Houston area breweries announce merger in 'new normal' of craft beer

I've never understood how they all make it
so many breweries and distilleries all fighting for same market
I remember when Abita was the only one of it's kind
breweries are like sushi places these days, on several corners and in strip malls

Craft beer is so 2014

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breweries are like sushi places these days, on several corners and in strip malls

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and very few are worth the trouble

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I've never understood how they all make it
so many breweries and distilleries all fighting for same market

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They aren't anymore. Breweries reached a peak saturation point pre-covid. It was starting to scale back to a healthy equilibrium then covid came and killed many breweries. While many that opened just to take advantage of the peak market probably needed to go, covid coupled with inflation started killing the rest. Then, to top it off, America's drinking habits changed. Young people aren't drinking as much anymore, and if they are drinking, it's a low calorie seltzer.

So you have 4 factors at play:

1) An oversaturated market destined to retract to a healthy level.
2) Covid policies that directly attacked breweries and other small businesses.
3) Inflation which is killing small businesses trying to survive through covid.
4) And millennials not drinking beer anymore.

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Then, to top it off, America's drinking habits changed. Young people aren't drinking as much anymore, and if they are drinking, it's a low calorie seltzer.

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Athletic Brewing Company (NA beer) just recently got a $800M valuation and huge $50M equity investment - so it's seltzers, craft cocktails, and fake beer that is hurting the scene.

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Any information or link on this? Not saying you’re wrong, but would like to see some data on this.

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Nothing off hand. I'm sure if i searched i could find it. Most of it comes from talking with brewers, listening to podcasts, reading articles online and in magazines about the industry.

The beervana podcast has a lot of information about the economics of beer. I'm sure some of it is on his website too.

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Lots of links to industry talks. You can peruse quite a few that paint the picture. Is there any one topic you are curious about? I can see if i can find an article for you on it. The one below is a recent one.

LINK

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We’ve seen this in every sector of the beer industry: mature businesses or the people that run them have spent years or decades riding waves of good and bad times and they’ve decided it’s time to “move on.” Michael Kiser didn’t quite use that language, but Bob Pease did, as have many who have been making similar announcements these days.

These are big announcements. The beer industry is in a moment of transition, and when important institutions like Good Beer Hunting and the Brewers Association make big changes, that transition hastens.

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At the time, the craft segment was 11% of beer overall (up sharply from 7.8% a year earlier), with a decade of sustained growth. But despite the growing visibility of craft beer, the past decade was notably slim on growth. Today, the craft segment is just 13%, well below the goal, and flat or declining. Barrelage has increased, from 15.6 million in 2014 to 23.4 million last year, and any industry would be happy to notch 50% growth over a decade.

Yet most of that growth happened in the first five years and has actually declined by 3 million barrels since 2019. Last month, I posted the graph above, which illustrates the problem. These difficulties are hardly unique to the US and reflect global trends in the drinks industry: declining consumption, fragmentation across alcohol categories, the rise of imports in the US, among others. And then there was Covid. The Brewers Association was swept along, and it’s hard to see how Pease or anyone at the BA could have helped quiet the turbulence.

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During these past ten years, the definition of what constituted a “craft brewery” has become so blurred and confusing no one really seems to know anymore—and smaller breweries have felt increasingly marginalized in an organization that includes Monster, Tilray, and even Boston Beer.

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Another good link

Excess Capacity

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A while back, I saw a statistic in an article I’ve now lost track of. It mentioned how much excess capacity exists in the beer industry. That is, the amount of beer that could be brewed given the time and space within breweries, but isn’t: the days the mash tun is idle, the number of tanks sitting empty. Excess capacity is bad. Brewing is a capital-intensive industry with narrow margins. Breweries do not want to buy, or worse, finance expensive equipment that just sits around. They don’t want to pay leases on space they’re not using. They don’t want to pay staff who have no beer to make.

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American breweries are currently at about half their capacity. That’s not good! But it’s actually worse that in looks because growth has been dead flat for three years. Were the industry growing, it would need headspace, so to speak, for future expansion. Here’s Bart:

“When you’re growing rapidly, excess capacity is a good thing so you can keep up with that growth. Athletic has a lot of excess capacity right now with the purchase of that former Ballast Point facility, but no one thinks that’s an issue. So the ratio in the mid-2010s was different because brewers were rapidly growing into it. As I pointed out in 2015, the 2012 and 2014 ratios look the same, but 2014 production was actually bigger than 2012 total capacity.

“So you need to understand the capacity number in the context of its time. If we were growing 18% again right now, even 51% might not be that bad (at 18% you’d use up all that excess capacity in 4 years), but at static or negative growth, it’s a lot worse, because it represents investments that aren’t being utilized.”

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The successful breweries in Houston tend to have embraced being neighborhood bars - trivia, bingo, run clubs, comedy shows, etc. Suburban no frills breweries in warehouses aren’t going to make it these days.