Beervana: Surviving the Stress Test

Good points. Human nature is to look to connect events, looking for a single cause - even when there isn't one.

 

I think the one thing of note is that Portland craft beer culture is probably the most mature place in the US, so this is where to look to see what will most likely happen in other cities in 1, 5, 10 years down the road (depending on the other area'ss state of beer maturity). The good news is that the craft brewing community in the US is a vast well connected network, and great brewers train the next generation of brewers who then strike out on their own to do a startup of a head brewmaster elsewhere, and as a US culture the beer making continues to make strides towards a higher bar of excellence and easier to find great beers.

 

Love good, short, well written articles like this one. I def. agree we haven't hit peak craft yet. But at 15% of beer market, and likelihood we'll top out around 20%, the top of the mountain is in sight.

 

Some of these failures are to be expected, now and increasingly in the future, just on general principles. Roughly half of all startups across all areas of business fail in less than 5 years. Typical reasons for failure involve incompetent management, trying to sell something the public doesn't want, and undercapitalization.

Given how many breweries, etc. there are now in the US that are less than 5 years old, we can expect to see growth in the number of failures over the next few years.

 

Well, the current "craft" segment of the market, in general, seems to be a larger "craft" brewer might lose 100k bbl./yr of sales but that is made up by 20 new hyper-local breweries each making ~5,000 bbl. So, the market share of craft stays about the same but the number of breweries continues to grow.

 

Unfortunately it's not always the ones making the worst beers that don't survive the culling.

 

I visited Portland in 2017. There are just so many places to visit, so I simply opted for those on the city bus line. Of course, I always visit Horse Brass (Bus 15).

 

Question: So from the random breweries you stopped at on the busline around Portland (i.e. you didn't do much homework on where to stop to get "the best" but sounds just kinda random), did a vast majority of the brewers and beers in the portfolio seem to be making solid beers, mostly amateur stuff with a few well made exceptions, or all erratic/over the map?

 

Well sort of. It seemed a lot of this huge surge in popularity was related to the New England IPA, and then the rise of the tap room culture.

While Portland's craft beer culture might be the most mature, it seems like what started in New England was copied everywhere else.

I could be totally wrong though, I've never been to Portland. I did just go to Austin though, and it seemed like the explosion in craft they're seeing mirrors what already happened in New England.

 

I hear this said a lot. Do you mean beers with brewing flaws, or do you mean styles you don't like, or something else entirely, when you say "worst beers"? Please clarify your comment. Thanks.

 

I think he means other factors can do-in a brewer than just beer quality to make or break a business. Location, food quality, price, vibe of the establishment, poor business decisions, local public opinion of the owner/brewer as a person and so on.

 

I think Jeff Alworth is spot on - the people with a good business model and a good product will survive the stress test - those flying by the seat of their pants should expect to loose some skin off their butt - if not their entire butt.

 

I disagree with the "good product" part of your claim, and there was nothing in the article to suggest that Alworth agrees with that portion of your claim. Many breweries that make some of the best beer, based either on quality (proper process execution and flawless product) or non-quality-based aesthetic characteristics, pay a pretty penny to do so in the form of top-notch equipment, high-end quality control, high salaries for brewers and other employees, expensive ingredients, etc. Some of them have gone into deep debt to finance the best of everything (often including extravagant taprooms, large spaces, and excessive brewing capacity), and they're very much dependent on continued growth in order to keep paying the bills, growth that may well not be coming. If a significant "culling of the herd" does occur nationwide, it's likely to fell many highly respected breweries, especially on the larger end, that produce impressive and even beloved beer. Good beer isn't necessarily good business.

Many of the tiny breweries built on the cheap, with inexperienced and inexpensive brewers, and that don't bother with anything beyond rudimentary QC, in contrast, are in better position to survive a stress test. This is due to their low costs, including low debt service, and realistically meager ambitions to be neighborhood gathering spots that don't rely strongly on succeeding in the cutthroat and lower margin world of distribution for their revenues. Good business doesn't necessarily generate good beer.

Added: There certainly also are some, probably many, dolt-helmed breweries that are bad at everything, beer and business alike. And there are some well-run breweries that make good beer while being cost-conscious and that have wisely resisted the temptation for major expansion or to start large. Such breweries are positioned to continue to survive and even thrive in a brewery bear market.

 

True... but that's common throughout business. A superior product certainly helps, but a business can easily fail despite that.

 

Breweries that routinely make beers that are just plain mediocre (or worse).

 

Not so good beer is one thing, but poor business acumen never works. A great chef with lots of cash and a great location can fail easily because of poor business practices. This is true of any business. Businesses fail all of the time for an endless myriad of reasons. Failed craft brewers seem to often have been naive about business dynamics.

 

I agree, and I'll add that certain business practices that succeed in a growing market and/or with minimal competition can fail in a stagnant or contracting market and/or with extensive competition. Some people who legitimately know how to make a lot of money in good times fail in bad times because they're not able to turn on a dime, either for lack of ability or because they don't or won't recognize that the market has turned. The biggest problem had by owners of most big-spending breweries today (those that are opening big, expanding big, etc.) is unrealistic growth projections both with regard to consumer demand and due to an unhealthy confidence in their own beer and business acumen.

 

Sounds like Green Flash. On a big, bad scale.