Back to the Bubble

Flikr Creative Commons via Katka Koscova

It seems like we come back to this same question every year. Almost like it is a slow news time or something.

I ran across this article (Will it Fall? A look at America’s Brewery Boom)in the recent Draft magazine (online). Every time there is a huge amount of growth in a niche market, chicken little runs around crying that the sky is falling.

Breweries are businesses, there will always be risk involved in business. It doesn’t matter if the business has been around for over 100 years or if it has been around for less than a couple days. The risk is still there.

The big brewers are losing ground, this has been going on for a good number of years now. The tastes of their core consumer are changing and they need to change to keep up. Of course when a company reaches the level of the big brewers it is slower to react and set new trends. It doesn’t help them that they have lived with little competition for many years now.

The craft brewers are young and new and hip. They have the ability to change to meet the needs of their consumers. But they also are riding a trend. As what happens with trends there will always be people that try to make a quick buck while the money is flowing in their favor.

I am suddenly reminded of Beanie Babies in the early 90s. These things were selling like hot cakes. Demand was enormous. If you wanted to make money with them you needed to buy and sell with no thought to what you were doing. It was a bit like piranha when a cow crosses the stream. But Beanie Babies were a liquid market. There was nothing substantial to back the sales.

How does this relate to the bumper crop of breweries popping up? I know it seems odd to think in these circles like this. But this is reality 101. There will always be the people looking for a quick buck. There will always be the people who jump into an enterprise with no clue what they are doing or how to make it work. This is life, the scenery changes but the way it all works doesn’t.

When it is all said and done, we will still want our beer. The breweries that are looking at this as a long term investment will still be around. The breweries that keep their focus on their customers and their satisfaction will continue to grow. There will be fall out. There is always fall out. This is nothing new.

Where this could hurt us in the long run is when the people who are willing to do what it takes to make it happen decide it isn’t worth it. When they start to believe the chicken littles of the world and believe the hype that this is something new. That is when we will lose all we have gained.

Time for a pint…

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12 thoughts on “Back to the Bubble

  1. So you don’t think these people jumping in looking for a quick buck and making bad beer will really affect the market? I would have to say that is the case because people will still want their craft beer no matter what.

    • It won’t be anything like they are predicting. The thing is our tastes have changed. We want fresh and local. Taste is also subjective. What one persons sees as bad beer is the greatest thing since sliced bread to someone else.

      There will always be people looking to make a quick buck. It is the ones who ride the storm out and stick to building on the basics that will carry it through.

      We want food and drink with flavor. It is thinking otherwise that is bringing down groups like abinbev.

      The article mentioned the craft crash in the 90s. The thing is many of the breweries that are household names now started in that time frame. The stuck to their guns and persevered over the people that were only in it for a quick buck then.

      • Going back to the beanie babies analogy, they are still being sold. It isn’t the quick buck market like it was in the 90s.

        At some point the beer market will reach an equilibrium again. Big beer won’t be as big as they were and we will still have a good number of craft breweries.

  2. I remember the Beanie Baby craze and I remember thinking when it was happening that it was the dumbest thing I’d ever seen. The product itself had no value above other, similar items, and there was no real reason why some were worth considerably more than others.

    Beer has never fallen into that bailiwick. As a commodity it has retained its value for a long, long time. It’s the second most popular drink in the world (tea is number one) and isn’t the oldest known recipe for beer? It’s firmly embedded in many cultures. There will be ebbs and flows in the market, but it’s a commodity that will always have a demand. It would be strange if the craft beer movement wasn’t taking off. The big breweries were not providing the variation the market was looking for. (see Malcolm Gladwell’s spaghetti story about Howard Moskowitz for another example of a market that was looking for variety.)

    To me, the paradigm for the beer market shifted, when that happens, everyone goes back to zero. It isn’t about David and Goliath, it’s about who can consistently produce a range of quality beer (locally) with good taste. As long as the craft brewers can do that, there’s no reason for the sector to disappear. the big breweries have to re-imagine themselves to compete. Great post Jon.

    • Great thoughts, Debra. What we are seeing right now is the market restabilizing after a long run of what was essentially a monopoly. It will reach a balance point some time in the future but this isn’t a bubble. This is a normalization.

      There will always be people that take on more than they should and fail. Think of restaurants. They fail on a regular basis but no one thinks about it. It is simply someone not understanding what they are getting in to.

    • In that respect the principles that guide every business remain the same. This has been something that big beer excels at, treating it like a business. Where they have failed was in their delivery to the consumer. Instead of listening to consumer wants and needs they set what the customer would be allowed.

  3. Jon – As you said business is business and some are going to make it and some will not. Things evolve and these brewers will either evolve with the market or not. Only time will tell who will come out on top. 🙂

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