Jim Koch: Craft beer bubble near "popping point"

[Soma]

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]

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?

 

[Soma]

God I'm an idiot. REDACTED!

Koch's still a ****** though, the Stone one.

 

[45_70sharps]

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!

 

[Bulls Beers]

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]

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]

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]

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

 

[weirdboy]

There is already some consolidation going on...that is always a sign of an industry that has peaked.

 

[WiseEyes]

+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.

 

[ludomonster]

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.

There's a brewery in Cape May, a brewery in development in Little Egg Harbor, the Tunn Tavern in Atlantic City, and One in Vineland. We also get a ton of stuff from PA such as Yards, Victory, and Troegs. Dogfish Head is in our region. There are about a billion local breweries serving Philly.

 

[scottland]

1st: Stone rocks. Period.

2nd: I agree that some markets are saturated, while others aren't. I also feel that there are many untapped markets in the US, but they are untapped for good reason. Texas is a great example. Sure, there are texans that really want more craft beer, but they are the 1%. 99% of people in Texas want BMC or Shiner.

3nd: There are a lot of breweries out there that aren't going to make it. Their beer isn't that good, and they don't bring anything new or interesting to their market. I don't see a huge 'bubble' popping, but as the market gets more and more saturated, it's going to be much harder for the crappy to mediocre breweries to grind out a profit. Expect to see the boom continue for another two years ago. You'll see a leveling off, then you'll see a metric crapton of 3-15bbl breweries for sale.

Any brewery making excellent beer with an owner that has some business sense will be just fine. There are so many breweries pumping out mediocre beer right now. The great breweries won't have any issue rising above them when the bubble pops.

And one small rant: New breweries that just started bottling: Put a GD bottling date on your beers. No, i'm not going to buy a $7 bomber of your IPA if A. I've never heard of your brewery before, and B. I have no idea how long it's been sitting on the shelf. I'm looking at you Knee Deep Brewing and your $11/bomber Simtra Triple IPA. /rant

 

[Wakadaka]

i read an interview or something with a local brewer that is about a year old, and it was something about competing with other local breweries (only a couple close by, but more are opening up). he said that they didn't see each other as competition, and the fact that other breweries are opening up is good for them because it will increase interest in craft beer.

basically saying that the market is going to be ex BMC drinkers not other craft beer.

i have to agree though, if i haven't heard of the brewery, or specific beer, i am going to pass on it unless it has some cool art on the bottle, or a creative name or something similar.

 

[theveganbrewer]

I really like the local pub creating their own line of beers, similar to how it is in England and parts of Europe. That would be enough for me if I was a business owner, a small local distribution network, a pub, and lots of local joints with my beer on tap.

 

[Bulls Beers]

I really like the local pub creating their own line of beers, similar to how it is in England and parts of Europe. That would be enough for me if I was a business owner, a small local distribution network, a pub, and lots of local joints with my beer on tap.

That appeals too me as well, but if you ran the numbers, could a small brewery make money? Just by selling to a few towns..

 

[SPR-GRN]

On the nano comments - I want to start one, but my goal isnt to make a ton of money and be able to quit my job, my goal is to do it on the weekends and have my expenses recouped in a short period of time, after which, be making a tiny profit; however I live in Connecticut, the land of rules and regulations, so it isn't that easy to get going.
In general - All micros/nanos are not great, so I don't expect them all to stick around, and even if the micro/nano tastes amazing, if they can't market properly, and balance thier books, they won't make it either.
I wish someone would open a brew pub in my area, that would be sweet.

 

[smw356]

I think the wine industry comparison may be a fallacy, seeing as how small wineries can directly ship to their consumers, while I don't believe breweries can.

So basically the distributers and their lobby still have a stranglehold here and this really needs to change.

 

[scottland]

basically saying that the market is going to be ex BMC drinkers not other craft beer.

That will continue for awhile, but it won't last forever. Without drawing some curves on a graph it's tough to describe, but I'll try.

Right now there is a huge interest in craft beer, but that demand is going to level off. Basically, craft is never going to pull 100% of the market away from BMC. BMC markets too heavily, and it's too much cheaper than craft beer. Just like small boutique pizza places will never steal 100% of the market from Pizza Hut. It's never going to happen.

So what is happening? The type of people that would be interested in drinking craft beer are discovering craft beer. This is driving demand. This will continue for awhile until the majority of the people that would be interested in craft beer already are. Now you're left with two groups, your BMC crowd, and your craft crowd. Craft may slowly steal more market from BMC, but at a fraction of the rate they are today.

To sum that up. Demand for craft will continue to rise. Heavily in the short term, but then very slowly a few years down the line. That line on a chart will continue to be pointed up, but it will be much flatter than it is today.

Now let's look at the second potion: Supply. As demand is sky high right now, there are tons of breweries flooding the market. As these breweries are entering the market, demand has continued to rise, and rise fast. That won't last though. Once demand slows down, supply will outpace demand. Good breweries will make it, mediocre ones will fail.

Stealing market from BMC isn't a bottomless grab bag. Eventually craft will steal all the market it can. BMC isn't going anywhere, no matter how much people want it to. Local breweries are going to need to start seeing themselves as competitors here soon.

