Did the Craft Beer Bubble Burst (in 1997)?

popping-bubble

Sometimes I forget that there was life in the craft beer universe before the late 1990’s, when breweries like Stone, Dogfish Head and Russian River crawled out of the primordial wort.  But there was, and after coming across a nice piece at AllAboutBeer.com written by “Beer Curmudgeon” Harry Schuhmacher, I realize that the “craft beer bubble” people like to talk about may have already popped, more than 15 years ago.  

The article is look back at the 1994 Craft Brewer’s Conference.  It was a young and eager Harry’s first time attending the CBC, and as he recounts the excited vibe of the conference, he also shares some jaw-dropping growth stats about the “microbrewery” industry from the mid-eighties to mid-nineties:

The exuberance and electricity in the air were palpable. Craft beer was hitting the national radar, and rags-to-riches stories abounded. Since 1985, the craft beer segment had not experienced less than 20 percent growth per year. In fact, for most of the years between 1985 and 1997, volume was up 40 to 60 percent, and in 1987 it was up more than 100 percent. These were heady numbers, and everybody from disenchanted Wall Street financiers to burned-out engineers to young get-rich-quick swashbucklers was looking longingly at our little industry.

Those are some crazy numbers, nothing like the steady 15 percent or so growth the industry has seen in recent years.

All those suitcases full of money being thrown around by the get-rich-quick folks can do some pretty significant damage, and that’s exactly what was to come:

What we didn’t know back in 1994 was that this euphoric craft beer bubble was about to burst. The 40 high-volume increases we had seen since 1985 were to turn into a 1 percent gain in 1997. The frenzy of new contract-brewed brands had hit a fever pitch, and people were shipping beer to distributors regardless of demand. Suddenly, beer of questionable taste and quality started backing up the supply chain until distributors and retailers said “no more.” Shipments were refused and a shakeout ensued. Strong brewers continued to grow, but others fell like flies.

I think the key to this last passage is “beer of questionable taste and quality started backing up the supply chain.” As beer geeks, we know that when the product goes bad, our happy little universe will likely begin to struggle.

This makes me think of what the mega-brewers are trying to do with Blue Moon, Shock Top, Batch 19, and all the other mass-produced craft beer lookalikes – exploit a trend with products of “questionable taste and quality.”  Harry’s history lesson gives us a good reason to be wary of them.

He goes on to talk about his outlook on the industry and if we’re headed for a second bubble or not.  It’s a really smart and funny read, and you should really check it out for yourself when you have a minute.

Here’s to hoping that history doesn’t repeat itself.

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Categories: Beer

Author:Jim

Craft beer nerd, frequent beer blogger and occasional home brewer.

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25 Comments on “Did the Craft Beer Bubble Burst (in 1997)?”

  1. April 11, 2013 at 12:34 pm #

    I haven’t had a chance to read the article you linked just yet, but, it would appear some of these smart brewers were aware of this in the 90s and have taken the newest batch of small brewers under their wing. Take Dogfish Head, who knew they could expand very rapidly based on the demand they were seeing but chose to control their growth rate. They value quality so much, they chose to dump a batch of 120 Minute a couple of years ago. These brewers have a far reach and greater influence.

    Plus, the “drink local” approach seems to be reaching a nice balancing point – nano-brewers here in Fort Collins are totally fine with beers on tap at local restaurants and having a community at their tap-rooms.

    Or, maybe I’m just spoiled to live here 🙂

    • April 11, 2013 at 12:37 pm #

      I think slow and smart growth has been the approach for the past 15 years or so. I’m sure it also helps that the get-rich-quick people got burned by beer in the late 90’s. Once bitten, twice shy.

  2. Craig
    April 11, 2013 at 12:58 pm #

    I have been telling people the same thing the last couple years when they worry some markets might be saturated, but I think there is room for more. We may or may not hit a bubble, but it will be nothing like the late 1990s.

    I started visiting breweries around the country a couple years before that bubble burst, and I can tell you the “beer of questionable taste and quality” has nothing to do with the mega-brewers. There were plenty of breweries that would fit the BA definition of “craft” (which I think is BS, by the way) that were just awful…people that had no business getting near the brew kettle. I don’t think the mega-brewers can ever be accused of having questionable quality. They might choose to make a product that has little taste but their quality is exceptional. I can think of a dozen breweries off the top of my head that were so bad the experience still sticks in my head after 15 or 16 years – and it was everything from poor recipies, to dirty lines, to spoiled beer, to staff that had no clue the beer was even bad.

