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Future wave of brewery closures

Discussion in 'Beer Talk' started by mclaughlindw4, Apr 24, 2012.

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  1. mclaughlindw4

    mclaughlindw4 Initiate (0) Jul 2, 2009 Maine

    I live in Maine and in the past few years there have been a very large amount of new breweries (as there has been everywhere). All the new breweries in the state as well as several notable breweries recently adding Maine to its distribution has caused the shelves at my local liquor store to be literally overflowing with beer.

    Now there is so much beer there that a lot of it just sits and sits on the shelves. Anyways I feel there is going to come a point where there is a rash of closures from brewers simply because it seems all the new choices may be outpacing demand. Any other opinions?
  2. BigPlay1824

    BigPlay1824 Initiate (0) Oct 13, 2010 New York

    i agree, partially at least. i believe we are headed in the direction of market saturation but, rather than seeing a mass closing of breweries nationwide, i would contend that we will see more breweries become more localized by pulling out of certain markets. small and local breweries will find it difficult,and even unwise, to expand beyond their immediate area, and larger brewers will pull out of under-performing markets. don't get me wrong, i absolutely believe we will see a number of breweries go under, but i think pulling out of markets will become the more common theme
  3. shand

    shand Meyvn (1,419) Jul 13, 2010 Florida
    Beer Trader

    Is it the brewery's fault, or is it your store's fault for bringing in more beers than they can sell? I think more blame might lie on the second than the first.
    elgiacomo likes this.
  4. goosewhisperer

    goosewhisperer Initiate (0) May 28, 2011 Colorado

    I think the part of the boom that will stay with the industry is the rebirth of the nano-brewery. As long as these folks remain a neighborhood spot, and are able to keep the doors open without over extension; they will remain viable part of a sort of grassroots brewing movement.

    In Colorado they are everywhere, and are supported by their neighborhoods and not by making huge sales to distributors.
    Kopfschuss likes this.
  5. beerinmaine

    beerinmaine Initiate (0) Jun 20, 2009 Maine

    I don't see this as a huge problem since many breweries can't keep up with demand, and are pulling out of territories just to have enough product on the shelves. Unless demand starts shrinking, or capacity expands a huge amount, excess supply will not be a problem. (for example, Allagash expanded 40% last year and 40% again this year, while shrinking their territory just to keep up)

    But if beer sitting on the shelf is a problem, the store needs to bring in less, and/or manage their stock better. I still see plenty of places stacking 12-pack beer in big piles, or dozens of bottles of MBC Lunch sitting out on the shelf. If these places can't move the stock, they shouldn't have it.
  6. TMoney2591

    TMoney2591 Poo-Bah (6,694) Apr 21, 2009 Illinois

    I agree with this sentiment, and I, for one, hate stacking 12-packs. Honestly, I have no idea why so many breweries are focusing on this format... There are some circumstances, though, when breweries work with distributors and stores to foist large amounts of beer (sometimes 12-packs, sometimes other formats) on the stores if they wanna get it at all or if they wanna get a decent bit o' pricing. I really dislike this whole thing, especially if the only choice is lots o' beer or none at all (though this doesn't happen all that often).

    Suffice it to say, there's culpability on all sides: the breweries for potentially over-extending/over-producing, the distributors for not moving the product properly (whether this involves goofy deals like those mentioned above or just not knowing how to sell the product), the stores for over-buying and whatnot, and the public for wanting more and more from everywhere. Hell, I'm guilty of two of these things myself...

    Frankly, I wanna see more draft-only enterprises surface...
    AnchorBaby and TheFlern like this.
  7. maximum12

    maximum12 Poo-Bah (3,548) Jan 21, 2008 Minnesota
    Beer Trader

    It's not just the amount new breweries, it's a problem with a lot of facets. It's the amount of breweries opening up that aren't putting out great product. It's the mad-rush expansion of mediocre breweries into new markets. It's the loss of shelf space for even good out state breweries. It's a lack of recognition/name-branding of out state breweries by the more common beer drinker. And yes, there are retailers who have a "one-of-everything" on the shelf, & that leads to old stock.

