Not yet, at least. But for some odd reason, the subject keeps climbing back into the mainstream, most recently in a story by Joshua Bernstein in Bon Appétit online, which when shared on Facebook emerges with the headline “The U.S. Craft Beer Market Is Way Overcrowded – Bon Appétit.”
That sentiment is not actually reflected directly in the story, the online version of which boasts the more equivocal title of “America Now Has Over 3,000 Craft Breweries—and That’s Not Necessarily Great for Beer Drinkers,” but the sentiment has launched a flurry of discussion around the web.
So let’s get this straight: 3,000 breweries are NOT too many for the United States and increased selection is NOT bad for beer drinkers.
Got it? Good! Now, here’s why.
At 3,000 breweries, the United States is now beginning to approach the breweries per population ratio we have in Canada, and in fact, depending on the brewery count for Canada you use – an accurate count in the country is almost impossible to ascertain – could already have reached the same level. But we’re not exactly awash in breweries north of the border, and I have yet to witness the “bloodbath” predicted by Sam Calagione in Bernstein’s story.
That brewery to population ratio, by the way, is about one per every 105,000 people. Which in a global context is actually pretty laughable.
How so? Look at the United Kingdom, for starters, where they boast a brewery for roughly every 55,500 citizens. Or Germany, with one for every 61,500 people. Or little Belgium, where every 70,000 individuals could claim a brewery of their own, should they be so inclined.
And that’s counting only traditional brewing powers. Wade into the numbers of nations that are experiencing their own craft beer renaissances, as is the U.S., and some of the numbers drop even further, like Switzerland, Denmark and New Zealand.
But wait, I hear American brewers arguing, we have the three tier system, which means that distributors are going to fill up and not want to carry any more brands. Which is why, I counter, microdistributors are beginning to appear all around the USA, and will no doubt continue to do so for as long as the demand for their services persists. Besides, more and more states are allowing self-distribution, which is surely sufficient for smaller operations.
But even so, I hear in the distance, it’s not necessarily about the distributors, but the proliferation of SKUs (the acronym for “store keeping units,” the short form for a distinct item in retail sale, such as a bomber of beer, a six-pack or a case, which represent three SKUs even if they are of the same brand). Except that most of these little start-ups are selling not from variety stores or supermarkets, where SKU quantity is an issue, but from their own stores or pubs or one or two of a handful of specialty retailers. And as for bars, well, more taps are coming on-stream daily in the United States, both from new bars and restaurants and existing ones which are changing from regular brews to crafts. (Even Pete Coors sees that happening, although he hasn’t yet quite figured out why.)
Regardless of all the above, however, I’ve still the most compelling reason why a beer bloodbath is not forthcoming in my hip pocket. Now pay attention, because here it comes.
Roughly 92% of the overall American beer market is NOT craft.
That’s about 180 million barrels of beer, folks, which is a whole frigging lot! So long as craft brewers continue to eat away at that part of the market, as they have been doing for decades now, there will remain plenty of room in the marketplace for 3,000 or even 4,000 breweries. And for brewers who don’t think they can chip away at that massive core of the marketplace, well, you might as well hang up your wellies now.
15 Replies to “No, There Aren’t Too Many Breweries in the United States”
The larger brewers are simply laying the narrative for the coming contraction and correction. You have to remember that if the trending expansion continues, you might have 4000 by the end of 2016 and fewer of those are brewpubs than was originally envisioned. The other argument that I have seen recently is that “small breweries and their crappy quality will sink the industry.” I am not sure that I believe that this is the case. I think larger craft breweries are seeding that argument so that they are not negatively impacted when it comes down. After all, five of the largest brewers are poised to expand by something like 2 million barrels production over the next couple of years. If anything’s going to hurt smaller craft breweries it will be the expansion of the larger ones and the lower prices they will be able to offer because of their ubiquity. Since we can’t have that argument circulating, the small breweries are either too numerous or too crappy. Look for that line coming out of larger craft breweries continuing for a couple of years.
I’ve seen this before, Jordan, in the 1990s. Ignoring the fiction that was spread by the Wall Street Journal — and oddly accepted as fact even within the industry — the main cause of the contraction then — which wasn’t even really a contraction; brewery numbers never actually dropped significantly — was poor quality and a number of high-profile concept brands. There is some bad beer out there, for certain, and consumers I think will react eventually.
That said, you make a very interesting point.
Oh, I don’t doubt some of the beer actually IS crappy. I just think we’re going to see the whole “brotherhood” concept turned on its head when you have top ten craft producers doubling their output on the other side of the country. That’s a really great way to get resented.
It’s already happening. Saw the first rumblings at the Craft Brewers Conference last year.
The “brotherhood” has been losing chips for some time now.
My fear is not that there are too many breweries, I too believe that there is room for many, many more. I worry that the current expansion is exceeding the growth of the demand for craft beer. I foresee a minor correction and then a return to a more rational rate of growth.
But then, I could be wrong.
I would be more interested in craft sector total product stats than the number of breweries given the advent of the nano. Another 1,000 nanos will have little effect compared to ten more big craft branch plants.
There may be a correction for those wanting to become Sierra Nevada or Sam Adams but there is plenty of room at the local level for more breweries. There is a large avarice for all things local and in fact I would argue that this is a big part of the current craft trend. As long as there are local brewers who do not want to go national, there is plenty of room for more! Bring them on!
There has been a shift in wholesaler/retailer opinion on SKUs. From a story I wrote for the a forthcoming issue of American Brewer:
Down in the trenches, distributors are clearly coming to the conclusion that craft is likely to become a more and more important factor in their incomes given the struggles of the macrobrewers to hold onto their markets. Sierra Nevada sales executive Joe Whitney told Beer Business Daily in early July that his distributors are no longer complaining about a proliferation of SKUs from craft brewers, they are “almost across the board” asking for more of them. He noted that high end brands are also being embraced and distributors see innovation (i.e., more and new craft) as the driving force for continued growth.
I believe there is practically no limit to the number of breweries in the US. But there is a limit of how many will be the next Sierra Nevada. People like to drink beer that’s produced locally. So breweries looking for large expansion outside their home markets will be frustrated. And that’s OK.
I agree with Russ. And, it’s not just the fact that the market for “large genuine craft” is limited, but relatively few companies have the skills and capital to take it to the next level. It’s a business model few are able to implement successfully, but SN and a handful of others will succeed.
I think nanos bring too much instability to the market. The nano concept is rooted in beating the system, and the system isn’t meant to be beaten. I think we’re heading for a repeat of the brew pub bust of the early 2000s.
I agree… Jacob with Liquor Shed