On Bubbles and Beer

Jeff at Beervana has a post on new numbers from the Brewer's Alliance and wonders whether we need to start seriously worrying about a bubble in craft beer.  As evidence, he notes this graph.

He also mentions anecdotal evidence that at Jeld-Wen during Timbers games Widmer far out-sells Bud. 

Why do I mention the two together?  It is because, as readers familiar with the blog will know well, my theory of the craft beer industry is that demand is endogenous.  In other words, the more craft beer the more people try it and like it, the more it appears in stores, etc.  I think Portland, Oregon has the largest demand for craft beer in the country not because there is something different about the people or culture, rather because of the length of the history of craft brewing in the state as well and the breadth (see post below about quality beer taps in random pizza joints).  When you get to the point where craft beer far outsells macro lager in sports stadiums, you know the world has changed.

Most cities and states are far behind Oregon and I see no reason why the same kind of demand cannot be developed in other parts of the US.  Therefore I am not ready to call a bubble based on the graph above (and in general as an economist I never think I can call a bubble because by definition if it is obvious it is not a bubble).  I do, however, worry about the ever present economies of scale aspect of brewing which - especially among packaging brewers - will probably lead to winners and losers.  This is not a bubble however, simply that market sorting out the good from the not so good.

But no matter what, the unequivocal good news is in the short run at least, there will be a ton of new beer to try.