Click here for part 2 of this series. I try to answer the question of the bubble in part 3.
The idea of the craft beer bubble is nothing new. In fact, I’ve discussed it multiple times in these posts.
For those either interested in beer, business or both, it’s an ongoing conversation. With such monumental growth in craft beer in just the last few years, where are our limits? Do we have any? Despite the 2,538 breweries already in operation and about 1,500 more in planning, people point out it would simply put us on par with some of our beer-loving European brethren.
The craft beer bubble is the topic of discussion for October’s “Session” post – the monthly event where beer writers from around the world come together to post and talk about a singule topic, as prescribed by that month’s “host” blog.
*For reference, here’s the definition of an economic bubble
Derek at It’s Not Just the Alcohol Talking asks:
Many in the industry are starting to wonder when, and more importantly how, the growth is going to stop. Is craft beer going to reach equilibrium and stabilize, or is the bubble just going to keep growing until it bursts?
To me, this isn’t a one-and-done kind of post. This week, I’m going to try and look at various angles of what a craft beer bubble means. Since the topic is so fluid and ever-changing, think of these posts as something of a real-time thought process where I hope we can work together to come up with something of an answer.
Curious if this bubble will burst? Let’s start poking it a bit and see what we can find.
Saturation
I feel that the best place to start this discussion is partially what would lead to a popped bubble – market saturation. Technically, this is not at the root of a bubble, but it’s certainly a big part of the debate over the craft beer version of it.
Craft beer has flooded the market in recent years, with exponential growth since 2009:
But where are these breweries and brewpubs opening? As discussed in my previous series on “How (and Where) We Search for Beer,” the Northeast is a popular spot and of course the West Coast doesn’t skimp, either.
Here’s a pieced-together map I created with the help of the Beer Mapping Project. It’s all breweries and brewpubs in operation, based on the latest info collected by the site (left click for full size):
That’s a lot.
I feel that’s where the discussion turns a bit and people start to wonder if that volume is sustainable when it comes to shelf space in the local beer store or room for another tap at your favorite bar. But most important to that is this: are there enough customers?
I ask because if the customer base is growing as the number of craft beers and breweries increase, then the craft beer market can breath much easier. If there are mouths to feed, there will be beer to fill them.
You may recall a New Yorker piece from over the summer detailing the incredible growth of craft beer in the United States. Chief among its importance was the mapping of several of its points. For ease, here are two maps, highlighting in shaded states the population growth of the U.S. on top and the total number of breweries, per the Brewers Association, on the bottom:
That may give an inkling of overall beer growth, but what I take away is that areas that have already dominated beer growth (Northeast and West Coast) will have a ton of breweries because there are already lots of people there.
So then I decided to dive into census data. The chart below features the 2010 reported population and the estimated 2012 population. All states are ordered based on the percentage increase in population numbers between those years.
Next to that is the best data I could find from the Brewers Association tallying the number of breweries reported to them in the U.S. in 2011 and 2012. I find this data interesting when paired with the New Yorker map.
For example, you’ll notice that Tennessee saw a great amount of population growth from 2011 to 2012 but its total number of breweries was relatively low, as reported by the New Yorker. In the following chart, however, you’ll see that the state’s population grew 1.74 percent and also gained seven breweries from 2011 to 2012. On the flip side, Wisconsin saw growth of .69 percent but 13 new breweries. “If you build it,” I suppose:
