The Brewers Association released their annual growth figures last week, announcing that once again in 2015 craft brewers continue to experience double-digit market growth. Our news feeds were quick to fill up with articles about the beer industry growth and the continued success of craft breweries nationwide. But then, right on time, an all too familiar topic reared its ugly head: is this just another sign that the “beer bubble” is ready to burst?
This idea that the beer industry is about to face a market adjustment “bubble burst” seems to be an annual tradition now. Whenever we see news about the brewing industry doing well, it’s always followed by speculation that an imminent crash is on the way. The newer articles claim the recent growth in the beer industry is unsustainable, and that at any moment the entire craft beer industry could just topple to the ground like a house of cards. Personally, we’re tired of hearing that the sky is falling. These stories about the imminent fall of the beer industry are speculative, unoriginal, and at least so far, each and every one of them have been completely wrong.
We first started noticing the beer bubble theme in 2013. At the time there were more than 2000 breweries in operation, with nearly as many more planned breweries on the horizon. The explosive growth in craft beer seemed too good to be true to many business types, who assumed that what goes up must certainly come crashing back down. In August 2013 Draft Magazine expressed worries that a niche industry like craft beer couldn’t sustain the record growth it was experiencing, and started to speculate that the industry could fall. By December 2013 the brewery count was up to 2,500 nationwide, a number that caused Business Insider to speculate about a collapse, saying “even such a healthy rise in consumer demand won’t be enough to sustain the many new breweries jumping into the marketplace.”
Despite the ominous warnings, new craft breweries continued to open across the country. By 2014 American had surpassed 3,000 breweries. At that point the conversation turned into a question: How much beer is too much beer? Bon Appetit magazine suggested that the market was “way overcrowded,” saying that consumers would soon become overwhelmed and confused by the variety of craft beers on the market. “How can you pick a pint on a 100-brew tap list?” they wondered. It seemed that everyone thought we’d reached a tipping point. Stories of an imminent bubble burst continued to rise to the surface.
In 2015 the beer bubble watch continued. Fortune magazine reported that even brewing industry insiders were beginning to get worried about the “uncontrolled expansion” in the market. However despite a few big-name buyouts and consolidations, new craft breweries continued to open at a strong pace. By December 2015, we had topped 4,144 total breweries in the United States, a new record. Previously the most breweries our country had open at one time was 4,131, and that record was set way back in 1873, before prohibition. Certainly a record number of breweries was cause for celebration… and concern. Nevermind that the population in 1873 was only 38-million, compared to the 318-million American’s today. The new total was enough to make the Washington Post to wonder if we had officially reached brewery overload.
In last week’s report from the Brewer’s Association, we learned that 2015 was another year of impressive growth for craft brewers in the United States. There was a 15% increase in total breweries, bringing the U.S. brewery count to 4,269, with a whopping 99% of the them being craft breweries. By the end of 2015 there were a total of 4,225 small and independent breweries, brew pubs and regional craft breweries in the United States. While that number sounds huge, there is no reason to think that it indicates a bubble is about to pop. Despite growth in nearly every market category, craft beer still accounts for just 21% of the beer market retail dollar in the United States, and 12% of the market share of the overall beer industry. Now we may not be financial experts, but it sure seems like there’s still a lot of room for growth in those two numbers.
Why is this bubble question even a question at all? The United States is home to more than 65,000 bars and 616,000 restaurants according to our resident expert, Google. New restaurants and bars are opening and closing all the time, but you never hear about a “bubble” in their markets. If that isn’t enough to convince you, consider this: As of October 2015, there were 11,100 Starbucks in the United States. Not coffee shops in general – just Starbucks. Certainly if America can support over 11,000 Starbucks without people constantly saying we’re on the verge of a coffee bubble ready to burst, we can support a lot more breweries, too.
Despite all the rumors, fear, and sky-is-falling speculation, there isn’t much proof that the beer industry is destined for a crash at all. The population can support more breweries without the industry crashing down. Some will be successful, and others will fail – just like every other business. The fact that these speculators seem to forget is that most new craft breweries are smaller, locally focused businesses, often content at serving beer to their local community. They may not even have plans to distribute to a larger market. These new neighborhood breweries will continue to survive and thrive because they offer so much more than a pint of beer. They are places where you can escape the daily grind, commune with your friends, and actually get to know the fine people who brew your beer. Local breweries are a social gathering place, a place to relax and have fun, and most importantly, they’re a place where the only bubbles that truly matter are inside your pint glass. And those are the only bubbles we care to read about from now on.
For those who want more info on the realities of the market in 2015 based on the Brewers Association report, check out the infographic below. Click it to open a larger graphic with even more facts on the 2015 growth of U.S. craft brewers. Then feel free to speculate on what you think it all means for the craft beer industry’s future in our comments below.