There was an article in Thrillist this week that predicted an impending burst of the “craft beer bubble”. This isn’t a new idea. Many articles/commentaries/random tweets have pointed out that the incredible growth in the number of breweries and beers being produced is probably not sustainable. Even if craft beer continues to gain a larger share of the overall beer market it will be hard pressed to keep pace with the increased amount of beer being brewed. The Thrillist article suggests that eventually the competition for customers, shelf space and tap lines will force normally collaborative and collegial brewers to turn on each other, leading to price wars and the failure of many breweries. I agree that the current rate of growth is unsustainable, and that eventually some breweries, and not just new startups, will fail. I have no idea where the breaking point is though I think the industry is still growing and gaining market share, but I do believe it will happen eventually. On a side note, I am not sure that the pricing is as big an issue as the article makes it out to be. Craft beer enthusiasts seem willing to pay a premium for good beer and many successful breweries have a premium price point. I could be proven wrong in the next few years, we’ll just have to see.
If you accept that there is a “craft beer bubble”, then it stands to reason that it will eventually burst (or at least deflate a little). When this happens some breweries will go out of business, and I think some of them will come as a big surprise to customers. Since most breweries are small, privately held enterprises their customers really have no idea how each is doing financially, but it stands to reason that some do a much better job with their books than others. Hopefully this burst is more of a minor market correction and not the equivalent of the housing crisis a few years ago. I would be happy to hear a counter argument that allows for continued exponential growth across the industry, but until then I think it is important for all breweries to hope for the best and plan for the worst. Here are a few suggestions I would give to a brewery that wants to not just survive but thrive in the face of heightened industry competition.
1. Make great beer. This is obvious, but it needs to be said. Don’t make good beer, make great beer. Every brewery should have at least 1-2 beers that are tried and true recipes that customers will go out of their way to seek out. After that feel free to experiment and always get customer feedback.
2. Quality Control. It sucks to dump out a batch of beer, and it has to be hard when a brewer is dealing with the razor thin margins any upstart brewery is working with. That being said, if a batch doesn’t meet the strictest quality standards it should be dumped. You need to assume that each beer you pour could be your only chance to lure a potential customer. If that one taste is a “meh” beer the customer might be lost forever, but if you blow them away they could become a regular and spread the good word.
3. Grow Organically: I am sure it’s frustrating for a small brewery to be unable to meet customer demand. It must be tempting to take out a bunch of loans and try to grow as quickly as possible. You might even be able to justify the added expense (the interest paid on these loans) by the lower production costs that come with scale. If I owned a brewery I would try to avoid the debt and reinvest profits from sales into organic growth. Besides, having your beer in high demand builds hype which is never a bad thing in a competitive industry.
4. Mix It Up: Instead of brewing a large stable of year round beers and making the same seasonal offerings year after year, brewers should vary their release schedule. Keep a few great beers as your flagships and then continually rotate your other beers. Taking a year off from brewing a beer allows demand to build and gives you the option to make something new that might be your next big hit. Craft beer enthusiasts like a variety and love novelty.
5. Taprooms/Loyalty Programs: Selling beer directly from your taproom means higher profit margins and provides the brewers a great opportunity to interact with their customer base. It also allows for small batch brewery-only beer releases. This can lead to loyalty/barrel/bottle programs that bring customers in on a monthly basis.
6. Become Known For Something Specific: Notch Brewing is known for their session beers. Jack’s Abby is known for their lagers. While each of these breweries make beers with a wide variety of flavor profiles, they have a niche in the craft beer market. This isn’t a necessity for every brewery, but having a calling card certainly helps build a brand identity.
Hopefully there is no craft beer bubble. Maybe every Bud/Miller/Coors drinker will see the light and start drinking more flavorful, hand crafted beer. Just in case, I think that brewers who do some of the things above will have a better chance to thrive even as competition increases in the coming years. Any other ideas? What things do certain breweries do that make you come back repeatedly?