The Last Time Beer Went Bust
Saxer Brewing, one of the casualties of the 1990s.
According to a lot of available data, the craft beer segment is in trouble. I offered one tranche of data on Wednesday, from the National Beer Wholesalers Association, and other sources also cite fairly steep declines. In about a week and a half, the Brewers Association’s Bart Watson will offer more detailed information, but has hinted the news will be grim. In one way, this isn’t surprising, given all the recent challenges: a global pandemic, supply chain disruptions, steel tariffs, barley shortages, wholesaler consolidation, grocery shelf reductions, and pretty serious inflation. But there’s something else going on here. Most of those things affect breweries of other sizes as well. Yet craft is doing bad even compared to other segments.
Consider that circumstances didn’t always hurt craft beer. It was doing great the last time we had a major disruption, in the great recession of 2007-2010. Craft was doing great for the decade after that, even as domestic lagers cratered. Even before Covid arrived, however, things started shifting. Flavored malt beverages and seltzers became the hot new thing, and young people turned away from beer. Among other categories of beer, imports have been eating craft’s lunch for at least half a decade. Even premium light beer seems to be rebounding better than craft.
We had a fruitful discussion about this on Twitter, and a lot of interesting thoughts bubbled up. I’d like to throw one more thing into the mix that only old folks like me are likely to remember: the first time craft crapped out. The two cases actually look a lot alike, and it made me think that what we’re seeing is in part just the cyclical nature of fashion.
Craft’s First Crash
Craft brewing was born around 1980 and grew constantly for the next decade and a half. By the mid-1990s, it was still a small segment of the overall beer market, but looked like a rocketship of growth. Sam Adams, Sierra Nevada, and a few others had become big breweries generating millions. Brewers had spent the past 15 years changing laws to make small-scale production legal, and paving an easier path to the customer. Craft was just 1% of the total market, but was far more successful in certain markets, causing opportunistic brewery openings and even copy-cat products from big breweries. From fewer than a hundred breweries, the industry has blossomed into 1,500.
It was a frothy time, and breweries assumed it would continue. Scores of the larger breweries made big capital investments into new facilities that would produce the much larger volumes they expected to sell. Visibility was also way up, and this was the biggest change. Throughout the 80s, “microbreweries” were the domain of only the most avid fans. But by the ‘90s, regular folks were starting to sample the beer. Much like what we saw in the 2016-2019 period, breweries chased after these new drinkers with sweet, fruity, adjunct-heavy beer. In the 90s, a lot of it was not good, and a lot of the new breweries weren’t, either. Many of the old-timers complained about tarted-up beers that seemed to be aimed after an audience hitherto satisfied with “alco-pops” and “malternatives,” categories that also, familiarly, flourished during this period.
More parallels: for the first time, while all this sweet beer was hitting the market, America was finding its voice in the form of expressive, hoppy ales. For those beer drinkers who were way into beer, it was a great time—but they were turned off by the excesses. Some of the most iconic breweries were founded during this period as a reaction not to big beer, like micros of the first era, but against the wave of highly commercial, sweet and flavored beers. This was the first time a cohort developed to defend “beer flavored beer.”
Much like today, supply seemed to far outstrip demand. People talked about those 1,500 breweries like they do the 10k today—way too many. Then the reset came. All the bad, sweet beers faded from popularity. They were a fad for a moment, but those drinkers were never beer drinkers, and they were onto the next thing. Real fans had soured a bit on an industry they didn’t recognize. Craft never actually stopped growing, but its growth tumbled massively. Many breweries failed, others were mortally wounded, their demise delayed by bad decisions they were forced to make, but which came eventually nevertheless.
Craft continued to grow, but it left the public zeitgeist for the next decade. Cocktails and spirits flourished instead. Real growth wouldn’t return again until 2004, and brewery growth not until 2009. (There were still only 1,600 breweries then.)
What Caused This Cycle?