|
State |
2010 pop |
2012 pop |
% pop increase |
2011 breweries |
2012 breweries |
Brewery increase |
| N Dakota |
672,591 |
699,628 |
+4.02 |
2 |
4 |
2 |
| Texas |
25,145,561 |
26,059,203 |
+3.63 |
57 |
84 |
27 |
| Utah |
2,763,885 |
2,855,287 |
+3.31 |
16 |
16 |
0 |
| Colorado |
5,029,196 |
5,187,582 |
+3.15 |
127 |
151 |
24 |
| Alaska |
710,231 |
731,449 |
+2.99 |
20 |
22 |
2 |
| Florida |
18,801,310 |
19,317,568 |
+2.75 |
42 |
57 |
15 |
| Washington |
6,724,540 |
6,897,012 |
+2.56 |
134 |
158 |
24 |
| Arizona |
6,392,017 |
6,553,255 |
+2.52 |
34 |
44 |
10 |
| Georgia |
9,687,653 |
9,919,945 |
+2.40 |
20 |
22 |
2 |
| S Dakota |
814,180 |
833,354 |
+2.36 |
5 |
7 |
2 |
| Hawaii |
1,360,301 |
1,392,313 |
+2.35 |
7 |
9 |
2 |
| Virginia |
8,001,024 |
8,185,867 |
+2.31 |
40 |
48 |
8 |
| N Carolina |
9,535,483 |
9,752,073 |
+2.27 |
57 |
70 |
13 |
| Wyoming |
563,626 |
576,412 |
+2.27 |
12 |
15 |
3 |
| Nevada |
2,700,551 |
2,758,931 |
+2.16 |
18 |
21 |
3 |
| Delaware |
897,934 |
917,092 |
+2.13 |
8 |
9 |
1 |
| S Carolina |
4,625,364 |
4,723,723 |
+2.13 |
16 |
16 |
0 |
| California |
37,253,956 |
38,041,430 |
+2.11 |
261 |
316 |
55 |
| Maryland |
5,773,552 |
5,884,563 |
+1.92 |
20 |
30 |
10 |
| Idaho |
1,567,582 |
1,595,728 |
+1.80 |
23 |
29 |
6 |
| Oregon |
3,831,074 |
3,899,353 |
+1.78 |
121 |
140 |
19 |
| Tennessee |
6,346,105 |
6,456,243 |
+1.74 |
23 |
30 |
7 |
| Oklahoma |
3,751,351 |
3,814,820 |
+1.69 |
9 |
10 |
1 |
| Nebraska |
1,826,341 |
1,855,525 |
+1.60 |
18 |
19 |
1 |
| Montana |
989,415 |
1,005,141 |
+1.59 |
32 |
36 |
4 |
| Louisiana |
4,533,372 |
4,601,893 |
+1.51 |
8 |
8 |
0 |
| Mass. |
6,547,629 |
6,646,144 |
+1.50 |
42 |
47 |
5 |
| Minnesota |
5,303,925 |
5,379,139 |
+1.42 |
34 |
47 |
13 |
| New Mexico |
2,059,179 |
2,085,538 |
+1.28 |
25 |
27 |
2 |
| Kansas |
2,853,118 |
2,885,905 |
+1.15 |
16 |
19 |
3 |
| Arkansas |
2,915,918 |
2,949,131 |
+1.14 |
6 |
10 |
4 |
| New York |
19,378,102 |
19,570,261 |
+0.99 |
69 |
88 |
19 |
| Kentucky |
4,339,367 |
4,380,415 |
+0.95 |
10 |
14 |
4 |
| Iowa |
3,046,355 |
3,074,186 |
+0.91 |
26 |
33 |
7 |
| Alabama |
4,779,736 |
4,822,023 |
+0.88 |
6 |
10 |
4 |
| New Jersey |
8,791,894 |
8,864,590 |
+0.83 |
25 |
26 |
1 |
| Indiana |
6,483,802 |
6,537,334 |
+0.83 |
43 |
54 |
11 |
| Wisconsin |
5,686,986 |
5,726,398 |
+0.69 |
70 |
83 |
13 |
| Mississippi |
2,967,297 |
2,984,926 |
+0.59 |
2 |
3 |
1 |
| Missouri |
5,988,927 |
6,021,988 |
+0.55 |
43 |
45 |
2 |
| Penn. |
12,702,379 |
12,763,536 |
+0.48 |
88 |
102 |
14 |
| Conn. |
3,574,097 |
3,590,347 |
+0.45 |
15 |
21 |
6 |
| Illinois |
12,830,632 |
12,875,255 |
+0.35 |
52 |
67 |
15 |
| New Hampshire |
1,316,470 |
1,320,718 |
+0.32 |
15 |
19 |
4 |
| W Virginia |
1,852,994 |
1,855,413 |
+0.13 |
5 |
5 |
0 |
| Ohio |
11,536,504 |
11,544,225 |
+0.07 |
45 |
58 |
14 |
| Maine |
1,328,361 |
1,329,192 |
+0.06 |
33 |
37 |
4 |
| Vermont |
625,741 |
626,001 |
+0.04 |
23 |
25 |
2 |
| Michigan |
9,883,640 |
9,883,360 |
0 |
102 |
122 |
20 |
| Rhode Island |
1,052,567 |
1,050,292 |
-0.22 |
6 |
8 |
2 |
So what am I getting at here? Well, I suppose that’s part of the running conversation.
If we talk about saturation, it seems fitting to discuss where the breweries are coming from. For the country as a whole, craft beer saturation may not have been reached, but if breweries are focusing on local and people are focusing on locally-produced goods, it makes sense to look at saturation from a local perspective – not just a nation-wide one.
What saturation means for someone in California and its 300+ breweries/brewpubs is different than what it means for North Dakota and it’s growing population with just two breweries. If North Dakota had 300+ breweries, this would be an entirely different discussion. Just ask Mike Stevens, CEO of Founders Brewing Co. Local is the name of the game. Perhaps that’s where managing the craft beer bubble starts.
