Is the craft beer bubble about to burst?
EVERYONE in the beer industry is talking about the damn bubble.
They’re either worried that it’s going to burst, or vowing that it will continue to grow.
Like the earlier dot-com and housing bubbles, the craft-beer bubble is the product of what pessimists say is unsustainable growth, with about eight new breweries opening nationwide every week.
The bubble can’t help but explode, they say. Here are three reasons we’re all gonna get soaked:
1. There are too many breweries
There are about 2,800 breweries nationwide, with as many as 1,000 more on the horizon.
Meanwhile, BudMillerCoors are glomming onto the sector, either with specialty brands ( Shock Top, Leinenkugel, Blue Moon) or acquisitions (Goose Island, Blue Point). Other established operations, including Stone, Victory, New Belgium, Sierra Nevada and Lagunitas, are in the midst of aggressive expansions that will increase capacity.
There are not enough slices of the pie to go around.
2. There are too many brands
Wholesalers gripe that there are too many SKUs, or stock-keeping units, the unique ID for every brand and packaging type. Consider: Most breweries produce at least 10 separate brands – that’s nearly 30,000 separate SKUs, and that doesn’t even count imports or the variety of 12-packs, 30-packs, bombers, cans, etc.
Even if stores could cram it all onto their shelves, wholesalers can’t possibly devote sufficient sales effort to promote every one of those brands.
3. There aren’t enough craft-beer drinkers
Craft beer’s economic model is based on premium pricing, which by definition is affordable by only a small percentage of consumers. Craft beer accounts for barely 10 percent of all beer sales.
The portion won’t grow unless craft brewers drop prices and begin advertising during the Super Bowl, and that’s never going to happen.
Pop goes the bubble!