 

[scottland]

And nanos really don't factor into this argument. There's always room for another nano in the market. My grocery store may have 15 brands of jam/marmalade, and sales for jam/marmalade may be falling, but the little old lady at the farmers market will always be able to sell her homemade jam and marmalade. She may never be able to have a jam factory, but she'll always find a market to sell 10 jars at the farmers market.

Nanos are the same way. There's always room for another 1BBL brewery. The problem is if they have aspirations of becoming much bigger in an already saturated market.

 

[bdjohns1]

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.

That's actually not at all true. I did some consulting work with a supplier to Wal-Mart's supercenters a few years ago. As the "lead" in a particular category, that supplier also was responsible for designing the shelves for WM (they call the layouts "planograms"). They worked with WM to design the set for their products, WM's private label, and competition products. WM's planograms are customized for store size and regional preferences. I think in the lunch meats, they had something like 600 configurations for ~2100 stores. That supplier also planned for many of the other supermarket chains, and the substantial majority of the big players in grocery are moving towards greater customization of their planograms, not less.

Now, I work for another food manufacturer, and I can tell you that pretty much every grocery store in the country has our "core" products on the shelf. (I'd be shocked to find a conventional grocer that didn't carry my plant's flagship product - good old regular Philadelphia cream cheese.) Where you see variations are in the amount of space given to the "specialty" items, even if you're as big as say Kraft is. Everyone's got the 8oz brick cream cheese, but they might not have all of the roughly dozen flavored varieties, etc. Certain varieties sell better in different parts of the country, and the nationwide chains do take that into account as they plan their shelves.

Plus, smart supermarket operators have seen that there's value (and increased sales) when they spotlight locally-sourced product. The only question is how much space out of the liquor department will go to the locals. I'm lucky in that I have a Woodman's grocery store nearby, and they have a ridiculously huge liquor department - they have two full-length refrigerated aisles of craft beer and a non-refrigerated aisle. They have more shelf footage dedicated to craft brews than to BMC - almost a 2:1 ratio, actually.

Then again, I live in Wisconsin. We take our beer seriously.

 

[Phunhog]

I think the wine industry comparison may be a fallacy, seeing as how small wineries can directly ship to their consumers, while I don't believe breweries can.

So basically the distributers and their lobby still have a stranglehold here and this really needs to change.

That is a good point. But it could also reinforce the whole "drink local beer" thing. I know my brothers winery does a ton of shipping to wine club members. It's a big part of their business. It would seem like the Brewers Association would be actively pursuing this. Here in CA The Bruery has a special club....http://www.thebruery.com/reservesociety/ They will even ship within CA! I could see a small, specialty brewery doing pretty well like this.

 

[WiseEyes]

Also, I believe someone mentioned the mid-west, I am in the Canton, Akron Ohio area and brew pubs are all but non existent, Thirsty Dog and two others are in Akron, but no brewpubs, The problem I see with the brewers that are in the area is they are marketing heavy, hoppy beers to a largely BMC crowd. I know from time in Europe that great full flavored beer can be easy drinking too. Yuengling has came in and made quasi-craft beer drinkers out of a lot of long time bmc'ers. I really believe that "beer geeks" do themselves a disservice by only embracing "extreme beers" while balking at or simply not talking about quality beers that are traditional or "low gravity" or heaven forbid appeal to the masses.
While I enjoy a Imperial IPA as much as the next homebrewer, on a Friday night playing poker at my house I really just want a beer I can drink all night and have a good time and I think that is the niche that is left largely unmet by the craft brewers. How many American Brewed Milds or Bitters Or Light Lagers are on tap at your local beer bar, cause mine has 50 taps and maybe 2 are on tap along with 35 Apa or Ipa. I guess what I am getting at can be summed up like this. Craft beer culture grew out of a want for choice other than American lager and skunked European imports and now the market has become flooded with variations of the same basic IPA APA and I love them, but choice becomes diluted when I go to the bar and 75% or 90% their tap space are various IPA's APA's.

 

[Crustovsky]

If people don't think the American (and specifically American, we haven't hit that level of saturation in the majority of Canada although Quebec is getting there) craft-brewing bubble is going to burst eventually they're out to lunch. It may not be as soon as Jimmy thinks it's going to happen, but it will happen eventually. I mean honestly, look at how many nanobreweries are popping up every week, and how many are being quietly buried just as rapidly. Not to take shots at those advertising their nanos in their sigs on this forum/in this thread, but I refuse to believe that the majority of these nanos are going to be around in a decade (sorry). The same can be said for a lot of new breweries popping up who are little more than johnny-come-latelies, trying to cash in on what other breweries have already done without forging their own identity or adding new innovation to the industry.

For all the pessimism I just spouted off I don't think things are that bleak though. I suspect the craft beer market share will continue to grow, and I have a feeling there will always be a solid market for fresh, locally brewed beer. Maybe not to the level the eleventy billion brewers in Washington state are currently banking on, but I'm sure it'll be there. Also, I suspect consolidation in the industry to start to ramp up in the near future. It always puzzles me that no one ever talks about it, as I don't think the craft beer world is immune to it.