    These days, I have visited plenty of breweries with which I am not impressed, but it has more to do with their style or presentation, but only rarely is it an instance of just plain being bad at what they do. For example, I am not a big fan of German styles, but the most successful local brewery brews only German styles – I don’t care to go there, but I recognize the excellence of their product.

    I won’t get into my opinions on the mega-brewers and their forays into craft beer – I have a much different opinion than most of your readers and I might go on for hours – but I can assure you they had only a small role to play in the bursting bubble of the late 90s. That bubble was mainly created by a bunch of overzealous brewers who rushed into the industry with an “if you brew it, they will come” attitude but without having a clue about the beer (or maybe “commercial brewing” is more accurate) or the market and often without even a business plan. And there were many of the get rich quick variety who really did know nothing about beer.

    Anyway…these are all opinions based on my personal observations and the experience of having tasted so much bad beer during the 90s. I think the craft beer community, and potential investors, learned from that experience and any bubble that bursts in the future will, I think, be much less dramatic and likely caused by events outside the beer world.

    Having said all that, I might be completely wrong.

    • April 11, 2013 at 1:14 pm #

      Thanks for sharing your insights, Craig.

      I’ve been to a couple of brewpubs where I wanted to scuttle their kettle so they couldn’t keep selling their “craft” beer, so I can understand what you’re saying.

      I went back and forth with whether or not to use “questionable taste and quality” line because I agree that the big boys crank out a consistent, if uninspired, product. The quality is really questionable in that regard, but use of ingredients and penny pinching are still real concerns.

      I think big brewers getting into craft brewing might water down the whole affair and steal share from breweries that are crafting excellent products.

  3. April 11, 2013 at 1:13 pm #

    Poor Pete. He made Wicked Ales back then. I think there is a serious indicator now that craft is here to stay, the risk, if there is one, is knock off craft coming out of the big breweries. Blue Moon, Shock Top, Long Hammer, the whole Fifth and Blake portfolio. The other risk is the big breweries buying smaller guys and running them into the ground through portfolio sales and forcing sales people to “make the numbers” on good craft beer. I am thinking of Leinenkugel and Goose Island. I used to love Honker’s Ale and Goose Christmas. Now, MillerCoors has Lenini peddling Shandy like its lemonade…and frankly it is. I think the focus needs to stay on good, regional craft beer. I also think, and others might knock it, that crazy high ABV beers with insane profiles are a niche. I think a good brand can build over time based on a solid line up of reasonable beers…even session ales. Once you add the occasional seasonal and a couple off release schedule batches, if you are doing it right, there is room for you to grow in the right market.

    • April 11, 2013 at 1:20 pm #

      I agree that the largest uncertainty facing the future of the industry is how the big boys infiltrate and manipulate the little guys. Every business is run on numbers (or its not run for long), and craft brewers are making that work though good products, not excellent accounting. I’d like to see it stay that way for as long as possible.

  4. April 11, 2013 at 1:33 pm #

    Interesting perspective despite its potentially ominous potential (OK, maybe that’s a bit extreme but you referenced DH so I felt compelled to use the word).

    Do you really thing the Swiilionaires were paying enough attention to the distribution backlog and questionable quality of the craft product in ’97 such that they’d try to ding the current craft industry by recreating those dynamics (albeit by flooding the market with their crafty crap)? I hope not. I’d tend to thing that strategy would hurt their own numbers before it negatively effected the legitimate craft brewers.

    That said, I was somewhat surprised to see how many different crafty labels I saw in the coolers a couple hours ago during a Stone Dayman run (failed). Maybe I just haven’t been paying attention but there must have been 4-5 Blue Moon varieties on top of all the Schlock Tops and that was before I got to Third Shift, Batch 19, and Black Clown.

    Looking forward to checking out that article later.

    Cheers!

    • April 11, 2013 at 1:42 pm #

      Yeah, it seems the kraft beers (you know, like fake “crab” spelled with a “k”) are multiplying like bunnies. I’ve even seen them infiltrating the heart of the craft beer selection in places that should know better.

      It’s gonna get weirder as we go I’m afraid…

      • April 11, 2013 at 1:55 pm #

        I’ve seen the same thing and doubt it’s a matter of the retailer not knowing better. It’s a matter of their being paid better for that placement…..

