Brewery closures are actually a good sign for the craft beer industry.
A recent Washington Post article claimed the craft beer industry has “grown less frothy,” citing that more craft breweries closed in 2017 than any time in the past decade. Should we start panicking?
No, no, let’s all take a deep breath. Because here’s the thing: according to the Brewers Association report, while last year saw 165 breweries close their doors, nearly 1,000 new breweries opened. The overall volume of breweries in the industry (including the macro overlords) may have dipped 1% in 2017, but craft brewers saw a 5% rise in the volume of beer being produced. That’s a lotta foam.
To be fair, The Washington Post isn’t just playing harbinger of doom by pointing out that the industry’s insane growth rate has begun to decelerate. After all, it’s unreasonable to expect an industry that brings in $26 billion per year will continue growing at the same double-digit rates. But instead of viewing this data as a sign that craft beer is losing its steam, we can see it as more of a signal that the industry is maturing.
Bart Watson, the Brewers Association’s chief economist, says this trend of closures and slowing growth isn’t necessarily indicative of all breweries across the board. In a Brewers Association report from March, he pointed out it’s more applicable to breweries with broader distribution and the inherent challenges of competing with big beer.
“Growth for the craft brewing industry is adapting to the new realities of a mature market landscape,” said Watson. “Beer lovers are trending toward supporting their local small and independent community craft breweries. At the same time, as distribution channels experience increased competition and challenges, craft brewer performance was more mixed than in recent years, with those relying on the broadest distribution facing the most pressure.”
So the more a craft brewery grows and the wider they reach with distribution, the more they risk having unsustainable overhead. An example of this is the recent sale of Green Flash Brewery to a group of investors. It clearly wasn’t a question of quality or appeal of their beer -- the 16-year-old San Diego stalwart had a huge footprint, locations in California and Virginia, and ambitious plans to distribute to every state in the US. But they also had a $20 million loan from Comerica Bank that they couldn’t make payments on.
Instead, craft brewers who focus on catering to a hyperlocal audience are unlikely to encounter any issues. Alejandro Brown, founder of Big Al’s Brewing, closed his operation in January of last year after almost 9 years of brewing in Seattle. In a Draft Mag interview he said survival in today’s industry climate relies just as much on having a solid local following than making delicious beer.
“I think the key to success in this industry is having solid retail,” Brown said. “If you can build your business around your retail and you can have your taproom full every night, you’re going to be fine.”
These trends are pointing toward the importance of craft breweries developing a relationship with their immediate community. When breweries grow to try to deliver their beer to supermarkets and bottleshops around the country, the possibility of stagnating, losing a connection with customers, and being burdened by extensive debt becomes a serious threat.
“Beer lovers want to support businesses that align with their values and are having a positive impact on their local communities and our larger society,” says Watson. “That’s what small and independent craft brewers are all about. The ability to seek beers from small and independent producers matters.”
There are more than 6,350 breweries in the country. If we keep supporting true independent craft, patronizing our local watering holes, and practicing responsible craft beer drinking etiquette like seeking the seal, I’m confident that a lot of these fine artisans will continue to supply us with prime suds. And if you already do those things, well, rest easy and drink up.
Written by Sigmund Steiger