New Belgium CEO Christine Perich steps down

I wonder if Christine Perich’s decision to quit after only one year is an indication of rough times ahead (in the near term) for New Belgium Brewing?

I have no insights into the financials of New Belgium Brewing but they are in a similar situation as Stone Brewing:

· A larger scale craft brewery that depends on a broad distribution and sales at retailers like supermarkets.

· They opened a $140 million brewery in Asheville this year

I will be watching New Belgium Brewing (and other larger craft brewing companies) closely to see when the next ‘shoe drops’.

Cheers!

 

Indeed, lots of parallels here with the Stone situation. You've got to wonder what kind of return they were looking for out of these second facilities that they have paid top dollar for.

 

I'm going to eschew my typical lengthy posting style and say, succinctly, if this is due to rough times, there can be no doubt: the bubble is popping (or at least transforming).

 

I respectfully disagree, because I think it depends on how you define the bubble. If you use the bubble to mean craft beer, then I don't think this signifies that the bubble on craft beer is popping. I think the popularity, marketability, and profitability of the craft beer market will continue for some time, particularly in relation to the popularity, marketability, and profitability of BMC beer or other alcoholic beverages. I think the industry as a whole will continue to show growth for 10 more years at least.

I think the issue is that examples like Stone and New Belgium show that there is a ceiling or at least increasing rate of diminishing returns in the industry. The market is built around the perception that small local breweries are good, as well as the idea that there is a lot of variety out there and everyone always wants to try the new big thing. No matter how good a specific Stone beer is, many craft drinkers would rather just try something new (not everyone, of course). Also, many would rather drink something local, and steer away from breweries that are too visible and widely distributed.

Living in New Jersey, I personally believe that almost every town around me could get it's own brewery and they'd all be profitable. I just wouldn't advise them to try and grow beyond the point of regional distribution.

Does this mean the bubble is transforming? I don't know. I don't know if the bubble ever meant BMC was out, and someone else should step in to fill those shoes.

Just my two cents.

 

I suppose somebody could define a segment of the overall craft beer market like: larger, multistate distribution craft breweries.

IMO these sorts of craft breweries are in very competitive situation right now. Whether this constitutes a “bubble” I am uncertain. Perhaps some BA who is an economist can provide further insight on this specific topic.

Cheers!

 

There is still room for growth. Wisconsin is (shockingly) devoid of very many truly great breweries. There is room here for many new breweries if they're good (and honestly even if they're not, they'd probably still do alright). We are in agreement on that.

While that seems to ring dissonant with what I said about the bubble bursting, I did put the caveat that it could simply be transforming, and, again, I think we're in agreement on this: it seems the market is currently unfriendly to "craft" breweries that have become too large for their own good. Will this somehow have a domino effect and send us toward a bursting bubble? I don't know; I am not an economist. I just worry that these former "success stories" and godfathers of the scene struggling may have farther reaching effects than we currently understand, and they may be bellwethers of harder times to come for all in the industry.

 

The top volume craft breweries are squeezed by the change in the top of the business (captive brands of the macros) and the surge in local breweries. I can't find a SN tap handle in my town, and I will say it would be better than the locals that have come on line.

The breweries that expanded were running at capacity, extra volume produced near the Eastern markets was a good decision at the time. Did they overbuild, that we can not answer.

 

Jeff, does the Brewers Association provide the data needed here?

• Brewing Company's brewing capacity
• Amount of beer that Brewing Company sells

Maybe @jesskidden has this information?

It would be interesting to compare these two metrics for the largest 10 craft breweries.

Cheers!

 

The old Modern Brewery Age annual Blue Book and the yearly Brewers Digest Brewery Directory used to list capacities for most breweries but the Brewers Association's The New Brewer yearly May-June listings note only sales (in some cases, those are only estimates).

Capacities are theoretical of course - After Schaefer built and expanded their brewery outside of Allentown, PA (now BBC's) their listed capacity claimed 5 million barrels - after Stroh bought it, it went down to 3.5 million (although other factors might have affected that - lagering times, beers brewed, new "fire brewing" kettles, etc).

