In this Dismal Economy, There’s One Thing that’s Booming!

Not everything is doom and gloom.

“Curious Cat,” a commenter on my article, Welcome to 2016! With Just a Touch of Mayhem, started out with this:

Wolf –

I would feel a lot better about the world economy if I heard one positive thing from anyone other than “US consumers are continuing to spend” (until they can’t any more) and US folks are buying cars (on a trillion dollars of borrowed money). Does anyone have anything positive to say about the world economy other than it’s not as bad as we thought it might be?

Here’s my answer for Curious Cat: There is “one positive thing” in this economy – more than one, actually, but one sticks out. It’s a huge boom with a delicious product. It’s a true American success story, pushed forward not by central banks, governments, or misbegotten stimulus programs, but by scrappy upstarts that fought all odds and disrupted a tired oligopolistic industry. And now, after a few decades, they’re attracting mega-tons of money: craft brewers.

The Brewers Association reported that the total number of breweries in the US soared to 4,144 in 2015 – a phenomenal 36% jump from a year earlier. Since 2011, the number of breweries has skyrocketed 252%.

So it’s only a tiny slice of the US economy, but it comes at the expense of an oligopoly of multinational brewing conglomerates that have totally forgotten about their customers – which makes the story quintessentially American.

In 1979, near the low-point in American beer history, there were only 44 breweries. But that year something happened: The industrial breweries were down to 42; but craft breweries doubled in number to … two!

And it opened the floodgates. The next year, craft brewers quadrupled to … eight. A dizzying boom had started: Americans, who were drinking less and less beer on a per-capita basis and were switching to wine and other sorrow-quenching and trading-loss-overcoming liquids, re-discovered beer, but full-flavored innovative craft brews that made taste buds tingle with complex pleasures.

This chart shows the near exponential boom in craft breweries (4,124 in 2015) even as the number of industrial breweries has now stabilized at 20 behemoths. Note how the Financial Crisis decimated craft brewers through 2011 – this being a very tough business that requires a lot more than just being able to brew great beers:


In 1873, the beginning of the data series, there were 4,131 breweries scattered around the US. Then the growing ubiquity of railroads revolutionized the industry: it became cheaper to brew beer in huge quantities in industrial installations and then transport it by rail to other cities.

Brewers have been consolidating ever since. Just before the time the Prohibition began, there were about 1,000 breweries left. During the Prohibition, the number dropped to zero, officially. After the Prohibition, the number jumped back to about 900. But then consolidation continued. And the number of breweries plunged. As bigger and bigger conglomerates were swallowing more and more beer brands, American beers, optimized for costs, began to taste the same, and folks lost their appetite for them – until craft brewers usurped the industry.

And so in 2015, the number of breweries closed out with a new high in recorded American beer history, though in all likelihood there had been even more breweries before anyone thought of counting them.

The report pointed out that 15 states now sport over 100 breweries each, in order of magnitude: California, Washington, Colorado, Oregon, Michigan, New York, Pennsylvania, Illinois, Texas, Ohio, Florida, Virginia, North Carolina, Wisconsin, Indiana.

Craft beer is local. If you live in a major city, you’re surrounded by craft breweries. And every one of them brews beer that has its own unique flavors. The report:

There are still thousands of towns currently without a brewery – but with populations potentially large enough to support one. With beer lovers continuing to desire more full-flavored, innovative options from small and independent local breweries, ample opportunities exist for well-differentiated, high-quality entrants in the marketplace.

This comes as the overall beer market in the US is stagnating: sales inched up only 0.5% in 2014 to 197.12 million barrels (the 2015 sales numbers will be out in a few months). With sales of craft brews soaring 17.6%, sales of imports rising 6.9%, and export sales of craft brews skyrocketing 36%, the boom comes at the expense of industrial brews.

And it’s attracting big money, both from private equity firms and from those desperate multinational brewing conglomerates whose organic sales, despite fortunes spent on advertising, are waning as Americans are losing interest in their industrialized, cost-optimized products, and whose only hope for growth is an acquisition spree that now includes craft brewers.

So the chase is on, with billion-dollar valuations, and the risk that your favorite brew, after having been swallowed by a brewing conglomerate, will be standardized and cost-optimized. And this is in the process of happening to me. Read… Buyout Binge in American Craft Brew Revolution Gets Personal

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  20 comments for “In this Dismal Economy, There’s One Thing that’s Booming!

  1. OutLookingIn says:

    Its a fact that during tough economic times, people seek escape.

    In the past it was movies and alcohol. Today you can add drugs to this cocktail (pun intended) of individual diversions.

    As all levels of government impose ever higher taxes on the manufacture, sales and distribution of peoples favorite libation, watch for an ever increasing number of stills (moon shiners) and brewers to grow.

    • MC says:

      Intriguingly enough I have a friend from the Deep South (Mississippi) who told me after years of very low profile, moonshiners are back with a vengeance in his area, so much a brand new church is widely rumored to be a front since nobody ever goes there!

