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Wednesday, November 13, 2019

Craft Beer's Rabbit Hole

When interviewed for the film PDX Brew City in 2014, I was asked if I thought a craft beer bubble was forming. It wasn't a hard question to answer. Of course there was a bubble forming. I could see it during my research for Portland Beer.

Portland's brewery count was around 20 in 1999 and about 30 in 2009. It then began to spike upward, surpassing 50 by the end of 2012. We have something like 75 today. National numbers show a similar upward trajectory beginning in 2007. There are around 7,500 breweries today.

PDX Brew City has gone through several iterations. When I saw the film early on, my response to the bubble question produced a fair amount of snickering from the audience of mostly industry folks. Craft beer was still exploding at time and not many wanted to consider the eventual downside. Last time I saw the film, the bubble comment had been edited out. No need to ruffle restless feathers.

Of course, there's plenty of recent evidence in the form of closures. consolidations and related data that confirm the craft beer bubble is losing its form. We aren't talking about a total implosion, but the upward trajectory of the industry, once considered unlimited by some, perhaps many, has flattened considerably. What happened?

Market saturation is the first and most important component in what has come to pass. It happened because the number of operating breweries and the volume of beer produced surpassed growth of the actual consumer market. When craft was growing at 15 percent annually, a thousand or two new breweries a year maybe made sense. In our present circumstance, no.

Saturation is not monolithic. By that, I mean there are still places that aren't locally or regionally saturated. Rural areas were slow to catch the craft beer bug and are slowly catching up. Most urban areas are fully saturated. That isn't just about breweries, by the way. Saturation includes breweries, pubs, taprooms, growler fill stations, pop-up bars, etc.

With consumers chasing more local beer in pubs, taprooms and the like, large regional brewers have experienced massive sales declines, particularly in mainstream grocery and retail. Those channels are now largely the domain of mass market lager and "pseudo" craft. Independent brewers, who once bolstered profits via mainstream channels, have been increasingly marginalized.

Innovation Craze
In an increasingly crowded market, brewers have gotten desperate to somehow differentiate themselves from others. You might think that would lead to an intense focus on quality standards as a way to stand out from the crowd. And there's more good beer today than there was 10-15 years ago. But quality has not been the primary focus.

What happened, instead, is that brewers started fooling around with radical approaches and ingredients, hoping to tweak the interest of fans who want something different every time they sip a beer. The rising power of social media influencers, who hype newness and uniqueness, almost certainly played a role in this transformation, in which craft beer achieved cult status.

What it means is newness and coolness are king. Breweries strive to produce a continuous stream of fashionable beers, preferably packaged in cans or bottles with glorious artwork designed to catch the eye of dazed consumers. Beer bars, taprooms and bottleshops must keep abreast of the newest beers and trends or be considered out of touch, irrelevant.

The logical extension of saturation and innovation craze is the endless onslaught of events intended to create buzz and interest. These take the form of tap takeovers, release parties, tastings, as well as large and small festivals which cram the weekly, monthly and yearly calendar. There was a time, years ago, when we talked about event fatigue. We hadn't a clue what was coming.

Here again, the rising importance of social media influencers has helped drive what some might regard as event madness. Social media channels are bombarded with event details. The purpose of the madness is that breweries, taprooms, and festivals are able to show that, yes, they are perfectly in sync with market fads, trends and sensibilities. Almost everyone is stuck playing the game.

The cumulative effect of the cavalcade of events is overexposure and confusion. In practice, you see beers and brands being wildly hawked all over the place on a daily basis. They melt together and fade into the background quickly.

Rabbit Hole
This is the rabbit hole down which craft beer has fallen. You have to wonder where we go from here. Or if there's an upside.