(In truth, it wasn’t that big a deal, hence all “heck” breaking loose, rather than all hell.)
Various people chimed in, some of whom mentioned to me privately that they had already taken Mr. Watson to task for what they viewed as, at minimum, a too rosy view of things, and at worst, a full-on effort at propagandizing. Me, I thought it was a pretty decent response to what I’ve been reading in the media of late and hearing from certain brewers for over a year now. (Remember that the BA’s main audience is the craft brewing community – the article actually appears in their “community” section – and therefore it is reasonable to assume that those nay-saying brewers were at least high among their intended audience targets.)
- There have been plenty stories of late about the craft beer “bubble” and whether or not it shall shortly burst. The article is, to my mind, clearly intended to balance those stories, many of which have repeated what I would view as misplaced assumptions – more about those below – and I think did a reasonable job of it.
- In terms of brewery numbers, what Mr. Watson states is true in that the United States is not even close to brewery saturation when compared to other markets, including Canada, the United Kingdom and Germany. In order for parity with those and other countries to occur, on a brewery per population basis, the U.S. would need to double the number of breweries it currently boasts.
- The suggestion that the market for craft beer is not growing is false. Critics point to the relatively stagnant nature of the American beer market, but that misses the point. Major beer brands have been in free-fall for the past several years – Bud Light has experienced five years of declining sales! – which has freed up major amounts of market share for the craft brewers. (And even so, the U.S. beer market grew 1% last year, which amounts to an additional 2 million barrels of demand.)
- New breweries regularly come to market with small amounts of brewing capacity, as little as a few hundred barrels. As such, the impact of the regularly reported 1,200+ planned – note, not work-in-progress, but planned – breweries will be minor. (1,200 x 500 barrels = 600,000 barrels, and that’s being extremely generous on the production numbers side.)
- New outlets for craft beer sales are coming online on a very regular basis. As someone who has worked with hospitality companies numerous times over the past several years and annually speaks at conferences involving top hospitality executives, I have seen the interest develop and grow first hand. I noted last year that when the restaurant company Darden (Olive Garden, Red Lobster) bought the multi-tap chain Yard House, it represented a sea change in the market for craft beer. That Yard House has been Darden’s top performing brand over the last year only cements that observation.
- To suggest that the graph Mr. Watson presents is comparing apples to oranges – ie: financial data to brewery numbers – is to miss the point. In my view, he is clearly observing that the shape of the dotcom bubble and the craft beer “bubble” are apparently quite different.
Of course, none of the above is to suggest that unrestrained growth in the craft beer sector is sustainable indefinitely – you’d need be an idiot to infer that. But the likening of the current times for craft brewing in the United States to a “bubble” connotes the idea that the “bubble” is about to burst, and I’ve seen nothing that suggests it will any time soon. Mr. Watson’s analysis might be the most cogent or thoughtfully presented, but its conclusion is, I believe, correct.
There will be failures in the craft brewing sector. There may even be a number of them within the next, say, five or seven years, but even a few hundred mostly small and off-the-radar breweries going out of business is not about to burst any “bubble.” Craft beer is on track to continue its growth – all market indicators suggest as much, including the travails the big brewers in North America are experiencing these days – and that means there will be market share to fill, as much as 2 million barrels this year and perhaps as much or even more in 2014.
It will require a lot of brewery expansion à la Sierra Nevada and New Belgium, plus a large number of new brewery arrivals to fill that capacity. The thirst is evident, and I see nothing to suggest it is even close to being fully quenched.