by Erik Wollschlager
Is the craft beer explosion creating a market bubble?
If you’ve ever elbowed up to the oak and ordered an IPA, chances are, somewhere, sometime, you’ve had to have the “craft beer bubble” conversation. In fact, I’d bet a good amount of money that you’ve heard the “craft beer bubble” conversation more often than you’ve heard Journey at any of the local watering holes.In the off-instance that you haven’t heard, the craft beer bubble is a mythical creature lurking deep in the shadows of society, waiting to steal your delicious craft beer and replace it with something more ‘Merican…or Canadian…or, well…you get the idea.
Basically, the craft beer bubble is a number. No one really knows what this number is, but many, many people are very certain we are approaching it—both on a local and a national basis. This number is the point where the market has become too flooded with craft beer and sales begin to decline, which means a diminished number of craft beer taps per tavern, and in turn, the closing of craft breweries.
While craft brewing is still fairly new to Buffalo, whispers of the craft brew bubble have been echoing off of the majestic purple mountains from sea to shining sea. In 2013, economist Bart Watson wrote an article for the American Brewer’s Association, entitled “The Craft Beer (Non) Bubble.” This is a great article, which highlights several important points, and backs each point with statistical data; for example, “Germany has 1,300 breweries, with a heck of a lot less people. If the United States had the same number of breweries per capita (our population is over 3.8x bigger), that would mean 5,000 breweries.” Watson goes on to point out that the bubble is probably more dependent upon average brewery production, but it is clear that in 2013, brewing was still on the rise, and nowhere near approaching its peak. The information provided in this article alone should have been enough to put the topic to rest, however, the craft beer bubble is still out there, forming in the mist and preparing to fill your pint with something-Lite.
Locally, we are experiencing quite a boom in craft beer. Our growth as a city seems to parallel this brewing explosion, and writers nationally and internationally would agree. Buffalo has become a destination once again, and few things are written about the city that don’t mention the great brews available locally. Even still, Buffalo is not immune to the glaring eye of the craft beer bubble. Despite the great response of consumers in the region, there is speculation that Western New York is reaching the apex of the craft beer bubble. Matt Kahn, President of Big Ditch Brewery, and all-around good guy, is on a mission to quell the raging fire of fear that fuels the craft beer bubble. Matt was kind enough to take the time to offer his thoughts on the topic over a pint of Citraburner. As a businessman, it is in Matt’s best interest to study these trends and to be able to respond to any negative fluctuation that may occur in the market. His response, in short: He ain’t worried.
“Before 2012, there were three breweries in and around Buffalo; Pearl Street, Flying Bison, and Buffalo Brew Pub—this doesn’t include those in the southtowns. Less than five years later, there are nearly 30 breweries, with three or four more set to open soon.” This exponential growth may seem to be pushing toward an inevitable decline, but statistically, the numbers tell a different story. “In comparison, Portland (Oregon) has about double the population of Buffalo, but SEVEN TIMES the number of breweries!” Numbers and statistics are great for predicting trends, but physical evidence is the best proof that Buffalo brewing is not in danger, and Kahn goes on to point out the obvious; “Even with all of these breweries opening, how many have closed? That would be the first indicator that we’re nearing the bubble.”
Matt is confident that there is still a lot of room for growth. Using and idea from the article by Watson, he points out that there are mainly two types of breweries here in Buffalo: brew-pubs and production breweries. Brew-pubs typically brew small batches—enough to stock the taps of their home tavern for their in-house customers, but not really enough to distribute off-premises. The potential for one of these types of establishments is nearly limitless—each neighborhood has a corner bar. If that corner bar turned into a brew-pub, that place already has a customer base. Some of those consumers will try the craft beer, and some of those will enjoy it, and become craft beer consumers themselves.
The best defense against the craft beer bubble is not an incantation or a precise ceremony to ward off evil. According to Matt, the answer is simple; “Make beer good enough to attract beer drinkers to Buffalo.”
End of discussion