I’ve lately read repeated iterations of this beer weenie lament about “The End of Craft Beer” and some great craft beer slowdown that’s looming and threatens to drive the whole glorious culture of American craft brewing into the ground, not to mention various side issues like the mere use of the word “craft”. It’s begun to clog up my Facebook page the way grease clogs up a garbage disposal…and it smells even worse than that.
This whole subject just irritates me so badly that I want to transform my body into electrical impulses, flow through the internet, emerge on the other end, and just slap the shit out of all those people who seem so freakin’ determined to turn this into an Issue.
This business of craft beer and boutique wineries and artisan distilleries suddenly experiencing a bust on the order of the dot-com collapse is pure nonsense, promulgated by people who have little or no knowledge of economics and the average American consumer.
FACT: the dynamic that kept Anheuser-Busch atop the brewing world for generations was the simple act of kids coming of drinking age being raised to think that the precise definition of “beer” was one of a relative handful of adjunct Pilsners, all of which looked and tasted almost identical. If a child grows to his/her majority and sees nothing in their home’s fridge but BudMillerCoorsPabst, THAT is what they’ll drink into adulthood. Now, we have a couple of new generations of American drinkers who grew up NEVER seeing that garbage at all. Their fridges were full of Sierra Nevada and Sam Adams and Anchor and Deschutes and Dogfish and the idea that you just buy and swill ONE brand of beer was never part of their experience. They also grew to adulthood with the experience that few kids of previous generations even found possible: driving ten minutes to a local craft brewery and having beer straight out of the tap. I’ve written this over and over and over and over again and will continue to do so because it is absolutely, inarguably true. Young people come of age, now, seeing wines from Dunham and Paul Hobbs and Joseph Phelps and Ken Wright in their parents’ wine cabinets, instead of rows of Robert Mondavi or Beringer Cabs. They find Hillrock and Stranahan’s and Corsair in the booze cabinets and not just Jack Daniels and Johnny Walker and Crown Royal. Anyone who doesn’t think American purchasing habits and brand loyalties evolve this way just hasn’t spent a lot of time, as I have, studying Why We Buy Shit.
This new social paradigm is why BudMillerCoorsPabst are already doomed and are now virtual Dead Men Walkin’, and why the shadowy “craft beer bubble” is NEVER going to go bust, ala the dot-com segment. Dot-commers DIDN’T MAKE ANYTHING. There was no tangible thing to acquire and enjoy immediately and the goods offered online were almost always big-ticket items because selling a beer or two at a time, with shipping, made no sense as a business model. More to the point, the “bubble” has, in fact, been busting for the entire history of the craft beer boom, albeit at a glacial pace. Breweries have been going out of business for the whole 30 years, either sunk by poor products, bad planning, or unrealistic expectations…in short, exactly the same things that torpedo businesses in every category.
Beer is a primal commodity to this country and its people. It was one of the first manufactured products made in America and has been such an ingrained part of our culture that you might as well ask when apple pie and puppies are gonna go bust. Consider this new fact: The Brewers Association, just yesterday, sent me a press release that observed a Milestone: we now have 4,144 active breweries, the most in the US since 1873….got that? Now, think about it: before 1873, back when this nation was less than half formed, there were more than four thousand, one hundred and forty-four breweries! In 1873, the previous high-water mark of small breweries, there were 38,558,000 people in the entire country, which did not include Hawaii and Alaska. There were 4,000+ breweries. There was no such thing as refrigerated transport, there were no trucks, and all brewing was local. 38M people sustained 4,144 breweries. That number was whittled down to zero basically by Anheuser Busch and their deep, amoral pockets. It was NOT because demand decreased.
