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They aren’t the first ones I’ve heard make this argument. “Craft beer is at a bubble and it’s going to burst.” “It can’t last.” “It’s a fad.” Blah, blah.

We heard this in the late 90’s. Now we’re hearing it again…this time from even respected resources such as Boston Beer’s Jim Koch and Stone’s Greg Koch (no relation).

Fact is, as every industry matures, there will be some losers. Some people are in the business for the wrong reasons – to chase $$ or achieve status, rather than making a great product. Some people may love beer, but are simply not talented or they’re under capitalized or spent money unwisely in building their business.

Mr. Koch makes a good point, however. There ARE a bunch of new breweries who are doing “nothing special.” While I would argue the overall quality of all breweries is much better than a decade ago – and many are producing fabulous beer – there are still some pretty suspect products out there crowding shelves and fighting for tap handles, often even within their own distribution partners. (In fact, there’s a significant newer player in my area that is seemingly a virtual clone of another successful brewer – and many have commented that it may be tough for them to distinguish themselves unless they do “something a little different.”) As evidenced by the growing number of “limited,” seasonal and extreme beers, hard-core beer geeks are constantly seeking “new and different” and often avoid a standard pour, whether it be a simple pale ale or even drinking one brand regularly.

The reality is, more breweries is still a great thing. “Fresh and local” is an advantage in terms of flavor and community benefit and it’s wonderful when consumers can stop by their local brewery regularly instead of always having to settle for commercial swill. That said, it will be much tougher for ambitious operations to go from “start-up” to “sizeable” (5,000-10,000 Bbl+) in a short period of time, as we saw with some of the established craft brewers – many of whom “grew” a decade or more ago on the basis of distributing to virgin territory that was not home to a local brewer. Some of them have now pulled back and consolidated (LINK, LINK, LINK) as they’ve faced local competition in far off locales and unwieldy distribution networks.

As mentioned above, retailers – both bars/restaurants and stores – are now deluged with craft beer options to the point that shelf space and tap handle real estate are at a premium. Distributors are bloated, with masses of SKU’s to learn, manage and promote. (This may also be the source of some of Mr. Koch’s frustration, as he also faces competition from small, local breweries who take some of his shelf space.) “Local” is also now less often the only show in town in many places…there are several local options.

Historically, brewing was always local. It wasn’t until pasteurization, refrigerated transportation and efficient distribution networks that brewers – foremost Anheuser Busch – expanded much beyond their own regions. Perhaps we’re slowly heading there again? I think it’s incredibly interesting when traveling to seek out local interpretations of styles and check out the local scene. I can get McDonald’s anywhere, were I so inclined.

Bottom line is, I think “bubble” is a strong term. Some brewers will not survive, of course, but I think we’ll continue to see more breweries, even as the large industry players continue to consolidate. It’s just that more of them will be smaller and fewer of them will grow much beyond their local areas. (LINK) That, in my opinion, is not a bad thing.

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