Too Much of a Good Thing? Concerns About Craft-Beer Saturation

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We are undoubtedly living through a beer renaissance. In the late ’70s, there were just 44 brewing companies in the entire U.S. Now, there are roughly 2,500 — including 409 new craft brewers added just last year. Another 1,250 breweries are in the works. Growth has been so explosive that the question is inevitable: When, if ever, will the craft craze level off?

Craft beer seems to be everywhere. It’s being incorporated into ice cream flavors and appearing in beer cocktails around the country. The website for the New Yorker, of all publications, recently launched an interactive craft-beer map of the U.S. It’s full of factoids you can scroll over, like that Blackstone Brewery in Nashville is the country’s fastest-growing brewery, and California has the most craft breweries overall (316), followed by Washington (158), Colorado (151) and Oregon (140). Mississippi has the fewest, with just three. (This is all based on 2012 data from the Brewers Association.)

The map also reveals that 48 out of the 50 states saw an increase in craft-beer production last year. The two exceptions are North Dakota, which only listed four craft brewers in 2012, and which apparently is rife with red tape concerning licensing and distribution, and Vermont. Despite its relatively small population, Vermont ranks 15th for overall craft-beer production. It also boasts the most craft breweries per capita in the U.S. Vermonters certainly love their beer. But Vermont’s beer production fell 2.45% from 2011 to 2012, a surprising shift that “suggests that perhaps the state is hitting its saturation point — that states, like people, can eventually have enough beer,” the New Yorker noted.

(MORE: Just Brew It: At Long Last, Fresh Air, Exercise and Beer Come Together)

Another interesting case is Indiana, which had 54 craft breweries as of 2012 (No. 14 in the nation), and where production rose an impressive 27% last year. Yet an article in the Indianapolis Star suggests that the craft-beer scene is getting overcrowded. “With about 60 Indiana craft breweries already saturating the market, triple the number from four years ago, breaking into the scene is only getting tougher,” the article states.

New brewers complain about the difficulty of getting their beers on tap at restaurants and bars. There’s only so much room at the bar, after all, and restaurants are in a position where they can be picky. “We don’t want to put five Indianapolis breweries on that have the same types of beer,” said the owner of one pub.

Bart Watson, a staff economist for the Brewers Association, says despite the dramatic increase in American craft beer over the past few years, there is still plenty of space for more growth. “Oregon is probably one of the most mature craft-beer markets in the country, and last year production still grew by 11%,” Watson points out. “Similarly, cities like San Francisco, Seattle and Portland have a much stronger craft presence than the national average, and they continue to see market growth.”

The U.S. has around 2,500 breweries, which sounds like a lot. But Watson explains that the number of breweries would have to double before we were on par with the per capita brewery rate of Germany, which has roughly 1,300 breweries.

(MORE: Think There Are a Lot of Craft Breweries Out There Now? Just You Wait)

Ultimately, increased variety and competition will result in better beer. “The beer drinker is too knowledgeable now about styles and quality” for a company to count on solid sales just by putting “craft” on the label, says Watson.

The brewers that’ll be successful understand this as well. “The first requirement to stay on tap is to have really good quality beer,” Omar Robinson, co-owner of Indianapolis’ Sun King Brewing, told the Star. “That’s the way you have got to get taps, and that’s the way you’ve got to keep them.”

20 comments
jailbreak1
jailbreak1

After reading the article and the responses from others, I figured I'd add my two cents (though two cents doesn't go as far as it used to).    I recently left my thirteen year career to join the ranks of brewery start ups in the great state of Maryland.    My business partner and myself are both VERY aware of the current craft beer market and we both believe it has become somewhat saturated in so much as it's becoming very difficult for the average consumer to differentiate between craft brands.    Go to any ale house and take a look at the fifty plus tap handles and ask yourself who the heck can figure out what's what unless you're a dedicated beer nerd.     We fully understand this but we also understand a few things.  First, the average consumer is starting to demand more from their beer as they have been demanding the same from their wine, food and other culinary offerings.   Beer, unlike wine, if more affordable to most unlike wine where the top tier will set you back $100+/bottle.    Second, the big three continue to enjoy a near 90% market capture but those numbers are declining for many of the reasons already stated by others here.   Lastly, of all the craft breweries out there today, there are MANY that are making sub par beers.   When (and note that I did not say "if") the shake out happens, it will be these breweries who are lacking in marketing, distribution or most important quality that will suffer the wrath.

