Friday, October 4, 2013

The Session #80 - Is Craft Beer a Bubble?

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Is Craft Beer A Bubble? This is perhaps the most popular question within the beer world currently and one in which Derrick from It's Not Just the Alcohol Talking would like us bloggers to answer for this month's Session. His words below:
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?
No, Craft Beer is not a bubble. If it were a bubble, I'm sure the genius economists at the macro brewers wouldn't have their companies in a tizzy trying to come up with "crafty" ways to fight back. The presence of Craft Beer is real and it's ability to grow has been incredible. People want these beers and they love the culture that accompanies it. Why do we like Smart Phones? Because they change constantly and always give us something new to fiddle with. New things are fun and I think our culture's ever present need for the next thing works in Craft Beer's favor. There's always a new beer, a new twist, a new hybrid beer that keeps people coming back in for more. How many of you buy the same three six-packs over a two month time span? I'd say if I do that at all, I do it at most twice a year (and that's being generous).

I think a better question would be Is there a bubble within Craft Beer? And if that's the question, my answer is Yes. Craft Beer as a whole is going to be fine, but that doesn't mean every single decision made by companies in the business is going to mean good things for them. I don't know very much about economics, but I do know a thing or two about space on shelves. Eventually, they fill up and you run out of space to put new things on. If you're an overeager brewery trying to expand too big too fast and you're product is too mediocre you're going to run into problems because the well established brewers are going to take up the space on the shelves. The bigger Craft Beer gets the more well educated consumers are becoming about what they put in their mouth. As that education continues the demand for superior products is going to become the determining factor of who stays and who goes. The question "what's new" might get you an initial place on the shelf, but if you aren't bringing anything new and innovative to the table, it won't be long before you're company is gone.

With that said, if new brewers focus on the local aspect of Craft Beer I think they stand a much better chance of surviving the increasingly congested highways. If they have a mindset of serving their community first and world domination second then the bubble that does exist can be reduced greatly. I don't have numbers in front of me, but a large part of the brewery growth comes from brewpubs. Are any of us going to not visit a brewpub if they make good beer and serve good food? I don't think so. I'll take ten quality local brewpubs over TGI Fridays and Chilis' every day of the week.

Is Craft Beer a Bubble? Yes and No. As I stated in the comment section of a different blog earlier this week, it depends on exactly how you ask the question and what angle you want to take when you're answering it. But am I worried about the whole thing falling apart? Not at all. Craft Beer is just too damn good.

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