As a fellow CPA, I always enjoy seeing the marketing vs financial viewpoints that you offer about the industry.
Just my two cents, but from what I’ve personally witnessed from a financial perspective the three main things that are causing the closures:
Brand: You touched on this and I know you’ve harped on this before, but too many breweries set up shop, starting making beer, and never built the brand. Most craft beer fans could probably describe the mascot on the anti hero cans, or know who gumball head the cat is.
Risk Adverse Behavior: We’ve never been saturated with so much good beer, but we’ve also never had so much OK beer. With wallets tightening craft beer drinkers are being much more risk adverse (risk of drinking a crappy beer) so I’m seeing much more brand loyalty, which goes back to point #1.
Caught Up in Two Different Business Models: At the end of the day, breweries are a manufacturing business. Beer making is taking raw ingredients, and turning them into a finished product. As the craft beer industry boomed, more breweries started opening taprooms, and event spaces, and serving food (Hospitality Business). My hot take is too many breweries made a on par or subpar product and relied on the taproom to bring business in. Where instead of focusing on the product which is the manufacturing side, they tried to focus on both, because that was the trend. If you make craft beer you need to have a cool taproom. My opinion is focus on the manufacturing side and make exceptional beer, the customers will come. It also put some breweries and (still has) into this weird situation where some of their competitors on the hospitality side are also customers they are trying to sell kegs to. Also, the hospitality business is just a cut throat environment as it is. So if you aren’t making exceptional beer and barley keeping up with demand, its no surprise that so many of these places are closing.
This is purely anecdotal but I have not seen this same cycle play out too much in northern Indiana/southwestern Michigan, yet. My theory is that the cycle can be very localized and hits different areas at different times, the hype phase did not hit this area particularly hard because it came later and thus has been more smooth, and in much of the area brewery density is still very low. My gut says that rather than seeing lots of closings around here, we're more likely to see the cycle manifest in slower growth and less openings.
I also think that selling people on your space and being well rounded is more important than ever. Most good restaurants have a good craft beer selection. They also have liquor and food.
So why go to a brewery? For the space, the environment, community, and location. Now we also have to sell food and provide different form of events, live entertainment, etc. I’ve found that without major production volume to tip the scales on volume vs margin, it’s time for smaller local breweries to become more like restaurants. Make great food, provide liquor and still have a kick ass space.
Always find the topics and writing fascinating! Started drinking craft beer in N. California in '89 - we'd always stop at the (tiny) Hopland Brewery (CA's first official brewpub!) on the way to school in Arcata, have a few Red Tail Ale's (RIP) and then grab a few for home!
Run a small bar / record store) in rural IA and see this happening around me (and follow the same thing happening in Chicago where I spent 20 yrs.) - really dig the viewpoints and insight! *glad you've opened up distro to Iowa - only wish I could get a few more of your core beers :)
As a craft beer lover since the early aughts, and a worker in the industry, I’m incredibly curious about how Craft Beer will shake out as an industry within Beer. I imagine there will always be small breweries that are destinations that represent “place” in their locale, but I think the middle tier will shrink a lot, either through closures or consolidation. What remains in 20 years or more, I’m not sure.
As a fellow CPA, I always enjoy seeing the marketing vs financial viewpoints that you offer about the industry.
Just my two cents, but from what I’ve personally witnessed from a financial perspective the three main things that are causing the closures:
Brand: You touched on this and I know you’ve harped on this before, but too many breweries set up shop, starting making beer, and never built the brand. Most craft beer fans could probably describe the mascot on the anti hero cans, or know who gumball head the cat is.
Risk Adverse Behavior: We’ve never been saturated with so much good beer, but we’ve also never had so much OK beer. With wallets tightening craft beer drinkers are being much more risk adverse (risk of drinking a crappy beer) so I’m seeing much more brand loyalty, which goes back to point #1.
Caught Up in Two Different Business Models: At the end of the day, breweries are a manufacturing business. Beer making is taking raw ingredients, and turning them into a finished product. As the craft beer industry boomed, more breweries started opening taprooms, and event spaces, and serving food (Hospitality Business). My hot take is too many breweries made a on par or subpar product and relied on the taproom to bring business in. Where instead of focusing on the product which is the manufacturing side, they tried to focus on both, because that was the trend. If you make craft beer you need to have a cool taproom. My opinion is focus on the manufacturing side and make exceptional beer, the customers will come. It also put some breweries and (still has) into this weird situation where some of their competitors on the hospitality side are also customers they are trying to sell kegs to. Also, the hospitality business is just a cut throat environment as it is. So if you aren’t making exceptional beer and barley keeping up with demand, its no surprise that so many of these places are closing.
This is purely anecdotal but I have not seen this same cycle play out too much in northern Indiana/southwestern Michigan, yet. My theory is that the cycle can be very localized and hits different areas at different times, the hype phase did not hit this area particularly hard because it came later and thus has been more smooth, and in much of the area brewery density is still very low. My gut says that rather than seeing lots of closings around here, we're more likely to see the cycle manifest in slower growth and less openings.
I also think that selling people on your space and being well rounded is more important than ever. Most good restaurants have a good craft beer selection. They also have liquor and food.
So why go to a brewery? For the space, the environment, community, and location. Now we also have to sell food and provide different form of events, live entertainment, etc. I’ve found that without major production volume to tip the scales on volume vs margin, it’s time for smaller local breweries to become more like restaurants. Make great food, provide liquor and still have a kick ass space.
Always find the topics and writing fascinating! Started drinking craft beer in N. California in '89 - we'd always stop at the (tiny) Hopland Brewery (CA's first official brewpub!) on the way to school in Arcata, have a few Red Tail Ale's (RIP) and then grab a few for home!
Run a small bar / record store) in rural IA and see this happening around me (and follow the same thing happening in Chicago where I spent 20 yrs.) - really dig the viewpoints and insight! *glad you've opened up distro to Iowa - only wish I could get a few more of your core beers :)
As a craft beer lover since the early aughts, and a worker in the industry, I’m incredibly curious about how Craft Beer will shake out as an industry within Beer. I imagine there will always be small breweries that are destinations that represent “place” in their locale, but I think the middle tier will shrink a lot, either through closures or consolidation. What remains in 20 years or more, I’m not sure.