How Long Can We Have Unprecedented Growth? For BeerNexus.com If you didn’t know better you’d think that CRAFT BEER aka CFT (for identification purposes) was a symbol on the stock market. The stock market continues to increase and hit new highs. This past month it closed over 26,000! It’s been growing steadily since it bottomed out in 2009 and has increased an amazing 250+%. Of course as it continues to increase there’s more talk of a bubble and an upcoming correction, since that’s typically the way the bull market ends. Does the value of the stock really relate to actual value of the goods and services that company is producing? It does to some degree but in an overall market correction does it mean every company lost X% value the same day? I think not. It’s called a market correction and those that benefited by the overall increase on the way up as opposed to just their results will also take the hit that everyone is taking irrespective of their individual performance. What about that fictional CFT symbol? Well it’s also shown amazing growth. Let’s look at craft brewery counts from the Brewers Association over that same period; Year Brewery Count Year over Year Growth 2009 1,596 2010 1,749 9.6% 2011 1,977 13.0% 2012 2,420 22.4% 2013 2,898 19.8% 2014 3,734 28.8% 2015 4,504 20.6% 2016 5,234 16.2% 2017 6,000+ 14.6% That’s good solid, consistent growth. The first couple of years were slow but the overall economy had just taken a big hit, so any growth was probably pretty good. Over the last five years the overall increase is an impressive 147.9% and equally impressive is the overall increase of 275.9%!!! Damn, craft beer is trending right on target with the stock market average in the after mini-recession recovery! We do need to acknowledge we’re looking at the average and that not every stock is a winner. There are a few individual stocks that increased >1,000% in the past 5 years, two of which are drug companies and we all know what FDA approval of a major drug can do to bolster a drug company stock, and there were also big losers over the period. (Of course if my last month’s prediction of the creation of Rx Beer comes to fruition then we could see that kind of increase for an individual craft brewery). How about the craft beer volume share; that should hopefully correlate to overall brewery increase? Tapping (no pun intended of course) the BA again we see; Year Craft Beer Volume Share Year over Year Growth 2009 4.3% 2010 5.0% 16.3% 2011 5.7% 14.0% 2012 6.5% 14.0% 2013 7.8% 20.0% 2014 11.0% 41.0% 2015 12.2% 10.9% 2016 12.3% 0.8% Like the brewery count we’re seeing the craft beer volume increase every year and the percentages are in a nice range except for two years. The huge growth in 2014 must be a result of the redefining of Yuengling as a craft brewer and adding their millions of barrels to the craft list. The negligible growth in 2016 must also be greatly affected by the delisting of two breweries from the craft list, Lagunitas and Ballast Point, which were #6 and #11 in 2015, which if adjusting them out in the prior would show a more reasonable growth. But I think the big question is, is the volume growth enough to support the increase in breweries? We know that as breweries open every year, some close, some merge and some get bought by mega breweries or private equity/venture capital. That’s to be expected in a business environment; a type of survival of the fittest. But is it really the fittest, or is some of it the newness and luck? We all know we’re attracted to every new brewery to see what they have to offer, but to be honest I’ve found many of them to be making just okay beer. They may have one really good one, but in a lineup of five or six or more, that’s not exciting. Location makes a difference also as the road trip (for those of us willing to drive) or the beer bus (for those of us wanting to be driven) or even the Beercation (for those wanting to travel) allows us to hit a few breweries within a reasonable radius and check them out. We also can’t underestimate the change in the “tasting room” over the years. Think back years ago when there weren’t as many breweries, regulations were stricter and the cost to taste was minimal. Today’s environment is much different, with fancy taprooms with big screens selling flights and pints at, in some cases, prices similar or close to a local bar. And they’re selling four packs, six packs, cases and growlers. Many of the smaller breweries are surviving, some even thriving on this, but living off the taproom could be dangerous if the economy does turn. So what about the older established craft breweries that don’t have the “newness” angle? Well they need to be constantly working on their seasonal and special releases since just producing the great beer they always did doesn’t seem to cut the mustard now. Last month I wrote about D.L. Geary’s in Maine, one of the 80’s craft beer pioneers in the country making great beer for thirty years but whose sales dropped of precipitously over the last few years and to survive were bought by another brewery. Well it didn’t take long in the new year for shoes to start dropping and we’re talking some big shoes. First it was Saratoga Brewing up in Saratoga NY opened in 1997, but more importantly its parent Mendocino Brewing. They opened the first California brewpub (2nd in the country) in 1983, as the Hopland Brewery, with their flagship beer, Red Tail Ale. I was lucky enough (I should take more credit and say smart enough) to have visited their brewpub in Ukiah, CA and taste their beers fresh in 1990. I consider Red Tail Ale one of the classic crossover craft beers along with (to only mention a couple) Fat Tire and Boston Lager. And others in their lineup, the Blue Heron Pale Ale and Eye of The Hawk Select Ale are both excellent. Both breweries over expanded, ran into financial trouble and were bought/acquired in separate deals by the same group. I was overjoyed when they started to brew Mendocino beers in Saratoga and I could get them here in NJ. They were one of my mainstays for years until their NJ distributor went bankrupt and they never seemed to get another one. Checking into it further, they closed the Ukiah brewpub suddenly days before the Saratoga facility was closed and their chairman and indirect majority shareholder is fighting extradition to India, which who knows if that’s part of the issue or not. I’m really hoping they get bought and continuing producing. I’m thinking I may need to make a run up to NY to pick some up and hope it’s not the last one I have. Last I knew Saratoga was the only brewery making the Indian beer Kingfisher, so wonder where that will go, not that I intend to purchase any. Pabst is the ultimate king when it comes to owning distressed beer brands; maybe they’ll start buying some distressed craft beers so they can compete with the High End and Tenth and Blake. Good thing I have a strong heart as a couple of days later the next shoe dropped: Smuttynose is being put up for auction in March! Seriously; another iconic brewery in trouble! Sure they’re not in the top 50 craft brewery list, but they’ve been making great beer since 1994. And if you’ve been up to New England or partway down the east coast you can find their Shoals Pale Ale, Old Brown Dog and Finestkind IPA. But they have something in common with Mendocino/Saratoga. They out grew their brewing spaces so in 2010 they began construction on a new facility at Towle Farm in Hampton, NH. They opened in mid-2014 and keep their original brewery, which ironically they bought at auction, and renamed it Smuttlabs to do contract brewing and experimental/product development stuff. In 2015 they open a restaurant at their new location. And two plus years later they’re at 50% brewing capacity, out of money and now up for auction. They obviously over expanded and weren’t thinking or expecting there to be 6,000 craft breweries a few years later they’d be competing with as opposed to the less than a third of that back in 2010. Like the stock market the craft beer bubble is looming and some have already taken a hit. I wouldn’t be surprised to see more “announcements” as the year progresses. Well I think I need to relax and have a beer. Where’s Alfred Loomis when you need him? Glenn DeLuca writes about beer and culture of drinking. He may be reached by writing thebigG@beernexus.com. *** *** *** |
Glenn DeLuca
Outtakes from a life of beer.
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