Drinking on the Last Frontier — Beer bubble not likely to burst

bh Growth-Small_HRBy Bill Howell, for the Redoubt Reporter

One of the things you can look forward to in the spring, at least if you are an obsessive craft beer fan like yours truly, is the release of the brewery statistics for the prior year. The numbers for 2013 have just been published by the Brewers Association, so let’s take a look.

First and foremost, the share of the total beer market that belongs to craft beers has continued to grow. Even discounting the quite popular “crafty” beers from the big three brewers, true craft beers captured 7.8 percent of the U.S. beer market by volume in 2013, up from 6.5 percent in 2012 and 4.4 percent in 2009. Obviously, craft brews still represent a very small segment of the total U.S. beer market, but this sort of steady, sustained growth is a very pleasant trend.

Turning to retail dollars, craft beers generated $14.3 billion in sales for 2013, which represents a 14.3 percent market share of the $100 billion U.S. beer market. As high-quality artisanal products, craft brews can command top dollar, making them even more important to overall beer sales than their 7.8 percent volume share would suggest. That $14.3 billion in sales represents a 20 percent growth over 2012. Growth rates like these make craft brewers smile and executives at AB-InBev and MillerCoors gnash their teeth and plan the release of more “crafty” beers in an effort to stem the tide.

The sheer number of new breweries and brewpubs continues to grow by leaps and bounds, as well. At the end of 2013 there were 2,822 breweries in the U.S., of which 2,768 were considered craft breweries. That’s a 15 percent increase over the number in 2012. In fact, there are now more breweries operating in the U.S. than at any time in our history, with hundreds more in the process of opening. We really are living in the Golden Age of American brewing!

Naturally, with this sort of explosive growth taking place, some people have begun to wonder if craft brewing isn’t heading for a fall. Could we be looking at a bubble? The craft brewing world has already experienced one episode of “irrational exuberance” followed by a crash in the middle of the 1990s. For a while, craft beers and microbreweries were the next big thing. Investors jumped into the market, driven primarily by the desire to make lots of money, rather than good beer. The market was flooded with many badly produced beers, and then the bubble collapsed, taking many breweries (not all of which deserved it, though many did) into bankruptcy. Brewers have long memories, and some have wondered if we aren’t seeing a repeat of this cycle, two decades later.

In my personal opinion, I don’t think the situations are comparable. Are some of the current breweries undercapitalized? Certainly. Is it likely that the pace of growth will have to slow soon? Hard to see how it could fail to. Will some breweries end up going out of business? Of course. However, I don’t think we’ll see the same wholesale slaughter as we did in the 1990s. The market is much more mature now than it was then, and has significantly higher standards. During the boom days 20 years ago, people thought they could make money with just a clever name and a cute label. Today, prospective brewers know that regardless of whatever else they do, their beer had better measure up or they won’t last six months.

When I look at craft brewing here in Alaska, as opposed to at the national level, I also see very little evidence of any sort of bubble. All of our currently operating breweries seem to be doing quite well, at least as far as I can tell. 49th State Brewing Company in Healy has just taken delivery of several new tanks to increase its capacity. Baranof Island Brewing Company was just awarded a $350,000 economic development loan by the city of Sitka, which will allow it to expand its production and begin canning its beers. Midnight Sun Brewing Company has just added a fourth beer to its canned offerings. Broken Tooth Brewing has added a new line of bottled beers to its selection of cans. Other breweries across the state are operating at max capacity to meet the ever-growing demand for quality craft beer.

In addition to the success of our current breweries, there is still plenty of room for newcomers. By summer, a new nanobrewery, Gakona Brewery and Supply Company, should be open for business in its namesake town. There are more breweries in the planning stage for Anchorage and the Valley, as well as Ketchikan. Furthermore, it can only be a matter of time before some eager brewer/entrepreneur gives Fairbanks its first brewpub. Overall, when I look into my crystal ball, the future of craft brewing in Alaska seems almost overwhelmingly bright.

Until next month, cheers!

Bill Howell is a homebrewer, teaches a beer appreciation class at Kenai Peninsula College’s Kenai River Campus and was named the 2010 Beerdrinker of the Year by Wynkoop Brewing Company in Denver. He and his wife, Elaine, have authored “Beer on the Last Frontier: The Craft Breweries of Alaska,” available via Amazon.

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