 

Not really an economist here but have consulted with a few on a project.

First, you can relax about "bubble" since what seems to be happening is not a bubble or a "bubble." A bubble is what exists when the prices of something in the marketplace jump drastically withount any relationship to increases in real value, as in the housing bubble that burst in 08, with many home owners being left with loan debts that were significantly higher than what the value of the house or what house could be sold for. Most often an economic bubble is something identified after it has burst.

I think they would argue, as we've seen others say in some other threads, that what those breweries have encountered or are encountering is market saturation where there is more product out there than dollars to purchase it. So while there may be overproduction of beer the value of beer has not gone sky-high beyond its real value. The adjustments that will need to be made are new products (which we've seen a lot of lately, e.g., Stone's Wussie Pils) or scaling back on production, etc., which we've actually seen in the Boston Brewing annual report last year. Their decline in beer sales basically caused the price of a share to drop from a bit over $300 to about $150.

 

Just as an FYI, it's not a bubble. See my comments just above this post.

 

Don't know about over building but I'd say it's safe to assume more rapid expansion than the market would support, e.g., Boston Brewing has had an overall sales decline despite their branching out into products other than beer. The decline is attributed to decreasing demand for their beers, probably as a result of all the new breweries entering the market and the growth in popularity of alternative hard beverages.

 

Those other products like cider take away from a large % of growth from newer coming of age consumers. The decline in sales isn't just new breweries and recent beer trends.

 

Yes, in some of the new bottle shops I've seen more hard cider or stuff like "Not your Father's X" than I've seen of the craft brands purchase by ABInBev. Thanks for adding that into the mix.

 

it's basic supply and demand. The demand for beers like NB can't keep up with the supply now that they have production facilities on both sides of the country. I think Lagunitas actually got it right by selling half to Heineken and expanding distribution.

 

Jack, that last time I was in Chico the Mills River Brewery was not brewing. They said the Chico brewery was making a lot of beer, nearly 1 million barrels a year, but it was more comfortable making 850,000 barrels a year. Higher volumes can stress the equipment and staff.

Edit - I do remember that NB said that they added capacity to Fort Collins to give some extra production when the Asheville site was delayed due to brownfield site issues, as they were hitting capacity.

 

I'm sure you're aware but
"Best Damn ___" is InBev
"Not Your Fathers ___" is Pabst (also bought Woodchuck somewhat recently)
"Coney Island ____" is Sam Adams, as is Angry Orchard

 

I'm not inclined to discuss the bubble at all. However, your assessment of the situation is absurd. Craft beer as a category showed 13% growth last year from the previous year. The number of craft breweries in the country has continued to rise, yet the growth this year is down significantly. Figures are suggesting that the growth this year should finish somewhere in the 6-8% range. To assume that the craft segment will continue to show growth for another 10 years is a huge over-estimate. The rate of growth being cut by nearly, or even more than, half in one year would suggest that the growth will not continue for even five more years.

I work in the industry, and I can say that I have seen three or more years of double-digit losses for many of my well-established supplier partners. The increase in number of craft options has done nothing but dilute the market. Call it a bubble if you want, but potential new craft beer consumers are now more likely to be too intimidated to venture out than ever before, because the number of choices has simply become overwhelming in many markets.

Craft beer is not in danger of losing market share in the near future, but the growth is unsustainable and is slowing quickly. I strongly believe that true craft will never reach even 25% market share.

 

Unless there was a more recent development *, the Pabst-Woodchuck (Vermont Cider Co.) deal announced last December is only a distribution/marketing agreement --- "...PBC will have an exclusive license to distribute, market and sell all of Vermont’s cider brands in the U.S...." --- not a purchase of the company, but it did include an option to buy.

According to the Press Release at the time which announced the "Partnership":

Brewbound had additional info at Pabst Forms Partnership with Vermont Hard Cider

At this point, Woodchuck/Vermont Cider appears to remain wholly-owned by the Irish C&C Group, best known (among beer people) for the Tennants brand (which they bought from ABInBev) although, interestingly, they also have Irish import/distro rights for Pabst Blue Ribbon.