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Jim Koch: Craft beer bubble near "popping point"

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Bulls Beers

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What's the count now, 2000 or so. Does anybody agree with him? There's only so much shelf space. I owned a business in the snack food industry and after Frito-Lay, Cape cod, wise etc, there wasn't that much space for me. I had a niche product so it was a little easier, but slotting fees are a real bitch..So many of the same beers trying to get our attention, how the hell are they going stand out.

If your just getting started today, what are the odds??
 

Paulgs3

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He said there are too many breweries brewing similar beers without adding anything to the market.
I agree with him on this but how much can your really change a defined product. Unless you start making your own style, an IPA is going to be an IPA. Same thing can be said about pizzas, a cheese and pep pizza is going to be universally the same but different places will use different sauce. Different people are going to put a slight twist on their brew, but yeah, they are going to be very very similar. I'd rather have more choices of similar beer than only three or four breweries to choose from per style of beer.

As far as store shelves, most of my "store bought" beer is from an actual Beer Store. Their shelves are not competing with potato chips and frozen pizzas. They are a specialty store and being a niche store they need more product to move more product.

My major source of beer consumption besides homebrew is bars. And the larger the tap selection the more money I'm going to spend. Getting out with friends and trying something on tap I've never seen or heard of before is the highlight of my day. If anything, this is a great opportunity for craft beer, the present momentum is huge and I hope it washes right over BMC.
 
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Bulls Beers

Bulls Beers

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I agree with him on this but how much can your really change a defined product. Unless you start making your own style, an IPA is going to be an IPA. Same thing can be said about pizzas, a cheese and pep pizza is going to be universally the same but different places will use different sauce. Different people are going to put a slight twist on their brew, but yeah, they are going to be very very similar. I'd rather have more choices of similar beer than only three or four breweries to choose from per style of beer.

As far as store shelves, most of my "store bought" beer is from an actual Beer Store. Their shelves are not competing with potato chips and frozen pizzas. They are a specialty store and being a niche store they need more product to move more product.
I know their not competing with the snack food industry, I was just saying that the competition amongst each other these days must be fierce. I have a really good beer store nearby. It's a large store that have hundreds of brands. Tough business to get into.
 

JohnnySardonic

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I can understand where he's coming from in regards to craft breweries who are trying to distribute on a state or national level, but maybe local breweries will be able to stay relevant.

To continue the snack food metaphor: if your company is called Johnson County Snacks (after your imaginary county of origin), it isn't going to mean anything to a consumer in San Diego. But your snacks might sell very well in Johnson County, or even in the surrounding area. You might not make millions that way, but it could be a way to remain successful. Just have to define success in a certain way.
 

Phunhog

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I absolutely believe this! There is just no way that every brewery can succeed and the competition is fierce and only going to get worse. I have talked to owners of smaller breweries (15bbl) and most say the tap room is where the real money is made. The profit margin is just so slim when you are selling bottles, cans, and kegs. I think we will always have great small, local breweries and a few mid size regional breweries. It is that in between stage where craft brewers are going to struggle to find market share. An example is my local craft beer watering hole. 101 beers on tap...now with all those choices you basically have a 1-2% chance that I will randomly select your beer UNLESS it has gotten rave reviews or is something unusual.
 

daksin

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Shelf space, and to a lesser extent, truck space is a big concern for packaging breweries, but smaller breweries that make mostly local deliveries to bars (only in self-distribution states) don't care as much about shelf space as a lot of their beer is sold directly to the public at tasting rooms and craft beer bars.

I imagine BMC will continue losing space for a while but will eventually push back hard. Craft beer will gain a larger foothold but will probably reach some sort of equilibrium with the big guys. At that point, when shelf space stops expanding for craft beer, you'll see the growth in little guys selling beer locally. Not nanos, mind you (I expect a lot of those will be tanking in the next few years), but much more regional and local places focusing on neighborhoods rather than counties.
 
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Bulls Beers

Bulls Beers

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And just think of how many breweries their were ( as many as we have now) in the early 1900's, with a 1/3 the consumers.
 
