Horrible Time to Open/Expand Brewery?

You're an expert at IPA IBU saturation, and national marketing campaigns/Brewing economics/future visions. I'm impressed.

 

There's never a good time to start up a business.
Too many breweries? The bubble is going to burst!
Not that many breweries? There's no demand!

As others have posted, if you have a well prepared business plan, a good product and perseverance, you'll succeed.
And, as Henry Ford, (who knew a little about business success) said, "Whether you think you can, or you think you can't---you're right."

 

Thank you for bringing up the "minority of a minority" point. I think a lot of folks here often forget that fact. Case in point, there are probably a dozen breweries in Portland (not to mention 20+ McMenamins locations) that never, ever pop up in the "Where should I go in Portland?" threads, and yet the vast majority of them are doing quite well selling cranking out beer for the locals.

As for the actual thread, I think there's still plenty of room in the market if you have all the pieces in place.

 

32 new Vermont breweries opened in the last year, many of them will not make it. I was sad to see Grateful Hands in Cabot,VT close shop, they made some great beers that were under the radar.

 

Regionally, there are some mid-level players who were first on the scene but not necessarily excellent. Here in central Virginia that's Starr Hill. Their beers are OK but nobody is raving about them. However they are distributed with A-B products and they are frequently the only craft options at your average "don't care about craft" bar/restaurant. In the last few years, you have production breweries like Blue Mountain and Devil's Backbone along with local Charlottesville options Champion and Three Notch'd that everybody would agree are making better beer. However, Starr Hill appears to be doing just fine. Whether anyone of them has the connections/capital/marketing to knock Starr Hill off its local roost remains to be seen.

 

It's never a horrible time IF you have good product AND enough money AND a good location. It certainly won't be as easy or quick to build up name recognition with the increased competition we have today but with the right combination of factors there still plenty of room for new players.

The problem I see is that many people apparently think that because they've made 6 homebrew kits that their friends liked at a party means that they are qualified to open a brewery and will be successful. No marketing strategy other than a twitter account, no business plan, no long term thinking of any kind. Just a couple guys (and sometimes women too) going "Hey we can brew and craft beer is the hot ticket right now!" Then they do a kickstarter and get some money together and open a brewery in the middle of nowhere that no one wants to visit making beer no one wants to buy.

 

I tried posting this two days ago, but it didn't appear. So I'm pasting it in again:

Yawn... If one were to take all the business advice posted on BA seriously, he would never start a new brewery, open a pub or convert one to craft. Just invest in BMC and get more lines to sell BMC beer. Blah, blah, blah...

Can we stop with the bubble talk? It's a great time to start or expand a brewery--if you know what you're doing. Most of the expansion so far has been taken up by brewpubs, which seems like a very 1999 business model. I might be persuaded to agree that most of those will go under. But those that bottle and distribute are a different category and there's plenty of room for growth--even if it kills more brewpubs. Face it--there's a lot of mediocre beer out there that's competing against itself. Many of the rest are one-hit wonders--they make one good product in the middle of a mediocre lineup. Of the top breweries, most have capacity and pricing issues--they don't make enough and what they do make is expensive. As long as both factors are present, they'll sell out every time. But, again, quality is still required. GI solved capacity and distribution problem by selling (out, if you wish). They are still expensive as hell for most products and those products still mostly sell out. That is hardly a mark of a saturated market. I am yet to hear of a new brewery that was any good that ended up in financial difficulties because of slow sales. I've seen a few shut down because the product was mediocre. A few more because the owners quarreled. Some have had difficulties because they had to overcome state obstacles that they did not anticipate or because they were undercapitalized from the start. But no one suffered from slow sales. If the beer was good, it sold.

Expansion is even less of an issue. I'm running a GoogleNews alert on breweries and I get 3-4 messages a week about different breweries expanding. And there is a least one story about a brewery expanding the current facility or building a new one every week. And, with rare exceptions, these are not brewpubs. And only a fraction try to expand distribution area before expanding capacity--they are largely growing locally, not nationally (New Belgium, Sierra Nevada, Deschutes and a handful of others excepted).

