Here comes the bubble.

Discussion in 'Beer Talk' started by Daemose, Jun 7, 2013.

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  1. StuartCarter

    StuartCarter Initiate (0) Apr 25, 2006 Alabama

    I can make pretty much any dish that any restaurant can make. We rarely dine out due to that fact: that I can make whatever my wife, kid and I want to eat at a fraction of the price you'd pay in a restaurant. But McDonald's, Olive Garden, Pizza Hut, etc etc are still around. Homebrewers are a minority inside a minority and suffer the echo chamber effect the same way that people on this site do - we assume that because we love barrel aged sour triple imperial English mild ales that the general drinking populace will love it, too. That's not the case: most successful breweries "keep the lights on" with 3 or 4 key beers, which are the pale/IPA/brown/stout, not the barrel aged Imperial.

    To summarise: just because people *can* home brew, it doesn't mean they *will*. If that was the case there would be a national chain of homebrewing stores in the same way that you can't move without bumping into a McDonald's/Starbucks/Subway.
    sharpski likes this.
  2. mcrago

    mcrago Aspirant (281) Oct 6, 2012 Indiana

    This type of thing happens in almost every industry. People try to get in "while the gettin's good". However, Capitalism has a nice checks and balances system. If you can't produce a product that people are willing to purchase, you will eventually fail.
  3. Can_has_beer

    Can_has_beer Savant (914) May 14, 2013 Texas
    Beer Trader

    Don't forget Buffalo Bayou. Ginger Citrus IPA? C'mon now, somebody should discipline them for that one.
    Daemose likes this.
  4. mattbk

    mattbk Devotee (467) Dec 12, 2011 New York

    In my opinion - this article needs to be taken with a grain of salt.

    First of all, the first half of the article is regarding on-premise accounts, namely bars and brewpubs. It does not
    account for bottle sales.

    This article then claims that the average number of units sold per craft brewer is declining, "implying that the overall attractiveness of the economics for the average craft brewer has diminished fairly significantly over the course of just two years." Actually, that decrease is due to a lot of new breweries entering into the market and selling less than say, Sam Adams, dragging down the average number of units per brewery. Um, so what? Just about all of those breweries (according to the Brewer's Association) are growing year over year, almost all of them at double digits. It doesn't mean that "attractiveness" is lower. It just means there are more breweries.

    Per the Brewer's Association. In 2011, craft brewers sold 11.4 million bbls. In 2012, they sold 13.2 million bbls. Craft beer grew 15% as a whole from 2011 to 2012. Compare that to the 17% growth in on-premise brewers quoted in this article. Pretty close eh? What about that is not sustainable?

    Brewpub growth was only 7% - all of that is on-premise. Microbrewery growth was 33%, some on premise, some off. The growth in craft beer is being largely driven by smaller microbreweries. Again, they are almost all growing at double digits.

    Not to say there won't be some consolidation in the future. Almost everyone believes there will be. But none of the data in this article supports that claim.
    5thOhio, davemont and cavedave like this.
  5. southdenverhoo

    southdenverhoo Disciple (347) Aug 13, 2004 Colorado

    Hugh Sisson had something to say about this, I think maybe a year and a half to two years ago. I tried to google it up but all hits are to something controversial he said more recently re: contract brewing (and discussed here as much as it needed to be, I'm pretty sure) this is a paraphrase:

    What I think he said was something like this: The explosion of nanos making 200-1000bbls a year is going to take away shelf space in craft beer stores, and tap handles in craft beer bars, and craft beer consumers, too. The big big craft guys are going to be OK, and the nanos, who have such low low overhead and capital commitment and usually are self-financed with no crushing loan payments--they're going to largely be OK too, they can go indefinitely on little or no profit and their overhead structure is such that they don't lose money so much as they expend their owner's time. Who I'm (Sisson) worried about is guys with breweries the size of mine.

    Without getting wrapped up in what people think about Hugh Sisson and his beers (I like the Heavy Seas stuff, so shoot me) I think that is a legitimate concern and a prescient comment. I think the consolidation/closures are going to hit the 2500-5000 bbl a year guys, maybe even the 5000 bbl -25,000bbl guys, many of whom have been plugging away for a good long time. Even if the market is moving from 5% a few years ago to 7 or 8% now, to an eventual 10%, if nanos are taking 10% of that 10% and the big craft guys' share is simultaneously increasing by 10% a year, it seems to bode ill for the big middle, competing for a fairly quickly shrinking share of a slowly expanding total craft market.
  6. kdb150