    There are more reasons. But taken as a bundle, I'd agree, there's going to be a shake-out in the next five years. Great breweries like Founders, Surly, Allagash, Russian River, etc. will survive just fine. But those making "OK" beer will find themselves increasingly crowded off shelves & turning off customers because their beer is not turning fast enough, & those who do take the plunge will be getting a mediocre (or worse) product that's old. Not a good formula.
  8. Hanzo

    Hanzo Initiate (0) Feb 27, 2012 Virginia

    This has been talked about a lot before, the craft bubble will burst eventually (come on...over 2000 breweries?), but the breweries we will lose won't be the ones churning out great beer, it will just be the ones that are jumping in to cash in on the gold rush.
    denver10, TheFlern and Grohnke like this.
  9. maximum12

    maximum12 Poo-Bah (3,548) Jan 21, 2008 Minnesota
    Beer Trader

    Agree. And who is that on your avatar?
  10. DirtyPenny

    DirtyPenny Devotee (434) Jun 25, 2011 Massachusetts

    That's Kari Byron of Mythbusters fame. :slight_smile:
  11. dukes

    dukes Initiate (0) Apr 2, 2012 Maryland

    I agree with you and maximum12 to a certain extent, and also disagree to a certain extent.

    I do think that (at least from my perspective) the scope of the breweries that will last is even narrower. I think it's going to come down to not only who is making great beer, but who is making great beer at the best value to the consumer. Case in point (anecdotal evidence for sure, but I've heard similar stories): Maine Brewing Company puts out Lunch at $7.99 a 500ml. It's a great IPA that many consider world class (I think otherwise, but that's besides the point), but who wants to continue to pay $7.99 a 500ml when many other breweries offer high quality IPA's at $9.99 a six pack? Whenever I get over this whole "just want to try everything" phase, there's no way I'm going to continually spend $10 for a bomber of Sculpin or a 4 pack of GF West Coast IPA when I can get a six pack of Smuttynose IPA or Lagunitas IPA for $10. It's the 80/20 rule. I think the breweries that are putting out 80% of the quality at 20% of the cost of the "top-of-the-line" beers are going to be the best off.

    And that just covers the "beer enthusiast" segment. I think that being a part of these forums can make it difficult to see the forest from the trees, but I'm willing to believe that the bulk of craft beer sales comes from casual craft drinkers. These are the people who want a better product than BMC but don't necessarily want something that is "difficult" or that they have to devote all their attention to in-order to enjoy it. They are the kind of people who just want something nice to drink at a party or with dinner, but don't want (or care) it to be the main course. A lot of beers that enthusiasts might scoff at and call "mediocre" or "poor quality" are beers that the casual craft drinker might thoroughly enjoy. I'm friends with quite a few "casual craft drinkers" and have asked them what they look for in a beer. Almost all the responses are that they want something that isn't too expensive and not overpowering. This market demographic probably won't be willing to drop a lot of money on beer in general, and certainly not on taking a chance with a new beer, but again I'm willing to bet it is the most populous segment. So I think the breweries that cater to this crowd will also do very will in the future.
    kuhndog and beancounter like this.
  12. nanobrew

    nanobrew Initiate (0) Dec 31, 2008 California

    There are a good number of nanobreweries in SD, the problem is a lot of them are expanding to the microbrewery realm. I think that may be the death of them in a few years. These places are fun, but honestly their beers do not warrant the price tag they have already. I think they see a lot of false sales; people buying their beer because it is new and the craft beer market is booming. However to expand, you have to be a well structured company with a solid offering.
  13. Longstaff

    Longstaff Initiate (0) May 23, 2002 Massachusetts

    Another aspect that will lead to the next round of shakeouts is the increasing demand of raw materials - if many of these proposed breweries come to fruition the demand for ingredients will cause prices to increase even more than they have in the last few years. Many of these new start ups are severely under capitalized and thus will fail due to inability to contract out for their ingredients.

