can from the top five breweries in the top five states...") I need to add "...when the beer bubble bursts."

 

Both. And poorly written isn't an apt description of this crap.

 

Yes, but it hits the different brewers differently. The BMC-class brewers, who make the lower priced beers, either have their own hop farms or contract buy their hops, (or both) so market fluctuations have a lesser impact. And, the AAL beers use a smaller quantity of hops per barrel of beer that does your craft DIPA.

Smaller brewers may be buying on the spot market, and the quantity and variety of hops per batch is higher, and so they get hit harder when prices go up.

However, I recall a thread here some time back arguing that the cost of hops is a relatively small part of the total production cost of craft beer.

 

Everyone thinks there will be a decline in growth. Craft cant grow at 18% forever. And that is exactly what we said about 15% growth in 2012 and 13% growth in 2011 and 12% growth in 2010. One of these years the growth will actually decline. It probably wont be 2014, as the first half continued the 18% growth trend from 2013.