Craft Beer and Market Saturation: Is there such a thing as too many breweries?

Vices By Will Brendza

The vast sea of brewery tents stretches as far as the eye can see, in every direction. Row after row of them, filled with thirsty beer buffs doddering around, tasting glasses in hand, searching for their next hoppy sample.

Pockets form around renowned breweries, and lines stretch out and into the wide aisles as thirsty festival goers wait their turn to try the freshest, most inventive beers of the year: La Muerta, Solzhenitzen, Artifexion, Bad Hombre and thousands more ...

Every so often, an undulating roar rises up, a chorus of boos — the shameful response to some poor soul who’s dropped their plastic tasting glass. It’s a time-honored tradition of the largest beer festival in the country: The Great American Beer Festival.

The GABF in Colorado took place last weekend — the largest of its run in history. Eight-hundred breweries, 7,227 beers and 60,000 attendees showed up. That’s about the population of Burning Man ... a crowd size that emblemizes the super-scope of America’s craft brewery movement. Nowhere else in the country will you find such an awesome display of The People’s love and affection for hoppy beverages. A fondness that verges on worship…

In Colorado, there are already 230 established craft breweries, each with a taproom full of their own charismatic flavors — and there seems to be more sprouting up every month. You can’t throw a stone there without breaking someone’s pint glass.

Which is nothing to complain about. But it is enough to make one wonder: Is there such a thing as too many breweries?

“Yes,” says Bart Watson, Chief Economist of the American Brewers Association. “But we haven’t seen any place that has really gotten there yet. Interestingly, the places with the most breweries are still the places we are seeing the most [brewing] license growth.”

So, we’re still on the up and up, as far as breweries go. Nevertheless, market saturation is a possibility that can’t be ignored. When too much of one good is on the market and the demand for, and price of that good, starts to plummet. The supply gets too high, and the market becomes a savage competition — an ugly capitalistic survival of the fittest.

With the torrent of microbreweries broiling to life all over America, one might imagine that market saturation isn’t that far off in high-density states like Colorado, where there are over 20 breweries per million residents. But is that realistic? Is it possible Colorado’s fondness for beer will ever dwindle?

“I like looking at other markets,” says Watson. “And you can see some glimpses of potential futures in industries like specialty coffee or wine. In coffee, after a huge boom, we’ve essentially reached peak coffee shops, but it hasn’t declined, just stayed flat. In wine, there is still growth, but it has really slowed after the boom.”

Besides, basic economics can’t necessarily predict the human side of business — these under-dogs all have devoted friends and family, loyal customers and random hop-addicted vagrants they can rely on to stay afloat. It is viable — though difficult — for regional microbreweries to survive solely on that sort of native identity.

“The little breweries that are focused on their local market and very limited distribution are in general [nimbler] and can more easily defend their hyperlocal market,” adds Watson.

And if that isn’t enough to save their skins, product improvement is another strategy. It’s what started the craft beer movement in the first place: for the longest time, big brewers like Coors and Anheuser-Busch were the biggest, baddest and most beloved breweries in the U.S. But in the last 10 years their business has taken a hit, selling millions fewer barrels of beer annually, all because people got a taste of something artesian and realized they’d been drinking crap for years. Small craft breweries, nervous for the future, need only out-brew their competition.

Perhaps that is a tall order, but it is adaptation at its finest.

So, even if we do start to see regional microbreweries slipping one by one over the edge, what we’ll likely be left with, will be the crème of the crop — a competitive market where only the highest quality and most unique breweries will survive. Which, is a ripe deal for beer lovers everywhere.