Too Many Breweries? - Bubble Will Burst

Discussion in 'Beer Talk' started by Celtics76, Jan 17, 2013.

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  1. Celtics76

    Celtics76 Defender (656) Sep 5, 2011 Rhode Island

    Here in RI we've seen Grey Sail and Foolproof recently open. On top of that, we have Newport Storm, Revival, Narragansett (though technically not brewed in RI) and various brewpubs (Coddington, Union Station, Trinity, etc.). I believe there are a couple of other breweries planned as well.

    I have to say I'm a fan of most of these breweries (NOT Union Station though) but feel the market is becoming way too saturated to be able to support this.

    What are everyone else's thoughts, and is there a lot of expansion in other parts of the country? I'm a Finance Director so I'm interested in the business side of things. I get the sense in the next few years we're going to see many of these breweries go out of business.
  2. Bi0HaZarD

    Bi0HaZarD Initiate (0) Aug 5, 2011 California

    I work in San Diego, I cant count how many have opened in the past year, but in a town about an hour north there have been 6 new breweries opened in the span of a few months. I don't see that as sustainable at all in the long run. Most make good beers, but I dont see them taking off to grow much larger than they are now.
    dianimal likes this.
  3. Zhiguli

    Zhiguli Initiate (0) Jul 12, 2012 California

    It's a good thing, the more the merrier. They'll have to compete on quality and pricepoint and the strong ones will stay open. Seems to me like we win.

    finance as well
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  4. Providence

    Providence Initiate (0) Feb 24, 2010 Rhode Island

    I agree that there are a TON of brweries these days and that the bubble will burst.

    However, this is not a bad thing in RI. We've been way behind. We still need more! We're getting clowned by our neighbors in New England. Our beer scene is rubbish. Grey Sail is the best brewery in RI by a mile in my opinion (although I haven't gotten to try Foolproof yet. I would imagine they will be #2 on the list though, as there isn't much competition 'round these parts).
  5. FosterJM

    FosterJM Poo-Bah (2,716) Nov 16, 2009 California

    Wow. Where is my CBS snifter so I can sit back and #markintihar it up this AM. You just #Markintihard that dude hard.

  6. marquis

    marquis Crusader (759) Nov 20, 2005 United Kingdom (England)

    There are over 1000 breweries in the UK and rising , with a population of ca 60 million. Lots of breweries thrive in Germany. With just over 2000 in the US , bearing in mind its size and population there's a long way to go yet.Look forward to it :slight_smile:
  7. MatthewPlus

    MatthewPlus Aspirant (253) Jan 2, 2013 Florida

    in the tampa bay area, we too have had an explosion of breweries in the past two or so years. there are a couple winners, ccb obviously, along with 7venth sun are the headliners. but i am of the opinion that as more and more quality breweries open, beer will become far more regionally based. demand will increase beyond the capacity of brewers and will force them to reduce distribution range. craft beer bars wont have a need to carry anything other than regional beers, as so many good options will be available locally. Craft beer is not going away. nobody gets OUT of drinking craft brews and reverts back to natty light or miller lite or whatever swill they drank in high school.
  8. fredmugs

    fredmugs Poo-Bah (1,500) Aug 11, 2012 Indiana

    One of those past threads mentioned a brewery per 30,000 in population is sustainable I believe. There are two breweries in my town of roughly 75,000 and I know a guy who is getting ready to open one so that would put us right at the tipping point. It will be interesting to see if he can stay in business.
  9. Cascade77

    Cascade77 Initiate (0) May 14, 2009 Vermont

    The phenomenon that is occurring is that beer geeks are starting to have trouble keeping up with every new beer that every new brewery is releasing. In other words, there are too many new breweries for beer geeks so their perception is that there are too many for the drinking populace to support. The country itself could easily support many more as long as we keep taking market share from BMC.

    That's not to say there won't be a few shake outs along the way, but I don't think we are looking at going back to the dark ages of the 70's nor do I think the shake out will be anything like we saw in the 90's. Not a bad thing. The cream will rise.
  10. dumpman

    dumpman Initiate (149) Feb 6, 2010 Rhode Island

    Sustainable local breweries trump the large macro brewers in my opinion.
    Instead of large corporate profits keep your local brewer profitable, keep the business regional.
    Pahn and SammyJaxxxx like this.
  11. draheim

    draheim Poo-Bah (2,419) Sep 18, 2010 Washington

    Or... if he makes better beer, markets it better, and makes better decisions than at least one of the other two, it will be interesting to see if they can stay in business. That's how this whole thing works.

