Dead Brewer Walking: Why (Many) Good Breweries Won't Survive a Craft Bubble Collapse

Beer lovers fight over lots of things, but there's one thing we all agree on: there are a lot of breweries out there today.  Others have thrashed out to varying degrees whether that's a good thing or a bad thing, whether too many open breweries too soon, and why you might not want to open a brewery yourself.  This week we'll jump to the end of the page: what will happen in the event that there is (or will be) a craft beer "bubble," and it pops?  

Many, many of the thousands of craft breweries open today will close their doors.

Many of them will be victims of identity or attitude, not product quality.  Brewing great beer won't save them.  

"But why not, you paranoid, pretentious, bloviating alehole?"

First off, that's quite enough of the name calling, thank you very much.  But the answer is that the traditional mechanics of customer choice are being undermined by attitudes that make beer quality a secondary (or tertiary, or quaternary) consideration.  That's a very bad thing for beer quality, and craft beer in general.

"Just Brew Good [Expletive Deleted] Beer"

A brewer friend has a simple (explicit) philosophy: "Just brew good [expletive deleted] beer." The gist is that brewing good beer covers all manner of other problems.  Most of the time I agree with him, and this attitude is part of the reason that his brewery has succeeded and grown.  Brew more beer, and better beer - do that and the rest will probably come clear.  It's kept him focused on beer quality and not on distractions caused by craft beer's Big Boom.  

I'm just not sure it'll be enough for when craft beer's Big Crunch comes. [Remember - for the purposes of today's argument, we're assuming it is coming.]  In a recent Chicago Tribune article, Dogfish Head owner Sam Calagione said, " It's the ones that have quality, consistency, and focus on being well differentiated...that will be successful.  

I don't buy it (no pun intended).

The parameters of the debate in craft brewing today seem to revolve in large part around what is and is not "craft," and around what is appropriately "craft-y" behavior.  How many barrels before a brewery is a "big" brewery?  Will collaboration continue?  Is it appropriate for breweries to open second and third breweries in other regions?  Does expansion and competition lead craft brewers into inevitable conflict?  How long can craft expand?  What role will private equity investors have?  How many breweries would be too many?  In all of this debate, though, there's one thing conspicuously missing:  Substantive discussion about the importance of beer quality.  

I'm not kidding when I say that this almost never comes up when I talk to brewers.  For every comment I hear about quality, I hear twenty about brewery behavior, cred, reputation, and identity.  And it isn't because there aren't bad craft breweries out there.  We all know of at least a few.  Some market watchers have even suggested that a majority of the new breweries out there are struggling to produce good beer.

So we know that beer quality is an issue in the marketplace (even if it isn't always discussed).  And we know that a contraction in the marketplace is possible, maybe likely, and (for our purposes today) even inevitable.  So who lives?

Beer Geeks and the Cockroach Breweries

Ironically, beer quality may not matter (much) in predicting who survives the craft-beerpocalypse.  What's going to matter a lot more is how beer geeks think of craft beer, and how that identity informs their purchasing.  In other words, this is more psychological than practical, and many poorly-brewing breweries are going to beat out high-performing breweries.

Purchase Intention is a simple enough concept: what do you intend to buy?  There are dozens of models to predict it, but most rely in large part on two core principles: perceived benefit (how much you'll like drinking that beer) and anticipated cost (what you'll spend on that pint).  In practical terms, this suggests that beer drinkers will be looking for the best beer they can get at the lowest price.  

But for the "beer lover," one additional (psychological) factor seems to trump the others: impressions of what constitutes a craft brewery.  We generally accept that it excludes those that have been taken over or sold out to Big Beer.  But beyond that?

From this writer's perspective, it seems like there's a consensus forming that what makes craft "craft" is no longer simply defined as "not BMC."  It's the result of an equation that measures size and locus.  Brewing a lot?  Maybe not "craft" anymore.  Distributing widely?  Might be selling out or squeezing your former-fellow craft brewers.  Call it the Craft Suspicion Index (CSI?  Why not.).  CSI = Output x Reach.  The greater the CSI, the less "craft" you are.

