Yahoo Finance: Problems for craft brewers

90% of craft brewers buy on contract.

It is the very, very small brewers buying on the spot market.

 

90% of all statistics are made up on the spot!

 

I saw that number yesterday, actually. Just looked it up, its OVER 90%, so I may have been low.

 

See? Told you!

 

There were many others that were making good beer, but had debt that was taken on with the thought the market would expand and lift the boat - Catamount is the example I remember.

 

Here's my thoughts, as someone with some economics background...

1. I think the craft beer growth and likely bubble busting are completely unrelated to hops in the long run. The hop shortage is due to the predictive nature of the ag industry. Exorbitant hop prices will likely correct in the near future as the ag industry changes their growing practices. Long term the affect will be likely seen in the marginal increases in other ag products (cost of not producing something else, think corn ethanol's affect on food prices). This should only have minimal affect on the industry as a whole, in the long run. The whole thing will right itself in a year or two. If the $'s there the farmers will find it.

2. I personally wonder how many craft brewers can be profitable in an increasingly competitive marketplace. There's only so many beers that can be drank. And only so many consumers that care about a higher quality product, and then still how many choose a Deschutes or another major player vs the small guy down the street. BA lists 134 brewers in Illinois alone, sure some Rock Bottoms and other chains, but still say its 110 legit brewers in the state. There's only so much shelf space, and only so much demand. I get the feeling there's a lot people making terrible bets on their wort. I hope I'm wrong and the demand is in fact unlimited and the Inbev and MillerCoors die the death of 10000 cuts. But I just don't see more than 15-20% of the beer buying population paying $10 a sixer.

 

yep true of Any biz. over 50% fail. I think whatever happens will be local in nature.

there was a dip in the 1990's I think Jess had the numbers.

many chains of micropubs like Hops failed.

 

I be honest with yea I thought this since 1998, and so far its Not happened yet. I do think it will peak, I mean it has too right? but does it really???, I sure do NOT know


first off no way is bmc going to go away for many reasons. at least not in 10 to 20 years, maybe 50....
My market is still growing but how much beer they are selling and If there even making money is a good question. I think most are in debit up to their butts....time will time...

I try not to say bubble folks get mad about that word. things will consolidate though. That I bet money on.

 

About 10x the number we have now.

 

Point 1.
The hop prices are not exorbitant for the common public domain varieties. Hop growers don't make a ton of money most years, often the cost of producing the hops is not recovered. Sometimes the hops are left in the field, as it does not pay to harvest. The farms do make money when there is a price spike. There are not many family hop farms left, and most have been at it a long time and know the costs and know how to grow hops.

The high priced hops are the trademarked/patented ones like Citra, Simcoe, Amarillo, Mosaic, etc. Only grown on certain farms, and acres are limited so that the growers make enough to be profitable. That is where the select growers that have those hops have adjusted and found the $.

Point 2
The taproom makes many breweries profitable serving the local market. There are some near me that are just sold at the Tapeoom, and are making a go of it. They are making a living serving beer to the local community, not getting rich.

 

Interesting timing. A report on rising hop prices followed by a merger of two of the larger producers of hops. http://beerpulse.com/2014/08/yakima...erations-into-yakima-chief-hopunion-llc-3405/

I understand these two combined their US craft operations a few years ago, but now they are one company globally. Any idea what the market share is for the two companies domestically and globally?

 

Assuming growth continues and there are problems mentioned in the article, at least it might mean some filtering out of the mediocre to poor breweries. We're long overdue for that. Too much crap occupying valuable shelf space. Freshness problem is worse than ever.

 

Civilization exists there?!

 

I did see that the company is owned by hop growers.

The largest broker in the world is/was Barth-Haas out of Germany. I don't know if the new company is bigger.

Many big breweries have contracts with individual farms. One would have to do some research to see what % of the crop goes through which channels.

 

I think even if this went into a direction where it would become a problem there would be a way to get around it. And if that means cultivating/splicing new hops.