Craft beer buzz cooling as brewery growth slows

Michigan

GRAND RAPIDS, Mich. (WOOD) — Steve Weatherby is tipping his last beer — or at least his last beer at The Hideout Brewing Company in Grand Rapids.

“I was pretty bummed,” Weatherby said.

Open since 2005, the brewery at 3113 Plaza Drive NE closed in March. The Hideout’s owners told 24 Hour News 8 the explosive growth in the number of craft breweries has cut into their customer base and made valuable product shelf space hard to come by.

“(There’s) so many (breweries),” Weatherby remarked. “Every corner, every block you go there is a brewery. They are going to start weeding themselves out eventually.”

That “weeding out” process may have begun and it’s not just smaller breweries like Hideout that are feeling the pinch. Dark Horse Brewing in Marshall starred in a History Channel Reality show, but that has not insulated the brewer from a slightly cooler craft beer market. In March, Dark Horse stopped matching its workers’ IRA contribution.

“Dark Horse will notify employees when matching contributions may be available again, but it’s an expense Dark Horse can’t afford to continue to offer,” read a letter from Dark Horse owners to employees obtained by 24 Hour News 8.

“We are sorry and saddened to have to discontinue this perk to our loyal and hardworking employees that are contributing to their IRA and we are very hopeful that we can offer (it) again in the future,” the letter continued. “Dark Horse is working hard at getting all the 2018 and Jan/Feb of 2019 IRA caught up and paid in full….”

In Kalamazoo, Arcadia Brewing was facing foreclosure until its owners sold it to the bank in March for $1.

New statistics released Wednesday by the national Brewers Association show growth in the number of Michigan craft breweries slowed considerably in 2018.  

The biggest jump recorded in the last decade — a 48% increase — happened from 2016 to 2017, when the number of breweries in the state went from 222 to 330.

But from 2017 to 2018, the industry grew by 8%, increasing from 330 breweries statewide to 357.

Still, Michigan ranks fifth in the nation based on the total number of breweries and 12th if you take each state’s population into account.

“In markets that grow very quickly, the growth levels out,” explained Don Alexander, Ph.D., an economics professor at Western Michigan University. “It goes to that market adjustment between supply and demand.”

Alexander said as craft beer transitions from novelty to commodity, the market around it will change too.

“What we will see is more of the marginal brew pubs will drop out of the market. They just can’t sustain the business without making a profit,” he said. “And you are likely to see some consolidation in the marketplace. After all, Michigan population and economy are not growing that quickly to sustain that kind of growth (in the) number of brew pubs in the marketplace.”

But Alexander said a maturing market could be a good thing for craft beer drinkers.

“It wouldn’t surprise me to see prices come down in this market that is maturing,” he said. “Come down and come down pretty quickly in order for breweries to survive.”

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