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Wednesday, January 12, 2011

A Craft Brewing Bubble?

In the mid-eighties, when I became addicted to caffeine, I realized there were these places you could go to get insanely strong coffee. Mostly, restaurants and coffee shops served Boyd's or Farmers Brothers, which was brewed to the color and viscosity of weak Red Rose tea. Over the next ten years, I spent a lot of my mind-space strategizing so that the demons of my addictions wouldn't be left to these puny distillates. Small towns were murder, as were many relatives' homes. Then, magically, espresso stands became ubiquitous. And then they became annoying. There were too damn many of them. I recall standing on the street somewhere in Portland and realizing that all four corners were occupied by coffee shops (probably two were Starbucks). Of course, then came the shakeout.

I mention this history because a couple of days ago I stumbled across the news that we're in the midst of the greatest boom in brewery building in--well, maybe in forever, but certainly in the last 140 years. Searching through the Brewers Association's list of breweries, I counted 505 breweries listed as "planned." BA currently lists 1599 craft breweries, which means this represents an increase of nearly a third (32%). And, even if a certain percentage of these fail to materialize, it almost certainly understates matters because the BA can't possibly track all of them. My instinctive reaction: uh oh.

The numbers are a bit staggering. Fourteen states will have increased their number of breweries by 50% or more since '08 (the last time the BA compiled state-by-state totals); five states will more than double their totals. California plans for 65 new breweries, Texas 33, Washingon and Colorado 29. Every state but one has at least one new brewery in the works (poor Delaware). Surely we're headed for a train wreck, right?

But then I looked more closely at the numbers and did a little thinking. Maybe this isn't so many after all.

The number of breweries is not evenly distributed across the country. In Oregon, where you'd say the market is still very healthy, we have a brewery for every 40,000 people. Now, we have a more rabid beer culture, so this may not be typical. Let's take Wisconsin instead, where the density is a brewery for every 85,000 people. Using that level as a benchmark, the US would have 3,500 breweries--more than twice as many as we have now, and way, way over the total we'll see even after this boom.

So, if the market is healthy and growing to fill demand, we'd expect to see more growth in regions that have low brewery density. And indeed, that's exactly what's happening:

Here's a couple other metrics to consider. People buy roughly 210 million barrels of beer in the US every year. Of that, just 10 million are craft-brewed. Most of these new breweries will hope to sell modest amounts of beer (like all craft breweries)--say a couple thousand barrels. At that rate, the entire new batch of breweries would add only a million barrels of production to the US total--point four percent of America's annual production. The last fact? After a drop-off a few years ago, there are still 11,000 Starbucks in the US.

I guess a few more breweries won't hurt.


  1. There's plenty of room for more breweries, especially if more and more of them would appear in small towns inside dimly lit public houses.

  2. Very interesting when you look at the growth regionally and keep in mind the likely, minor overall increase in production.

    I hope this influx will help strengthen the national craft beer scene rather than over-saturate. However, I think there is a legitimate concern that overall craft beer quality could suffer and lots of new breweries (presumably very small) could create artificially inflated prices that may be detrimental.

  3. Nice research Jeff. Excellent perspective.

    I think Portland could certainly support many more brewpubs, but the issue is location. So many seem to want to locate in the Central City, at some point we're looking at saturation. But it seems to me that there are still many underserved corners of the city/metro area.

    One concern is that as they proliferate and fill more geographic niches, that they each serve a smaller local customer base, making it harder to support the cost of on-site production

  4. More breweries would be great, and even better in the suburbs. I live in a town with 2 bars, and even in those maybe 6-8 taps, with bud, bud light, and coors taking up those taps. Most of my craftbeer drinking takes place in 22oz portions, my choices are limited to Fred Meyers selection.

  5. You could bring one to Oregon City and I wouldn't complain, especially if it specialized in Belgian styles.

  6. The take home message is, if you live in the Portland area and want to start a brewery, you may have better success if you relocate to another state, say South Dakota.

  7. We are one of the 505 'in planning' breweries in the USA. We are reviewing sites in the Northeast and will build a micro brewery called Nor'easter Brewing Company .... taking the industry by storm.
    Our market studies have concluded their is still plenty of room for more breweries - I hope we are correct! Thanks for the helpful blog.