craft beer bubble – Beer Search Party

March 31, 2015August 31, 2018

The Firkin for March 2015

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I finished reading the Signal and the Noise by Nate Silver, founder of the FiveThirtyEight Blog, and one of the big takeaways for me has been what prognosticators don’t consider when making a prediction or a forecast. (Yes, those are two different beasts)

It can be due to bias that is well known or too subtle to catch. It can be due to their being too much noise to find the signal. Or it can be due to using the wrong sample set all together.

It makes me wonder what data is being unconsidered in the world of craft beer. And/Or. What data shouldn’t be used.

The big data question that has been discussed ad nauseum is the Bubble Issue. Are we at a saturation point for breweries? With this book in mind, I checked a sample of articles on this topic. What I found was that chasing the new is big, IPA’s are big, demand is strong, market share is growing. Loads of positives but also a growing sense of foreboding. That a popping sound is soon to be heard.

I don’t have the statistical training to come up with an algorithm or equation to explain all of craft beer economics. And I don’t see others with rock solid evidence either. No one has calculated the craft beer consumer market and come up with a tipping point for amount of breweries or amount of barrels that the market can stand. Could the generation after the millenials return to the watery lagers? No one has said where the slow trickle of losses at the corporate water lager merchants will come to a rest because this is the first real challenge to their hegemony.

Plus, we can’t really compare the last beer bubble to this one. Now and then, though not separated by much in years, are far apart in so many ways. Dominant beer styles is one glaring aspect. Ambers and pales were big back in the day. Now it is IPA, barrel-aged and sours. Distribution is different. No Stone delivering other craft brands. Education is vastly different. So many customers with knowledge. Still room to grow on that count but before nearly everything had to be explained. The economy then and now was different. Then you factor in that the youngsters drinking craft now, grew up with it. They have only known a world with great beer. I and others can still unfondly remember the days of limited choice.

I don’t doubt that a bubble may be a coming. That poorly brewed beer and poorly run breweries may not survive. But the size of the bubble and when it arrives may be as hard to discern as determining when the next earthquake hits L.A.

October 4, 2013September 10, 2018

Session # 80

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From Derek Harrison’s Beer Blog, It’s Not Just the Alcohol Talking, we get another hot topic in the beer world. Will the bubble deflate or is their a bubble at all. The bubble not being housing or internet stocks but our beloved craft beer. From checking out Harrison’s blog and reading his post for Session # 79, it should be a well moderated debate and not just provocative for the pleasure some take in “keepin’ it real.”

Here is the assignment:

Session #80 – Is Craft Beer a Bubble?

It’s a good time to be in the craft beer industry. The big brewers are watching their market share get chipped away by the purveyors of well-made lagers and ales. Craft breweries are popping up like weeds.

This growth begs the question: is craft beer a bubble? 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?

You hear the tone and see the head shake and you know you are in the presence of a fatalist. We have all run into the guy who says that we have too many breweries. It is unsustainable for the customer base. So on, ad infinitum. Why would someone be negative when we are living in a golden age of great beer?

Me, I see the pint glass as more than half full though. I am not so naive as to expect double digit growth forever, in fact, I expect a shakeout or two in the next few years but nothing on the scale of the microbrewery implosion that we have already bounced back from remarkably.

I base my non bursting bubble assumption on the fact that there are states in America still playing catch up to craft beer and many countries around the world yet to enter the game too.

The southern states are just now easing laws on brewing. Texas is a big and only partially tapped market. Same with my current city, Los Angeles. We are just now getting a head of steam going in the new brewery department. There is room to grow. It may not be in markets like Portland or Denver but even those cities are creating more beer each year.

Spain, Greece and the Scandanavian countries could easily enter the game as well. Not to mention China and its current wine buying binge that could translate into beer too. Just think if it became cool in China to buy up Black Tuesday from The Bruery. It might end of up $100 a bottle.

Another aspect that craft beer has going for it is that the customer base is strong, vocal and entrenched. Poor quality beer will not be bought out of pity, so some places will have to change or go bye-bye. Just like in any niche market And it means, also, that current craft consumers ain’t gonna buy Bud-Miller-Coors ever again. So even if the momentum completely shudders to a stop everywhere and at once, we will be in a 10% to 15% craft market depending on which stats you want to believe.

And some pundits may mark a certain percentage as the end of the line or the bottlecap ceiling but that says they can tell you that the market will top off at point A is only making a guess. Whose to say that the market isn’t 25% or 30%? I see the Big Brewers losing market share and I don’t see them making craft beer so I see potential in the 85% of America that doesn’t buy it yet. I was just at a bar in North Hollywood that has a good set of regular non-rotating handles. They do occasional special nights but nothing fancy to make a beer snobs heart pitter patter. But two of the bartenders admitted that they drank crap before and that they can’t now. These little leaks of customers will continue as far as I can see.

In the end my slightly educated guess is that craft beer will keep growing.

January 21, 2013September 11, 2018

I Second this Emotion

Oh, how I wish I had been videotaped (can you still say “tape”?) uttering these words. This short video is both hysterically funny and spot on correct. I love Gigantic Brewing beers and this makes me love them even more.

Yes, these sentiments come from a Pacific NW perspective but I believe the same could be said for San Diego or Austin or Asheville and sometime soon, Los Angeles.