Will Your Local Craft Brewery Survive 2017?

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This past October, the Stone Brewing Co., one of the nation's largest craft brewers, announced it was laying off about 5 percent of its approximately 1,100 employees. The 20-year-old, San Diego–based operation blamed the move in part on "the further proliferation of small, hyper-local breweries."

Stone's reasoning shed harsh light on a reality gripping the normally collegial world of American craft beer: that competition from inside could end up doing as much damage as competition from outside, from big beer concerns such as Anheuser Busch InBev, which in the same month as Stone's layoffs absorbed SABMiller.

Your favorite brewery, that is, could cease to exist as you know it in 2017, not through the merger-and-acquisition machinations of Bud, but through the surprising popularity of Ye Olde Neighborhood IPA Producer.

A quick history lesson. The modern American craft beer movement dates from the rescue of the Anchor Brewing Co. in San Francisco in August 1965. From that point, the number of craft breweries — those making beer in more traditional manners with more traditional equipment and ingredients — grew slowly but steadily through the 1970s and 1980s.

By the 1990s, what had come to be called microbrewing was a bona fide trend coast to coast, and out to Alaska and Hawaii. Market share was increasing, as was media attention. There were hundreds of craft breweries and brewpubs — breweries that served their beers in house — and even a couple of effectively national brands in Samuel Adams and Pete's Wicked (remember?).

But all was not well. Nervous big beer operations started flooding the market with phantom craft beers that looked and sort of tasted like the genuine articles (think Blue Moon and Shock Top). Those same operations also loosed a distribution squeeze to try to edge craft brewers out of that many more restaurants and supermarkets.

Finally, big beer led an all-out assault on the perception of craft beer, publicly questioning whether entities such as Sam Adams and Pete's, which brewed their beers under contract at various breweries, could really call themselves craft. How could something be handmade in small batches when it could be found in finer gas stations everywhere?

Big beer got help with this line of attack from other craft brewers long upset that contract brewers got the sales without having to sink money and risk into physical breweries of their own. When David Geary, co-founder of D.L. Geary, now the oldest craft brewery east of the Appalachians, defended Sam Adams cofounder Jim Koch at the 1996 Craft Brewers Conference, the audience booed.

It was that bad.

There are signs of the old tetchiness after about a decade of collegiality. There have been fights over copyrights to brand names, heated debates about the very definition of craft beer and craft brewer, sniping regarding the growing role of private equity in the industry, and, of course, open warfare on smaller brewers who sell their concerns to big beer, which has been happening a lot lately.

"On the surface, these brands may look the same, but the soul behind the eyes is...different," Greg Koch, cofounder of Stone (and no relation to Jim Koch), wrote of craft brewers selling to Big Beer in a San Diego Union-Tribune op-ed in February last year.

But it's the rise in the number of craft breweries — especially the tinier, "hyper-local" ones that Stone described in October — that may, in fact, finish off more craft breweries than Anheuser-Busch InBev could ever hope to kill.

Less than two months after the news of the Stone layoffs, the Brewers Association trade group announced that the number of breweries in the U.S. had crested 5,000 for the first time ever. Most were — and are — craft breweries.

At the same time, the latest statistics from the same group show that the retail dollar share for craft beer remains in the very low 20s percentage-wise. That's 51 years after the rescue of Anchor and the start of all this.

In the late 1990s and early 2000s, big beer's pushback and the industry infighting — and a recession — led to dozens of craft brewery and brewpub closures. The current boom grew from that nadir and has been helped tremendously by a sunny financing climate.

Is there room for 5,000 craft breweries when, taken together, they can barely command one fifth of the dollars spent on beer in the U.S.? Especially if the economy turns south? This year may very likely provide the answers, and here's hoping they're yes. 

Tom Acitelli is the author of The Audacity of Hops: The History of America's Craft Beer Revolution. His new book, Whiskey Business: How Small-Batch Distillers Are Transforming American Spirits, will be out in June.