So where does that put our start up brewery?    Time will tell.   We're still not commercially producing beer.   All I can say is that I feel we have a good plan and will never compromise on quality.    I'd rather sell no beer at all than sell substandard beer or even beer that I feel is merely par for the course.    We're making the investments in what we feel is in all the right places and we're funded to the point that we can afford to stand on the sidelines until we perfect those beers we'll be offering to the public.    We believe that just because a beer CAN be made doesn't mean it SHOULD be made.    We believe in making beer that WE enjoy drinking but also what the public is demanding.   Yes.....there is middle ground.    And yes...we intend on making an IPA and maybe even a DIPA but we also believe that these beers speak to only a certain audience so we plan on making a lighter beer and also a darker beer (sorry....I love my stouts!!).      And while we'll experiment quite a bit, the majority of our focus will be on making the very best 4-5 beers possible.     

Sorry for the rant.    I do, though, feel that there is plenty of room for growth for breweries willing to make the investment in quality.    Quality in addition to effective branding can and will propel a brewery to success in any market.   This is just my personal belief and one that I'm staking my future and that of my family upon.    Drink well all.   

RonJohnson
RonJohnson

@jailbreak1 As another MD Beer Guy here I just want to say cheers to you and best of luck to you in your endeavours! Hope to enjoy a pint of your work soon!

RyanMeray
RyanMeray

We're at 10% saturation with craft right now, at best. There's plenty of headroom.

1) There's lots of non-craft beer drinkers who can be converted to craft

2) There's lots of non-beer drinkers who may find they like craft beer

3) As the popularity of craft rises, the multinationals will be forced by demand to allocate interest to craft and help deliver it to market, as AB Inbev has done (so far to great success) with Goose Island.

jboxton
jboxton

Here's how it works for the uneducated Bud/Miller/Coors drinkers. The big macro breweries focus on one thing. Getting as much beer as possible out of as little ingredients as possible. This gives them bigger profits (and very bland bee)r. The big profits they get are spent more on advertising than ingredients. A craft brewer doesn't have the big advertising budget (exceptions of course) so their smaller profits go more/all towards ingredients and resources thus creating better tasting and more varieties of beers. I love being at a good beer bar and hearing some dumb frat guy ask for a Coors Light and then get mad when the whole bar laughs or groans.

jtrice
jtrice like.author.displayName like.author.displayName 2 Like

@jboxton Sharing your knowledge as an enlightened consumer with refined tastes is usually better than berating someone like an obnoxious snob. The American style of light-colored low-alcohol lager was developed during the industrial revolution for thirsty hard working laborers who wanted to down a few pints without feeling bloated or smashed (many had to work a second shift afterward). Producing a lager beer like Bud, Miller, or Coors is actually a very complex manufacturing process that many craft brewers won't attempt even on a small scale. If you've been landscaping in the hot sun all day, nothing refreshes like a cold light lager. My personal favorite among these varieties is Yuengling from Pottsville, PA. It's the oldest and now the largest American-owned brewery (Sam Adams is a close second in total output).

As for introducing the uninitiated to the world of craft brewing, I recommend a softer approach. The big guys make and distribute some decent inexpensive specialty amber/red lagers and white ales that can serve as gateways to enjoying other varieties -  Killian's, Blue Moon, Shock Top, etc. If you can get them to drink and enjoy darker lagers like Negra Modelo, it's not such a long leap to brown ale, porter, bitter or stout.