    kdb150 Devotee (465) Mar 8, 2012 Pennsylvania

    Yes, breweries do seem to do this more and more. And you know what? I don't care. If they don't have the business sense to create a stable core lineup of beers before trying to branch out to reach the tiny sliver of the beer drinking market that represents people who buy limited release stuff, then they deserve to fail. People with poor business sense should not be running breweries. Founders couldn't sustain itself if their line of barrel-aged beers were all that people bought. The high-end stuff is good for creating a reputation and selling more of the mainstream stuff, but if you aren't putting out a solid line of 4-5 "everyday" beers, then you are probably not going to last very long, unless you follow the Shaun Hill business model and think that having more people showing up to buy your beer is a bad thing.
  7. mactrail

    mactrail Poo-Bah (7,560) Mar 24, 2009 Washington
    Supporter Beer Trader

    In San Diego County last year there were 27 breweries in the PLANNING stage, according to the West Coaster newpaper. You might think that's an impossible amount of beer to sell. And yet when I go to any beer-centric place, they are mobbed on popular evenings. There must be a limit, but all these new breweries have bars and restaurants eager to sell their product.
  8. JrGtr

    JrGtr Disciple (397) Apr 13, 2006 Massachusetts

    You're absolutely right. We've been lucky here in Mass that we've been seeing a huge boom in the growth of new breweries here and in the suirrounding states - RI, CT, NH, and ME especially (a ot of the better VT ones haven't distro'd here yet) However, there are certainly some that aren't as good as others. IMO, Night Shift is making some great stuff, Mystic the same. Jack's Abby keeps knocking it out of the ball park. Those guys will make it, no problem. I'm liking what Enlightenment has done, though the prices are kinda high, and so far he only has 2 styles out. Some of the Backlash are good, we'll see what happens there.
    Then there are some others that are labels only, being contracted out, or have small facilities making fair to decent beer. Those are yet to be seen how they'll make it. Blue Hill makes fair at best beer (sorry, if there's anyone from there reading this) but they've been around several years so far. Not certain how, but people seem to be buyiung it. I'm not a big fan of Clown Shoes, but I guess otherws are. White Birch is incredibly inconsistant. I;ve been trying them on and off all along, and some batches are quite good, others are like you're eating a band-aid (within the same beer.) I'm kinda rooting for them to get things worked out, since I've met Bill Herlicka several times and he's a nice guy and truly passionate about beer, but I don't know how he can go on like that.
    As you said, another problem is the cost. Imperial and Barrel beers, I can see the prices being high. Even those with specialized fermentations and bottle-conditioned (like Mystic and Enlightenment) I can see being higher, around the $10 mark. However, a standard, force-carbonated beer, with no specialized ingredients or handling, I agree, shouldn;t be that high a price.
    I'm liking what Blatant is doing, keeping the prices low (around $5 for a bomber) and it's also damn good beer (nothing imperial or barrel, just a really well-crafted representative of the style)
    mklisz likes this.
  9. Longstaff

    Longstaff Initiate (0) May 23, 2002 Massachusetts

    Not mentioned yet is that there is a couple million bbls of xtra capacity coming on line within a year or so. Will be good for younger craft markets where the big guys have yet to deeply penentrate, but will be interesting to see how more beer will work out for older craft beer markets where most national breweries are already in second and third tier bars/stores.
  10. mattbk

    mattbk Devotee (467) Dec 12, 2011 New York

    The big craft guys are growing at a slower rate than the little craft guys. Brands like Sam Adams, New Belgium, Shiner, Matt/Saranac are the craft brewers feeling the pinch. The more mature brands are giving away share to the younger brands that are doing more experimental stuff. There are examples throughout the mid-tier of faster and slower growth.
  11. hopfenunmaltz

    hopfenunmaltz Meyvn (1,291) Jun 8, 2005 Michigan

    Thanks. That had some information and insights that one should ponder if thinking of starting abrewery.
  12. herrburgess

    herrburgess Meyvn (1,016) Nov 4, 2009 South Carolina
    Industry Beer Trader

    Again, in some markets this may be the case. But in the aforementioned underserved markets, brewers like Oskar Blues, Sierra Nevada, and New Belgium have already made big moves to fill that space and, as Longstaff pointed out, will be coming online with huge numbers of BBLs very soon.
  13. sergeantstogie

    sergeantstogie Aspirant (202) Nov 16, 2010 Washington

    Jeff, You've said it before, at least I'm pretty sure it was you, that what there needs to be more of, is places to sell/serve all this beer that will be made. That's what's key to all this.
  14. hopfenunmaltz

    hopfenunmaltz Meyvn (1,291) Jun 8, 2005 Michigan

    And mouths to put the beer in.
  15. sergeantstogie

    sergeantstogie Aspirant (202) Nov 16, 2010 Washington

    Eh, thats the easy part. Once brewers start to think like businessmen and not artists, they'll get the mouths.
  16. southdenverhoo

    southdenverhoo Disciple (347) Aug 13, 2004 Colorado

    Yes, I wrote that poorly. When I wrote "big big craft brewers" I was really thinking of the Brewers Association Top 50. I agree that it has been a time of stagnant growth for Sam Adams, FX Matt and Shiner; I am less sure about New Belgium (though its Asheville facility seems to be on hold for this year) and of course SN is building huge capacity in North Carolina. But I am pretty other members of that Top 50 are experiencing growth in significantly high numbers that 10% annual for that portion of the sector isn't inaccurate. I wish I knew where to verify that though! The BA list didn't include barrel totals though I used to get those every year when I subscribed to The New Brewer.