This post may not provide specific answers, but I hope it’ll act as a jumping off point for further discussion. Share your thoughts/experiences/gripes below and let’s also chat on Wednesday when we take a look at how investing in beer may be a game changer.
+Bryan Roth
“Don’t drink to get drunk. Drink to enjoy life.” — Jack Kerouac
This Is Why I'm Drunk 
My opinion on the reality of the bubble is “it depends. Yes and No”. It really boils down to who is asking the question and who is answering it. Which angle are they looking at it from. So, good on you for taking us through more than just one POV with this question.
Thanks – I think you’re very much right.
Is there a bubble? Yes, I certainly believe so, although that could be said about any fast-growing good or service, I suppose.
What’s the severity of the bubble? Hell if I know. People have been saying this for years and we’re doing OK.
I don’t think it’s a bubble in the sense that it could burst and the craft beer market will collapse and we’re left with just a few major players. If there is a decline in the market, I think it’ll be more due to people putting out crappy beer than anything. Breweries are popping up all over (there’s something like 5 being planned within a half hour of me), and not all of them are going to be good. Like any other industry, a business with a subpar product won’t succeed.
Completely agree. I believe we’re at the point both in strength of businesses and interest that some massive collapse is not a realistic option. When I read or talk about things like saturation or investment practices, I think of people either 1) getting into craft beer for the sake of making money or 2) getting into craft beer for the sake of making money and creating an inferior product.
I have come across several local breweries that have opened in the last six months who make beer that in my (obviously) biased opinion is average, at best. But because of good location and lack of competition, they will most likely survive and perform well. Is that good? Bad? Does it matter if people are happy? One man’s trash is another man’s treasure.
I’ve been thinking about my Session #80 post a lot. A few other things that may exacerbate the bubble problem (that I’m sure you’ll cover in other posts):
-More brewers begets more brewers. When new guys see that a brewery is opening up nearby, they may think, “hey, I can do that” even if they don’t have the beer or business experience. I fear that we’ll have a glut of flailing breweries soon because people rushed to the market before they were ready. That alone will cause the stats to fluctuate.
-Craft still only makes up ~7% of the beer market share. I’m sure that number will continue to increase, but probably not at the same rate breweries are opening. I see two solutions: 1) some of the new guys don’t make it, or 2) a resurgence of pilsners and craft lagers that might win over more of the 93% who are still buying macro.
One of the interesting things among the Rise of Craft Beer is that in reality, Big Beer isn’t hurting too much. Yeah, sales are down, but profits are up because they’re creating new premium brands or “crafty” brands that cost more to buy and get snatched up in large amounts Even as craft beer inches toward the inevitable 10 percent market share, Big Beer is still coming strong where it needs to – its bottom line.
On the flip side, the tiny micro/nano businesses are becoming more popular – at least what I read and see near me – so when a new brewery opens up, that is one new brewery but represents a tiny fraction of space at a local bar.
By the way, America yells at your for suggesting craft pilsners or lagers for them. “WHERE DO YOU KEEP THE HOPS?” they ask? More India Pale Lagers, coming right up!
I have yet to find an IPL I actually liked. Most of them taste like something went seriously, seriously wrong during fermentation. Not saying it can’t work (see Noble Pils, Prima Pils), but so far, no bueno.
Do you know how Shock Top and Blue Moon are lumped into the stats? Are they in the craft numbers or the big beer numbers? I might have to do a full comparison because now my brain is set to stun.
Shock Top, Blue Moon and the like all fall under BA’s guidelines of non-craft. Ditto for folks like Redhook, Magic Hat, Kona, etc. I believe Goose Island is also lumped into that now.
Ah, thank you. Noted for future ranting.
this has also been an ongoing question for me, although i think that a certain extent of the early maniacal growth in the craft beer industry can be blamed on “filling the void”… i think that while there may be a bit of a bubble going on, i also don’t feel that the “sustainable” equilibrium that will eventually be reached is necessarily all that lower than where we are today.
looking forward to more of your posts and the upcoming Session.
Thanks … and thanks for chiming in, too!
I think what will be very deciding as momentum moves forward is just how many the “about 1,500” breweries in planning actually come to fruition. Since it could be anywhere from conception to construction, there’s a lot of leeway what it may mean. I was just reading today the amount of breweries/brewpubs opening comes out to almost one a day in the U.S., which certainly sounds like a lot.
Then again, as I mention, I think where those businesses are opening matter, too. Have you seen many breweries open near you?