Today, there are 320 MILLION people in this country. We’ve already gone back to the pre-AB paradigm of local/regional breweries. In 1873, there were 9,500 people per brewery as a potential audience. Today, that number is 797,500 people per brewery, and Americans are drinking more beer than ever. The thing that will sustain those breweries is that, as time goes by, MOST of the current buyers of BudMillerCoorsPabst and all those adjunct lagers will either A) die off or B) get interested in craft beers and abandon the mega-brewers. In 2013, total domestic sales of the mega-brewers brands was $23,707,870,000. In that same year, total craft sales – the figure that sustained the 3,200+ breweries that existed then, was $1,882,415,000. Using those outdated figures, let’s say that craft beer is able to bleed off maybe 25% of mega sales in the next ten years. That more than quintuples total craft sales. Beer consumption in general is rising, so in ten years, let’s extrapolate that megas are bringing in $25B. Let’s call it 5,000 craft breweries total. That’s FIVE MILLION dollars a year for EACH those breweries, more than enough to keep all but the largest in business. IF – and this is a BIG “If” – the craft brewing community can ever manage to get their REAL story out, about how craft breweries are the ONLY real American-owned breweries left, how they create jobs by the tens of thousands, fund subsidiary businesses like yeast, hops, grain, barrel, transport, brewing equipment, and packaging companies, contribute hundreds of millions to states’ tax coffers, and just plain taste better than mega-lagers, (The absolute worst craft beer I ever tasted was still a LOT better than anything BudMillerCoorsPabst makes) there’s no real reason why they can’t siphon off considerably MORE than that 25%. For more information on that, I’m going to send you back to this blog’s most successful ever post and the links contained therein.
FACT: there is NO corporate interest that has enough cash for investment to buy up all these 4,000+ breweries. It would even break AB and they’d never try it anyway. Beer as a local commodity is NEVER going to be displaced by the investment firms and mega-brewers gobbling up breweries because our entire cultural orientation has changed. Americans harbor a rooty mistrust of all things corporate and that includes beer. That said, will some breweries fail? YES, but they’ve been failing ever since craft began to boom. THAT natural attrition, driven by simple marketplace demand – mediocre breweries failing as consumers become more and more savvy about what constitutes great beer – is craft beer’s “bust” and that is how it SHOULD be. We’re all living in the Golden Honeymoon of the American craft beer business. There will be a shake-out but the idea that craft brewing is abruptly going to become an unsustainable business category ignores all sorts of empirical evidence of how Americans think and choose goods. But most importantly, we as 21st Century Americans, like Choices. We are no longer mollified by the “conventional wisdom” about much of anything. We’ve simply moved on from the aesthetic strait-jacket of BudMillerCoorsPabst and we’re not going back.
Yes, there will be more and more larger entities gobbling up craft breweries because the word that they’re profitable has begun to penetrate the thick skulls of investors who used to see craft brewing as a charming fad, akin to panty raids or the Pet Rock, which would soon pass. In America, Large Buys Small and that is a natural function of an active and healthy marketplace. For me, whether we’re talking about huge congloms buying up boutique wineries, investment houses buying into breweries, or our current new boom of artisan distilleries eventually growing to a size at which they become chum for corporate sharks, I have to ask myself if that company plans to buy up the operation and impose the old, corporate thinking onto their production – as Anheuser Busch or AB/InBev or whatever they’re calling themselves this week has certainly done with properties it’s acquired – (they’ve completely ruined Hoegaarden with their asinine “efficiency strategy” and cheaper production standards) or if they plan not to kill the Golden Goose and realize that what made that brewery, this winery, or another distillery so desirable in the first place was their creativity and expertise. A smart corporate overseer will simply stay out of the way, while doing the only two things at which investors truly excel: funding and distribution. As in the case of Ballast Point, recently acquired – for one billion dollars! – by Constellation Brands, I know some of the people at Constellation and they are thrilled to their genes to finally have, as one told me, “some decent beer to sell after years of nothing but Corona and Pacifico.” Constellation is smart and capable and tends to improve their brands. But more fundamentally, Constellation did all of us beer lovers a great favor, even if they didn’t mean to do it: they have now set the price for a significant American brewery at a billion dollars and that alone is going to scare off plenty of potential suitors. Constellation will be good stewards of Ballast…and I’ll keep drinking it.
Let’s not forget one very important thing, too: There are a hell of a lot of small American brewers, winemakers, and distillers who wouldn’t sell out to a big corporate interest because they just wouldn’t – not for any amount of money. I can’t divulge names but well over two dozen producers of adult beverages have confided to me that they’ve been approached by potential buyers and turned them down without even hearing the offer. LOTS of people see selling to a corporate interest as whoring out and God Bless Them for seeing it that way. The numbers who feel that way do, still, Thanks Heavens, outnumber those who are willing to grease up and bend over and as long as that continues (which is to say as long as human nature remains perverse and independent and mercurial) we’ll have craft beverage producers who are beholding only to themselves and to us.
