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Old 02-02-2012, 08:10 PM   #1
TomHanx
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Default Does anyone else think that there is a craft brewery "bubble" forming?

looked over the site real quick and didn't see that it has been asked about before so sorry if it has and I missed it.
Seems like I'm hearing news nearly once a month or so that there is going to another brewery or brew pub or even just a craft beer pub opening up somewhere in my area (general D/FW area).

For example:
When I first got into microbrews (before I got into brewing) I only knew of 3 places where they had a real selection of beers and specialized in it. I'm sure there were more, but I only knew of the three. To top that off when I got into brewing around this time last year there were only 3 breweries in all of Dallas. Population of well over a million, and only 3 (according to the tour at Franconia Brewery) in DFW.

Now I know of 5 breweries, just found out today that 2 more breweries have license approvals and will start and one brewpub.


I'm not complaining! Trust me I love that there is growth in the area but it seems this trend is popping up all over the country, very rapid growth. Obviously no one expects this level of growth to continue forever, that's not my "concern" or maybe just observation. Just that maybe it's being over done, that in a few years or so a lot of these brewery startups will find there isn't a big a market for all the product out there as thought and they'll be shutting doors...

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Old 02-02-2012, 08:15 PM   #2
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No pun intended on the title by the way.

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Old 02-02-2012, 08:20 PM   #3
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Nah, I don't think so, I don't think it's any more rapid than it's always been since the first ones opened (at least here in Detroit) in the early 80's. It hasn't been rapid here, just steady. We now have nearly 100 through out the state of Michigan. I guess it all depends on what your definition of rapid is.

As to them shutting doors, that's happens in all business sectors. But I think it has ore to do with the quality of your product rather than if a market gets saturated. Over the last 40 years there's probably been a dozen of them in Michigan that folded. More to their making crappy beer than there being too many of them.

Is it any different for BMC bars? You can have a ton of them on a strip and they're all doing fine, except the ones that give crappy service or their food sucks, those fold, but usually another one moves in to try to take it's place.

There's places like Ann Arbor, Mich and even a couple areas in Downtown Detroit, and Royal Oak where the micro breweries are in walking distance, and they are usually very busy every night.

I'm just going by my experience living in Michigan, where craft beer and homebrewing both have a huge following (we also have more LHBS in Metro Detroit than any other area evidently)

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Old 02-02-2012, 08:36 PM   #4
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I am expecting to see something happen fairly soon. I wouldn't consider it a bubble bursting, but more of a culling the herd. Many of the new brewpubs, nano's, micro, beer bars, and everything else opening up are just catching the wave of the boom in popularity. There are people that have always thought they made good beer and their friends told them they should sell their beer but never could or did. They didn't because they didn't think it would be successful or didn't have the funding or whatnot. Now with the change in popularity they think it will be and instant success like all the others and funding is much easier to get. Come to find out it wasn't as good as they thought and they fail.

So, like I said it isn't really a bubble bursting but there will be a lot of places closing down just because they weren't good enough to compete.

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Old 02-02-2012, 08:36 PM   #5
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Quote:
Originally Posted by TomHanx
. Just that maybe it's being over done, that in a few years or so a lot of these brewery startups will find there isn't a big a market for all the product out there as thought and they'll be shutting doors...
Alcohol is one of the only industries that has never really had a slump or bad economic time. If anything, these new start ups will be fighting to make better beers, and each one fighting to make something better than the other breweries around them. There will always be a market for a good drink.
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Old 02-02-2012, 08:55 PM   #6
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We now have nearly 100 through out the state of Michigan.
wow. that's a lot. someone correct me if I'm wrong but I don't think there's more than maybe 30 or so breweries in all of Texas. wikipedia shows 25, there's a few missing from that list though but not much.


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As to them shutting doors, that's happens in all business sectors.
That's very true which is partly why I'm expecting to see doors close. Whether or not it's the business itself or an over saturated market depends on a lot of other hard to determine factors. But agree ups and downs seem to be a part of every business segment.

