Nine hundred and five breweries closed between 2000 and 2010, an average of a little over 82 a year. The numbers for 2011 aren’t in yet, so I couldn’t include them. Closings ran higher in the front half of those years, but in even the best of them, other than 2010, a brewery closed at least once a week.
So I’m bumfuzzled why my feed reader is full of stories, actually the same story modified here and there, implying that six breweries closing so far this year could be the start of a trend. Hey, maybe 2012 is going to turn out to be a terrible year for small breweries, but it won’t be because these six breweries closed. (To be clear, I feel bad for the owners, investors and the poor souls who worked at these places. Mostly the people who worked there.)
I can’t tell you how much beer the breweries that closed sold last year. Those numbers are not available yet, but take a look at the 2010 sales listed below. Except for Buckbean, which did not report its production to the Brewers Association (and that might tell us something), so I had to go with 2009.
| Bavarian Barbarian Brewing | 350 |
| Buckbean Brewing | 1,050 (2009) |
| Airdale Brewing | 450 (under contract) |
| Kelley Brothers Brewing | 77 |
| Bee Creek Brewing | 250 |
| The Local Pub & Brewery | Opened in 2011 |
So let’s say that 80 breweries end up closing during 2012 and that they previously produced an average of 750 barrels a year — a number pretty much made up, I admit. So that’s what? 60,000 barrels out of the system. I’m pretty sure that Deschutes Brewery alone will grow that much in 2012.
Even in booming times there will always be players that are not up to the game for whatever reason. It happens in every business, why should brewing be any different?
People are worried in the UK that we will see a lot of brewery closures this year. There is a lot of saturation in some areas and beer sales are declining in general but microbrewers are taking an increasing percentage of the remaining market; so I’d hope there wouldn’t be many closures.
What about the balance of closings to openings? A 16 year-old brew pub in our area closed down last month — on the other hand, one pub and one micro opened just before.
The closing in question has been iffy on management for a while, so it’s probably the age-old restaurant woes to blame, but they promised to reopen at a new location having their beer brewed by… the new micro that opened. So’s the rumor.
A definite non-story. The craft brewing industry has seen several dozen brewery closures every year for as long as I can recall and this year is no different. As with the news media, a quick series of unrelated criminal acts gets attention because it allows them to report on (or just show the old b-roll of) the other stories.
Now this is not to say that we won’t see an uptick in closures in light of the very unusual uptick in openings, same as in the mid-90s.
Interesting that you picked a large brewery like Deschutes to pick up the slack for all the smaller brewery closings, but it sort of proves my hunch that the American brewing industry is becoming more national and less local. There industry consolodation and since there are a lot of economies of scales supporting larger and larger breweries, one might very well expect the larger players to get larger while the smaller ones to have a tougher time of it.
I would also have to say that in one recent closure, the biggest problem seemed to be about the beer, not any economic effect.
Derrick – I picked Deschutes because they’ve got those new tanks and the math is easy.
First, I’d be surprised of the barrelage of breweries that close this year approaches 60,000.
Second, these are 2010 numbers but 2011 probably looks much the same: 80 “micros” (meaning they sold fewer than 15,000 barrels) increased production 1,000 or more barrels. So I’d say that the not-so-big breweries are doing OK so far.
Stan, you’re right on the money down the line. It would be wonderful to do a survey of those brewery closings to find out how young they were at the time of closure. My guess is that at least half were under a year old. Even though brewing is a great business venture right now, it’s quite easy to create a flawed business plan, over-leverage yourself, and find that sales don’t catch up with debt in time to keep the doors open.
If craft brewing was in trouble, we’d expect to see established breweries with a record of success closing. Of course, that’s not happening. In fact, for every poorly-conceived brewery that fails, another one manages to hang on in spite of their faults. That’s how strong the market is. (By the way, based on the numbers in John Holl’s Indiana Brewery book, plus a bit of back-of-the-envelope calculating I’ve done based on the percentage of the market owned by the top twenty craft breweries [high], I’d place the average production for a small brewery at five hundred barrels or lower.)
Derrick’s point will be accurate at some point. Consolidation will inevitably happen as the market plateaus or contracts. But as long as it’s growing, big breweries and little breweries can live in happy coexistence. You happened to select a brewery in my home state as your example, Stan, and I can confirm your view. Deschutes sells more beer in Oregon than any other brewery and the Northwest remains its main market. Yet Washington and Oregon are seeing unprecedented new brewery openings. A bunch of formerly-small breweries founding in the past decade (Block 15, Oakshire, 10 Barrel, Ninkasi, Fort George) are growing like weeds. Room enough for everyone here. Now, at least.
