Friday, December 7, 2012

The Beer Bubble And Potential Poppage.

The Beer Bubble And Potential Poppage. 

Stone Brewery founder Greg Koch warns us about the pending brewing bubble...
“We are in a time of irrational exuberance in craft brewing,” said Greg Koch, co-founder and CEO of Stone Brewing. “We are like a Third World bus, with all these people hanging on to the roof. Sooner or later, we are going to hit a bump in the road.”

It's interesting because the majority of the article is all about how craft beer is really booming and growing out there. His concern is that the market is being over saturated. And much like any other product, once it hits a breaking point, then it's only the cream of the crop. The Stone Breweries that survive to see the next period of growth and bubble bursting.

When you think about it, during pre-prohibition, there were about 1,700 breweries in the U.S., which at the time had a population of around 100 million. So if you project that out to today's population, you'd get about 5,000 breweries. Not quite that insane amount of the first figure of the era gone by. But it's still twice the current amount. And yeah, AB and the other three major companies have the lions share of the market, but that % is coming down. It's been shown that more people are caring on who brews their beer. Perhaps this move will increase so that locals actually support their.. you know, local beer.

Nationwide there really is no bubble. Sure, in San Diego there's a ton of new breweries popping up left and right, but you go out to places like Riverside, Ca. and you'll find that it's not as insane as you would expect. We are basically working towards the way it should have been all along. Every city in the U.S. that isn't run by stone age thinkers, could easily support one brewery for every 30,000 people there. Some do even better than that, but this means we could easily have something like 10,000 breweries - depending on the size and locations of the town. If they don't expect to strike it STONE or SAM ADAMS rich, they could make a nice profit.

Factor in that there's also over double the number of wineries in the US compared to breweries and they don't have this mentality that the bubble is coming. Nor do they see that they're going out of business anytime soon. Especially with the fact that this "Irrational exuberance" is all happening during what is being considered a recession.

Yeah, some cream of the crop breweries who make great quality products will remain, the ones who make poor products and can't market themselves correctly will obviously fail, but I don't see this being like the mid-90's when the bubble burst. It's not going to be a huge plunge nor could you really call it a market bursting, just a market settling on who is successful and who isn't. 

Either way, let the good beer flow and the bad just sink to the bottom like it would even without a bubble to push it along the way.

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