    OP, Washington State has 165 breweries and 6.8 million people. That's a brewery for every 41,000 people. Colorado has 153 breweries and 5.1 million people. That's a brewery for every 33,000 people. Oregon has 142 breweries and 3.9 million people. That's a brewery for every 27,000 people.

    Rhode Island has 11 breweries and 1 million people. That's a brewery for every 90,000 people.

    I think you'll be fine; in fact, it looks like you have some catching up to do.
    Celtics76 likes this.
  12. JulianB

    JulianB Initiate (0) Feb 1, 2012 South Carolina

    If there is going to be any sort of shake out in the craft beer industry, I imagine it's going to start with breweries that are mainly/only selling expensive bombers of big/barrel-aged beers, without having a reputation established (so not The Bruery etc. but newer, smaller ones).
  13. jegross2

    jegross2 Meyvn (1,227) Jan 3, 2010 Illinois

    Too many brewpubs? Thats like saying there's 10 restaurants in my town and only 7 days in the week.
  14. FlakyBiscuit

    FlakyBiscuit Initiate (0) Sep 11, 2012 Pennsylvania

    I have pondered this as well fellow finance director. I think those who succeed will scale the business accordingly. There is quite the capital investment in running a brewery and I am not sure anyone would get in this business for the money. An initial micro or nano brewery can probably survive some saturation cause the cost structure is small. If a brewery takes that next expansion step, then they better be well established in the marketplace or they will never recover those investment costs. We are already seeing a sort of differentiation between those brewers that have expanded and are expected to be available to customers (Great Lakes, Sierra Nevada, Founders, Dogfish, Stone, Bells,etc.). As such, I expect we will see levels of brewers. Local, regional and more national. Within each segment, those who carefully expand and continually turn out high quality, consistent, in demand product, will survive.
    LeRose and Polasiuss like this.
  15. SammyJaxxxx

    SammyJaxxxx Poo-Bah (2,220) Feb 23, 2012 New Jersey
    Premium Trader

    It is important that you support local independent businesses-Not just breweries. Support your local hardware store, sporting goods store, shoemaker etc. Local indepenent business are good for your community as a whole.

    The fact that some breweries will close does not mean there is a bubble. Not all businesses are successful. that is a fact of life. 50% of new restaurants fail. Does that mean there is a restaurant bubble?
  16. steveh

    steveh Poo-Bah (2,099) Oct 8, 2003 Illinois

    By many a nay-sayers' opinion, the bubble's been bursting since 1999.
  17. DonDirkA

    DonDirkA Initiate (0) Dec 14, 2011 Arizona

    I just took a tour of Stone the other day and the guide was saying that San Diego county currently has 60 breweries with 20 more in different stages of opening. That'll be 80 within an hour of each other.

    I don't think this "bubble" will burst anytime soon though. I mean there are roughly 2400 craft breweries/brewpubs in the US. That's one brewery for every 129,829 people. I think we are okay for now. Craft beer makes up around 6% of the current beer market. So there may be a lot of them but they aren't oversaturating the market. If AB-InBev can control 47-53% of the market (depending on if the Modelo deal went through, I'm not up to date on that) and they don't collapse then why should all the little guys? Just keep supporting them and they'll keep growing. We have gone from 3 breweries to 6 in less than a year here in Tucson, AZ and the Phoenix area has probably more than doubled in the past year and they are all doing well.
  18. VitoFerrante

    VitoFerrante Initiate (0) Sep 11, 2012 Pennsylvania

    Breweries that make a decent product and can will make it.
  19. mychalg9

    mychalg9 Champion (808) Apr 8, 2010 Illinois

    If you count how many people drink craft beer and then count how many people don't drink craft beer, it sure seems like there is plenty of room for expansion.
    dumpman likes this.
  20. tjensen3618

    tjensen3618 Initiate (0) Mar 23, 2008 California

    Breweries that won't survive the bubble; Ones that make solid to tasty beer but are selling it mostly through >$7+ bombers. They are surviving right now due to the ticker mentality and newness of their brand, not many people are putting these types of breweries in their everyday/repeat purchase category.

    Breweries that will survive; If you do one of the following- make decent beer and put them in 6 packs, or get a strong local draft presence, or you have a great pub attached to your brewhouse, or you make phenomenal beer and you can repeat sell it in the $10 bomber range and people will pay it.
  21. jbertsch

    jbertsch Meyvn (1,099) Dec 14, 2008 Massachusetts

    I know Rhodey is a small state, but you think its mere 10 breweries = over saturation?
  22. loony4lambic

    loony4lambic Initiate (0) Nov 26, 2012 California

    I feel like there are WAY to many breweries. Its grown beyond a hobby, and beyond a love of the craft. Half of the new beers I try nowadays SUCK because of these people opening breweries because its the thing to do. Really? From one batch of homebrew to Commercial? STOP OPENING BREWERIES AND LEAVE ROOM FOR FOLKS WHO KNOW WHAT THEY ARE DOING.

