Peak beer? Why some are worried the craft-brewing craze could flood the market

Hundreds of people across Canada have poured into the craft beer business, but some experts say the newcomers may bebetting big on a product that's pushing close to the limits of its popularity.

And all that new beer runs the risk of flooding the market.

"The data would show that we are actually starting to achieve or reach peak beer,or market saturation," said Larry Plummer, an assistant professor of entrepreneurship at Western University's Ivey Business Schoolwho studies the beer market in North America.

He saidthe number of new breweries in Canada has more than doubled over the past fiveyears to nearly 800. That includes craft breweries, microbreweries and brew pubs.

"I don't think the [growth] is sustainable," said Plummer, who is one of three co-authors of a 2016 case study on entrepreneurship in the craft beer industry.

"If you assume each of those breweries is going to be offering at least 10 to 20 beers some of them are offering as many as 50 you're talking about a really crowded market space for new entrants to be competitive."

Alberta tells the story best

Some Canadian markets are becoming more crowded than others.

In Alberta, the growth in new breweries has been faster than the national pace, increasing from 19 in theprovince in 2013 to 68 today, with morein development or under construction.

Much of the growth in Alberta stems from a change in regulation. The province used to require that breweriesproduce at least 500,000 litres of beer per year before they could sellcommercially.

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But the province scrapped that rulein 2013.

Suddenly, no matter how small the operation, anyone could market and sell their beer.Homebrewers, beer-lovers, entrepreneursand others started up breweries.

"On one hand, I'm excited and optimistic because [craft] beer is growing. It's exciting," said Charlie Bredo, founder and co-owner of Red Deer'sTroubled Monk Brewing.

"But, on the other side of the spectrum, it's basic supply and demand; you have too many suppliers and not enough demand.

"I'm absolutely concerned."

While craft beer continues to be the biggest driver of new sales in the Canadian beer market, there are signs some of that frothy growth may start to go flat.

According to Beer Canada, the trade association for Canada's beer industry, the most recent data showsoverall domestic beer sales are down 1.6 per cent so far this year compared to 2016.

Growth is slowing

The growth in craft has come from siphoning off drinkers from mainstream brands. Those mainstream brands still account for the vast majority of beer sales in Canada.

In the U.S. a more mature craft market than Canada the pace of growth in craft beer sales has slowed.

Some of that slowdown can be attributed to popular craft brands being bought up by multinational brewers.

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But the Brewers Association in the U.S., which represents smaller, independent brands, has also backed off a previous goal of achieving 20 per cent market share.

And yet more and more people continue to try their luck in the beer business in North America.

"It's crazy right now in Alberta,"said Graham Sherman of Tool Shed Brewing, which will soon be joined by two more craft breweries within one block of each other in an industrial area of northeast Calgary.

Prior to Alberta's regulatory change in 2013, Sherman had to brew his beerin B.C. and truck the finished product back to his home province to sell. Now his operation includesa one-million litre production facility, and his beer is available in bars and retail stores across the province.

There's so much interest in his business and the industry in general these days, he holds seminars he calls "So you want to open a brewery."

The events attract hundreds of people.

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"The first question [from attendees] is typically, 'How much money do you make?'"

The answer is not as much as one might think. Sherman's overhead is $200,000 per month. Margins aren't huge. The business was on the verge of collapse more than once, with Sherman's own home in foreclosure before they were able to stabilize and start growing.

"It's not good enough for new breweries just to say, 'If you brew it, they will come,'" he said.

Space in bars limited

Beyond the general difficulties of starting a business, this river of new suds is also facing another problem: a logjam downstream because there just aren't enough taps to go around.

"[The new breweries] come in and they're ready to sell and everything and I'm like, 'Well, how are you getting a tap?'" said Stephen Lowden, owner of the Calgary pub, the Pig and Duke.

"I just don't have answers for them," he said. "I'd love to put more taps up.I don't have room."

Craft brands are increasingly competing witheach other for market share, rather than simply stealing it from Big Beer.

"You go up to the bar owner and say, 'We'd love to go on tap,' hoping they'll pull one of the big guys but they don't.They take one of the other crafts off," said Troubled Monk's Charlie Bredo, who's had that scenario happen with his product.

'Makes people happy'

And yet with nearly 90 per cent ofbeer drinkers in Canada still drinking the big brands, there are potentially plenty of people who could still be convinced to switch to smaller, independent brands.

That's what newcomers like Adam Nachbaur, co-owner of Snake Lake Brewing in Sylvan Lake, Atla., are counting on.

"[The crowded market] is always a concern," he said. "But there is a lot of room left in the market, in my personal opinion, for breweries to be growing."

Nachbaur left a well-paying job as a heavy duty mechanic in the oilpatch to pursue his dream of opening a brewery.

He and his two partners all former homebrewers sold just about everything they owned and poured it all into their new venture, which is set to open early in the new year. Along with a loan from the bank, the three friends have about $2 millionon the line.

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But, in the end, he says it's not about money;it's about a lifestyle and the opportunity to pursue a dream.

"It's beer!" he said, with a huge smile.

"It's so awesome to be part of something that makes people happy."