How Many Breweries Can a City Support?

A couple days ago, Ben Edmunds wrote an intriguing piece over at The New School. His thesis: Portland has reached the saturation point for new breweries and we may be due for a shakeout.
A look at the 2008 Brewers’ Association statistics is telling (the 2009 ones should be released in the next New Brewer). Compared to the previous year, the number of barrels produced by Portland-based brewpubs grew by over 16%, a strong number that far outpaced the national average for craft beer growth. But, during the same year, at least eight of the city’s brewpubs (Old Market, Roots, both Lucky Labs, Kennedy School, The Mash Tun, Tugboat, and Rock Bottom) saw dwindling production and contracted. What exactly happened? A fair share of the responsibility for the growth of the market and the shrinking of some businesses belongs to Hopworks and Deschutes, both of which opened in the middle of 2008. While none of the new slew of breweries portends to make as big a splash on the market as either HUB or Deschutes, the numbers don’t lie: one brewery’s gain means another one’s loss. And while the spirit of collaboration runs high amongst craft brewers, competition will be the new reality in a market where supply already outpaces demand.
I'll go this far: there is a point of saturation. It's possible we've already reached it, too. But there's a big difference between a point of saturation--equilibrium--and the apocalypse Ben fears.

Let's run a few numbers. According to the Brewers Guild, Oregonians consumed 2.72 million barrels of beer in 2008. Oregon breweries produced 912,000 barrels, 327,000 of which was sold here. These numbers don't tell the whole picture--we consumed craft beer from other states and countries, too. In fact, Portland consumes more beer than any other city. As far as craft beer is concerned, it's a very big market.

For a shakeout to suddenly strike the city, those numbers would have to drop, not plateau. Ben mentions that something on the order of ten new breweries are open or will be opening soon. If every one brewed 500 barrels (a robust start), that would add 5,000 barrels into the city's supply. But that's less than 5% of all the good beer sold in Portland. If the market didn't grow at all, it's hard to imagine anything too dire resulting from this modest infusion.

But forget raw numbers. The issue has less to do with economics than culture. Portland is such a good brewpub town because residents prize neighborhoods. They want coffee shops, restaurants, grocery stores, and pubs they can walk to. This ethos creates the environment for dozens of brewpubs to flourish. Would St. Louis support 40 brewpubs? Would New York City? Probably not, but it's not because there aren't enough people or even enough people drinking good beer. The patterns of consumption and local culture in other cities differ. Portlanders will support their local, and as a consequence, they can support a lot of breweries.

Brewpubs are among the safest businesses in Portland, but they're not foolproof. We've seen brewery failures since Cartwright's time, and we'll continue to see them. Poor beer and bad business decisions will kill a brewpub, even in Beervana. (Anyone remember all the way back to the pre-Rogue incarnation of the Green Dragon?) Yet the neighborhood brewpub is still a solid bet for breweries devoted to making good beer.

For a shake-out to hit Portland, something more disturbing would have to happen--we'd have to experience a change in culture. Of course, that could happen eventually. Cities change, people move to the suburbs, they change the way they socialize. But that's a very slow process, and not one in evidence. (In fact, the evidence suggests the opposite as this desire for a local neighborhood reaches further and further into the suburbs.)

One more Portland-specific observation and then I'll quit rattling on. Back in the 80s and 90s, brewpubs tended to open on shoestrings. Owners cobbled together used equipment and found less-than-central locations. If they thought about branding and image at all, it was only cursorily, and usually after the fact. Now when a brewpub prepares to open, it has a name and logo and lives virtually for weeks or months online. These new places are well-financed, sport brand-new brewhouses, and are located in the center of neighborhoods. All of this allows them to shoot out of the gate in a way that wasn't possible 20 years ago. The risk of starting a brewery now is actually lower than it was back in the day.

Breweries will fail. Some will be over-leveraged and have overly optimistic business plans and will fail. But in ten years, Portland will have more breweries than it has today and Portlanders will consume more good beer than they do now. No apocalypse is imminent.