There is no "craft beer bubble". But breweries should be careful.

by Chris McClellan

 

I'm, of course, referring to the now-tired news around market speculation concerning the growth of the craft beer industry in the United States. We're seeing double digit growth every month, with a new brewery opening up every 10 hours or so over the past year. It's certainly prodigious growth, but I think the uninformed perspective will tell you that it's all going to fade away like passing fad. It won't. I promise you that.

Speculation, as I mentioned, is the main culprit here. We've read too many articles where economics professors and journalists, who don't know what they're talking about, claim that economic realities will eventually hit us like an NFL linebacker and correct this abnormality. Economics play a huge, and important, role in craft beer's future. I am a pragmatist, and I understand the principles of supply and demand. I understand pricing issues, and market capacity, and growth. But that's not necessarily what's happening here. This isn't growing for no reason. This industry is growing because people are buying the products being produced. They're willing to spend their money on good beer and they're clearly willing to see more breweries open up to meet the demand. This is real money changing hands and real growth happening.

It's all a matter of perspective. I agree with many brewers and industry professionals about the current trajectory. It seems a little ridiculous to assume that breweries will keep opening up at this pace. Vermont is on track to see something like 85-90 total breweries operating in the state within the next year. I don't think that's feasible, and this is the opinion of a guy who grew up there. There aren't enough people in Vermont to sustain that many breweries, and odds are there aren't enough good businessman to keep their projects afloat that long. I'm not picking on Vermont, because I'm sure that scenario is playing out in other geographies as well.

Brewery openings will slow down, and even though it doesn't make the front page, breweries close all the time for any number of reasons. You don't see that making national news because there's nothing sexy (or terribly interesting) about a business shutting its doors. It will shake out a little, as every sector of business does. But it won't pop.

Modern craft brewing is an intensely interesting business when you break it apart. It's a lifestyle product and a community pillar. It's required to be that way. It's an industry full of dreamers, artists, and creative souls looking to push their own limits and do something innovative. A majority of breweries never went into the vocation out of school. They didn't train to be brewers first. They trained to be rocket scientists, and chemical engineers, and farmers, and project managers, and sys-admins for Fortune 500 companies. By any measuring stick, these are clever people. As part of my work for The Brew Enthusiast, I have conversations with them all the time, and some of their backgrounds are hilariously differentiated from their current brewery work. It's an inspiring and optimistic island of misfit toys who came together and realized that they loved the world they'd created. They became addicted to its stories, its culture, and its wonderfully interesting people. They get an indescribable high when they see the satisfied look on someone's face who loved their beer. They live for that moment in a lot of ways. If I brewed beer, I would too.

And believe it or not, craft breweries are held to the same standard that every business is held to. They have to make a quality product. They have to do their taxes. They have to control their cost-of-goods-sold, and they have to make money. They evolve with the changing consumer landscape just like everyone else does, and the breweries that don't do this will fail. That's for sure. But consumers will continue to support the craft beer professionals doing it the right way, and for the right reasons. I'm talking about the entrepreneurs who thought it through, and asked for help when they didn't know, and focused on their business and their consumers. The ones that did the market research, and came at their business with a plan and enough runway to allow for a few mistakes.

And while I'm at risk for repeating myself here, it pays to mention again that there is a demand out there. The consumer landscape is changing, and while they're certainly more demanding than ever on their brands, they're also interested in supporting great local beer. Will we see another mammoth craft brewery like New Belgium, Sam Adams, or Sierra Nevada pop up from humble beginnings in the next 15 years? My guess is probably not. Will we see the business landscape continue to partner up and consolidate? Yes we will. But there is still plenty of room for the small to midsize craft brewer.

To put a bow on this whole thing, there is growth happening here. Wonderful growth. The market is growing, and talented breweries are making great beer to meet that demand. There are too many educated consumers out there to call this a "craft beer bubble". There's too much validated growth to call it completely unsustainable. There is substandard beer being made, but there's a lot of quality beer being made too, and more and more consumers are clamoring for great local beer every day. There is sustainability in this industry.

As Brewers Association President Charlie Papazian puts it, "We are not in a bubble, we are knee-deep in foam and the foam is still rising".