Growth, growth, growth, growth, growthity growth! So much growth already. Craft beer is looking like the Dot Coms of the late 90’s early 2000’s. Oooh…That can’t be good. Or is it? Truth is we just don’t know. The craft beer industry continued its blistering pace of growth in 2010, during a down economy blah, blah, blah.
Yeah, the economy still sucks, gas prices are creeping through the roof, still record foreclosures and a more than sluggish real estate market, and now inflation. Most retail sectors are forecasting close to double digit price increases, and through it all, like Arnold Schwartzenegger in a Terminator movie, Craft Beer is surviving and thriving…
The numbers don’t lie. And the Brewers Association has done a great job putting together all the data here. And it is compelling. Craft beer is up 11% in 2010, and that is on top of an 8% increase in 2009. That is retail volume. Retail sales in the craft market have again cut into sales in the Mega Brewery market as well. This year being 4.9% of total US beer sales and claiming 7.9% of beer sale revenue. Production has increased by a million barrels up from 8.9 million in 2009 to 9.9 million in 2010. And finally the number of breweries is at an all time high above pre-prohibition levels. What is more there are over 600 new breweries in various stages of planning.
So this all sounds really good, right? Well my father always told me if something seems too good to be true, it probably is. I’m not disputing that craft beer is going through some sort of renaissance here, but how sustainable is it, and are we headed for the dreaded “market correction” that will blast a bunch of breweries in the face? It is hard to know, but I now have a bit more appreciation for the apprehensiveness that many regional breweries feel about large scale expansion at this point.
Before everything went to hell in a hand basket in our economy, we went through 10 years of unprecedented expansion. We’ve all lived it, and are coping with its impacts! Could it be that brewers are actually trying to learn from the past and not over build and borrow a lot of money and go into massive amounts of debt, just so they can sell product 1500 miles away?
I have been one of the most vocal critics of breweries not expanding to meet their market demand, but is that so wrong? I’m beginning to change my tune a bit. While I still don’t like breweries pulling out of existing markets or contraction, I can definitely see why some are refusing to grow by massive proportions, even though in the short run they could probably sustain such an investment.
It isn’t today, or tomorrow or even a year or two from now that brewers need to be wary of, but 5 or 10 years from now. This wave of increase in craft beer consumption probably isn’t going to come to an abrupt end like it did during prohibition, but it will probably slow, and just like the new homes market, a slowing market can have a major effect on overall health and stability of that industry.
So, I’m no economist, but I do know the news is good, however it is beginning to be a little too good for my comfort. Not that things will collapse, but we may reach a stabilizing point where things will change, for the better and worse as the craft beer movement keeps rolling along.