We’ll see craft beer as a viable business segment for the rest of all our lives. The simple, bedrock fact is that MOST small breweries start out not because the owners want to become the next Sam Adams or AB/InBev but because those who take that noble gamble – to start and grow a small American business when there are thousands of people screaming at them, in every…single…case, “Are you out of your f__king mind? There are too many breweries NOW!” – can’t imagine being happy doing anything else. It sounds trite to say it, even to me, but the inescapable fact is that Love is the best motivation you can have for doing anything that involves your energies and fortunes. I know within ten seconds, when meeting a new brewer or winemaker or distiller, if they’re likely to succeed at it because the fascination and energy and passion for it bubbles so close to the surface that it’s almost impossible to hide. When their eyes light up when talking about a certain barrel or a grain mill or a drip system, I know this is someone to watch. And that is NOT a function of size. I get the same subsonic vibration whenever I talk with someone from Deschutes or Fort George or Rogue or Dogfish. The fascination, the excitement of their daily grind of hoses and tanks and grapes and hops and grains and science, never wanes if it comes from a real place, to start with.
Joe BIssaca, the sell-out who peddled away his Seattle-based brewery – which shall remained unnamed here – over the wishes of his only significant partner, recently surfaced in a wine-related website, sounding the alarm about craft beer’s over-saturation, which is NOTHING more than his own desperate desire to justify whoring out and salvage some local credibility among craft fans who now consider him a traitor and the brewery a mere shell of what it had been. Codifying this alarmist viewpoint and quoting it in a credible website lends those adolescent sentiments a gravitas they neither possess nor deserve. Anyone who has really studied the dynamics of American consumers and closely watched the shifting, post-millennial paradigms of beer has to shake their heads at stuff like this and just…go have a beer.
It sure is funny that people talk about the craft beer bubble assuming that we’ll all go back to shitty cheaply made lagers. There will totally be an adjustment, just like any business, and those people trying to ride the trend will ultimately be the ones to lose out the most versus those who are passionate about it who make better beer. Heck even some of the most crap beer drinkers I know have converted. The fact that we have viable brewing programs starting up in schools really speaks to the future of this industry, which is grand. I’d argue that the entire food and beverage industry in North America is moving this way, which is part of the reason for craft beer’s success, people are craving local products that taste great in restaurants, cafe’s gastropubs and breweries. What the macro companies missed all along was that the craft beer of today was truly disruptive innovation, blue ocean, (insert newest buzzword), a clear market and game changer that won’t ever change back again.
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Well, that’s what I keep saying, as I said above: at least a LARGE portion of what kept Bud so dominant for 100 years was that there just wasn’t any real alternative. Everything labeled “beer” in stores was the same watery, adjunct lager crap and whole generations of young Americans equated those with what “Beer” meant and never saw anything but that garbage in their home’s fridge. As that continues to fade from the national consciousness, the mega-producers will continue to lose audience and there’s NOT A DAMNED THING THEY CAN DO ABOUT IT. We are NOT going back to that narrow, boring bad-Pils style of beer – ever, period, and if that’s what AB is banking on, they’re doomed. Seriously, as one former AB exec friend of mine told me, the corporate management at AB and the Busch family really never grasped that their continued success was a product of habit. They sincerely believed that people drank Bud because they loved it and that it would withstand all comers. Which it did, except that “all comers”, up until craft beer got rolling in the early 80s, was all exactly the same thing as Bud. They knew how to play the adjunct Pilsner game but genuinely thought that our excitement and enthusiasm for craft beer was some sort of adolescent fixation like chugging Tabasco or posters of Carmen Electra. They expected to easily scoff craft beer out of existence and then, when it became clear that people actually preferred those “weird beers” they even then tried to play old cards that didn’t apply. They went for freshness, never mind that many craft beers improve with aging. The way my friend tells it, they used to drink bottles of Anchor Steam and Sam Adams Lager in board