Review (Two Columns)

22 January 2018

Beer bubble? (Turn the boot!)

John C. here. I'm going to start by going off topic and admitting I have a problem. I just can't seem to delete old emails. I try. I really do. But a glance at my gmail inbox as I'm writing this shows I have 4,474 unread emails out of a total of 16,703. Like I said, it's a problem.

However this collection of old emails does lead to some gems. I was scrolling through a few the other day in a mostly futile attempt at deleting them and I ran across this classic from 1/4/2012 that I sent to Spike and Dustin at Terrapin Beer. The subject was "FYI - Shakeout is Coming." What did the email say?

"USA: Number of actual and breweries in planning skyrocketing – unofficial estimate

 

At the end of November (2011), there were 1,927 US breweries and brewpubs, including over 50 that opened in just the last 2 months, Beer Marketer’s Insights report.

 

The official Brewers Association statistics are that there are now 858 breweries in planning in the USA. Not all of those will come to fruition. But that number has skyrocketed...... at mid-year 2010, there were 389 in planning."

 

I look back at this now and laugh. Did I really believe the bubble was going to burst when there were ONLY 2,000 breweries? Who was I kidding? Today we have more than 6,000 breweries in the US and more opening every day. Actually 2.5 opening every day! As you can imagine the growth in craft breweries in the last 5 years has led to multiple questions and an ongoing conversation about when the craft beer bubble will burst. You see it mentioned in articles ranging from NPR to the New York Times to my personal favorite - a response from WLOS to the Wall Street Journal. I'm here to tell you unequivocally that it will not happen!

That's right. No bubble is going to burst - if by "bubble" you mean a huge correction where we find 20% of craft breweries closing in the next 6 to 9 months. It's just not going to happen.

The best explanation I've seen yet comes from Joe at brewmuseum.com. In a post from October 2017, he puts up this chart:

He then goes on to point out the difference in the 1880's and today.

 

Historically, we have seen the number of breweries rise rapidly and fall dramatically. Through the middle of the 19th century, the number of breweries grew as immigrants.....opened neighborhood breweries. In 1873, the number of breweries in the U.S. reached a peak at over 4,000 (Brewers Association), at a time when the population of the U.S. was about 45 million people. That works out to 1 brewery for every 11,000 people. If we had a proportional number today, we would have over 29,000 breweries.....

 

What about the fall that followed? The....decline in the number of breweries that begin in the late 19th century saw a move from neighborhood breweries to large-scale factory production. Railroads and refrigerator railcars made national distribution possible. Cost efficiencies of large scale production made local breweries less competitive.....

 

The reasons for the previous contraction in the number of breweries would not seem to apply today.... we are in a long-term consumer trend favoring local, craft, and artisanal products.....Big Beer continues to lose market share at a rate of about 2% per year...... the drop in the Big Beer share of the market and that of nationally distributed craft beers can both be seen as signs of the prevailing trend toward local beer, moving us closer to the state of affairs in the 1870s, when every neighborhood had its own brewery.

 

I have to agree. If Joe's numbers are correct, we are nowhere near having the number of breweries per capita that we had in the late 1800's. That's one sign there is still room to grow. Another sign of potential continued growth is the fact that craft beer is currently around 12% of the overall beer market. I can not recall the source but I read somewhere that other food industries (coffee, bread, etc.,) tend to have the "craft" segment grow to around 25% to 30% of the overall market. And there's a third sign that craft beer will likely continue to grow. That is the focus today on local, or hyper local as some are calling it. This has led to a huge increase in beer being sold in brewery tap rooms.

 

Now you know. I personally do not believe the "craft beer bubble" will burst. But I do believe we are going through a rapidly changing market for craft beer. That focus on hyper local is hitting some established craft breweries really hard. And it will hit other breweries extremely hard in the near future. I'll touch on that in more detail next time.

Please comment below and let me know you thoughts. Is the craft beer bubble coming? Have we jumped the shark? (Extra points if you get that reference. The Fonz was my hero growing up.)

Cheers, John

 

05 February 2018

The Times They Are A-Changin'

Image result for beer bubble images

Recently we discussed the growing popularity of the idea that a craft beer "bubble" is imminent. If you missed my thoughts on the subject, they can be found here. To recap, I'm a bit of a contrarian as I do not believe a bubble is coming anytime soon. That is if by “bubble” you mean a huge correction where we find 20% of craft breweries closing in the next 6 to 9 months. It’s just not going to happen.

But something big is happening in craft beer and we are living through it right now. Call it what you will - restructuring, reorganizing or adjusting to new market dynamics. No matter what you call it, The Times They Are A-Changin''. Here is a small selection of stories from the past year:

Stone Restructures; Lays Off Employees,

Summit Brewing Lays Off 10%; Withdraws from 6 States,

AB Lays off 90% of High End Saleforce,

Green Flash cuts workforce 15% and stops distributing to 32 States.

Just damn! What is going on here?

I'll tell you what is going on. There are now over 6,000 independent breweries in the US and hundreds more preparing to open in 2018. And more and more people are supporting their local breweries. That's an awesome thing. But it's having some unintended consequences for the larger regional, craft breweries. To understand why, let's do a quick review of the craft brewing industry over the past couple of decades. It will be easier for me to explain if I use my personal experience, so bear with me.

