We’ve been talking for years about the craft beer bubble, asking whether or not we’re already past the golden age of craft brewing, a time when the industry is young and creative, and the future’s so bright, you gotta wear shades (which also help with hangovers, BTW).
Will things continue to get bigger and better, or are the good times already behind us?
Stone Brewing’s CBGO (Chief Beard Growing Officer) Greg Koch certainly thinks things aren’t quite as rosy as some might think, and he paints his outlook of the industry with a very vivid brush indeed (UT San Diego via BeerPulse ):
“We are in a time of irrational exuberance in craft brewing,” said Greg Koch, co-founder and CEO of Stone Brewing. “We are like a Third World bus, with all these people hanging on to the roof. Sooner or later, we are going to hit a bump in the road.”
Greg, back when his beard was but a pup…
I adore this quote. Not only is it a little bit snarky about the realities of public transit in less affluent countries, I can actually see what Greg says happening in my head.
The imagery holds up even when you break it down a bit. The bus is the craft beer industry, and the riders are all the breweries hanging on for their lives. Logically, the more established brewers like Mr. Koch got on the bus early, and have comfy window seats and are safely inside. It’s the emerging breweries, all the latecomers jumping on the bandwagon as it hustles by, that may only have a precarious perch up top with the luggage and Mitt Romney’s dog.
But is it a solid analogy? After all, we have yet to understand just how full the bus is at this time. It could be that there’s still lots of room for folks and their livestock in air-conditioned luxury. Also, we don’t know how big the bus will become as it continues to travel into the future. Craft beer sales continue to grow by double digits year over year, and new people continue to discover how good beer really can be. The road keeps stretching out smoothly as far as the eye can see.
But it can’t go on forever. Eventually there will be too many breweries out there, and some will begin to fail. And who knows, maybe craft ciders will become the Next Big Thing and eat beer’s lunch.
It’s impossible to predict exactly what will happen, but eventually SOMETHING will rise up from the road and cast those with the weakest grips into the weed filled ditches.
So inevitably, Koch will be right. Here’s hoping that it isn’t for a very long time.
When things do go sideways, beer geeks like us can all look back with fond memories at what was one hell of a ride.
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Beer & Whiskey Brothers 
Or perhaps a position similar to those that Obama choses to throw under the bus. I suspect there will be many who make it on a small scale with smaller distribution.
The Romney thing wasn’t political – he was the only candidate who I had motor vehicle material for is all.
I think there’ll be plenty of room for smaller guys and gals to carve out a niche, a lot like the wine world, which is endless (and BORING!).
I do think the craft beer market may be getting to the point where it can be seen as overly diverse – but I also don’t personally think that’s a bad thing or that it’s going to change anytime soon. I work at a large liquor store with a big selection of craft beer, and many newbies become so quickly overwhelmed when faced with new decisions that it’s sad. However, craft beer is still very indie, in the sense that to get involved in it beyond the surface, you have to seek your own knowledge and do your own research. The only craft beer ads you’re going to find on TV or in popular magazines are from the top 3 craft breweries, and again, that’s just the surface. The balance is struck between the big breweries that draw people in and the ones on the inside that continuously try a little bit of everything. The great “shakeup” is only going to occur when these large craft breweries start actively squashing their smaller competition. Is that something we’d want to root for?
No, we shouldn’t root for that. I think things will level off in the industry, but I hope there’s not great big “pop” of the bubble.
On Thu, Nov 15, 2012 at 2:04 PM, Beer & Whiskey Bros.
I don’t think the issue is the number of craft brewers out there. The most interesting bit in this quote is in the first part: “We are in a time of irrational exuberance in craft brewing,” What does he mean by that? That brewers are irrationally just brewing up a storm, without really knowing what they are doing? That they are empirically trying every combination they can dream of, without any sense to guide them through? Or that Styles and Tradition are happily forgotten in the big festive party that Craft Brewing is as the sky is the limit? Or something else entirely? One need to ask Greg to elaborate on that. The bus image, colorful as it is, is merely a distraction, if you ask me.