 

[b-boy]

I've enjoyed craft beers for for years and I'm thrilled at the recent interest. I love the variety and quality of beer available. However, I worry that the craft beer phenomenon is a bit of a bubble in itself. It's starting to feel a bit trendy.

Everyone I know is suddenly on-board the craft beer train. Everyone is drinking, talking about, and brewing IPAs. I play poker a few times a month. We spend a good chunk of the evening swapping beers and doing taste tests. I can walk into any supermarket, drugstore, or convenience store and find a fully stocked craft beer section with hundreds of varieties. Heck, I can get a Growler filled at my local gas station. Half the people in my department are now brewing beer. I can even buy a brew kit at my local Rite Aid.

It's starting to feel like 1999 when everyone was obsessed with the stock market. Little old ladies in a supermarket check-out line could quote the Dow and everyone you talked to was going to quit their job to become a day-trader.

I hope I'm wrong, but if the interest in craft brews wanes it may take out a lot of breweries who have recently expanded. Hopefully not the ones I really enjoy. (I'm looking at you Stone, Rogue, and Great Lakes. )

 

[Bulls Beers]

I didn't go to the GABF this year, but I wonder if we see a shift in vendor attendance next year? Will their be more, less or the same as this year?

 

[tonyc318]

Beer tourism is hot right now. I think little craft breweries opening in places that people like to visit are going to remain successful. Here in little Astoria, OR a craft beer scene is starting to develop thanks to Fort George Brewery and Astoria Brewing Company. There is also Seaside Brewing Company just getting off the ground a few miles away by the beach. This is a destination and the local cities are starting to do a better job of promoting beer-cations. Lots of people from Portland come here. I think the beer tourism idea will help continue to grow the craft breweries.

 

[Nightshade]

I agree to point.

Those seeking large scale distributorship on a regional or even national scale are going to either stop at the apex or push beyond it at some point. This is just the way any market works especially when seeing a surge as we have in the last 10-15yrs. Those looking to maintain a more local distributorship or brewpub style distribution will weather the storm far better and will most likely be looking at future progress in smaller increments.

I have been involved with several startups (variety of industries) and have seen a large number of them see a moderate success then spend or plan as though they were in the big time...they all failed because of this. Always plan and spend like it could plateau at any point but still gradually reach for the brass ring and success becomes nothing more than a game of patience.

 

[InLimbo]

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.

I'm only singling you out to make a point I was going to make anyway, so I'm not trying to make a dig at you. However, I am baffled as to how easily you can write off an IPA as just an IPA (and don't even get me started on your pizza remark). Yes, there are a truckload of IPAs out there, but just how many craft brewers actually make a Damn Decent one? We as homebrewers know better than anyone that an IPA (or best bitter, or russian imperial stout etc..) can either be fantastic or terrible. And honestly there are far less good ones than bad ones. While it would be fun to pretend like this is truly a free market and only the best representations of the styles will prevail, the realist in me knows that the deciding factor as to which craft brewers' survive and thrive will be through politicking and aggressive business practices, and not so much who really make the best beers.

Now you're left with two groups, your BMC crowd, and your craft crowd. Craft may slowly steal more market from BMC, but at a fraction of the rate they are today.

I disagree, and I will attempt to explain. I believe an intermediate tier between "true" small scale craft beer and BMC needs to be acknowledged. I propose a tier for the likes of Sam Adams, who produce somewhere between what I think of as craft beer, and BMC at the macro level. I appreciate what SA has done for craft beer, but at the same time it's important to stay realistic.

I don't believe there will be a craft bubble "burst." I think that there will continue to be a virtual "land grab" for the craft beer market share and that through through business practices there will be a new mini-macro division of brews (think Sam Adams, Shock Top, SN, Widmer etc..) that will do unto "real" craft brews as BMC has done unto.. well, everyone.

 

[jbaysurfer]

I realize this is not a healthy way to form judgments of people, but I'm unimpressed with Jim Koch and what I view as his self worshiping advertising penchant.

It mostly started with Beer Wars though, and his refusal to help his former business partner get her feet under her. I'm skeptical of her product (and why it is that if beer with Caffeine is legal why hasn't a large company like redbull or monster already merged with BMC to meet this market, I'm sure it would be substantial), and in the movie they never covered whether she was the brewer or not, but the excuse he gave her "It would be helping a competitor and that would be unethical", was very very weaksauce IMHO.

I think he's getting so big that he'd actually benefit from a collapse of the micro-bubble, and saying stuff like he's said in this interview is somewhat self serving.

 

[SixStrings]

(and why it is that if beer with Caffeine is legal why hasn't a large company like redbull or monster already merged with BMC to meet this market, I'm sure it would be substantial)

Look what happened to Four Loko, Joose and the like. (not beer, I realize, but still an alcoholic beverage) The FDA shot the products down claiming the mixture of a stimulant and a depressant was a health risk. They're still on the shelves today, but now all of the caffeine, guarana etc have been removed from the recipe. The same thing happened to Moonshot as well if I'm not mistaken.