        • April 11, 2013 at 2:07 pm #

          Oh, I don’t think it’s a mistake, but it’s also not the kind of thing you’d ever imagine at a place that has a reputation for being a craft beer mecca. Like I said, weird times…

  5. JLS
    April 11, 2013 at 1:50 pm #

    Blue moon HAS been around since the mid 90s, it wasnt just created to offset the “recent craft boom”. Brewmaster Keith Villa has a PhD in brewing science and is hands on in EVERY SINGLE receipe that comes out of the brewery. Batch 19 is a recipe that comes from the preprohibition log book. Not an interpretation of what is prepro style – it IS prepro style. Everyone is at a different place in their journey with beer. Everyone has different tastes and some might even think that the crazy high ABV/taste/profile beers are “of questionable taste” based on their own journey. Not everyone can have the insight and pallet that others do.
    And @Kenneth Willets, it’s Tenth and Blake, not Fifth and Blake. And it’s spelled Leinies, not Lenini, as in Leinenkugel. A family that is now on it’s sixth generation involved in the family brewery.
    There is so much history and heritage in and LOVE that goes into brewing. Ask any brewer, regardless of who they brew for, beit themselves, a local, regional or big brewery, and they will all tell you this – they love beer. They love to brew it, they love to drink it and they love to share it. And at the end of the day, isnt that what its all about? And isnt it the responsibilty of those that are further along on their journey to hold the hand of those that arent so far along rather than intimidate them and insult breweries that dont fit into what they find to be “inspired”? When was the last time you talked with a brewer at a big brewery to see what they thought? #vivalacerveza #emp

    • April 11, 2013 at 2:02 pm #

      At least divulge that you do on-premise work for MillerCoors before coming in here and lecturing us, Jeri.

      • JLS
        April 11, 2013 at 2:13 pm #

        I didnt lectur, I tried to offer insight and share in a few sentences that there is so much more to “the big guys” than shortsighted perceptions. AND I hashtaged with #emp – employee. i didnt hide anything. And interesting that all you saw was a lecture rather than any other perspective….and Im with Tenth and Blake, not on premise for millercoors.

        • April 11, 2013 at 2:27 pm #

          I understood your perspective quite clearly – so much so that I googled you and knew what I would find before the results came up. Also, you need to update your Linked In profile – Tenth and Blake isn’t on there.

          Also, writing “#emp” doesn’t clearly state you are an “employee.” It could stand for “Electromagnetic Pulse” (widely used on Twitter) or “Eat More Pork” or “Everyone Must Pay.” Plus, hashtags are #stupid.

          And while the spirit of your comment was “they (we) love beer, and isn’t that enough?” you took the time to lecture Kenneth on his reference to “5th and Blake” and how he spelled Leinie’s, both of which had no bearing on the spirit of what he had posted. It felt like you were attacking him the only way you could in an effort to discredit what he wrote wholesale, and that’s bullshit.

          Anyway, you’re entitled to your opinions and I’m happy to have you here, but don’t nitpick the regulars because you don’t agree with how they see your company.

        • JLS
          April 11, 2013 at 3:18 pm #

          My apologies at Kenneth if I offended you for calling out not knowing fully the organization that you were calling out. Im sorry Jim for not updating my linked in profile. Im sorry that you dont care for the the organization that I am employed by. But I cannot apologize for my love for an organization that has instilled in me the love for the liquid and the story and the love that goes into the brew, regardless of who brews it. An organization that challenges me to think outside my own boundaries and to experiment with styles and tastes and competitive products, even if I dont think I might like them. A company that sees value in the journey that all beer drinkers are on, and the fluidity of that journey. An organization that promotes creativity on the part of its brewers and keeps the legacy of the brewers, deeply involved in the business, the brands and the brewing. A organization that promotes right account, right beer, right occassion as to maintain the integrity of the beer and the brands, including those that are part of various “craft” collections within the portfolio. And I apologize I did not put a disclaimer that I was employed by a brewery. i thought putting hashtag would at least put some insight into it and not have me be attacked for being employed “by the big guy”. signing out.

        • April 11, 2013 at 4:05 pm #

          The only real issue was not clearly stating that you have an allegiance to all of the products you were defending.

          We’ve had a few run ins over the years with employees of big breweries and their advertising/PR agencies coming in here and masquerading as regular beer-lovin’ folk who just love them some good old-fashioned macro beers.

          You didn’t do that, but the lack of clarity set off my alarm bells is all.

          I apologize for being abrupt – you are certainly welcome here.

          Just don’t use hashtags, because honestly, those are still stupid. 🙂

  6. April 11, 2013 at 1:56 pm #

    There’s an old Latin proverb that translates to ‘Nature abhors a vacuum.” Time and again, when a brewery has been deep-sixed, another has stepped in to take its place.

    There’s room out there for good beer of all kinds, ABVs and flavors. If its well-made, with attention to detail, you’ll likely find an audience for it (mountain oyster beer comes to mind here.) Its obvious from craft’s gains in market share over the past 2 years that many, many Americans like good beer. That appreciative audience is not only here to stay, its growing. If current and/or new micro and craft breweries continue to please their palates, they will thrive.

