As beer drinkers toast the brewery boom, the beer industry isn’t celebrating just yet.
By Joe Stange
These are heady days for beer drinkers who like options. Here is a picture of our brewing nation: Prolific taphouses multiply, while both upscale restaurants and corner dives add drafts and bottle lists. Those lists often feature new names, as different towns and neighborhoods—many of which never had breweries before—get their own microbreweries or brewpubs. Those that already had breweries are getting more, becoming destination areas for savvy drinkers. Meanwhile, shops are packing their shelves with more brands from near and far.
More, more and more. Happy times, right? So why do the folks who make and sell this stuff seem so, well, nervous?
The source of the jitters is a certain statistic, bound to be a topic of hall chatter and pub natter at October’s Great American Beer Festival in Denver. By then, in all likelihood, the number in question will be bigger than ever.
Here is that number, as this magazine goes to press: 1,528.
That’s how many breweries were in the planning stages in the United States at the start of May, according to the Brewers Association, craft beer’s industry trade group. To put that number in perspective, there were 2,403 working craft breweries—“small, independent and traditional,” per the BA’s definition—at the end of 2012. While not all of those in planning will open, they represent a potential 60 percent jump in the number of existing U.S. breweries. There are reasons people in the industry fret about that number.
There are also reasons to celebrate it.
First: the worries of a niche industry. In 2012, craft beer accounted for 6.5 percent of all beer sold—more than before, but still just one-third the market share of Bud Light alone. While there seems to be no shortage of people willing to jump into craft brewing, the distribution channels, shelf space and tap handles don’t necessarily expand so quickly.
“I wouldn’t want to be a startup brewery right now,” says Mike Stevens, CEO of Founders Brewing in Grand Rapids, Mich. Stevens and partner Dave Engbers quit their jobs and borrowed money to open Founders in 1997. He said it took several years to find their footing and sort out branding. Founders is now a national player and one of the country’s fastest growing breweries, distributing to 25 states and counting.
“The days when you could open a brewery and really try to learn your path are over,” Stevens says. “You need a good plan from the get-go.”
He says new brewers need a mastery of quality control from the start if they want to compete for shelf space. The proliferation of newcomers means “more opportunity for folks to get involved that don’t focus on quality … or don’t understand it.”
This is not just about new breweries bringing their A-game. Brewers fear that some of the new guys—especially those just out to make a quick buck—are going to make plain, old bad beer.
“Frankly, I’m pretty convinced that the market [here] won’t support all of these breweries,” says a bar owner in Texas who asked not to be identified, for fear of offending those with whom he does business. “From talking to all of the bar owners in the market, we all have that opinion. There are a few breweries right now that none of us, meaning respected beer bars, support regularly. They sort of get ‘pity handles’ because we’re all on the same team.”
There are a couple of myths in play here, and like all good myths they are partly true. The first myth is that of an elusive creature: a longtime light lager drinker who has never tasted craft beer and one day finally takes that chance. If the beer is bad at that pivotal moment, or so the thinking goes, a convert is lost forever.
The other myth is that craft beer means high quality, so hey, let’s not mess that up.
“What the industry is afraid of is low quality, and that will taint the quality of craft beer overall,” says Jeff Schrag, owner of Mother’s Brewing, a regional microbrewery that opened in 2011 in Springfield, Mo. “But I don’t know,” he adds, looking thoughtful. “There’s a lot of beer now that’s tainting the image of craft beer.”
The spooky spectre that looms over all of this is what happened in the 1990s. An explosion of brewpubs followed a business trend and then bottomed out, with many closing their doors soon after. “Back then, everybody who thought they were a homebrewer could jump in and make commercial beer,” Stevens says. “The new problem is everybody wants to get in the game, experienced or not.”
In San Diego, Stone co-founder and CEO Greg Koch—with a fulsome beard adding an air of sagacity—has used a series of colorful metaphors to illustrate his concerns about a new wave of breweries. First there was the Third World bus, “with all of these people hanging on to the roof,” he told the San Diego Union-Tribune in November. “Sooner or later, we are going to hit a bump in the road.”
“In San Diego we have a lot of eucalyptus trees, all over,” Koch said more recently. “They grow so fast that their branches are not strong enough for the Santa Ana winds. … Sometimes when you grow too fast, the structure isn’t there, and some branches will break when the winds kick up.”
Right now, according to Koch, there are not many headwinds for craft beer. But how long can that last? “I do fear for some of the limbs,” he says. Not a very sunny view for someone from San Diego.
Yet there are plenty of reasons for optimism. Craft beer’s current 6.5-percent market share is 15 percent bigger than it was the year before. That marks three straight years of double-digit growth for craft beer, even while the economy flags and the biggest beer makers shed sales.
So how big can it get? For a possible answer, it makes sense to check an especially soaked market.
In Portland, Ore., craft beer was a whopping 37 percent of all beer sold last year, up 8% from the previous year, according to Benj Steinman, president of Beer Marketer’s Insights. Steinman says craft beer there may outsell AB-InBev and MillerCoors in the next two years.
At last check, there were 136 breweries in Oregon, up 50 percent over two years ago. More are coming.
Portland and Oregon—and California and Colorado, among others—would suggest craft beer has plenty more drinkers to attract, and that there’s room for plenty more breweries.
Worth noting: All of these new small breweries will still be minuscule compared to the global companies losing market share. A fraction of a percentage point in a local market is more than enough to sustain most neighborhood outfits. This brings to mind the “burger joint” postulate of Dylan Mosley, head brewer at the Civil Life in St. Louis. In 2011, the year Civil Life opened, I asked him how many breweries were too many.
“Seriously? It’s beer,” Mosley said. “You know how many people drink beer? If I opened a hamburger joint, nobody’s going to be, like, ‘Hey, you know how many hamburger joints there are?’ They’d be like, ‘Sweet! Another hamburger joint!’ ”
Also, like other vectors on the movement toward better food, there’s something undeniably viral about rising interest in characterful beer. Friends turn each other on to new things, and it spreads from there. It has always been thus, but social media like Facebook, Twitter and beer-rating websites—nonexistent in the early ’90s—have made this process simpler, frictionless, adding velocity to the curve.
Viral growth can be exponential, to a point. But there are still plenty of drinkers out there for craft beer to attract.
So what about those drinkers? Should they be worried about a dramatic uptick in the number of breweries?
It’s hard to think why they should. More variety is coming, and variety—not quality—might be the real secret to craft beer’s recent success. Meanwhile, there are still populated chunks of this country—in city neighborhoods, suburban sprawl and rural towns—still waiting for brewpubs and savvy beer bars of their own.
Take Oakton, Va., for example. That’s where Ashley and Jeff Fox, two self-described beer geeks, live; they drive to the nearest Metro station and take the hour-long train into D.C. to peruse ChurchKey’s 55-tap list.
“The lack of a ‘good beer place’ in our area is a sad and frequently discussed topic with us and our neighboring beer-loving friends,” Ashley says. “What we wouldn’t give to have a local beer joint…”
Their home is about 10 miles from the nearest brewpub, but traffic in the area can make it seem longer. Meanwhile, they prefer the variety they get from a long tap list, sampling whatever’s new from a series of four-ounce snifters.
“All bubbles burst,” she says, when asked about the mounting wave of new breweries. But they’ll enjoy it while they can. •