    It takes more than good beer to run a successful brewery - those with poor business models and/or that are rigidly structured in the (high) price it must charge for its products, will have a difficult time in the near future.
  14. hopfenunmaltz

    hopfenunmaltz Meyvn (1,305) Jun 8, 2005 Michigan

    Back in the 90's a lot of breweries, Sierra Nevada for example, grew in size, while the total volume of craft beer sold held steady. Breweries that expanded with the growth of craft beer sales baked into the plan were squeezed financialy when they could not sell the beer to service the debt they had from expanding, so they were forced to close.

    Longstaff's point has been discussed by some Pros. There are 2000+ breweries in operation now. There are 900+ in the planning stage. Those new ones will all need the raw materials, and then the market to absorb the beer once it is made. A problem on either end is big trouble for a start up.
  15. ModernTimesJacob

    ModernTimesJacob Initiate (182) Apr 24, 2012 California
    Industry Beer Trader

    Whoa, it's been a while since I've posted! Just wanted to chime in (in my new capacity as the founder of a brewery in planning, rather than my old capacity, as Stone communications guy.)

    I wrote a piece about this very topic not too long ago entitled "Why I Think I'm Mostly Not Crazy for Opening a Brewery": http://www.beerpulse.com/2012/03/why-i-think-im-mostly-not-crazy-for-opening-a-brewery/

    But to address some of the things the article doesn't touch on, I'll say a few things. The idea that stores are running out of shelf space or distributors are taking on too many SKUs or whatever it is, is something we've heard in the craft beer industry for years now. I think the reason for this is that the current marketplace is so different from how it looked 20 years ago, when many of the same people were in the industry, that some folks just feel like it can't work. But it keeps working. And growing. Look at the number of wineries and wine SKUs carried by an average chain store. Craft beer is miles away from that. But yes, I agree, the focus needs to be on quality and smart growth; anything else is less likely to work in the long run.

    The second thing is the idea that there's a crunch on ingredient supply. I've heard this in a few different places now, but it just doesn't make sense to me. Hop and barley prices are not anywhere near historic highs. The only ingredients that are hard to get (as in, you can't get them right this minute for an ideal price, but with a little work and some pricing flexibility, you could probably get them) are Amarillo, Simcoe, Citra, Galaxy, Nelson Sauvin, and Motueka hops; there may be one or two more I'm forgetting. In the case of most of those hops, contracts are still available for next year, and the growers are doubling production every year. So I just don't feel like it represents a mortal threat to the entire industry. An inconvenience to some brewers, sure, but let's not overstate the case.

    Something that's important to keep in mind, I think, is that the absolute number of breweries doesn't really tell you much; it's the total production capacity of craft breweries that's more significant. And the reality is that many of the new breweries opening are very small. We'll see if that's a viable business model or if those breweries grow, but either way, I don't think disaster is imminent.

    Jacob McKean
    Modern Times Beer
    AnchorBaby, beerme411 and kuhndog like this.
  16. mikeg67

    mikeg67 Poo-Bah (1,682) Nov 12, 2010 New Jersey

    Craft beer is only about 5% of total beer consumption. But the number grows steadily. If this number grows let’s say till 10% and the total consumption stays the same it means craft breweries can double their beer production or the market will be able accommodate 2000 more new breweries. I don’t see any mass brewery closing in the near future.
  17. Flashy

