On the first Friday of every month beer bloggers around the world join together for The Sessions (which are also known as Beer Blogging Friday). There’s no entry fees or membership required, we all just write a blog entry on a pre-determined topic each month.
This month’s session is hosted by Derek Harrison at It’s Not Just the Alcohol Talking on the topic ‘‘Is Craft Beer a Bubble?’’. Here’s how he explains things.
‘‘It’s a good time to be in the craft beer industry. The big brewers are watching their market share get chipped away by the purveyors of well-made lagers and ales. Craft breweries are popping up like weeds.
‘‘This growth begs the question: is craft beer a bubble? Many in the industry are starting to wonder when, and more importantly how, the growth is going to stop. Is craft beer going to reach equilibrium and stabilise, or is the bubble just going to keep growing until it bursts?’’
My, how time flies – the first I knew The Sessions time had come around again was when I saw the offering of Liam at Drunken Speculation in my WordPress reader. So I figured I’d better bash something out to keep my Session streak alive – this is the 13th straight Session I’ve participated in. But it’s not likely to be one of my best given that I need to bash it out quickly.
Anyway, my feeling is that in the US, yep, it’s a craft beer bubble and it’s gonna burst. But not here in Australia. My US belief is drawn on little more than watching the speed with which breweries seem to be popping up. It seems pretty obvious that this sort of rapid growth isn’t sustainable. It also seems pretty obvious that people, being a bit on the greedy side, look at that growth and want to be a part of it.
So the growth isn’t going to stop by people going ‘‘hey, we’ve reached saturation point here. I’m going to do something else other than make beer for a living’’. It’s going to stop by the bubble bursting and a number of breweries closing up. Which mightn’t be an entirely bad thing. it’ll be bad for the brewers themselves, sure. But for the broader beer community it’d at least mean that the weaker breweries get weeded out and the stronger ones stay standing.
So why won’t this happen in Australia? Well, partially because we’ve had a craft beer bubble already and – hopefully – we’ve learned from that. Back in the late 1980s, early 1990s, when the phrase was ‘‘boutique beer’’ rather than ‘‘craft beer’’, there was a spurt of breweries opening up. Not a huge amount but certainly far more than the market needed.
So most of them closed. They also fed the more recent craft beer growth too, because more recent breweries ended up buying the brewing equipment of those that went to the wall before.
The other reason I think we’ll be okay is that that the Australian craft beer industry isn’t showing crazy growth like in the United States. Which is very important, because we just don’t have the population to support US-style growth. While there are still new breweries being opened, the numbers don’t seem to be picking up speed. Maybe the earlier bubble made a difference.
And I guess the higher excise Australian brewers have to pay the government compared to the US could act as a brake on speedy growth. You can get an idea for how high excise is in Australia here. Because they have to pay a whack of money to the government, making beer isn’t really something that’s going to make them rich any time soon. So maybe that clears the field of the speculators and carpet baggers and restricts it to just those with a passion for making beer rather than money.
I can’t believe that despite how much I wrote, I still didn’t make reference to taxes. The excise handbrake is an excellent point.
Thanks – I actually thought I might have been over-reaching to suggest excise may have an effect on reducing the growth in breweries. That’s kind of why I buried it down the bottom of my post.
If you cut the excise from where it is now down to the American level, that extra 10-20% of revenue going to the brewer instead of the tax office changes the business case substantially and starts to make it look like a reasonable investment.