Craft Beer Investor Psychology

Most of us entered the craft beer zeitgeist at a fortunate time, filled with optimism, excitement, and the thrill of the hunt. As we became invested, we forgot that we’re participating in a market subject to the economic forces and psychology faced by all industries. I use the term “investor” to stretch well beyond having financial ownership in a craft brewery. Thousands of businesses were built to serve this industry including its equipment, ingredients, packaging, merchandise, systems, and services. Those of us who have chosen a career in beer also find ourselves heavily invested in its ability to grow our career through new opportunities, advancement, and pay raises. Even customers are invested in the story, evolution, and experiences provided by their favorite craft breweries. As investors, we must face the emotional rollercoaster of a cyclical market and currently, we are headed into the eye of the storm. The key to survival is the self-awareness to know when to bunker down and when to invest.

The Trip to Euphoria (2010 - 2015)

It’s rare to reach a consensus on anything related to craft beer, but few disagree that 2015 was the absolute peak of the industry, not in terms of volume, but in unbridled optimism. The period leading up saw exciting waves of new brewery openings, yet demand still managed to outpace production. You’d hear emphatic phrases like “we brew what we want to drink” as a brewery’s core philosophy fueled by a feeling of invincibility. It’s easy to exhibit those high levels of confidence when the beer can’t stay in stock, which led toward a euphoric state that triggered the largest investments ever made in craft beer. The arms race was on.

Attracted by lower freight costs, fresher beer, and the opportunity to be “local” in a second geography, the largest breweries began doubling down and building second operations on the other side of the country. More regional and local breweries were all working on expansions of their own in an effort to keep up with demand, facing few hurdles in acquiring financing. New jobs and advancement opportunities were arising left and right, while vendors working adjacent to craft beer saw a seemingly endless amount of prospective business. And customers saw their favorite beverage become gamified where frequent new releases fueled the thrill of the hunt. Everyone was hooked.

What’s not talked about enough however is the maximum point of financial risk that coincides with this impregnable feeling. As the level of aggression and greed increased, focus shifted off course and mistakes became prevalent in the form of infections, recalls, and plenty of poor Human Resources. A handful of savvy brewery owners took advantage of the FOMO surrounding craft beer after receiving an offer they couldn’t refuse or simply knowing that an exit would never be better timed.

Chasing Trends Straight Into COVID (2016 - 2020)

As beer enthusiasm hit its apex, craft beer’s most engaged fans were ready for something new to get behind. With sweetness and flavor intensity on the rise, the Hazy IPA caught the wave, turning into a phenomenon with seemingly unending iterations that enabled so many craft breweries to find growth and stability throughout the rest of the decade. Early adopters of the Hazy IPA found wide open runway in 2016-2017, then the “big guys” eventually bought in and validated the approach in the main stream.

The Hazy IPA was providing so much badly needed momentum, often for breweries who were fundamentally against the concept at first and missed the first few years of adoption as a result. With most incorrectly assuming that the Hazy IPA’s momentum would evolve into something else, any whiff of a new trend would no longer be met with the resistance that the Hazy IPA faced. The rhetoric shifted from '“we brew what we like to drink” to “we’re listening to our customers” which signaled a reliance on the next trend instead of building around a brewery’s unique point of view. You live by the trend, you die by the trend.

Counting on “the next big thing” did not pair well with the increased competition brought on by continued brewery openings. By 2019, craft breweries had experienced the full downward spiral of emotions including denial, anxiety, and even fear. Topics of conversation included health & wellness, the challenges in the on-premise as many beer bars struggled to match the allure of Taprooms, and many’s preference to “Netflix & Chill” over going out. The only trend being dangled in front of craft breweries was hard seltzer, which would involve further straying from what many brewers originally set out to create. And all of this was before the outbreak of COVID-19, which sent the industry into the red stages of depression, then panic.

Time to Invest (2023-2025)

Now like most other industries, craft beer sits at a point of uncertainty driven by an economy dangling on the brink of a recession. The price is being paid for COVID’s stimulus dollars that floated craft breweries through 2020 & 2021 as the free money spigot has been turned off, inflation is impacting spending power, and consumers begin dipping further and further into savings and credit cards. The capitulation stage is underway as breweries who don’t have the flexibility to wait out a storm are beginning closing up shop or sell for cents on the dollar.

While the peak of euphoria signaled the riskiest point of financial risk, this upcoming period of dependency represents the biggest point of financial opportunity. It sounds unfathomable to be investing in craft beer right now with the economy such a question mark and breweries having surpassed their saturation point, but that’s exactly how market psychology works. Thankfully investing doesn’t have to mean bank loans, bigger brewhouses, more tanks, or new locations. It can be more about time and focus be poured back into the following areas:

• Revisiting your brewery’s point-of-view to ensure it’s regularly communicated and consistently understood by ownership, employees, partners, and fans.

• Spending more energy sharing information and strategy with employees and partners to create a feeling of ownership by ensuring each can speak to not just what the brewery is doing, but why they’re doing it.

• Initiating a fundamental shift on social media away from selling and into creating value for your followers.

• Focusing in on hospitality with a goal of visitors feeling so welcome and appreciated that their next trip out will be a return visit to your brewery.

Those investing right now will be the beneficiaries when the market sentiment of dependency naturally shifts toward skepticism, then hope, relief, and an eventual return to optimism. The night is always darkest before the dawn. Be prepared.