    Flashy Initiate (0) Oct 22, 2003 Vermont

    I was there for the first shake out and though some may close, things are different now. Craft brews back then were almost unheard of, both to the drinking public and the liquor stores. Half the time you were the only customer picking through out of code micro-brews looking for a six that wasn't cloudy. Craft brews have become integral to local scenes, sold at major league and minor league parks- there's even gay beer bars according to the recent Ale Street News (not that there's anything wrong with that).
    I just spent $60 on six four packs of Heady Topper (don't tell my wife)- in my opinion this hasn't even begun. Though some may close, there is little room for inferior products and/or inferior marketing.
  18. flanneltrees804

    flanneltrees804 Initiate (0) Aug 8, 2010 Illinois

    I work in a wine shop and know a little bit about both the wine and beer industries. In the wine industry there are far too many producers to ever dream of carrying everything that's available. We specialize in a certain area of the market (small producers) and bring in what we like and think is true to style and delicious. People come in all the time asking for "such and such" a wine and we don't carry it but "I have a great wine in that same style from that same region that is really great." Now to get to my point...

    I have been thinking about beer recently (we carry a bit of that too) and with the flood of new breweries and my limited space at the shop, I cannot stock everything. People come in looking for "such and such" a beer and I tell them what I told the wine guy, "I don't have that one but I do have a beer that is the same style and it is really good." I can easily see this same thing happening to larger beer shops as more beer comes to market.

    At some point you just cant stock everything and dream to keep a regular rotation of fresh beer. Bottom line for me is, I am going to try a lot of different beers (oh darn) and look through my selection and more or less "curate" my beer selection instead of bringing in everything on the market. Others are going to have to do this at some point and that probably means some breweries are not going to be stocked.

    What does this mean for craft brewers? Brew really great beer, brew weird/specialty beer, have great advertising, or otherwise do something to stand out and stores will stock your stuff. My thoughts anyway, some may disagree.
  19. jl28r1

    jl28r1 Zealot (511) Jan 10, 2011 Texas

    Frankly, I wanna see more draft-only enterprises surface...[/quote]

    I would love to see this!
  20. nanobrew

    nanobrew Initiate (0) Dec 31, 2008 California

  21. Zimbo

    Zimbo Initiate (0) Aug 7, 2010 United Kingdom (Scotland)

    Think much depends on the economy. If even a partial recovery continues to take many years then we might be hitting critical mass sooner than we think. But as long as people continue to squeak by without much in the way of debt then things should just trundle along as they are.
  22. hopfenunmaltz

    hopfenunmaltz Meyvn (1,305) Jun 8, 2005 Michigan

    The Lansing Journal article says forclusure.
  23. nanobrew

    nanobrew Initiate (0) Dec 31, 2008 California

    but who owned the building? A lot of breweries in our area lease the buildings.
  24. TapeDeck

    TapeDeck Initiate (0) Mar 31, 2011 Illinois

    Interesting article, Jacob. I have a few friends opening a brewery in Illinois, and I'll forward it on to them.

    Here's what I'm thinking.

    If you make great beer, it is not hard to find a consumer.
    If you make good beer, it's reasonably easy to find a consumer.
    If you make crappy beer, you had better be on some sort of ridiculous trust fund.

    Good businesses succeed. And the model for good craft beer must obviously start with good (or BETTER) craft beer. The world doesn't need another mediocre craft brewery, or brewpub. You have to excel. And that has a lot of implications... it probably means you have to be equally concerned with subtlety as you are with polarizing extremes. Like any other business, you have to be willing to throw away what doesn't work for you, and try to find the gaps that other businesses miss. It can be done. It just can't be done by lazy people. Bearded hippies and tattooed metalheads work HARD on their beer.
  25. ModernTimesJacob

    ModernTimesJacob Initiate (182) Apr 24, 2012 California
    Industry Beer Trader

    Glad you liked the article. I think your breakdown makes sense in the current market. As I've said elsewhere, I think most of us would still gladly seek out Pliny even if it were sold in ziplock bags with a label handwritten in sharpie. Doesn't mean you don't have to also make good business decisions, but the best way to create a market for your beer is to brew beer that is so good people can't shut up about it. At least that's my theory.
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