I took the “irrational exuberance” as meaning that everyone – beer geeks, wanna be brewers, the media, etc. – all think that everything is coming up roses for the craft beer industry and nothing is ever going to go wrong.
The “bus” analogy is a colorful way of saying there are bad times ahead, and not everyone’s going to make it through – everything isn’t as rosy as people might like to think.
On Thu, Nov 15, 2012 at 2:14 PM, Beer & Whiskey Bros.
I believe that if you are going to start a small craft brewery these days, you can’t possibly survive by offering a core lineup of “standard” beer styles while hoping to occasionally hit on a special release of some kind. The market is much too crowded for that. Some of the best new craft breweries in Colorado are either specialists in a certain style, or willing to offer up lots of unique beers. For example, Funkwerks only brews Saisons and variants of that style, Prost Brewing focuses on traditional German beers, and Crooked Stave only brews barrel-aged wild ales. These breweries really set themselves apart from a crowded beer scene by focusing on what they do best. Conversely, a place like Denver Beer Company never has the same tap list, since they are constantly experimenting with different styles and ingredients, which keeps things fresh for returning customers.
If you plan on opening a brewery today with a lineup that only includes a Pale Ale, an IPA, a Stout, and a Brown/Amber/Red ale, you are dead meat on a stick since there are plenty of other established places that offer the same thing.
Good point, Alex.
I’m going to open a brewery that only makes sours and call it “Old Soxwerks.”
The craft beer industry does suffer from a bit of schizophrenia.
First is some desire to ‘brew’ a craft beer commercially. But you MUST have at least a 7 barrel brew house (15 is even better supposedly) or it won’t be feasible, but in order to sell the volume which a 7 or greater barrel system could produce, you will have to hire a brew master since you will actually be tending to administrative duties. So you can’t want to brew beer as much as be a manager of those that do.
Then you establish a market segment and begin some growth arc, which may or may not be sustainable (Pete’s Wicked), and control is ultimately purchased by some conglomerate, which detunes the grain bill and turns your product, into the very thing it stood in opposition to at the start. And the cycle of life is complete.
The craft industry needs to leverage their advantages, instead of trying to imitate the big three with the blandification of flavors, and expanding exponentially, laden with new debt. Craft brewers are nimble and can change recipes faster than the big three can change the font on a label. Craft brewers have a tax advantage based on output, and a logistical advantage based upon location. Four dollar gas and diesel puts a squeeze on a mega-brewery five hundred miles away. Being able to self distribute in all states, for craft brewers, would be a good common cause. The big three don’t care about self distribution since they need the network which many craft breweries are compelled to use.
Just so long as there is a demand, even if it is slight, then the focus should be on producing a ‘balanced’ supply, which is facilitated with sensible laws which enable such an economy. (stepping off soap box)
Will the curve flatten out? Undoubtedly. Will the craft beer geeks disappear? No way! One major difference in this bubble is that its occurring in an industry that took a major political hit (Prohibition) and then was hogged for decades by a few pseudo-Pilsner producing monopolies putting out stuff that we drank only because nothing better was available.
We beer geeks won’t go away, though we may gravitate to one of two demographics–those who like traditional, session type lagers, ales, etc., and those who want new, cutting-edge flavors & styles (bull’s balls beer is a good example of this, as are the high ABV and flavored beers.)
The first demographic may just age-off and die. Alternatively, they may be replenished by maturing members of the current crop of Young Turks. (Henry Reinhard’s brews are a good example of marketing to this demographic.)
The second demographic will continue to be augmented/replaced by beer-discovering youngsters. The marketing danger w/ this set is that it will hold up only as long as there is room for innovation (i.e., more than one bulls balls beer is overkill.)
Any new or established craft/micro brewer should keep these two major demographics in mind and choose early-on which will be their primary audience. (I think its fairly obvious who DFH caters to–Sam is a smart cookie and can see the handwriting on the wall.)