meetings and make faces and say, “Oh, everybody will get sick of this shit pretty soon. How much of this bitter crap can people stand?” Today, their advertising has taken on a petulant tone that shows their frustration: the Super Bowl ad, the ongoing ads about “139 years” and “proudly macro” and especially the Red Hook ads with the surly voice-over, saying “You say I’m TOO OLD? I’m the GRANDFATHER OF CRAFT BEER!” and the tag line, “You’ll drink it and like it!” I guess next is, “So, you don’t like Bud, anymore, eh? Well, FUCK YOU!” I’ve found that MOST of these guys who post quasi-learned stuff about how craft beer is doomed are usually import snobs or German beer geeks who are actively rooting for the demise of craft, with its heavily British orientation, or those tedious elitist craft fans who hang out with five or six pals and think they’ve amassed so much craft beer wisdom that they feel just SO above it all and have to invent more and more extreme “issues” to prove their superiority. I’ve engaged with some of these nitwits and it drives them crazy when anybody contradicts them. I’m very close to done with the whole subject. That line of reasoning, that craft’s suddenly going to go bust, reveals such a profound lack of erudition in both consumerism and economics and so little understanding of American commerce that I can’t even address it seriously, anymore. I only wrote this because I happened to get four Facebook links and six emails about it on the same day that I was interviewed by a Boston publication about that very subject. It just…makes me tired.
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Wrong. You are correct that there is a generational shift and that the days of Budmilloors dominance are coming (have already come?) to an end. People that start drinking IPAs and porters and saisons in college are not suddenly going to switch to drinking American Light Lager. BUT there is a bubble developing because the mad rush of inexperienced, under-financed, overly optimistic entrepreneurs into craft beer will lead to a consolidation. Craft beer is an extremely difficult business even in a less competitive environment. Right now we’re seeing more and more breweries, little and big alike, competing for limited tap handles and limited shelf space. Sure, large grocery stores are devoting more shelf space to craft, and we’re seeing more handles switch from macro to micro brands, but in the near term there isn’t any possible way that a significant percentage of small craft breweries won’t be closing in the next five years because they simply won’t be able to make enough money to stay in business. And that will be a good thing for the overall health and long-term viability/profitability of the craft beer industry, which someday, in the not-too-distant future will simply be called the beer industry.
No, Brian, I am not wrong about this and I have probably spent maybe ten times the time you have in studying both the beer culture and American buying habits. I hear this childish mantra all the time: “inexperienced, under-financed, overly optimistic entrepreneurs“…leading to consolidation? How, exactly? The inexperienced, under-financed breweries are NOT, nor will they EVER be, the targets of larger investors and that’s what you’re talking about when you say “consolidation”. If you’re using that term to mean that a collective of breweries will consolidate, as in merge and pool rosources, why on earth would breweries partner up with “inexperienced, under-financed, overly optimistic entrepreneurs”? Your statement that “there isn’t any possible way that a significant percentage of small craft breweries won’t be closing in the next five years because they simply won’t be able to make enough money to stay in business” is also a tired old refrain that I hear constantly but that proceeds from the far too-American presumption that ALL businesses measure “success” in terms of how fast they can race to megalith status and a fat IPO. MOST smaller breweries do NOT compete for tap space. Many, many of them sell everything they produce in their own taprooms. Why is there this absurd perception that getting filthy rich is the only reason to go into business? I’ve spoken, over the past twenty years, with literally hundreds of small brewery owners and less than ten of them expressed any desire at all to be huge, mainly because they’re usually business people enough to know that, unless all the dominoes fall just the right way, brewing is not a business in which you’re going to end up retiring to the Bahamas and cruising on your yacht. Fully 98% of these people told me they’d be quite happy to simply be a little profitable, make enough money to pay the mortgage and feed their families, and maybe travel, now and then. It’s called “realistic expectations” and, as time goes by and brewers share their experiences, the general savvy level goes UP, not down.
