Monday, November 20, 2023

Craft beer isn’t facing an apocalypse … but the industry is changing

In addition to running the employment & labor practice at Wickens Herzer Panza, I also run our burgeoning craft beer practice. Which is why a recent article in Paste Magazine — "For Many Craft Breweries, the Apocalypse is Now" — caught my attention.

Here's the author's thesis:

The tragic breaking point for major brewery closures is no longer "coming soon." It's a macabre event that has been framed as something perpetually on the horizon for years, but there's no use in denying it anymore–the great die-off is here. It's now. The culling of the herd is underway in 2023, and simply making great beer is no guarantee of survival.

I wholeheartedly disagree. I do not believe that craft beer is facing an "apocalypse." 

I do believe, however, that a combination of the lingering impact of Covid (staffing shortages, rising inflation, and higher interest rates) plus changing consumer tastes means that craft beer's salad days are over.

So, what does this mean for our industry?

It doesn't mean that craft beer is dying or dead.

It does mean that there's no longer a runway for a brewery owner to make bad business decisions.

🍺 If a market is over saturated, pass on opening a new brewery there or expanding your current brand into that market.

🍺 You need to think long and hard about whether the expense of distribution makes sense for your brewery.

🍺 Operate within your space. If you're a taproom known for your beer, do you really need to build out a kitchen to serve food to your customers when a rotating schedule of food trucks will just as well serve that need.

🍺 Don't borrow what you can't afford to pay in cash based on what your business plan, budget, and financial projections tell you that your brewery will reasonably earn.

There is still room for craft beer and craft breweries in communities. I believe, however, the key to the future of our industry is community. I view the future of craft beer in America akin to how the Irish view their local pub — the main gathering space for the local community. Thus, there is still lots of room for breweries to open and thrive, as long as they are reasonable in scope and expectations.

Bigger isn't always better, and for most craft breweries, bigger is a license to close. For craft breweries that stay in their lane, I firmly believe that the future remains quite bright.