Charlie's Blog: The Craft Beer Bubble


The Craft Beer Bubble

Comforts that were rare among our forefathers are now multiplied in factories and handed out wholesale; and indeed, nobody nowadays, so long as he is content to go without air, space, quiet, decency and good manners, need be without anything whatever that he wants; or at least a reasonably cheap imitation of it.

Over the last decade, I have learned one thing about bubbles. A bubble is formed when a fad meets easy credit. The reason for this is simple. There are people with ideas, and there are people with capital. There is no end to ideas, but capital is a naturally limited thing. But thanks to fiat currency and low interest rates, anyone with an idea--good or bad--can jump into business. The result is a boom as the novelty drives curiosity and the bust when that curiosity is satisfied. It could be the Dutch Tulip Bulb Mania or Dot-Com Stocks or McMansions. Today, we have the craft beer bubble.

Now, I want to say at the outset that I have quaffed some of these beers, and I have found a few of them to be quite tasty. But as the novelty wears off for me, I find myself returning to the familiar in much the same way that listening to Pink Floyd, Rush, and Yes made me realize that the best rock came from the meat and potatoes music of AC/DC. At the end of the day, you just want to rock. Likewise with beer, you don't want to think much about it. You just want to drink it.

Now, I could easily poke fun at the absurdities of the craft beer revolution such as the concept of chocolate beer. But that would be too easy. Instead, I want to point out the similarities of this revolution with others in wine, coffee, and ice cream. The fact is that all these new craft brewers are competing to be the next Starbucks and Ben & Jerry's of the beer world. Those two brands did for coffee and ice cream what these craft brewers are doing for beer. They challenged the status quo of the corporate products to give us new and bold flavors and established themselves as the new corporate products. There is something sad in this tale.

There are essentially two types of products in the world. There is the factory made, and there is the homemade. The factory made food or product is mass produced, uniform, and cheap. The homemade food or product is locally produced, varied, and expensive. This is why my town can have various corporate fast food places but also mom and pop diners and hamburger stands that attract the locals. The lesson here is that you can either get something cheap or something good but not both in the same product. This is because the large producer tends towards the bland while the small producer tends towards the flavorful. What if you could have the best of both worlds? You can't. But people still try, and there is where craft beer comes from.

Craft beer began with homebrewing. People dissatisfied with Budweiser, Miller, and Coors had the option to buy their own barley, malt, hops, yeast, equipment, and bottles and make their own. The result was beer with greater alcohol content and better taste than the watered down stuff you get off of the supermarket shelves. The homebrewer may even have shared his beer with friends and neighbors who found his recipes awesome. One of these homebrewers would go on to make Samuel Adams beer to the delight of beer lovers. Those same beer lovers hold that beer in disdain now as it has become corporate. They even have a term for this corporate craft beer--crafty beer. It seems that the primary appeal of these craft beers for craft beer lovers is that no one else drinks them. Yet, they want these beers on tap at their local bar or on the shelf at the local supermarket. Basically, they want a corporate beer that no one drinks. These people are not beer lovers but beer snobs. They are cousins to the coffee snobs and the wine snobs.

The reality is that you can't be both corporate and homemade. Once upon a time, Ben & Jerry's was homemade ice cream. Now, it is Unilever made ice cream. This may seem depressing, but it should be hopeful for the homegrown entrepreneur. If you can make something good and different, you will find your customers. The temptation is to sell out to corporate greed at some point which is what Ben and Jerry did with their ice cream. The corporation will try and maintain the illusion of homemade because this allows them to charge a premium price for a factory made product. And it works until the product becomes mass contaminated with listeria.

My advice to the homebrew entrepreneur is to never sell out. Stay small, remain faithful to your values, and remain profitable to the end of your days. You won't be rich, but you will be successful and happy. Unfortunately for many, this is not enough. Getting rich takes over the driver's seat from making quality stuff. People quickly forget the reason that people liked them in the first place. It was because they were small, local, and good.

I tend to like two kinds of products. I either like the corporate made crap because it is cheap and ubiquitous. Or, I like the homegrown stuff for the quality and value they provide. The result is that I shop at Walmart and the farmer's market. I do not shop at Whole Foods Market. I will drink coffee at Dunkin' Donuts or a local diner. I do not drink Starbucks. This is because Whole Foods and Starbucks tries to occupy that middle ground between the corporate and the homemade. The result is expensive crap. I want it cheap or good. I don't want it expensive and bad.

At some point, this bubble in craft beer will pop. This will probably happen as capital dries up and people settle for the Starbucks of beer. When bubbles burst, the survivors become the winners and the new corporate masters. And there will be those who rebel against these masters. And I will write it again. You can't have the best of both worlds.