Thursday, January 26, 2012

Headed for a Crash?

It's time for another non-construction-related post.  As I have mentioned briefly before there are a lot of new breweries in various stages of opening in Cincinnati these days.  While I firmly believe we are overdue to catch up with everyone else in the craft beer renaissance that is occurring all over the country, the pessimist in me sometimes wonders how many breweries we can actually sustain in this area.  As I said before, there is definitely room for more breweries in this town, but how many?  Two?  Five?  Ten?  Of course this is a hypothetical question and I'm not asking it to stir any great debate, but some comments I read recently made me start thinking about this issue a little more deeply.

A few days ago on the Ohio Beer Blog Rick Armon interviewed Fred Karm of Hoppin' Frog Brewery in Akron.  If you haven't read the Ohio Beer Blog, its a  great resource for keeping up with the comings and goings of Ohio's breweries.  Rick Armon writes for the Akron Beacon Journal and also wrote the Ohio Breweries book last year.  One of his recurring features is "Five Questions With..." where he asks an Ohio brewer a set of questions about their favorite beer etc.  The most recent installment featuring Fred Karm contained an interesting answer to the question "What advice would you give to someone who's interested in opening a brewery?"  Here is his response (entire interview here):

"These days it seems everybody wants to start a brewery.  It is understandable.  I’d say DON’T DO IT — IT’S TOO RISKY, and oh, yeah, not to mention it’s really hard work.  Sure, everybody wants to start a brewery these days, but I’ve seen this before.  Reminds me of the American craft beer boom-and-bust of the late 1990s.  These lessons of the recent past can teach us that the availability of craft beer grew way too fast compared to the customers.  It appears that is the case again, with American craft beer sales being so predictable — they have been increasing at steady rate of about 11 percent over the last eight years.  That rate of growth has been matched in the last decade with many existing breweries increasing their production.  But in the last year many new American breweries have started up, and along with the growth of existing breweries, production recently has grown faster than the market can bear. And a lot more are already registering for 2012.  That is too fast of a growth for the customer base.  Back in the late 1990s, many newer breweries that weren’t as ingrained into the fiber of the community found themselves unable to make enough sales to stay in business.  It is possible that this will happen again, as history does tend to repeat itself."

This response struck me as interesting.  Usually this question is answered with upbeat statements like "keep at it, be true to yourself, etc" Fred Karm's candid response "don't do it" gave me pause.  I've never met Mr. Karm, but I admire his brewery and his honest response to this question.  He seems to have the data to back up his statements too.  As someone who was also present during the first boom/bust I have to say that I agree we must be careful not to let history repeat itself.  There were over a half dozen brewpub-type establishments in and around Cincinnati in the late nineties.  A few years later Rock Bottom was the only one left.  It's been 10 years and we're just now approaching the same level of brewing establishments we had back then.  But how many more can we handle?

One place where I do disagree with Mr. Karm is in the interpretation of those growth numbers.  While the growth rate may not be keeping pace with the expansion in output nationwide, there are definitely areas where this imbalance is much greater than here in Cincinnati.  Maybe it's because we are always "late to the party" in this part of the country but I firmly believe local trends towards craft beer are on the upswing here at a pace that can definitely sustain a few more players in the market.  According to the Craft Brewers Association Ohio ranks 32nd in breweries per capita but ranks 7th in population.  By contrast Colorado is 22nd in population and 4th in breweries per capita.  I think that means there is still room for improvement!

So, what's the answer?  Beats me.  I don't think we'll ever know where the "brewery saturation point" is in this town until we hit it (if we hit it at all).  Until then (if it ever comes) it's going to be fun helping to build a wonderful community of small breweries here in Cincinnati.....

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