  • 7bbl system and only distributing from their own tap room?  Low CSI.  Almost definitely "craft."  Drink at will.
  • 30bbl system, local or regional distribution?  Hmmm....medium CSI.  Check ownership percentages and birth records to determine hometown of brewers, owners.  Possibly "craft."  Drink, for now, but be alert for outside corruption.
  • 60bbl system or larger, multiple brewing locations, national distribution, and available at a major sports stadium? HIGH CSI ALERT!  Even if no macrobrewing ownership stake, high probability of extra-local market-intruding expansion. Drink with extreme caution.  Barrel-aged products only.

And so it goes.  I'm not exaggerating when I say that at least once a month I hear someone tell me that they drink only the most local beer, even if it isn't as good as that "big craft" beer on the other tap, because they want to "keep their money local," or "because at least I know it's fresh."  The breweries they're avoiding aren't those that have been bought out by the big brewing conglomerates.  Usually they're just breweries that have committed the sin of growing and expanding to the point that they've lost their "craft" cred.  Too common.  Too available.  Sure, they have new beers, but there's this other tap from a local brewery...and yes, it's middling or bad, but it's local.  My handy-dandy "CSI App" is reading "green."  [Yeah - green apple - HA!  ACETALDEHYDE BURN!  Good one, Josh...but back to our regularly-scheduled programming.]

So when our Craft Beer Big Crunch goes down, a substantial number of these breweries, floating as they are on a cushion of hometown sentiment, will live on, like the proverbial cockroaches in the wake of a nuclear holocaust.  And a number of their competitors who are actually producing good and noteworthy beer will not.  

And craft beer will be worse for it.

Quality First

This isn't just some woe-is-me, everything sucks, postmodern jeremiad.   It's also going to get into some groveling.  Here goes.

DRINKERS: Please, please, puhleeeeeeze focus on "quality first."  By all means, avoid buying a Big Beer-owned faux-craft session IPA that's just going to mean funding some fat cat's new Gulfstream.  But after that, order the best beer, not the most-local beer.  If you're in the mood for a Vienna and your choices are Boston Lager and an amber lager from a tastes-like-it-had-a-bar-of-Life-Buoy-soaked-in-it local brewery, order the Boston Lager.  If you want a hoppy pale beer and your choice is Sierra Pale Ale or that dry-hopped-with-stale-pine-cones-IPA from the local, buy the SN.

Don't reward mediocrity.  You're undermining the very foundation of the market economy.  You're taking the Invisible Hand and shoving it up its Invisible Ass (my apologies to Adam Smith for the vulgarity).  

BREWERIES: You need to do your part, too.  I don't believe that we'll ever talk all of the "local first" folks around.  But I do believe in two things: one is the power of price, and the other is the ability of people to rationalize their behavior.  

So first, get your costs down.  Let's see more session beers with light hopping for lower prices - a brewpub in the Rockies that I visited coming from and going to Seattle offered a $3/pint ordinary bitter, all day every day.  And it was good.  Even some of the folks who claim to be "local first-ers" will jump on that deal when the Christmas shopping bills come due and they see an $8 six-pack of a good session beer.  

Then, second, get involved.  Sponsor all kinds of local events in any and every market you're in.  Contribute stuff to local homebrew competitions.  Organize a 5K.  Give people a reason to believe that you care about their community.  Host a Rescue Animal Day with your local shelter.  Don't be "just another brewery."  If you are, they'll pass right by your name of the tap list.  But if you show you care, they'll find a reason to buy your beer.  And make that beer good, not just "new."  

This is a fight for beer drinkers' hearts, minds, and tongues.  And I don't know about you, but I don't want to be living in the post-Craft Crunch, Road Warrior-type world drinking something that tastes like Saltines dipped in butter just because some "local survivor" brewer thought of the beer name first ("That's How it Gose") and decided to make a beer they'd never had, and poorly.

Keep it simple.

JJW