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There's places like Ann Arbor, Mich and even a couple areas in Downtown Detroit, and Royal Oak where the micro breweries are in walking distance, and they are usually very busy every night.

I'm just going by my experience living in Michigan, where craft beer and homebrewing both have a huge following (we also have more LHBS in Metro Detroit than any other area evidently)
Sounds awesome, wish there was more real support of microbrew scene in dallas area.

Dallas Brew Pubs/Microbeer =
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Old 02-02-2012, 09:01 PM   #7
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So, like I said it isn't really a bubble bursting but there will be a lot of places closing down just because they weren't good enough to compete.
Yeah, that's pretty much exactly what Revvy said. I guess I still think maybe it's not that we're at a point where the is just entirely too many microbreweries out there, but that at this pace if it doesn't slow down soon I could see there being too many competing micros and not enough consumers for micro's.

I guess that I didn't maybe think of that though as being a larger contributer to closings than just over production. There are so many popping up all the place with little to no experiace in either brewing at that level or with some kind of business background, that it will start to catch up.
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Old 02-02-2012, 09:20 PM   #8
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I can definitely see a "bubble" at some point. It happened in the 90's, but the situation was slightly different then. Most of the breweries that closed were owned by financiers looking to invest in the brewing business, not by brewers.

I can't bump into two homebrewers without one saying he wants to "go pro". Everyone wants to open a brewery, but there is definitely a limit to the amount of brands any given market can sustain. The question is how many that number is. Personally I only think about that stuff when its someone else talking about it.

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Is it any different for BMC bars?
I think its totally different. A bar isn't necessarily about the beer they serve. The atmosphere, the retinue of DJ's/bands, the location, etc are all more important as far as BMC bars go. Now picture a block full of brew pubs. They can certainly develop all those attributes I listed for the BMC bars, but they also have to compete against each other (something craft beer apparently is averse to do) for customers who are choosing between them mainly because of the beer. Its a totally different dynamic.

When I was in the Army, there was a strip in Colorado Springs with like 5 bars on it. We would wander between them because each had a different crowd, specials, etc. If it was 3 brewpubs, I don't see that happening. "Hey guys, lets drink a stout here, then a Pale Ale here, then a wheat beer here,"... they wouldn't have that situation. People would choose one and that would be their regular place. Could a few block radius really support multiple brewpubs long term? I doubt it.
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Old 02-02-2012, 09:40 PM   #9
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Interesting question.

I say no for one reason: Concentrated ownership

Breweries are typically private & closely held, so "irrational exuberance" by the market can't really bid up equity prices.

With tech or housing, the entire nation was involved and the nation lost a ton of money. In this case a bubble burst would be limited (and devastating) to that concentrated ownership. But what about for us, the consumers? I'd suspect cheaper beer. What happens when bubbles burst? Asset prices fall; breweries would need to move product just to stay afloat, margins suffer, prices drop, etc. Supply > Demand, P falls.

I'm gonna think about this more though...very interesting.

EDIT:
Another thought...why do bubbles form? In a simplistic sense, it's over-speculation (+ leverage recently) on profit-making opportunities. You don't see Goldman Sachs or VC/PE going after nano/microbrewers. The returns just aren't there. As most pro-brewers know, it's not a lucrative industry. The "boom" is obviously fueled by demand, but it's also greatly fueled by people who are passionate about making beer and wanting to spend their time & energy doing it. It seems to be less about seeking excess returns.

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Old 02-02-2012, 10:20 PM   #10
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But what about for us, the consumers? I'd suspect cheaper beer.
That brings me to a whole other thread I should start sometime but when are we gonna see that?? I know a lot of guys out there probably don't mind forking over a few extra bucks for better beer, but I can't be the only one on a budget.

Tired of seeing one bottle of Sierra Nevada Dubel for $10 bucks look over a few shelves and see a 6 pack of Budlight for 7 bucks
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