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I think we'll see a lot more brewpub style breweries that supply their local towns, similar to the way it is done in Europe. In this respect, your local town will be what supports you and your success will be determined by them and the quality of beer you make.

I also believe that we have way too many people who want to make beer, and not nearly enough bottle shops to sell them! People need to start opening more craft beer stores. Distributors are also a part of the problem, because depending on where you live they can control the market...but that's a whole other conversation...
 

cswest

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Maybe if you are talking about regional to mid-sized production breweries but I think there will always be a place for local brewpubs. I feel like the shift will be to stop saying your different than MBC and start focusing on local/fresh.
 

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While visiting the in laws in Germany, I love walking into the liquor stores in the small villages where family lives. You have your big brand beers like Warsteiner and Radelburger, but there are shelves of small house brews all over the store. The nice thing is, you can pick up an empty plastic case in the front of the store, walk through, pick up 1-2 beers you want to try, and then ring out at the counter. The six pack and 12 pack dont exist. You can go in and buy all one beer if you want. I think if small breweries want to compete, allow the buyer to pick and choose. Don't charge $9-12 for a 4 pack that I dont know whether I'm going to like. Just my 2 cents. I know we aren't Europe. We don't have beer trucks traveling from village to village dropping off and picking up beer. But in areas like the North East, where there are multiple micros within a short drive from one another.
 

whitehause

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The market is definitely saturated. Like some have said, the small scale local guy might make it, but to get to a Rouge, Sierra, Russian river, Dogfishead, level these days will be very hard without a ton of advertising capital. If we've learned anything from the "big three" it's that advertising is everything. I'll guarantee that miller 64 is selling better than most any big craft beer name. Is it better...not to me, but the advertising reaches the masses.

A good LHBS might still be a market that could be taken advantage of if you don't have one close by. The craft industry has made a lot of people aware of home brewing.
 
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For a brewery pretty running on marketing over substance, I don't really take his opinion too seriously. However, there is some truth to it. There's a lot of breweries out there saturating some markets like CO, CA, OR, NC and WA but then a lot of the south and midwest states don't have many breweries. Per person, Texas is pretty unsaturated and we have a lot of BMC drinkers who will be replaced by younger craft drinkers. Hell, the DFW area is the fourth or fifth largest metropolitan area in the country and we have one local brewpub, six breweries operating and four in the works. Sounds like a lot but all but one of those breweries has been open less than two years. So there's a lot of room left to grow even if you don't count erosion into the BMC market. It's definitely going to be hard to grow into a big brewery in a saturated market but similarly many states/regions don't have a big regional brewer. Texas has one (St. Arnold's) and could probably support one or two more larger brewers. Some brewers are going to fail even if you ignore the competition for drinkers just because there's intense competition in quality. People won't show love locally in great numbers if your product isn't that good. It gets harder if they can chose between a good local, good regionals and a crappy local.
 

tonyc318

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Skeptidelphian said:
I think we're gonna see a shift from the extreme ends of the style to more quaffable sessionable beers as well.
+1 I think if craft breweries don't start excelling in making really great session beers, the ceiling won't be as high. People like BMC beers because they go down easy. As homebrewers, we know that you can make very drinkable session beers that are WAY better than the BMC guys.
 

dcarter

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There are 700 breweries in England with a population of 53 million people.

There are 2146 breweries in the US with a population of 350 million.

I think that there is still plenty of room to grow in the US.
 
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I kind of feel that way in Colorado. The growth of the craft beer industry has been at break neck pace the past 7-8 years here. I feel like some of the new microbreweries, especially the nanos, will start to fold. I've had some pretty average beers from breweries that just seem to want to get their foot in the craft beer door so to speak.
 

daksin

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Going to have to +1 on session beers- the industry is going to have to move in that direction if they want to bring in new customers. That's our strategy and we're sticking to it.
 