There will be consolidation and there will be a shakeout. But consolidation will happen because of growth potential, not because of the bubble. And the shakeout will occur because of local oversaturation and differential growth, not because of national glut.

 

That's not been the case during this current period of unprecedented growth.

From The Brewers Association (website and New Brewer magazine) operating craft breweries stats:

Year - brewpubs/combined microbreweries-regional craft breweries
2009- 1,013 / 572
2010- 1,033 / 683
2011- 1,068 / 902
2012- 1,132 / 1215
2013- 1,165 / 1318​

 

This time next year: HFS will be shipping overstock kegs to Des Moines, at cost.

 

That's fair. But why is the combined number almost 1000 short of reported totals for all craft breweries?

 

Add the 2 numbers and the total number of brewery licenses is close to the 2700+ reported. 1+ are opening per day this year, so hard to say what the number is today.

 

Those two figures - 1,165 / 1318 - are from the Brewers Association's year end totals for 2013 and don't include "Big Brewers" and breweries not considered "craft" (at the time). I used their figures because they break "craft breweries" down into "brewpub", "micro" and "regional".

Maybe you're comparing it the recent Beer Institute's reported number of 3,699? See Brewbound's explanation for the difference at Beer Institute: Brewer Count Continues Record Breaking Rise

 

As I mentioned, I have a couple of alerts set. It's very hard to tell from newspaper reports what they mean by "brewery" when they have "new brewery" or "brewery expanding" reports. Most that I've been going through eventually say "pub" or "restaurant", so expansion applies more to the space than capacity. I don't count those. But quite a few new breweries, both nano and micro, of all sorts. Not sure how to count, though, as many announce plans and take two-three years to actually produce (if ever).

 

Thanks

PS: Last line from that post

 

Brewers Association keeps track, but I know for a fact that they are finding it to be a challenge to do so.

 

Like others have said, quality is the most important factor. Every time I go to RI I see new breweries opening up. It's a small state, but there is a definite craft beer culture and larger markets nearby, so I think the state can support a decent sized brewing industry. But then I taste the beers and I'm rarely impressed. Grey Sail hit a homerun with Flying Jenny, but places like Foolproof, Bucket, Revival, etc. are not producing anything that I would say is consistently better than the established competition. Proclamation's Tendril IPA was good, but didn't blow me away. The new/local factor wears off after a while and quality reigns.

 

@ the ibu thing, common knowledge != expert. sorry you're so butthurt though. feel free to keep estalking.

@ economics, just giving my opinion. see thread topic.

 

estaslking?

 

As they say it all starts with great beer. If you can make great beer and then start a focused business you can be successful.

Are there going to be breweries & brewpubs that start and have no business being in business? Yes.

 

It's a good time to open a new brewery if you make good beer. In 2012 the craft beer market was only 6.5% of the overall US beer market. A 1% increase in craft per year is the equivalent of 2,000,000 barrels of beer and I expect that will be the norm for at least a few years.There is a huge market out there and craft still has only a small percentage. The potential is great.
Following the Brewers Association Forum, it is interesting just how may new brewers are increasing their capacity within a year or even a few months of opening. The market for well made craft beer is quite good at this time. Remember the die-hard yellow beer drinkers are not getting younger as a group.
That said, while the market for craft beer will continue to expand in the next few years, that does not mean every brewery in business or every new brewer that opens will succeed. Many will fail if the product is not on a par with what the market expects. Others will fail because of the usual reasons - financial, management, regulatory issues, and so forth. But the market will increase.
Many brewers will survive and thrive. Weak players will go out of business but unlike post-Prohibition history, new breweries will continue to open. And yes, some consolidation will occur. But for the foreseeable future opening a new brewery seems a reasonable bet as long as the beer is good and the brewer does not make those mistakes that doom many business.