For those that are not aware, I got my start in craft beer in 1995. Yeah, I've really been involved in the beer industry for that long. In the late 1990's, my former business partner Spike and I came up with the idea for Terrapin Beer Company in Athens, GA. Our original intention was to start a brewery that was draft only, would grow to no more than 5,000 bbls, and was primarily available in the local market. I'm willing to bet this was the extent of the vision of most of the brewery founders in the 1980's and 1990's.

But a funny thing happened on the way to realizing our dream. When Terrapin started, it was one of only a handful of breweries in the Southeast. Because there was a growing demand for more breweries than were available at the time, people from other places started asking for our beer. We rapidly expanded to Asheville, Birmingham, Jacksonville, Nashville, etc. And each of those cities considered Terrapin to be local because we were from the same region of the country. This same process was happening at the same time to many other craft breweries that had opened by the early 2000's. If you made great beer, there was a demand for your product in other cities and other states in your region. So quality breweries like Highland, Sweetwater, Terrapin, and many others expanded to meet that demand.

This demand caused the older existing craft breweries to rapidly add new territories. It was also the impetus for new startups in many medium sized and smaller cities that did not have their own brewery. This was and still is a development that a majority of existing breweries supported. A rising tide lifts all boats. Craft beer was growing and it was taking share away from the large domestic brewers. We were winning! But then a funny thing happened. The definition of local changed.

Southeastern breweries like Highland, Sweetwater, and Terrapin used to be considered local in Birmingham. And Jacksonville. And Knoxville. But as more breweries opened in those cities, the circle that defined local began to shrink. For a while, state lines became the defining point for what was local. But more and more new breweries continued to open. We reached a point where just being in the same state was not local enough. For at least a couple of years now, a brewery from Charlotte has not been considered local to Asheville. And vice versa. Even so, more and more new breweries continue to open. Which has taken us to the point of hyper-local.

Hyper-local is defined by your neighborhood. There are now multiple breweries in many small and medium size cities. Is that brewery from the next small town over? It may only 15 be miles away but it's not really local. This is the changing market dynamic that is happening right now in craft beer. This is why the larger regional breweries are having difficulty and are cutting back on their distribution area. The key to success in today's craft beer world is to figure out how to be "local" in each market. It may not be produced there, but can you be relevant in a particular market? If not, it's time to pull out of the market as evidenced by the news stories linked above.

Are today's beer buyers drinking mediocre beer just because it was brewed down the street? Are they missing out on excellent beer because it comes from several states away? I'd love to hear your thoughts.

Cheers, John

P.S. Speaking of hyper-local, would you like to sample all the local breweries in Asheville in one day and in one place? Check out the 2018 Asheville Beer Expo on February 24th.

02 March 2018

Keys to Success in Craft Beer: Part 2

Last time I listed what I believe are three keys to success in the craft beer industry. They are 1) Be Passionate, 2) Know Your Why, and 3) Remain Relevant. If you missed that first post that covered Passion, you can find it here. In this followup post I promised to dive deeper into the "WHY" behind UpCountry Brewing so let's get to it. If you have not yet watched the Simon Sinek video, please do so now. It will profoundly change your view of how the world works.

Even though Simon gave a great TED Talk on finding your "WHY", the concept is not new. It has been discussed for hundreds of years. Just ask these peeps:

Image result for find your why imagesRelated imageImage result for albert einstein strange is our situation

Wow - heady stuff. There are many more quotes but lucky for you I didn't want to spend all that time surfing the net, copying and pasting. I could also go on about how important it is to find your "WHY" but I won't do that because deep inside you know it is true. You do. Instead I'm going to talk about my personal "WHY" and how that relates to UpCountry Brewing.

As I write this I am 48 years old. Some think that is really old, others tell me I'm still a kid. It is what it is. I only mention my age because it has taken me most of those 48 years just to maybe/kinda/sorta figure this life thing out. What I've finally realized is that in my personal life it comes down to Family and Community. That personal "WHY" of Family and Community feeds into the "WHY" of UpCountry Brewing. Over the past year we have been far from perfect (stories for another time) but we continue trying.

This "WHY" of Family and Community can be found in our mission statement and our core values:

Mission Statement: To create awesome experiences while sharing our passion for craft beer, local music and for getting outside.

Core Values:

People First - We’re all in this together.

Right Thing, Always - Do it like your mama is watching.

Excellence in Everything - If it’s worth doing, it’s worth doing right.

Air it out - Sometimes you just have to fight, hug it out and have a beer.

Community Support - This is our home and these are our family and friends.

Have Fun - We’re in the beer business! ‘Nuff said.

I'd like to end this post with one more quote. This one is from a gentlemen who has influenced me and so many others in craft beer. This industry would not be what it is today without his impact over the years. Thanks Charlie.

Image result for Charlie Papazian

"A brewery without a clear identity is like a country without a constitution." - Charlie Papazian

We would love to hear from you. When you visit UpCountry is our "WHY" apparent? If not, what is it you see us doing that is not congruent with our "WHY". What can we do better? Please let us know.

Cheers, John C.