These type of stories remind me of the impending Shark Attack stories we’ll be getting this Spring. The Internet will trot stat about vending machine deaths being higher than shark attacks.
Alarmists should follow restaurant closures for awhile and resist the temptation to declare the death of food.
How about letting some facts into the discussion? Total production of beer in the US (all breweries) hit a high of over 203 million barrels (31 gallon and hectoliters) in 1990. While production stayed fairly level for six years, it then began to decline. By 2009, it was under 197 million barrels and in 2010, it was just over 194 million barrels.
By the same token, consumption dropped between 2009 and 2010 from 209 million barrels to under 208 million. The difference between the production and consumption figures are the imports. In 2009, imports had 12.1 percent of the market, and in 2010, they got 12.8 percent.
To look at this another way (perhaps more meaningful if talking about small breweries), California had more breweries than any other state in 2010. In 1994, consumption in California was 20.2 gallons per capita. In 2010, it is 18.4 gallons. Considering the average for all states was 20.7, California was well under the average. The beeriest state, btw, in 2010 consumed 32.7 gallons. Any guesses which state that was?
Statistics are courtesy of the 2011 Beer Almanac.
In my former life I did an analysis of beer industry growth over the decades. Basically, from the end of WWII through the mid-90s, annual growth in domestic beer sales was almost entirely predicted by growth in the population of 21-27 year olds. That correlation was completely broken around the year 2000 — the Millennial Generation (the “Echo Boom”) was adding lots of new 20-somethings each year, yet overall beer volume was pretty much flat. The reason? Millennials were embracing craft beer and spirits, both much more so than mainstream beer. (The growth in craft hasn’t been offsetting the decline of mainstream, possibly because the decision to drink 2 or 3 craft beers on a given night often replaces the decision to drink 5 or 6 mainstream lights.) So maybe any would-be alarmist writers should be addressing the future of mainstream beer, not craft beer. (I know, I know, it’s still huge. But…)
Not a discussion that should begin this far into a different topic, but the future of mainstream beer is still very important to smaller brewers, re access to vital ingredients. Hops and hop farmers are one example.
Mike, interesting observations, but, if overall consumption is declining, it’s hard to see a sharp rise in anything but a tiny share of the market. Secondly, in 1980, imports had a 3 percent market share, in 2010, they had 13 percent. Microbrewed beer had maybe one percent or less in 1980 and now has 3-5 percent (depending on whether you buy the redefinition by the BA). Looking at these numbers, micro-breweries have certainly grown since 1980, but not nearly as much as imports.
I haven’t seen an age-related statistics, but I certainly have the impression that you are correct to focus on the 20-somethings.
Another interesting statistic I found is that draught beer has declined in market share from 13 percent in the early 1980s to 9.6 percent in 2010. At the same time, bottled beer has gone from 23 percent in 1980 to 38.2 in 2010 (after reaching a high of 42 percent in 2004). I would imagine these figures say something about brewpubs and a decline in popularity.
True, Mike, but I would add a couple other observations (some, admittedly, from memory…) Most of that increase in imports happened in the first half of that 30-year span. The growth of imports has been more modest, if consistent, in the 2000s. And unlike craft, when imported beer has a good year, the growth is often dominated by one or two successful brands (Corona and Heineken in the 90s, to a lesser extent Stella Artois and Dos Equis in the 00s). (I’d also point out that Corona had a couple tough years in the mid-00s, which they “fixed” largely by cutting prices.) So I guess my point is that imports growth tends to be more a result of successful brand marketing, while craft growth — and mainstream beer weakness — tends to be more about “consumer pull” (and even cultural shifts).
Mike, unfortunately, the statistics don’t list brands, but, you are quite correct that Mexico is the largest exporter to the US, however, the second country is not the Netherlands, but Canada.
However, what you wrote about the growth of imports is actually the opposite of what happened. Between 1980 and 1995, imports grew from 3 percent to 6 percent share. However, from 1995 to 2010, it went up by 7 percentage points.
It is my impression that both the imports and the micro-breweries advance through marketing, though, obviously, not the same sort. The micro-breweries have special “events” (Dark Lord Day, for example) plus benefit hugely from the beer fan sites and amateur beer reviewers who post to YouTube or elsewhere with rhapsodic reviews of Micro-Brewery X or Y’s latest product.