JackKennedy1
JackKennedy1

It is not a good thing. Alcohol has killed millions. Time mag should not sugarcoat it.

jboxton
jboxton

Oh yeah and your mom's a who re

jboxton
jboxton like.author.displayName 1 Like

@JackKennedy1 EWWWWWW!! Not one of you psycho neo-prohibitionists! I didn't think you fossils still existed!

AdamCalagione
AdamCalagione

@JackKennedy1 more people are hurt or killed in accidents that involve cell phones every year than in drunk driving by a wide margin.  Time for you to join the anti cell phone group. 

BorisIII
BorisIII

I like any beer that taste like beer.  Trying to hide the taste of the beer makes it taste gross.

blittle1
blittle1

Ever notice how the old beer benchmarks: British pub ale and Oktoberfest lager seem to have been forgotten by the US craft beer crowd?  Nowdays it seems that brewers want to "out hop" the other...its like drinking a pint of liquid pine tree sometimes.  

Not to be critical, but I wouldn't be surprised if there is a quiet revolution back to the lighter styles.

RyanMeray
RyanMeray

@blittle1 There's plenty of brewers making solid entries in the traditional styles. Even brewers known for their extreme beers like Kuhnhenn's put out spectacular (and year-round) English Pale Ales and Marzens.

jboxton
jboxton

@blittle1 Hahahah...that has been true for quite a while now. Sessionable beers have been the latest craze for at least half a year.

zaglossus
zaglossus

Good beer if fine. Just don't start talking about it, holding it up to the light, sniffing it and chewing on it (before swallowing or spitting it out), in short indulging in the rituals associated with wine snobbery.

SeaWuf
SeaWuf like.author.displayName like.author.displayName 2 Like

Lots of numbers but maybe it's not being presented fairly. Grouping Budweiser, Coors & Miller as Domestic Beers (as opposed to Craft), they pretty solidly maintain a 90+% of the market. They spend millions of dollars in advertisement to claim how superior & unique their beer is while associating their products to beautiful people, hearty animals and cute animated characters on screens and billboards nationwide. When in fact (as compared to Craft Brews) they are nothing more than watered down versions of what was once a 'good' beer. Those days are past. As consumers become better educated, these 'lawnmower' beers from the big three, become something that a person will drink when consumption levels are at the highest. 

On the other hand, Craft Beers & Ales have character. Something to savor and enjoy, leaving behind the mindset that more is better. Maybe the retraining of the majority of American beer drinkers begin with quality, not quantity. How many party scenes in advertisements do you see with large tubs of canned beer in ice as the center attraction among people (usually men) pulling one after another to pass among their 'friends'?

To state that the Craft Beer market is becoming or is now over-saturated sounds like something the large breweries would imply. Nonsense! Maybe, just maybe, it's the Bud, Coors and Miller companies which have pushed their products far past the saturation point. 

Next time when asked which beer would you like to be served, bypass the herd and try something different. Try a Craft Beer, not one you could grab out of a bucket of ice.

cjh2nd
cjh2nd

@SeaWuf

"To state that the Craft Beer market is becoming or is now over-saturated sounds like something the large breweries would imply. Nonsense! Maybe, just maybe, it's the Bud, Coors and Miller companies which have pushed their products far past the saturation point."

wrong. the major breweries aren't going anywhere.there's always going to be a strong demand for cheap beer. the point of the article is that since there's a smaller market of people who will pay more for craft beers, the market is limited. and with thousands of breweries flooding the market, that's market saturation.  this article is independent of major breweries. i think you missed the entire point and just wanted to show off your beer knowledge


Brookston
Brookston

@cjh2nd @SeaWuf

Wrong. Why do you think the market for craft beer is necessarily limited? Beer with flavor is quite common in many other parts of the world where advertising bland beer hasn't been as successful as it has been in the U.S. There may be a lot of smaller breweries, but they still only represent about 6.5% of the total market, so there's still plenty of room for growth. It's one of the few segments of our economy that's been growing during a recession. Growth of the craft segment has been unprecedented in recent years while the big, publicly traded beer companies have been in decline, forcing them to buy craft breweries or concentrate more heavily on foreign markets. The point of the article was wrong.