Fashion is a funny thing. The hottest moment always comes just before the crash. Indeed, too much buzz causes crashes. That seems to be what happened around 1997 and twenty years later. (Both lasted about fifteen years before taking a tumble. Leave aside Covid and all that, and they’re remarkably similar in length and growth in frothiness.) But what’s behind the cycle?
Mike Kallenberger, a 31-year marketing vet at Miller, thinks generational behavior is a big part of it. The founding generation of craft brewers and drinkers were boomers. Craft brewing was part of an overall trend away from mass-production to artisanal foods and beverages. Gen X was a small force, and by the late 90s, they were not drinking as much—and they were turning away from “yuppie beer.”
I started writing about beer right at that seam between beery eras, in late 1997. By 2000, craft beer was really looking passé—it carried the image of the middle-aged boomers who mainly drank it. My old alt-weekly even dumped the beer column I used to write in favor of a cocktail column. In Portland, Oregon! Meanwhile, the Pabst boomlet was the only bright spot in beer, as gen Xers looked for something working class and “authentic.”
Millennials really saved the day. They started turning 21 in 2002, and fueled the next great wave of excitement in craft beer. The last of them turned 21 in 2017, just as craft’s fortunes were about to turn.
With generations and fashion, the pattern of rejection seems unavoidable. Whatever your parents thought was cool is, definitionally, terminally sad and uncool. That’s where the cyclic pattern of the craft cycle (niche and obscure ➡️ just niche enough to be very cool ➡️ mainstream ➡️ overexposed and trashy) collides with generational cycles. Right about the moment any trend is getting overexposed and trashy, it’s so visible that kids naturally avoid it. Aaron Goldfarb documents this in a wonderful piece on the new TikTok fad of teens filming their hopelessly embarrassing dads gush about beer. Gen Z seems like a kind and gentle generation, so they do it lovingly—but they do not think sampling flights of beer at taprooms is a cool way to spend your time. The age of the bearded beer connoisseur as trend-setter is decidedly over..
Is This a Good or Bad Thing?
Let’s start here: I think craft’s malaise is a thing. I don’t see this as a temporary downturn. Craft beer is suffering an identity crisis and it won’t snap back to being the cool kid’s drink anytime soon.
That doesn’t mean we’ve entered an existential crisis for small breweries, either. Rather, I think the growth numbers and overall frothiness of the mid- to late-teens was fueled by interest among people who were happy to drop beer in a NY minute for a mango seltzer or canned cocktail. As in the 1990s, the base consumer is still around, if a bit soured by recent trends, and also very well served with all the small, niche breweries making lagers and wild ales and characterful IPAs.
History doesn’t repeat itself, so some factors are different. The late 90s were a boom time in America, a relaxed, happy moment of post-cold war ease. That is … not the case right now. In the 1990s, speculators got the hell out of beer—it was obviously not a quick way to make money anymore. I would expect new brewery opens to similarly slow. In the 1990s, the number of breweries plateaued for a decade. That seems likely now, too (or even the loss of a chunk of them).
But craft beer continued to grow. The breweries that survived got back to basics both in beer and business terms, and they build a foundation for growth that wouldn’t start really humming for a decade.
If we take cycles as a kind of inexorable feature of demand, then we would expect craft beer to have to ride out this moment for 5-10 years, until the excesses of the late-teens wear off and young people come back to craft. Mike Kallenberger sees additional rough waters because gen Z seems disinterested in beer and risk in general, and I suspect he’s right. For three years running, 21-year-olds haven’t developed the habit of going out for a drink. The pandemic, inflation, and debt have taught them caution. But all that is subject to change if today’s 12-year-olds experience something like a normal childhood. They may be ready for some fun when they’re 21.
And, even if things continue to bump along rockily (I wouldn’t bet against that scenario), we also know that beer has a pretty good record. People have been drinking it through war, famine, and revolution for 10,000 years. It’ll probably be around a few more.