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Home Brew Forums > Home Brewing Community > General Chit Chat > Does anyone else think that there is a craft brewery "bubble" forming?

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Old 02-08-2012, 06:43 PM   #21
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If you mean about a bubble in the commercial craft beer industry ...

There’s a bunch of dynamics that apply to a larger alcohol-related sector that make it harder to see whether there is a “problem” or not. This affects not just Microbreweries but also Brewpubs, Small Wineries, Taverns, Class C license-holders etc.
They are all in a similar boat in some ways.

This includes positives like ...
A greater usefulness (or demand for) local alcohol providers closer to drive or walk to, due to concerns about drinking and driving ... including buying craft beer at the store and bringing it home.
Good financing rates for those that can actually get financing for their production or retail operations.
More awareness of craft products due to online communication, homebrewing and word-of-mouth.
An apparent return to the craft and croft mentality, and interest in certain products as was the trend in the 1970’s (gardening, brewing, home food production, farmer’s markets etc). I think part of this too is that there is at least some trend toward (if you’ll allow the expression) a more “European” model of alcohol production and consumption. Both in terms of production but also I hope (!!) of the idea illustrated by the Public House ... your “living room away from home” ... basically “community life” - which is something that sustains the European quality of life at a more reasonable expense to the consumer.

And negatives affecting the sector such as ...
Uptick in small businesses in general due to the economy (i.e. greater competition).
Reduction in people’s disposable income.
Smaller number of drinkers overall as the boomer demographic gets more health conscious and drinks less.
Greater difficulty of obtaining financing.

So, where is the danger for craft beer outlets like brewpubs and microbreweries?

For the small concern, I think your safety in part depends on your exposure being very local. For the larger concern, (larger microbreweries) your downside exposure is both local and regional or larger. The exposure to market risk is greater and the effect on your bottom line is greater as the business’s overhead is greater.
Meaning that those producers that are “small, fat and happy” are the ones that are in the best position to avoid disastrous effects in a downturn. The greater you are scaled to the larger market, the greater your exposure to the over-saturation of craft beer providers and any potential “bubble”.

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Old 02-08-2012, 06:49 PM   #22
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All I know is that there were 36 breweries in Cincinnati in 1870 and now there are 6ish with a few more popping up.

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Old 02-08-2012, 06:59 PM   #23
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I'm worried about the supply and cost of malt and hops for us homebrewers as more of the breweries start popping up.

Colorado has 140+ breweries with a huge amount in development. I can see ingredient costs going up, which will drive beer prices up, and maybe shutter some of the smaller guys.

http://www.fermentedlychallenged.com...weries-in.html

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Old 02-08-2012, 07:17 PM   #24
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...but if ingredient prices go up that means it becomes more profitable to supply it, which means more farmers grow it, which means supply increases, which means prices fall. Not convinced on this one.

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Old 02-08-2012, 07:19 PM   #25
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But we have already seen it. Like with the Denver bulk grain buy attempt.

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Old 02-08-2012, 07:24 PM   #26
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Quote:
Originally Posted by Kaleco View Post
But we have already seen it. Like with the Denver bulk grain buy attempt.
True...differential in adjustment times lead to seasonal spikes. Good point.
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Old 02-08-2012, 09:49 PM   #27
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Quote:
Originally Posted by maxam View Post
All I know is that there were 36 breweries in Cincinnati in 1870 and now there are 6ish with a few more popping up.
Ha!


back to the point, there is a 140 breweries in Colorado?? I'll try as much as possible to not talk in generalities and just plain conjecture, a quick review of wikipedia shows about 270 municipalites listed in CO. I've been through CO a few times there are plenty small, remote, barren places there. Just conservative guess lets say 30% of the cities are under a population of 5000 so those won't even be counted for this example because they're so small. Look at a ratio of 140 breweries to around 200 cities? So nearly a brewery per city? If it works, then great. I'm not saying it won't or can't, but my reasoning tells me that it honestly is probably too much.

anyways, not saying anything is absolute or I'm right or anybody else is wrong. Just thinking out loud.
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Old 02-10-2012, 10:19 PM   #28
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Some interesting articles from a beer blogger I read on Facebook:

http://beernews.org/2012/02/buckbean...ntent=FaceBook

http://beernews.org/2012/02/airdale-...ntent=FaceBook

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Old 02-10-2012, 10:20 PM   #29
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http://beernews.org/2012/02/kelley-b...ntent=FaceBook

http://beerandwhiskeybros.com/2012/0...to-the-future/
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Old 02-10-2012, 10:38 PM   #30
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Quote:
Originally Posted by Revvy View Post
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)
I'm no expert in business, but there are problems that can cause any business to close, no matter how great their product or service is. Poor cash flow management is one. If you don't have the cash to pay the bills, you're screwed, even if your sales are great. The second is a related problem; over-expansion. I've read interviews with two pro brewers who say that they wish they had grown at a slower pace, and Flying Dog has pulled out of markets in my region for this reason. Falstaff brewery, at one point the second largest brewery in America, collapsed because of overexpansion.

Ultimately, I look at it this way. Beer is better fresh so local breweries are a good thing, 50% of the beer on the market is pretty forgettable stuff, there are many bad businessmen out there, and the brewing industry is reaching a new era where creativity and new or forgotten techniques are creating great possibilities. It's a good time to be a brewer and a drinker.
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