Will the NYS craft beer bubble break?
As you have probably heard by now, the craft beer and spirits business in New York State is booming. With the help of government grants, breweries have sprung up all over the map, to the tune of eight to 10 new businesses a month, and with a failure rate estimated at 30 percent.
Brewing (as well as wine and spirits) is important to our state’s economy and tourism economy. Farm breweries, craft breweries and microbreweries employ thousands of people. But at what point does the constant opening and closing of wineries, breweries and distilleries become counter productive? Government involvement in privately owned businesses can slow the process of opening and cause a lot of “red tape,’’ but it seems to me, after observing how some of the operations in Central New York have come to fruition, that the process may now be more streamlined.
This can be good and bad. Economic growth, tourism and the creation of jobs can exponentially help a town, county or region to the tune of several million dollars a year. But what happens when these operations don’t make it? It concerns me that saturating a market can cause huge impacts on these businesses net profit margin, causing them to be unable to pay the huge loans they are taking out on top of the government grants. The issue will never be if their product is good enough. As my father always said: “Beer is like sex. Even the worst I had was still pretty good.”
So what will cause the bubble to break? A study conducted by the National Brewers Association (NBA) found that craft breweries make up about 13 percent of the beer market today and hope to top 20 percent by 2020. This seems feasible, since we already exceeded pre-Prohibition numbers in 2015.
As for New York, there were 38 local breweries in 2000, and after the farm brewery bill was signed in 2012 that number jumped immediately and exponentially. As of today, NYS is home to around 326 local craft breweries and up to 200 licenses pending, which still misses our pre-Prohibition number by about 124 breweries. The craft beer market sector is on the rise, but we have to consider that the high number of breweries in New York State at the turn of the century was mostly exporting to the western states, so that number might not be as obtainable as you think.
In another study done by the NBA, it was found that artisanal products like coffee and cheese can reach as much as 50 percent of the market, so there is a possibility for massive growth. This growth will be contingent on a large portion of these breweries staying small and local due to the possibility that over saturation could cause many of these breweries to close their doors. This causes a bit of a conundrum, because as anyone in business will tell you, “if you aren’t growing, you’re dying.”
This leads me back to the economic impact of these operations. Yes, they are generating huge revenues right now. Yes, they are bringing tourism to New York State. What happens to all of these employees if and when breweries close? Most of the employees that work at these breweries have moved to small towns and out-of-the way farm breweries for the opportunity to get in at the ground floor. These should be major concerns for the future because closures will affect a region’s unemployment rate, housing market, supporting businesses, farmers, etc.
Now, I don’t want you to think that I am not for economic rebirth or the government doing what it can to help industries grow. Our country is built on growth and capitalism, but like a fat kid in a pair of skinny jeans, at some point there will be no place left to shove it in and the results could be disastrous. I never want to discourage people from taking a chance or supporting local businesses, but the next time you see a new brewery, winery or distillery pop up, I want you to think about what happens when that bubble breaks.
– Micah McKamie
**** The original post of this artical mentioned the local brewery, Local 315 Brewing Company, had opened with the help of New York State grant money. This information was not accurate and Local 315 Brewing Company opened with no help financially from New York State. ****