    Also, if Big-Beer control of a once great brewery like Leinies or GI ends up leading to the low-road, it’ll die (and in that case, good-riddance.) If, however that brewery remains true to its original brewing traditions, it’ll keep most of its loyal customers, regardless of who owns its stock. In other words, yeah I know Bud owns GI. So what, as long as their beer tastes good, I’ll keep buying it and so will many others. To help prove my point: Old Dominion, another craft brewery owned in large part by In-Bev, has a contender in the semis of the local DC Beer-off. Believe it or not, its their Oak Barrel Stout—you remember the one (scan thru your archives if you don’t) where they use oak chips rather than aging in barrels. Yeah it sounds like cheating, but it tastes good, so….

    • April 11, 2013 at 2:06 pm #

      I agree that if the beer is good, it’s all good.

      But all things being equal, I’ll support the little guy, because it’s folks like that who push the boundaries, which is something I adore.

      • April 12, 2013 at 4:54 pm #

        I do too. But I’d also like to see Big Beer really buy into micro and craft’s quality paradigm and mind-set and produce beers that can actually compete for the craft-impresario’s $$. Everybody stands to win in that scenario.

        For instance, after a hard day out on the back 40, I just finished a bottle of Southern Tier’s Eurotrash Pilz. Was it an outstanding beer by the standards espoused here? Probably not, but it was good, it was refreshing and ST has no reason to be ashamed of it. Imagine if the standard Bud or Coors tasted like that, I know I’d be drinking more than a six-pack or two this coming summer. What a great beer to accompany steamed crabs (or clams, or mudbugs, etc…)

    • JLS
      April 11, 2013 at 2:15 pm #

      Great perspective massugu!!! Big guys, little guys and everyone in between can make good beer and they can make bad beer….let the liquid speak for itself and the market will be the judge!!!

  7. April 11, 2013 at 2:56 pm #

    Hey- how many beer curmudgeons are there, anyway!?

    From what I remember, the bubble that burst back in the nineties didn’t affect many real brewers –big or small– it affected many pseudo-brewers who were contracting their brands at some of the larger regionals at the time (F.X. Matt, Henry Weinhard, Pittsburgh, Genessee, etc.). It was these fake microbrewers (read: Quick Buck investors) who were producing inferior “craft” beer that brought on the first bubble burst.

    I’d also like to go on record as saying there won’t be a second one.

    • April 11, 2013 at 3:07 pm #

      Well there’s Harry (self proclaimed), you (documented here) and, judging by the “get off my damn lawn” response I gave that young lady from Tenth and Blake in the comments above, there’s me as well. 🙂

      It’s an important distinction you point out between quick-buck contract brands and actual brewers, but it also show how much more stable and healthy the industry is today without them.

      I think you’re right about no second bubble, which means all three curmudgeons agree!

  8. Matt
    April 11, 2013 at 6:32 pm #

    I don’t believe the craft beer bubble will burst at least not any time soon. I’m still very new to craft beer, I started drinking it about two years ago. I think that craft beer has really opened up people’s minds like myself on what beer is, what it can be, and where it’s going.

  9. April 13, 2013 at 6:32 pm #

    I would like to see what (I hear) they do in Germany – its all micro and local breweries and they are supported by the local community. Unfortunately, I don’t think our capitalist market and consumer habits will support it. Personally, I try to stay relatively local – for me that’s primarily Southern Tier and Saranac because I live in… well, Pennsylvania, but on the NY border. Although, admittedly Sam Adams and Sierra Nevada get some of my beer budget as well.

    Regarding the big boys, they get zero of my budget primarily so I can support the regional breweries. Last summer I attended a few shindigs where the only option was Coors Light… bland? yep. Uninspired? sure. Was it horrible? Actually, not really… on a hot day if someone hands it to me it actually goes down pretty easy… kinda like, well… water 🙂

    On last thought… I am starting to home brew so Brewers Best (sold through LOCAL dealers, I may add) is going to start getting more of my budget. I will still buy the other stuff – just less of it. Southern Tier has a new 2X Steam that I’m very anxious to try and come autumn there will be the Sam Adams Harvest Collection and So. Teir crack… er… PUMKING ALE!!

Trackbacks/Pingbacks

  1. Beer Origin Story | cueballandeightball - November 7, 2014

    […] Of course this book came out right before the first craft beer bubble burst.  Flipping through the books pages, is a time capsule of breweries that no longer exist.  That includes my Pete’s Wicked.  Too many people making too much crap beer nearly sunk the industry around 1997. […]

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