Then, there’s this: “…in the near term there isn’t any possible way that a significant percentage of small craft breweries won’t be closing in the next five years because they simply won’t be able to make enough money to stay in business.” I’m sorry but I’m going to tell you what I told the last five people who told me that: It’s asinine. In 1873, the previous high-water mark of small breweries, there were 38,558,000 people in the entire country, which did not include Hawaii and Alaska. There were 4,000+ breweries. There was no such thing as refrigerated transport, there were no trucks, and all brewing was local. 38M people sustained 4,000 breweries. That number was whittled down to zero basically by Anheuser Busch and their deep, amoral pockets. It was NOT because demand decreased. Today, there are 319 MILLION people in this country. We’ve already gone back to the pre-AB paradigm of local/regional breweries. In 1873, there were 9,500 people per brewery as a potential audience. Today, that number is 797,500 people per brewery, and Americans are drinking more beer than ever. The thing that will sustain those breweries is that, as time goes by, MOST of the current buyers of BudMillerCoorsPabst and all those adjunct lagers will either A) die off or B) get interested in craft beers and abandon the mega-brewers. You just agreed with that: “You are correct that there is a generational shift and that the days of Budmilloors dominance are coming (have already come?) to an end. People that start drinking IPAs and porters and saisons in college are not suddenly going to switch to drinking American Light Lager.” In 2013, total domestic sales of the mega-brewers brands was $23,707,870,000. In that same year, total craft sales – the figure that sustained the 3,200+ breweries that existed then, was $1,882,415,000, Using those outdated figures, let’s say that craft beer is able to bleed off maybe 25% of mega sales in the next ten years. That more than quintuples total craft sales. Beer consumption in general is rising, year by year, so in ten years, let’s extrapolate that megas are bringing in $25B. Let’s call it 5,000 craft breweries total (obeying your assertion that we’re gonna have a lot of failures). That’s FIVE MILLION dollars a year for all those breweries, more than enough to keep all but the largest in business. IF – and this is a BIG ‘If” – the craft brewing community can ever manage to get their REAL story out, about how craft breweries are the ONLY real American-owned breweries left, how they create jobs by the tens of thousands, fund subsidiary businesses like yeast, hops, grain, barrel, and packaging companies, contribute hundreds of millions to states’ tax coffers, and just plain taste better than mega-lagers, (The absolute worst craft beer I ever tasted was still a LOT better than anything BudMillerCoorsPabst makes) there’s no real reason why they can’t siphon off considerably MORE than that 25%.
FACT: there is NO corporate interest that has enough cash for investment to buy up all these 4,000+ breweries. It would even break AB and they’d never try it anyway. And I have one more observation to make: EVERY time I read something from one of my readers, talking about “inexperienced, under-financed, overly optimistic entrepreneurs into craft beer“, either saying or insinuating that the beers are no damned good, they’re somebody who is copping some elitist attitude based on their own personal preferences. Though I’d never name them at gunpoint, there are a SMALL number of breweries I’ve visited, over my 25 years ion the beverage trade and beverage reviewing, that I think of as simply bad. WITHOUT EXCEPTION, those breweries were profitable and had a core of fiercely-loyal customers. None of them were threatening Sam Adams but all had people who swore by what they made. And ALL of them, after 25 years of tasting, are still in business. I think I’m right about a LOT of things. I even think I’m right about those breweries. None of what I think matters a damn. Nor does what you find lacking in the state of craft beer. Better breweries will succeed and prosper and mediocre ones will fold but that happens in EVERY business segment and always has. It’s a simple FACT that each brewery in the US now has a possible constituency of almost 800,000 people from which to draw. If you’re looking for brewery failures, look at the beer meccas like Portland and San Diego and San Francisco, where geographic saturation is far more of a possibility. For dead-certain, some breweries are going to fold. Just some of ALL businesses fold. Restaurants, my old business, has a three-year survival rate, nationally, of less than 5%! But nobody’s talking about opening a restaurant as being untenable and we’re not having spirited debates about “too many inexperienced, poorly-financed overly optimistic” restaurateurs, leading to a situation in which we’ll all suddenly decide all we really need is MacDonald’s. I’m not guessing about any of this, Brian. I spent years, before I got into the beverage biz, studying consumer research and the psychology of the American shopper. And I still study it today. We are NOT approaching some mammoth craft beer collapse in which breweries by the thousands or even the hundreds go broke. And if you think we are, you’re just operating off your own prejudices and not looking at the whole picture.
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