There’s a LOT of action in Virginia right now, quite possibly more than can be sustained – just the breweries that I’m aware of in the past 2 years are Champion, Three Notch’d, Parkway, Three Brothers, Strangeways, Hardywood, Center of the Universe, Blue Mountain, Sunken City, Lickinghole Creek, Wild Wolf, and James River… and that’s on top of the existing breweries. It’s a lot.
Great post, Bryan. I came to a similar conclusion as you, that when we talk about a “craft beer bubble,” it is more valuable to discuss distinct regions of the country, rather than the whole United States as a whole.
Also, like Das Ale Haus said, I don’t believe their would be a “bubble bursting event” caused by simply the # of breweries. I believe something more drastic would cause a rapid decline in the # of breweries, such as a stock market crash or a prohibition like event.
What I believe we will see is, rather than the bubble bursting once a brewery count in a region reaches an unsustainable pinnacle, is that the bubble will slightly deflate until the brewery count reaches sustainability again.
Of course, you can’t always simply look at numbers. Quality will be at the forefront, also.
Cheers!
The reason, I think, there is so much discussion about the craft beer bubble is because we have no real “control” time frame. If you look at the breweries in US by year, there’s a steady decline in breweries leading up to prohibition due to the temperance movement, then absolutely a lot of breweries closed due to prohibition, and continued to decline through mergers and acquisitions (and what I assume was a significantly high barrier to entry). Once homebrewing was legalized, we see the sharp rise in breweries. Eventually the market will find its stabilization point and we will see the growth slow and then halt (or if it is already over-saturated: decline). However, given the continued sharp rise in growth it is reasonable to assume that the market hasn’t it its saturation point yet. Considering that craft beer has seen unprecedented growth in a down economy, there is obvious demand despite craft beer being a “luxury item” with a readily available, cheap alternative. There comparison is made to
All good signs that there is more growth to be had.
Stupid fat fingers.
There is a comparison to be made to the 1887 number of breweries being surpassed (2011 vs. the current 2538), but it should also factor in total population and breweries per capita. In 1887 there were 59M, as opposed to 2010: 297M or .00003 breweries per capita vs. .000009. To match a brewery per capita close to 1887, there would need to 10,000 breweries.
Would there also be consideration for size of brewery? The difference per capita is important (10,000 breweries seems like a staggering figure!) but I wonder about comparison of an 1887 pub and it’s production of beer vs today’s breweries and their varied lineups.
The variety, let alone quantity, breweries produce is a lot. Admittedly not knowing much about 19th century brewing, I wonder if the “neighborhood pub” back then had a small enough clientele for so many businesses, compared to today’s spread out population.
I’m just thinking (and typing) out loud here, though.
Definitely a valid point; I know that in part of Boston – where I’m from – there were 24(!!!) breweries with 2 neighborhoods (source: http://www.jphs.org/victorian/bostons-lost-breweries.html). One would have to assume with such a tight concentration that the amount produced was relatively small, but that’s just my assumption.
From a personal perspective, I feel there are already a ridiculous amount of brewers on the scene with a crazy variety of offerings….
I didn’t say this is a bad thing 🙂
My point is simple: When I take my $10 this week to the beer store, I don’t even LOOK to see what’s available from out of state because there is a 50ft long wall from floor to ceiling of local (Michigan-made) offerings – including a 4ft wide, floor to ceiling, section of “limited & seasonal” beers.
At just ONE beer store.
…And my $10 gets me 2-5 beer bottles. Sometimes a 6-pack.
The problem isn’t great beer vs mediocre beer. It’s not about established vs new brewers. I think the question going forward is, “how can I allocate more of my paycheck to craft beer” 🙂
But seriously, if you look at Michigan, there is a crazy amount of craft available. There is NO WAY to even TRY it all at an individual level… And that’s just focussing on my OWN state. You could be creating AMAZING beer & I’ll never discover you or it, just because of volume of options available.
If “the bubble” is in reference to saturation, then I think the bubble is here.
But there are those who will survive & thrive by catching the attention of the OCEAN of $10/week customers like me who are staring at a WALL of beer & trying to fill their 6-pack. How will they catch my attention? A cool looking bottle/label. A great marketing campaign. An active twitter/facebook account. GREAT BEER that sells itself word-of-mouth , including apps (untappd, etc) that feature “bragging” on beers.
As much as I wish it weren’t true, I don’t see a future where I’ll spend more than $20 in a week on beer, & a lot of weeks it’s zero. And even though that will ALWAYS be locally-made craft beer for me, just simple math will show that if the number of options increase, my “share-purchased” will diminish.
In that case, may your beer stay local and your wallet flush.
Cheers!