Phunhog

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Actually I think if anyone is going to survive it is going to be the nano's. Most of them are run as some sort of side business and they cater to an extremely local customer base. Most of them don't even have any employees besides the owners. The vast majority of them will never get "big" but for a lot people that is okay. Think of a brewery as a restaurant. Most restaurants are small "mom and pop" places.....I see that being the destiny of many, many breweries. Not necessarily a bad thing IMO.
 

daksin

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Actually I think if anyone is going to survive it is going to be the nano's. Most of them are run as some sort of side business and they cater to an extremely local customer base. Most of them don't even have any employees besides the owners. The vast majority of them will never get "big" but for a lot people that is okay. Think of a brewery as a restaurant. Most restaurants are small "mom and pop" places.....I see that being the destiny of many, many breweries. Not necessarily a bad thing IMO.
It's a good point, but I think a lot of the nanos that are open today were financed with the intention of "Getting big" very quickly. Barrier to entry is low, but most of the places I've been to were not well thought out and will lose money for quite a while before they can even sell beer. After that it's a bit of a crap shoot. As the fella says: "Want to know how to make a small fortune in the X business? Start with a large one."

You are right though- small local breweries are where things are headed.
 

zeg

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The only reason this is a problem (or possible problem) is because of the homogenization of grocery/liquor stores. The big national or major regional chains want to sell the same product lines at every location---maybe with a token amount of shelf space set aside for localish options. That only allows room for a limited number of breweries.

Along the lines of the nanobreweries being the survivors argument, if there were more local variations in grocers and product lines, this wouldn't be an issue. This is, I suspect, why England and Europe can support proportionally more breweries---it's not expected that every one of them is going to be sold in every grocery store throughout the country.
 

Xpertskir

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95% of businesses fail within 5 years. A vast majority of those breweries have come about in the last 3-5 years. there are a lot of breweries that will go under.

Despite bad business practices, have you tasted the swchill that some of these "brewers" are making?
 

Schemy

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It is my belief that we will see a trend to the smaller artisan nano-breweries/brew pubs. The established production breweries will remain, and continue to break into additional markets. The major markets are pretty saturated. Take Denver for example, small breweries are finding success with limited distribution (made easier because CO allows self distribution) so a nano like Wits End becomes the neighborhood brewery, a small craft place like Denver Beer Co has that ability to brew different beers all the time, Strange Brewing can run limited productions and still be successful. IF I were to open a brewery, this is the route I would initially pursue. So in a sense Jim Koch is correct in regards to production brewing.
 

homebrewdad

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I agree with a lot of the thought here in this thread. The megabreweries will remain due to their huge financial edge.

The small breweries will continue to open (and close), but will largely have to rely on local business to survive. The truly exceptional ones will have a chance to grow and become regional/national brands.

This is not a bad thing. Historically, beer has always been a local/regional product... this is the number one driving force behind the varying styles in existence today. This will continue, going forward; I think that craft beer will grow into a reflection of older times, with much more variety locally - but no guarantee of finding those local brews in the other side of the country. Viva diversity!
 

Phunhog

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This is where I think the brewing industry can take a cue from the wine industry. There are over 7000 licensed wineries in the US right now. Most are very small local wineries that are more a labor of love than a money making operation. Most were were started as a hobby business rather than a career change. My brother owns a high end winery and he is one of the few that actually started from the ground up...most made their money somewhere else. They then decided to open a winery. I could see a lot of people doing this with small nanobreweries. The advantage of a situation like this is that the brewery doesn't necessarily become a job but something you choose to do.
 

Homercidal

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I'm wondering what his reasoning is. There is still a lot of beer being consumed besides craft. The question is, how many of those drinkers will convert to craft from Macro?

I agree that shelf space may start to get precious for craft. But I think that there are lots of smaller towns that could use a small brewery. If the owners are smart about the financing and they brew a decent beer and serve good food, they can maintain a small business.

I'm not sure I understand Jim's statement that they don't produce an IPA because there are already lots of good IPAs being sold. So what? They make a lot of beer that doesn't taste good already. I'm fairly certain that if they made an IPA as good as he claims they can, a lot of the public would buy it just because it's readily available. Then again he says he doesn't enjoy drinking an IPA, so... Is the reason they don't make one because he doesn't like them? Sounds like he's is poo-pooing a fairly significant portion of the craft beer market...

And then he says they are considering a "India Pale Lager"? WTH?? So they think they can sell an IPL just because nobody is doing it? or because they purport themselves to be geniuses at lagers?