    Who are the ones who know what their doing? GREAT craft breweries that have been around for years. Aspiring homebrewers who have put ALL of their time into learning and experimenting so that someday they can open a brewery, that releases GREAT beer. My point is, Way too many breweries are opening with Low quality beer and the bubble will burst soon. Just my 2 cents on the subject
  23. westcoastbeerlvr

    westcoastbeerlvr Poo-Bah (2,126) Oct 19, 2010 California

    I think it's dangerous to compare the British brewing scene with the American one. For British real ale producers the local pub is still king. They produce cask conditioned beers that are designed to be consumed within a short distance from the brewery, and as such they operate on limited production capacities and the business model is not geared towards a constant need to increase production.

    Many American breweries on the other hand see vanguard breweries such as Stone and New Belgium as their ideal production model. They invest heavily at an early stage in growing their capacity, distribution, and range of styles produced, and if this far-flung continuing increase in craft beer consumption in general and of their own brand in particular doesn't pan out, they see a negative return on investment. I see cities such as Portland as being some of the few that haven't bought into this bigger-is-better mentality, and have by and large kept production and consumption local, as being some of the few that will be truly sustainable.

    The good news is that like others have said, I think that in general the good breweries will weather any contractions or plateaus in the craft beer movement, while the more mediocre will flounder and in general we'll be better off for that. That said, we'll probably all see some favorites go, and we'll see some really shitty ones survive, just because they have more business-savy, better distribution, etc.
  24. 77black_ships

    77black_ships Initiate (0) Dec 4, 2012 Belgium

    Around 1900 there were 3000 lambic breweries in Brussels.
    This was just one part of the country & one type of beer.

    Even now still the amount of breweries that the States have now is nothing compared to what once existed in the old world. Even now still, the amount of breweries in the States is very small compared to what you have in Germany, UK, Belgium, Denmark etc. there is a lot of growing, with local brewpubs, smaller productions and people doing brewing as hobby instead of a fulltime job & people getting used to the idea of getting a local beer instead of a big brand at a bar, the amount of breweries in the USA could easily increase many, many times over.
  25. BeerLover99

    BeerLover99 Poo-Bah (1,607) Dec 13, 2008 Illinois

    I think you make good points. As a teacher/Historian, facts are facts, only the popular and strong will survive. That is why I am shocked when I see tons of breweries popping up that have either weak craft beer or not even 1 good beer. How can they survive vs the big craft brew monsters that have national influence? If you want to get into this business you better have a mighty good product. We have tons of cheap, bad, mass-produced beer, so why on Earth go cheap on the ingredients or not be innovative?
  26. BrewsoBrewco

    BrewsoBrewco Initiate (119) Feb 15, 2011 Oregon

    I don't think that number carries much weight. A place like Bend, OR, which is just about the same population as you stated, will have 20 breweries by the end of 2013, including one of the top 10 biggest craft breweries barrelage wise in the country. And every single one of them is killing it as far as business goes. Not one is struggling right now. It's crazy

    I think you are right in a sense. We are seeing a little bit of a resurgence of the mentality of of the 90's where it was the thing to do to open a brewery, because you could make money at it. All those breweries closed, and some that didn't deserve too, because the bubble burst. But for as many breweries that are opening with people who have only ever homebrewed or really aren't in it for the right reason, there are the same amount that are being opened with people who do know what they are doing, and can and will make a great product. Eventually there will be a bubble burst, and some good breweries will go down along with the leagues of the bad, but it's probably going to be a good while, and at the end of it there will still probably be multiple breweries in a lot of towns. It's not going to be the 90's where people tried craft and then went back to macro. They are going to realize the good craft and stick with the good craft. Thats just my .02
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  27. loafinaround

    loafinaround Initiate (0) Jul 16, 2011 New York

    can there really be a bubble right now? craft brews are $$$, and our economy still isn't the best. In several years, i bet there will be a larger craft tbeer market, not a smaller. As for the # of breweries, it's similar to the # of italian restaurants in the ny metro area. Always in excess... always fierce competition, and only the best survive.
    I don't think a bubble will "pop"... I just think as many breweries will close as will open in the long term.
  28. ScottUCF84

