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Session #80 announced: Is Craft Beer a Bubble?

The SessionHost Derek Harrison at It’s Not Just The Alcohol Talking has announced the topic for The Session #80: “Is Craft Beer a Bubble?”

It’s a good time to be in the craft beer industry. The big brewers are watching their market share get chipped away by the purveyors of well-made lagers and ales. Craft breweries are popping up like weeds.

This growth begs the question: is craft beer a bubble? Many in the industry are starting to wonder when, and more importantly how, the growth is going to stop. Is craft beer going to reach equilibrium and stabilize, or is the bubble just going to keep growing until it bursts?

This discussion will most definitely overlap with the chatter that broke out following Joe Stange’s “Will it fall? A look at America’s brewery boom” article in DRAFT magazine. Given that The Session mostly attracts contributions from the UK and US it’s not realistic to suddenly expect reports from Italy, Argentina, New Zealand, the Czech Republic, Scandinavia, and all the other places (apologies in advance) that small breweries and selling beer beyond the mainstream . . . but that would make good reading.

What is clear is that you don’t want to take anything I write too seriously. Just a year ago Derrick Peterman asked us to predict how many US breweries would be in operation in 2017. I settled on 2,620. Given that by June of this year the number had already grown from 2,126 to 2,620 it appears I might have underestimated the total.

The October Session will convene on the Fourth. Join in and send Derek the information for his recap.

8 Responses to Session #80 announced: Is Craft Beer a Bubble?

  1. Nate O. September 15, 2013 at 9:59 am #

    A lot can happen in 4 years. I suspect your prediction was overly optimistic, if anything!

    You can’t take a short position on microbreweries, so anyone who is bearish on the craft beer market is sitting this one out. The bulls keep piling in, pumping the bubble bigger and bigger.

    IMO once Wall Street types get involved, it’s over. Those are the least-imaginative trend-followers around, which means they’re buying in at the top.

  2. Jeff Alworth September 15, 2013 at 2:58 pm #

    I don’t know that brewery numbers are really a good measure of anything. I have great confidence that when the first generation of founders begins to turn over seriously, a massive amount of breweries will cease to be. But because the vast, vast majority of craft breweries produce almost no beer, it won’t really affect the overall production. I could easily imagine a scenario for 2029 (50 years after Sierra Nevada) where the US has 2000 breweries making 30 million barrels a year. (Now it’s 2600 making 15 million barrels.)

  3. Stan Hieronymus September 15, 2013 at 3:29 pm #

    Nate – I would argue that the Wall Street types and the people starting really small breweries are two very different types.

    I came up with a number last year because it was part of our “assignment” (and I did even create a formula), but I wouldn’t pretend to guess how many there will be in 2017, and certainly not in 2029.

    There are going to be a bunch of individual stories. Personally, I’m more interested in the trees than the forest.

  4. Gary Gillman September 16, 2013 at 4:09 pm #

    I’m not sure what the question means.

    Is he asking whether craft beer itself – the concept of rich, well-made beers – may have a finite life and be absorbed by mega-brewing? I.e., that mass market adjunct beer will reassert itself to take almost 100% of the market again?

    A second read is, no, craft brewing itself is not in doubt, but many current players may not survive the recent expansion of the market: there may be another 90’s-style shakeout.

    A third reading is, the beers themselves will survive, but perhaps they will end up being made by the megas who will push out all the small players because they can make the same thing at least as well and distribute it better and for less.

    How do you read it, Stan?

    Gary

    P.S. I believe what will happen is, craft brewing – the kinds of beer and the players – will grow and multiply and ever take more share from the big brewers.

    • Derek Harrison September 17, 2013 at 7:13 am #

      The question is meant to be ambiguous. I hope to hear different interpretations of what the “craft beer bubble” could be and see what evidence there is to support or refute any type of bubble.

      Good answer, by the way.

      • Stan Hieronymus September 17, 2013 at 7:21 am #

        Thanks for chiming in, Derek.

        Gary, since I was in the Northwest last week and talking to hop farmers who have an obvious interest I suspect I will be writing about this within a business context.

        • Gary Gillman September 17, 2013 at 7:50 am #

          Look forward to your writing, Stan and good to hear that hop farmers’ views will be discussed; they have their ear to the ground and their crystal ball is probably better fined than many others’! (I’m speaking to a pro writer here, sorry for the mixed metaphors!).

          Gary

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