Iconic Breweries Face Closures, Financial Hardship

Off the top of my head (and without hard data) in my local area this rule of thumb has not applied for recent breweries.

 

Unequal growth rates and non linear growth trajectories, essentially shifting fortunes, are hardly surprising in any market. The realistic alternative to a bubble bursting was never going to be unending growth and profits for all. The best that one can hope for is that your own favorite breweries are doing well and have their finances in order.

 

Newflash, companies can only succeed if they pay attention to the current market and shift with that market. You can pretty much see that in any industry. If your customers want something different than you provide and your competitors do provide it then you will likely go out of business.

 

Tree House (2011), Trillium (2013), Idle Hands (2012?), Nightshift (2012), Somerville Brewing Co. (2011), Jack's Abby (2011), Aeronaut Brewing (2013), Down the Road (2013), Notch (2010), Mystic Brewing (2011), Mighty Squirrel (2013)...

These are just off the top of my head and from a quick Google search. Off the top of my head I also can't think of many that have closed. Watch City brewing...um, I'm sure there's others. And these are just in MA.

There a few others which will be five years old next two that are thriving.

I didn't even include the real heavy hitters that have been around for a long time like CBC, Boston Beer, Harpoon...etc.

 

I think this is the more salient point. All but 1 of our locals have crossed the 5 year mark by now (well one of them has only had the local brewery for 2 years but the company is based in Korea is already close to 10 years old) and there hasn't been a single closure of a brewery here since the 90s. But I think it's just that there was so much room for flavorful local beer. Two of the oldest are my least favorite and I see them now scrambling to come out with hazies and fruited kettle sours and that sort of thing. It will be a lot more impressive for your brewery to last five years going forward than it has been, that's for sure

 

Empire makes some decent beers. They're on most shelves here, I've been to their Syracuse location a couple of times. Cazenovia is on a modest lake away from any tourist or metropolitan area and the opposite direction of most regional day trippers.
A few years back NYS created “farm breweries” requiring NYS hops & ingredients (60% of each) in exchange for tax, distribution, licensing, and advertising advantages with the idea that breweries would benefit from programs similar to those for the wineries.

The problem is that NYS wineries are located in “destination areas” (Finger Lakes, 1000 Islands, Long Island, etc) while the farm breweries usually aren't. Given their Cazenovia location I can't imagine that it could be self-sustaining. I can picture Empire shutting down the “farm” and reopening the brewing facilities.

Ithaca's problems aren't related to competition. They are due to the fact that the city of Ithaca is controlled by the students and staff of Cornell & Ithaca College (former mayor was Socialist Party, current mayor elected at 24). Tompkins County encourages breweries, but there is a history of unreasonable regulations on businesses within the city limits.

 

Not regulations about sales. Constantly changing, stringent, and expensive environmental regulations. If the brewery had been a hip downtown brewpub they would have been grandfathered in.

Ithaca is all in on “energy equity”

https://www.cityofithaca.org/642/Green-New-Deal

and they don't care how much it costs a successful business to comply

 

People have pointed to the failures of individual craft breweries as a sign of impending doom for the industry as long as there have been craft breweries. Most craft breweries are small businesses. My gut instinct tells me craft breweries are doing better than most small businesses. According to the Small Business Association (SBA), 30% of new businesses fail during the first two years of being open, 50% during the first five years and 66% during the first 10. Based on 2013 data, 51.5 percent of the brewpubs and 76 percent of the microbreweries that have opened in the modern era (since 1980) are still open (so failure rates of 48.5 percent and 24 percent respectively). More and better research might tighten the gap between craft breweries and small businesses in general but I think the beer industry is still doing better than small businesses in general. I have had a small business for 25 years and there are a million ways to screw up - every day there are new ones. It reminds me of the Grandmaster Chess Player Savielly Tartakower “The blunders are all there on the board, waiting to be made.”

 

I think at least part of the reason for the continued success of craft breweries has been that the product itself was so new that it tapped into pent up demand and ended up creating a huge demand that didn’t even exist before. I have to think that we are nearing the end of that demand explosion at this point, and it seems anecdotally that growth has flattened in most markets. Over the next 5-10 years, I think it is more likely that we start seeing craft breweries becoming increasingly subject to normal market forces that affect all small businesses. What will happen, for example, when we have the next recession and people have to make hard choices about where to spend their disposable income? I don’t buy the idea of a bubble, but I would be surprised if craft breweries (most of which opened after the Great Recession) don’t soon start seeing the same types of opening and closure rates that apply to other businesses.

 

I've been wanting to do a brewery "dead pool" with friends where we each "draft" breweries we predict may go out of business soon and assign points based on how likely or unlikely they are to actually fail. Just too morbid, though. I like some of the spots I'd put on my list and I really hope they stick around forever.

 

Very good point.

Look at the founding dates of those breweries. Most were right in the middle of the craft beer explosion.

 

Anecdotal, but a lot of places around here are hurting and/or nowhere in sight of hitting their target production/sales numbers. one place -- the first to open here a little over 5 years ago -- will close at the end of this month (Aug). I have a strong feeling they won't be the last.

 

There is no shortage of beer drinkers. If breweries can't figure out a way to make a buck they have only their product and processes to blame, not the market...

 

...forgot to mention: another long-established brewery nearby is for sale and another newer one is moving to contract brewing operations for a lot of its revenue.

 

Hmmm...not entirely, I think? "Craft" consumers are not as brand-loyal as the AAL drinker buying cases of BMC repeatedly and reliably. I just look at my own buying habits - one can of this, a bottle of that, the occasional 4 or 6 pack, rarely from the same brewery or store. Pretty sure looking at WBAYDN and the aptly titled New Beer Sunday threads I'm not alone in my buying pattern. I have no data to back it up, but I am guessing there's far more beer than drinkers at this point. Or at least there is enough beer volume out there that we're hardly putting a dent in the supply or our per capita consumption would be a pretty big number. Volume sales (ie, people buying a bunch of one brand repeatedly) is profitable and I'm not sure that is happening. Plus the infamous business model shift where the very small locals seem to be doing better than just about anybody - it's a tough, competitive world for brewers these days. You can obviously hedge your bets with sound business practices/processes, but at some point you have to sell most of what you make or you have to be losing ground financially.