We interrupt today’s regularly scheduled blog post about the Beer Bloggers Conference ’13 for some breaking news. Splashed all over my newsfeed today is a report written by Ken Christensen in Crain’s New York Business sounding the alarm that there is over-saturation in the New York City craft beer market and the bubble is about to burst!
Quick, hide your kegs hide your BCS… craft beer is hitting a saturation point!
Whoa, there, Bessie! Let’s just take a little looksie, shall we, at the claims that portend such devastating news for local beer drinkers.
The article quotes Manhattan Beer’s Robert Mitchell, who harkens back to the 1990s shake-out of the craft beer industry, and claims “there’s clearly not enough room at the table…”
Interestingly, Ray Daniels, Founder of the Cicerone Certification Program, refuted this very thought a mere 24 hours ago at the BBC. During his keynote address, he said there were two main causes for the 90s contraction:
- Anheuser-Busch made a calculated stink about Sam Adams/Boston Beer not brewing in Boston, which caused a major PR fallout for craft brewers trying to present themselves as “the little local guy”;
- The beer sucked.
Daniels (not alone in this opinion) actually said the second issue was the real reason why craft beer in America blew up almost 20 years ago. No one wanted to take a chance on new beers, because the last new beer they had was terrible. The 2013 new beers are invariably high quality when it comes to craft beer that is distributed and marketed for off-site consumption (i.e. non-brewpub beer).
Which brings us to “saturation,” a point that Christensen seems to believe we’ve reached. He writes,
“(NYC craft brewers) need to find a place to sell their brew, too—and face competition from about 100 craft breweries in the rest of the state and 2,600 across the country, according to the Brewers Association.”
Those numbers do not hold up. In fact, the Brewers Association breaks down breweries by brewpub (i.e. only selling for onsite consumption, with a few growlers possibly walking out the door), microbreweries (which may well be self-distributing a handful of kegs each week to the neighborhood bars) and regional craft breweries. Only this latter group will profoundly impact the market saturation. In fact, from 2011 to 2012, the US saw only eight new regional craft breweries come online (while non-craft breweries barely changed, losing one brewery). The number of true nationwide breweries that make up Christensen’s 2,600 that will make an impact outside their immediate geographic region are a mere handful.
If you look at the largest number of “breweries,” you’ll find that from 2,416 existing breweries (all types as of March 2013) nationwide, 1,124—nearly half of all breweries in America—were brewpubs. Not only are these brewpubs not going to be major factors in the beer wars, their numbers are unlikely to change. The average life expectancy of any restaurant in this country is not particularly long. For every new brewpub that comes into existence, chances are overwhelming that another one will go out of business.
With regards to the 1,139 microbreweries that make up the other half of the extreme craft beer growth, a slow, steady business model that takes years to establish profitably is probably more likely to be the case than an overrun of the market. A prime example is Rockaway, which puts out 12 kegs a week on a two-barrel system. While Christenen quotes Ethan Long, his co-founding partner, Marcus Burnett, recently told me that the brewery is happy with their current rate of growth, and they have no immediate expansion plans; again, this microbrewer is satisfied with the street traffic and local restaurant scene.
Now let’s look at the numbers that came out from the Brewers Association today regarding drinking habits. “American craft beer dollar sales and volume were up 15 percent and 13 percent, respectively,” the BA announced. This despite the fact that overall beer sales are down, meaning more beer drinkers are switching to craft beer.
Finally, consider that per capita, New York State ranks 39th in the nation for breweries based on population. Our nearest neighbors rank 45th (New Jersey) and 33rd (Connecticut). We are nowhere near the capacity of Vermont (#1) or Colorado (#2).
And speaking of Colorado, has Crain’s New York Business looked at the economy of Denver recently? It’s booming, and it’s doing so under the leadership of a former brewer Governor! This country needs entrepreneurship. It needs jobs! Especially in NYC.
Anything that brings in more business opportunities to a city whose median household income (2010 census) is a mere $57,000 sounds good to this Bitch. And craft beer is creating those jobs, not just in breweries and pubs, but in advocacy and marketing and accessories (one can never have too many koozies!). Keep in mind that craft beer lobbyists and public beer advocates such as the New York City Brewers Guild and Patriot Craft Alliance didn’t exist back during the last craft beer growth spurt.
So, while I’m no glass-half-full Pollyanna, I embrace the “onslaught.” I say, there’s plenty of peeps in NYC to drink what all the new brewers have to offer. Just make sure it’s made with the best ingredients (preferably local when feasible), and I don’t think you’ll have any trouble at all selling your stock.