Yahoo Finance: Problems for craft brewers

With every bubble, comes an implosion. It's basic economics. If there is too much supply, it will eventually cause a stress on the markets for raw materials such as hops/grains. If the brewery boom continues, I think it's only a matter of time before the outliers that can't compete, shut down. Right now, it's like a gold rush for opening a craft brewery, but I think it will be a matter of time before there are almost "too many" choices of craft beer, which will cause stiff competition. But hey, that's capitalism for ya.

 

So, if I'm understanding correctly, this entire article could be trimmed down to this:

"Too many small craft breweries are starting up, too many of said breweries are using too much hops for their mega-popular IPAs, therefore, said breweries are destroying themselves and other small breweries by creating shortages and inflating hop prices."

And, well, maybe they have a point. It's a simple, time honored point of supply and demand economics. The hop crop is certainly limited. Sounds like some farmers need to get crackin' on some hops, but you gotta wonder how economically feasible farming hops is? If the money isn't there, the farmers have no incentive.

 

"American craft beer can be found in every local watering hole and in mass-market supermarket chains like Whole Foods."


When the first sentence of an article starts like this, I tend to discount the rest of it. Every local watering hole? Perhaps every local watering hole you visited, but every last one? Riiiiiiiiiight.

And mass-market supermarket chains are mentioned and Whole Foods is your only example? Yes, Whole Foods has an acceptable selection of craft beer but the majority of chains do not.

Another crappy article, IMO.

 

And in other news the sun came up this morning

 

Did the First Wave of Craft Beer crash because of shortages of materials or because there weren't enough people drinking their stuff?

 

The brewers think they have a problem! They should try financing a habit of actually buying and drinking the stuff!

 

Sounds like I need to start a hop farm.

 

Well, markets tend to balance over time. Hops production is not a static resource. According to the USDA, hops production in 2012 was 61.2 million pounds, with 32 thousand acres harvested. In 2013, production was 69.3 million pounds with 35 thousand acres harvested. Hops farming would seem to be responding to the increased demand.

 

If we should've learn one thing by now then it's that economic predictions can be anything from "slightly off the mark" to "completely useless" - especially if all they're based on is basic economics by a relatively unreliable news source.

and as MNAle said, markets are not static entities.

 

According to this article by 47hops, the hop shortage is due to those in control of the hops not allowing the growing production to boost along with the demand. Anyone know if there's any truth to this?
http://blog.47hops.com/

 

The article is a space filler with about as much substance as the mythological "craft beer bubble." A boom time for some sector of the economy is not a bubble and there will be some breweries that fail regardless of what the market does. That’s the nature of start up business. Reliable data show that roughly half of all this year's start ups, regardless of what they sell, won't be in business four years from now.

 

It seems to me that it's always the things you don't see coming that get you. Not the things 1,000 wannabe experts are yammering on about.

 

I'm not entirely certain about this situation, I'm not an expert on the beer market but if I've learned one thing in 3 years of majoring history is that any kind of situation is barely ever a result monocausality. That assertion would also sound like there's either collusion or a monpoly at play - which are both pretty much illegal in most Western countries.

I know that taxes and import restrictions are issues here in Germany.

 

Even if he's right, that does not apply to all hops, only a selected subset of hops where someone owns the rights to the variety. No reason someone can't grow the non-proprietary varieties of hops, thereby undercutting the attempt to jack up prices to unreasonable levels by arbitrarily limiting supply.

 

Do you consider the first wave the small group in the 80s or the larger group in the 90s that experienced a large crash? I would consider the 90s wave of brewers to be the first craft bubble and subsequent crash.

There wasn't a shortage of materials and back then hoppy beers were not so voluminously produced that there was a hop shortage. There was a shortage of interest. It was sort of a passing fad in food/beverage like so many others that have collapsed. The 90s is where you saw an interest in food and beverage beyond chain restaurants and mass produced products really start to creep in. Healthy food options started to become popular, nicer restaurants started becoming more accessible, etc. But the market for it wasn't that big nor did all of the aspects that rose to popularity stick around. The kids who grew up in those emerging food markets helped drive the big movement towards local, diverse, craft, etc. food and beverage. There is a critical mass of support for craft beer, like other craft food industries, to keep it afloat.

Another problem in the 90s was that there was a rush to get into the market by investors and dudes who wanted to brew that exceeded the volume of knowledgeable and experienced brewers. That's why you see a large number of the survivors from the 90s had involvement from brewers from the big industrial brewers. They knew what they were doing. Like today, lots of breweries in the 90s had homebrewers turned pro running the brewhouse but homebrewers had little access to professional systems and homebrewing in the 90s was fairly sketchy. That resulted in an excess of shoddy beer that too few people wanted to drink.

I am not sold on the idea that we have a bubble right now. There is a lot of demand in the entire food and beverage industry for craft, local, etc. food and the market for those products and experiences has a lot of room to grow. Denver and San Diego may not have much room but many other large and mid cities do. The looming failure for some breweries is getting out competed due to inferior products and competition from larger brewers in the market. The idea that you can start a brewery and everybody in your market will welcome you and protect you from competition forever is naive. That is where the bubble exists. Eventually competition will get serious and brewers will have to put out solid products under a solid business model.

 

Step outside a big city, and the majority of 'watering holes' have very little, if any, craft selection. But hey, when was the last time a journalist realized there were actually people living in those expansive wastelands between the major metropolitan hubs of civilization?

 

The article is true to the extent that we are talking about proprietary strains because the owners of the intellectual property behind the strain control who can grow it. Public domain strains, like cascade, can be grown by anybody in as much or little volume as they choose. However, you can't just buy rhizomes for Amarillo or Citra and start growing it. That makes it hard to fill the overwhelming demand for certain proprietary hops and thus prices can rise as a function of supply and demand.

 

Sillyness

 

What a poorly written article. Maybe it's just click bait with buzzwords like "craft beer" and "boom" but if not for it being about beer, I would guess this was an essay from a child.

This is beer.
These are some of my favorite beers.
Here are some stats about beer.

Very interesting perspective. Thanks for sharing.