    ScottUCF84 Initiate (0) Apr 7, 2006 Florida

    I think that in certain regions the markets are becoming saturated, but the US as a whole still has a lot of room for new breweries. Down here in Florida we are seeing more beer bars and breweries, and although I don't have financial numbers to support this, I really feel that there is room.
  29. BrownNut

    BrownNut Initiate (0) Jul 11, 2011 Florida

    I keep seeing this question/prediction but it keeps not happening. I think we will see plenty of breweries come and go, but I don't think that will take the form of a bubble pop. I think craft's marketshare will continue to creep up, particularly as the economy improves, new standout players will emerge and join the ranks of the bigger names, and in the background, tons of smaller breweries will be going in and out of business like in most industries.
  30. ShogoKawada

    ShogoKawada Initiate (0) May 31, 2009 Pennsylvania

    I don't know- if some bars around here would drop the 7-8 total crap tap lines, there's a shot.

    Grey Sail rocks it. Foolproof IPA is good- we'll see. Haven't had The Bucket yet.

    Revival ain't going anywhere either.
  31. ShogoKawada

    ShogoKawada Initiate (0) May 31, 2009 Pennsylvania

    And on a larger note about the RI beer scene- can we get some god-damn growler law revisions? Seriously.
    fineout and Celtics76 like this.
  32. CellarGimp

    CellarGimp Initiate (0) Sep 14, 2011 Missouri

    IMHO there will be an inevitable shakeout just like any other industry. However, I do not see a huge consolidation of power to save on back-office process, etc.. The whole intrigue of craft is the huge variety. It is not simply a matter of 3 players jockeying for the #1 spot. If it was, Sam Adams, Sierra Nevada and New Belgium might be the only companies left standing. I don't see this happening. However, I can't imagine that the current torrid pace of openings is sustainable. The cream will rise to the top. Also, their is the whole local thing going on. If your home market can support you alone and then you start to distribute beyond your hometown, you can probably make it work. However, you better be reinvesting yourself frequently and always bringing something new to the table.
  33. SFACRKnight

    SFACRKnight Meyvn (1,238) Jan 20, 2012 Colorado

    We have 6 times the population now than we had in 1887. Seems to me like we have room for more.
    Droogins likes this.
  34. AxesandAnchors

    AxesandAnchors Initiate (0) Nov 21, 2012 Oregon

    I think what we're likely to see as more and more breweries hit the scene is some of the breweries/pubs that have been around for a while but have gotten by with mediocre product will fade out. Competition is becoming more fierce, and the consumers palate is evolving. I think across the industry there has mostly been little attention paid to atmosphere and service as well, so I would imagine places that offer the whole package will see larger numbers of patronage and those that are doing the minimum will suffer and/or fade out.
  35. Cascade77

    Cascade77 Initiate (0) May 14, 2009 Vermont

    Huh? Where are you getting that statistic? I'm skeptical.
  36. TheTinDoor

    TheTinDoor Aspirant (238) Aug 12, 2012 Maryland

    "Bubble" indicates an unsustainable increase with little underlying increase in value, typically driven by investment, followed by a contraction. Think:
    • Tulip bubble: people investing in tulip bulbs for resale (not personal use)
    • Internet startups ~2000: stock-market driven investment in companies with no underlying value
    • Real estate bubble late 2000's: can argue the causes, but a big driver was certainly the huge demand for mortgage backed securities (investments); underlying real estate values didn't change much
    I see breweries as a different animal. These are not investments, but new businesses. They are not being over-valued by any market, simply selling products. Certainly there will be a saturation point in specific regions, at which point adding new breweries is a zero-sum game. However I think it's unlikely that there would be the "contraction" phase of a the typical bubble burst, rather an equilibrium reached.
    How much longer it takes to reach that equilibrium is the real question...the potential customer base (all beer drinkers) in the USA is much, much larger than the current base (craft beer aficionados).
    westcoastbeerlvr and PaulQuinn like this.
  37. jRocco2021

    jRocco2021 Aspirant (295) Mar 13, 2010 Wisconsin

    You could say the same thing about bars but you'd be wrong on both counts. The more people that start brewery's the better it's keeps the well established brewery's from getting lazy.
  38. evilc

    evilc Initiate (0) Jan 27, 2012 California

    I feel like Bill Murray in Groundhog Day.
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  39. Celtics76

    Celtics76 Defender (656) Sep 5, 2011 Rhode Island

    Grey Sail is getting some good buzz (though I've only tried Flagship, which is just OK), I just find it hard to keep up with all the local breweries (which I try to support frequently) in addition to the nationals I enjoy. There will eventually be a downturn in my opinion, though currently interest in craft beer is still rising. Will take time.
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