Friday, April 6, 2012

Economies of Scale in Craft: New Belgium Expanding to Asheville

New Belgium's Fort Collins, Colorado Brewery

Why economies of scale?  Well, when you are bigger you have the capacity to operate two separate breweries and thus locate closer to your customers which reduces transportation and storage costs and allows you to lower average cost even further.

And so it is that New Belgium has announced that it will open a new brewery in Asheville, NC.  This announcement comes shortly after Sierra Nevada announced their new brewery to be built about 20 miles away.

This is what I mean about trends in craft beer leading to an eventual shake up.  I think local craft beer markets are growing fast enough now to support lots of new entrants, but when it comes to packaging breweries the inexorable forces of economies of scale suggest that the natural patter will be consolidation and/or a shake out of brewers.

What does this mean for craft beer enthusiasts?  Well, for one you shouldn't punish a brewer for growing.  They have to do so to survive.  The challenge of course is to maintain creativity and quality in so doing.  Judge them on this aspect.  Growth is not bad but good for the continued market survival of packaged craft beer. 

Think of a time in the future when beers such as Sierra Nevada, New Belgium, Widmer, Deschutes, etc. will be available as ubiquitously as Bud, Coors and Miller.  Is this better or worse than now?

It'll be better if they maintain their quality and creativity and if there is still space for local brewers.  I suspect that both will continue to be true.