The fact that industrial beer from other countries is far more successful than micro-breweries in the US is pretty strong evidence that the vast majority of US beer drinkers, after 20 or 30 years, are still not convinced about micro-brewed beer.
Perhaps the 1700 or so breweries in the US is close to the optimal number. If many more breweries start up, there may be more closings or profits may suffer.
Mike, this is why I shouldn’t pull numbers from memory — sorry about those errors on import growth. But I still stand by my point about imports relying on marketing push versus craft beer relying more on consumer pull — this time I checked the numbers, and Heineken spends over $100 million a year on TV advertising alone, while Corona spends over $50 million. It’s tough to compare Dark Lord Day to that. And even your second example is about “marketing” generated by consumers. Your statement that the vast majority of US beer drinkers are still not convinced about micro-brewed beer is quite correct. But that only means that craft beer has a huge pool of potential new drinkers to draw from in order to grow — only a small percentage of the unconvinced need to become convinced each year. (After all, the discussion has essentially been about growth, not absolute volume, as it almost always is in business.) There will undoubtedly be some craft breweries closing in the coming years, maybe more than a few. But I have to agree with Stan’s headline: No trend here, folks — at least, none currently visible on this side of the horizon.
Mike, I see marketing as an activity, not a price point. It seems to me there are two primary ways of succeeding in the market: 1. make a really good (*) product that has good distribution and 2. focus all your effort on marketing rather than product quality.
That the industrial brewers have chosen #2 seems pretty clear, right?
*Good in this context might have several variants: popular, aimed at a specific demographic, good price/quality ratio, etc.
I think you made an excellent point by relating beer sales growth with an age group. I do agree with you that many micro-brewed beers seem to be aimed squarely at 20-somethings. If there is a trend here, I think that is it.
It is this trend that has, I think, limited the appeal of micro-brewed beer in the US. Clearly, young people who have little experience with beer (by definition) are more open to new and unusual tastes than more experienced drinkers are. However, as they mature, it seems they do not take those tastes with them.
If micro-brewed beer were more successful, I’d probably have to change my opinion. However, the most significant change in the micros in the last few years is their re-definition by the BA.
And how significant is that change by the BA? I think it changes the entire picture. A “small” brewery, according to the BA, brews “only” six million barrels a year. Using an onlive convertor (http://www.onlineunitconversion.com/), this comes to about 7,000,000 hectoliters. The European statistics (for 2009) are measured in 1000 HL, so, the US figure is about 7,000 (1000) HLs. By comparison, the entire Czech Republic (one of the beeriest countries in Europe) produced a little over 18,000 (1000)HLs – that’s the entire country, not just one brewery.
The UK, which is a much larger country with a number of large breweries, produced 45,000 (1000) HLs. I believe the latest figures for the UK show about 900 breweries in total.
And it was this change in definition that caused (probably) the biggest increase in the micro-brewed segment.
Mike,
Correct me if I’m wrong, but it sounds like you believe the average U.S. craft beer consumer is someone who tends to participate in events like “Dark Lord Day,” post to ratebeer, read beer blogs, etc.
If so, this is a key misunderstanding. The vast, vast majority of U.S. craft beer is drunk by people who do none of those things. (Note also that beers like Dark Lord, imperial IPAs, etc, are a tiny fraction of U.S. craft beer production.)
The highest-volume U.S. craft beers are products like New Belgium Fat Tire, Sierra Nevada Pale Ale, Widmer Hefeweizen, etc. These are “normal” beers in some sense, and certainly old news, so do not generate much attention from “beer geeks.” Nevertheless they dominate production and consumption of U.S. craft beer.
Matt
Matt, I think you may have misunderstood me (or maybe I wasn’t clear). I was speaking about microbrewers and how they use other, cheaper means of marketing their products.
While the industrial brewers, for example, may have the cash to buy TV ads or magazine ads, the microbrewers have special events (like Dark Lord Day), give their beers cute/funny names, send beers to those guys who do beer tastings on YouTube, produce a zillion (OK, maybe only a couple thousand) different beers every year, etc.
And, don’t get me started on beer geeks… (until you’ve locked up the kids and their pets).
Mike,
The point I wanted to make is that the type of marketing you describe, used by some brewers for some beers, is not representative of the larger US craft beer market.
Most craft beer consumers don’t view YouTube tasting videos or attend events like Dark Lord Day (i.e. they are not beer geeks), and craft beer production volume is dominated by beers like those I mentioned, which are really not marketed in this way (i.e. they are not geared toward beer geeks).
If you’re saying you understand that, then I guess there is no misunderstanding.
Matt