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Craft Beer & the Bubbleless Evolution

With talk afoot in the United States about a possible craft beer bubble I thought it might be insightful to share some theory. I’ve touched on this before – Can you be the Best or the Cheapest? – but maybe it’s worth fleshing out the concepts.

Young under-exploited industry sectors where there is room to grow often experience a collegial phase where ideas and resources are openly shared among friendly competitors. There is room for everybody and competition is reasonably relaxed. You can see this collegial phase in action in the contemporary craft brew ethos where I’m located. Collaboration is almost a social event.

However, any business sector that turns a reasonable profit will attract new entrants. As sure as flies are attracted to shit and road kill.

These new entrants, attracted by the opportunity and potential to turn profit, begin to chew into the incumbents’ existing profit margins and eventually that once open prairie landscape becomes more competitive. These new entrants eventually lead to an over-served market and the result is often attrition.

The bad news is that industry attrition often befalls so-so just another brands sitting uncomfortably in the middle. Not the best products; not the cheapest.

This progression from a low competition environment to a more competitive one is worth taking into account when you read anything about a craft beer bubble. I’m neither convinced that the market has left the collegial stage, nor that those in the middle are going to be squeezed out in a hurry.

I don’t think there is a craft beer industry bubble. That statement sounds more like editorial link bait than industry re-evaluation.

It would only be a bubble if massive amounts of consumers stopped buying craft beer; it would be a bubble if the market itself shrank definitively, and; it would be a bubble if with all of that commercial upheaval the populace voted with their wallets for a standard cheap commercial tasteless beer.

The amount of new craft breweries emerging may be a concern, but whether it saturates the existing market or expands to consume the large corporate market share is an open question. At this stage it could go either way depending on public education, effective marketing and consumer choice.

There is clearly a strong future for artisan beers around the World with continued reasonable growth displayed in all the statistics that I’ve seen to date.

I think somebody at the journalistic editorial layer is mixing up the idea of a bubble with the reality that sectors move from collegial towards more competitive environments as new entrants saturate the sector. So, in that context, all I can say is let the best craft beers prosper. And let the rest be absorbed, unified and pushed aside to maintain a healthy evolution of the industry.

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Steven Clark Steven Clark - the stand up guy on this site

My name is Steven Clark and I live in the Derwent Valley in Southern Tasmania. I have an MBA (Specialisation) and a Bachelor of Computing from the University of Tasmania. I'm a mazer & a yeast farmer (making beer, fruit wine and mead as by-products of continuous improvement in my farming practices). I'm a photographer, although my film cameras are currently silent. I do not tolerate idiots. I do not tolerate bigotry. I do not tolerate excuses. Let's be clear, if you sit with my enemies you my are my enemy for life.

Blogger. Thinker. Brewer. Drinker. Life partner to the amazing and incredible Megan.

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