I don't know SeaWuf, but he's correct about one thing that you dismiss by saying that the "article is independent of major breweries." It's been my experience that business writers (and author Brad Tuttle "covers business and personal finance") overvalue the big beer companies because for so many years that's all they knew anything about, and the business press has been slow to catch on about what was happening with the smaller breweries. They seem to internalize the point of view of the large corporation, because that's something they understand. With the new model(s) for craft beer businesses, they either ignore them entirely or don't seem to quite understand them. This article is no different.

Also, cheap beer doesn't have to be void of flavor. The big breweries have kept their prices artificially low for years due to competitive rivalries with one another, which has kept the gap between craft beer and mass-produced beer wider than it would be ordinarily. But that's beginning to narrow. As it does, predictably, many more people are choosing the more flavorful, albeit more expensive, alternative. The continuing reason that big beer continues to sell as well as it does has more to do with their massive advertising budgets and market access than price. And as that becomes less and less of a factor, their market share will continue to slip.

JohnSwanson
JohnSwanson

@lew.bryson @JohnSwanson @Brookston @cjh2nd @SeaWuf 

I agree with a lot of what you said brewer consolidation and their goal of distributor consolidation is a mistake.  My market is pretty unique in we have four distributors in the market.  This is a win for the consumer prices are kept in check and we are constantly vying over space making sure each of our brands are available for purchase.  I wasn't in the business in the mid 90's so I cant really speak on the quality but I do know their are a lot of good quality beers being made now.  The choices consumers have now is greater than ever.  When the craft movement started this time we began picking up everything we could  now we have a dedicated person to craft beer who goes to markets they are in to see movement and make sure its the right fit.  I do think as a whole wholesalers have gotten much better.  Retailers as well have dedicated space in grocery and c-stores for strictly craft beers.  Bars have as well diversifying their lineup.  In my opinion the brands effected the most by the craft movement have been the imports.  I have seen some import brands almost become extinct because they refuse to change.  I can only speak for our market and what I see in wine is a ton of it being sold at huge discounts to get thru inventory. 

lew.bryson
lew.bryson

@JohnSwanson @Brookston @cjh2nd @SeaWuf As a beer writer (like @Brookston : hey, Brother Jay!) who lived through the mid 90s, and who was looking for similarities...I can tell you that this is not like then, and the biggest difference IS the quality of the beer. There were so many bad beers back then, and a lot of it was because of old, crappy, used equipment. Almost all of it has fallen apart since then, and equipment (and training) is much better now. The beer is much better now. 

And you know what? Wholesalers and retailers will have to get much better now. There are thousands of wines; wine wholesalers seem able to handle it. Maybe...what we need are MORE wholesalers rather than less, because beer wholesaling went through the same kind of rapid consolidation that brewers did. Retailers largely don't have a choice in wholesalers because of consolidation, and because of exclusivity/franchise laws. 

So maybe...craft beer would grow even faster if there was some competition among wholesalers for a change. What do you think of that?

JohnSwanson
JohnSwanson

@Brookston @cjh2nd @SeaWuf

As a beer distributor who not only has the big breweries but also has multiple brands of craft beers I believe their will be a tipping point and only so many craft beers will succeed. This craze happened in the mid 90's and went away. I do think this time it will stick but their are too many craft breweries not making quality beer. The craft beer is great for the consumer because it gives you so many choices but it is tough for the retailers and distributors. The lack of brand loyalty on these brands makes it nearly impossible to accurately order sufficient quantities. It will be an interesting journey to see what happens in this segment over the next few years. The thing most people don't realize is when talking about the growth and explosion of craft beer is that over 80% of the craft growth came from three brands Blue Moon, Sierra Nevada, and Sam Adams.