Another mitigating factor, as already mentioned, is the Locavore phenomenon. Given the growing energy crunch, this consideration will undoubtedly play a larger and larger role in determining what and how much is drunk and by whom.
Not related, but maybe related:
http://www.cnbc.com/id/49067149/Budweiser_Thinks_Small_in_New_Release
Budweiser’s new sampler pack, which is out on shelves, includes a bourbon barreled lager.
Has anyone tried this – or would you be willing to try this? Next, Budweiser will probably say they found an ancient recipe of theirs for an IPA or porter to keep stabbing away at the craft beer market.
I think they’re sending me a set of these. I’ll try not to be snarky (and fail).
On Thu, Nov 15, 2012 at 6:15 PM, Beer & Whiskey Bros.
I just bought this the other night because my dad was coming over and he doesn’t like anything remotely craft (I know… it pains me greatly), so I wanted to grab something that I’d like a little more than MGD.
My 5-cent review: it was “meh”. All 3 styles were drinkable and perfectly ok, but not exciting in any way. It was essentially like having Michelob Amber Bock instead of Michelob.
The whole thing is just a ruse to make people think that Bud is trying out exciting new things, but they’re barely any different from normal Bud, so the maximum amount of people will still like it. Kinda like if McDonalds had a new “eXXXtreme” Big Mac, which was just a regular Big Mac with a slice of cheddar instead of american.
Just try not to fall head over heels in love. 😛
Last I heard, Sam Adams – the Grand-daddy of craft beer – just recently reached 1% of the beer market, which indicates to me that there is still a lot of room for growth. Historically, industries start out with a few pioneers, grow into many, many companies, and eventually consolidate into about 3 major companies. I want to believe that craft beer is still in the relatively early growth stage.
I hope the brewpubs stay, though. Even if Sam Adams, Stone, Southern Tier, etc continue to grow I would still like to see the local joints stay local. In my neck of the woods we have the Ellicottville Brewing Company in Ellicottville, NY (about 45 minutes south of Buffalo). They have 2 locations and what limited bottling they do is done by Southern Tier and pretty much limited to Western New York. I don’t know that they have any aspirations to be a major player.
I’ve been told (because I’ve never actually been there) that in Germany beer is still largely a cottage industry… when you are in a town, you drink the beer brewed in that town.
Maybe I’m old fashioned, romantic (my wife would disagree with this one!), and even a bit naive, but I would prefer to see companies stay local or regional rather than mega companies driving out the little guys.
My friend lives in Germany and he told me that each place you go to makes their own beer. So, instead of walking in and ordering a Bud or a Coors, you order a pilsner or a bock, and the understanding is that it’s their own in-house pilsner or bock.
Or altbier if you’re in Dusseldorf – I LOVE altbier!
On Fri, Nov 16, 2012 at 11:34 AM, Beer & Whiskey Bros.
My first take was “This guy sounds like the old man yelling at the kids to get off the lawn.” But reading the article, his quote made more sense, but only in his particular case. His local market is saturated with breweries and it is almost a guarantee not all of them will survive. But San Diego isn’t the US and to say the US craft beer market is saturated to the degree that San Diego appears to be is moronic. The greater DC area has about 10 craft breweries up and running, of various sizes. One has vowed to remain a nano-brewery. The others are almost entirely distributing at the local-to-state-ish level. Throw in the breweries that are in and around Baltimore and Delaware you’ve got maybe another half-dozen. Which is no where near the level quoted in the article.
It sucks for Old Greg (I’m Old Gregg!) that he has to operate in such an environment when he was more or less first, but that’s his problem, not mine as a beer drinker. Competition from the consumers standpoint is almost always a plus. It sucks to be him. But I’m not him. More breweries make me happy. Some will make great beer, some won’t. Hopefully the good brews survive. Yea Capitalism.
I really like ScottG’s point. It’s easy to forget about the horse-blinder effect we all have in our respective beer regions. I posted some additional commentary about the third world bus on my website. This article is quite poignant and really interesting. Well done Jim, well done.