By the time they get all of those hops in there nobody is going to notice if it's an Ale or Lager. I think he doesn't understand IPAs at all.
 

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I think there will always be room for a passionate brewery that can find a location that isn't saturated. In South Jersey there's only Flying Fish in the area and Iron Hill Brewpub. Flying Fish expanded and sells really well in my small store and Iron Hill is regularly packed and is opening a second location in the area. These are good signs, and I would wager to say that there's room for a few more locals to get to Flying Fish size if they are smart on the business side and care about their product. People around here want local beer, there isn't enough.
 

Calichusetts

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And then he says they are considering a "India Pale Lager"? WTH?? So they think they can sell an IPL just because nobody is doing it? or because they purport themselves to be geniuses at lagers?

By the time they get all of those hops in there nobody is going to notice if it's an Ale or Lager. I think he doesn't understand IPAs at all.
Jack's Abbey makes the most amazing IPL...they are like a stone's throw from Sam Adams. SA could never compete with any of Jack's Abbey's lagers, period. I bet they don't do it.
 

Skeptidelphian

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I think there will always be room for a passionate brewery that can find a location that isn't saturated. In South Jersey there's only Flying Fish in the area and Iron Hill Brewpub. Flying Fish expanded and sells really well in my small store and Iron Hill is regularly packed and is opening a second location in the area. These are good signs, and I would wager to say that there's room for a few more locals to get to Flying Fish size if they are smart on the business side and care about their product. People around here want local beer, there isn't enough.
Well you get all the good SE PA brews as well.
 

Soma

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I'd be thrilled to see Stone collapse and be replaced with 2 dozen smaller, superior breweries. Then we can stop listening to Koch pontificate on the future of craft beer.
 

ktblunden

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I'd be thrilled to see Stone collapse and be replaced with 2 dozen smaller, superior breweries. Then we can stop listening to Koch pontificate on the future of craft beer.
Jim Koch is the co-founder of Boston Brewing. Greg Koch is the co-founder of Stone. Greg has nothing to do with that statement. And what is your problem with Stone?
 

45_70sharps

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Where I live there isn't much shelf space given to quality beer.
I hear about tons of types of beer but don't see a lot of it so I suppose the bubble just doesn't hit places like where I am!
 
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Bulls Beers

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Speaking of Greg Koch...This from him on the craft beer industry, “We are like a Third World bus, with all these people hanging on to the roof. Sooner or later, we are going to hit a bump in the road". These guys guys gotta be a little stressed. So many small brewers nipping at their market share.

I wonder who's driving the bus??

http://beerandwhiskeybros.com/2012/...s-the-craft-beer-industry-to-a-3rd-world-bus/
 

Kojack84

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I agree that the wine market is a good example to look at. TONS of small wineries, a handful of big guys. Depending on the area I think small guys can definitely succeed. Going national will take a lot of work though.

I believe that some beer markets are way over saturated. I would never want to open a brewery in CA or CO, there are so many to chose from already! You might be able to pay the bills but I don't see how you can grow without some crazy marketing cash behind you.

I'm hoping to open one in CT as there is no regional brewer here, and the locals aren't anything special either.
 

Frige

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Some grocery stores do get it. HEB in Texas has a huge craft beer aisle. Its like being in a candy store, so much to choose from.
 

ktraver97ss

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:( Stone's a winner in my book, their latest "Enjoy by" IPA's are excellent, and Sublimely Self-righteous is my fav Black IPA.
 

WiseEyes

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+1 I think if craft breweries don't start excelling in making really great session beers, the ceiling won't be as high. People like BMC beers because they go down easy. As home brewers, we know that you can make very drinkable session beers that are WAY better than the BMC guys.
I also see this as a huge niche in the craft market. I love beer, I don't drink wine, I don't drink hardly any liquor, but I drink one or two beers three or more times a week. I really don't like the idea of doing that with a 6% + abv beer all week long and is a big reason i started home brewing. When I am out and the designated driver i find myself drinking Yuengling or even bmc because I want to be able to have 2 beers and drive home and I know that at 4-5% and i know i don't want the Imperial whatever that's 7.5%. I really think there is a market for less extreme beers.
 
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