    I just checked the list; Number 50 was Troeg's. Per a Central PA Patriot-News article and interview from April 11 2013, Troeg's sold 44,000 bbls in 2012 (I was surprised it was that low, I thought Number 50 would be around 60,000 bbls) and expects that to increase by 30% in 2013. The article says Troeg's has increased by 20% per year since opening in 1997.

    I continue to believe the lower middle tier--the 2500 bbl to 5000 bbl breweries--is in more jeopardy than either the top 50, on the one hand, or the new nano explosion market entrants on the other, in terms of being squeezed. Many of the latter will fail not because of economics of scale, but because of shitty beer, though, so I'm not suggesting they are all going to make it. But their replacements are lining up, and I believe that segment of the market will continue to grow and rob sales from somewhere, and I don't think they are taking them from Shiner Bock or Sam Adams Boston Lager, nor evidently are they coming from Troeg's if John Trogner knows whereof he speaks, and I believe he does.

    I know this is too long already but I decided to google one of my locals. Odell is 33d on the 2012 list and per Beerpulse in December 2012, Odell forecast through the end of 2012 to do 67,500 bbls, but was in the process of construction of an expansion which would give them 100,000 bbl capacity. They forecast sales in 2013 of 78,000 bbls which if it happens would mean 4 years in a row of 13% to 16% growth. Again: the top of the market is growing, the bottom of the market is growing, and the middle is getting squeezed.
  17. hopfenunmaltz

    hopfenunmaltz Meyvn (1,291) Jun 8, 2005 Michigan

    New Belgium is getting pinched?
  18. southdenverhoo

    southdenverhoo Disciple (347) Aug 13, 2004 Colorado

  19. MrOH

    MrOH Defender (642) Jul 5, 2010 Maryland

    No shit. Every time I buy an IPA I'm underwhelmed because I CAN BREW AN IPA EXACTLY HOW I LIKE IT AND NOT WORRY ABOUT IT BEING FRESH.
  20. grassrootsVT

    grassrootsVT Initiate (0) May 10, 2005 Vermont

    How did you obtain a copy of my business plan?
  21. Brodie91

    Brodie91 Initiate (0) Jul 13, 2012 New York

    Haha I thought of the fish who loved bubbles in finding nemo...
    sergeantstogie likes this.
  22. mattbk

    mattbk Devotee (467) Dec 12, 2011 New York

    Interesting. BA reported this as a 7% increase, 1/2 as much as the rest of the industry, which grew at 15%. Their share dropped 1/2 a point too. When I said they are pinched, I mean they are being outpaced. Of course, they could be outpaced because they are at capacity. In which case, I'm wrong. Everyone in craft beer is growing. Eff you bubble.
  23. 5thOhio

    5thOhio Zealot (500) May 13, 2007 South Carolina

    The BAs that continually predict a bursting bubble will eventually be right.
    mattbk likes this.
  24. abecall98

    abecall98 Devotee (448) Aug 11, 2007 California
    Beer Trader

    I wanna be that BA. I'll post before the year is over.
    5thOhio likes this.
  25. hopfenunmaltz

    hopfenunmaltz Meyvn (1,291) Jun 8, 2005 Michigan

    When the craft sales went flat in the 90's Sierra Nevada grew enough that they built the second bigger brewhouse and had it on line around 98 or 99. Many other Craft breweries went bust. With all of the capacity coming on line, I can see where there will be some of the same going on in the future.
  26. Flashy

    Flashy Initiate (0) Oct 22, 2003 Vermont

    Just enjoy it while last and do your best to support what we have. Two things killed the Micro Brew revolution last time out, owners opening places who shouldn't have "should I open a sports bar or one of those brewpubs" and out of code stock sitting on shelves. John Q Sixpack goes to a brewpub and it sucks- he isn't going to another one again. He buys a craftbrew and it is a year out of code, is cloudy and has stuff floating around in it- he wouldn't buy it again. Though the latter is less likely than less time around (I remember having to hold bottles up to the light to see if they were good or not).
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