  2. Mike R. says:

    I agree that this is not particularly ‘good news’. Seems alot of younger generation are drinking beer all the time. It’s made up to sound creative and sophisticated (craft brews), but it’s primarily drinking alot. Same true with older generation (all alcholoic beverages). Leaves the 30’s-40’s trying to run the place and get by.

    Not a good recipe for our society.

    • Wolf Richter says:

      A good IPA has such a strong taste that you don’t feel like drinking a lot. It doesn’t go down like water (unlike industrial brews that are designed to do that so that people drink more). So you savor every mouthful. It’s a pleasure, rather than something you do to get drunk.

      • d'Cynic says:

        I second your view about IPAs, but also like other craft beers with IBU around 50.

        • Wolf Richter says:

          Agree. I’ve had a great variety of awesome craft brews. One that sticks out: a whiskey-barrel aged dark ale I had in Chicago (don’t remember the name). Totally awesome. But way too strong for drinking like a normal beer from a big glass….

  3. ERG says:

    It’s all part of the Europe-ification of the United States. No one can afford to buy a home or to retire without becoming a ward of the government, but the food and drink are pretty good.

  4. Ptb says:

    How does lagonitas IPA taste now? They were bought a while back. Seems like craft beer is absolutely everywhere in the USA now. I’d venture to say we’re at peak craft beer. I used to make my own, but now there’s tons of decent product on the market. Reminds me of the winery market. Every group of guys under 40 is starting a craft brewery.

    The fact that I was recently entertaining the idea tells me it’s about over.
    What else ya got?

    • Wolf Richter says:

      I’m still drinking Lagunitas IPA. It hasn’t changed YET. Heineken’s corporate cost cutters don’t come around until all loose ends of the deal are tied up, and even then it takes some time. So for now, enjoy it.

      • Dan Romig says:

        On Boxing Day, I joined some buds to watch Premier League football at the Local Pub (10th & Nicollet, Minneapolis), and lo and behold, Lagunitas Pils was on tap. I mentioned to the barkeep what had recently happened via the Heineken buyout, and the barkeep remarked, “We just got it in, but that makes sense, as most of our brews are from Heineken.”

        The tap beer was damn good, but unfortunately they did not have Schell’s Pils. Just a little family owned craft brewery founded in 1860 in New Ulm Minnesota!

  5. Petunia says:

    I think the trend is tied to the fact that the beer is made in the USA and people want to support American businesses. I see this at the hairdresser and the nail salon. People are spending more money on grooming than on clothing because the money is going to workers who spend it here. The same thing with entertainment. Star Wars is breaking all records in a bad economy and restaurants are doing well. All the extra money being spent is staying home in America.

    All of us voting with our dollars can make a difference and I am seeing it more and more.

    • ERG says:

      It’s a ‘locus-of-control’ and ‘quality-of-life’ thing, Petunia.

      While it may be difficult to find a good paying job (something out of our control), we can make certain the things we do have control over – what we eat, drink, and how we look – meet a higher standard of quality.

    • Nigelk says:

      I run a small independent grocery store and it’s a generational divide.

      Nobody under 40 buys Bud/Miller/Coors/Keystone/Natural.

      The 40-55 demographic is discovering craft beer. They like to buy singles (22-24oz bottles).

      Old men buy the domestic giants. Force of habit is all I can surmise. I have 4 doors of domestics (3 for cases, 1 for singles), and 10 doors of craft (8 for 6-12pks, 2 for singles). And it costs 20-40% more. Customers don’t care. Cost is not king, especially for the under-40s, the vast majority of whom are on a tight budget.

      Lagunitas hasn’t dropped off yet, but I expect the dedicated beer snobs to abandon it sometime this year.

  6. unit472 says:

    LIke small vintners, ‘craft’ beer is a venture that doesn’t require a huge amount of capital but whether it is really profitable is another matter. Unlike the winery you don’t get a Napa house and vineyard to go along with the brewery just, perhaps, a grog shop to feature your brand and party at.

  7. chris Hauser says:

    maybe there’s hope for the future after all.

    anybody remember when a six pack was sub $3?

    • Sgt Milstar says:

      In the early seventys I worked in a mom-pop market when beer was fair price traded. A six pack of 12 oz couldn’t sell for less than $1.35. Sixteen oz went for no less then $1.65. I haven’t a clue what beer sells for now as I quit drinking.

  8. Mark says:

    As I said many times before; there is shift in “old money” and “new middle class” from quantity to quality.
    I stopped drinking beer when I moved to Canada since there is no good beer here (it is all watered down) and started enjoying what Canada makes the best: Crown Royal.

  9. polecat says:

    I’ve been making mead for several years now, with pretty good results. Started brewing beer as well, and just last fall started a batch of wine from the muscat vines we grow. Why buy when you can brew your own!

  10. George says:

    Rainier Beer. Best stuff ever made.

Comments are closed.