THE GIST
Now is an opportune time to be a U.S. brewery looking to score a deal on used equipment. Brewery closures and an increase in mergers and acquisitions have led to more used brewing equipment on the market than in years prior, with low prices as much as half-off new equipment. The glut of fermenters, canning lines, mash tuns, and more is a symptom of a mature market facing a low- or no-growth future—and it could be a harbinger of even tougher times ahead for craft breweries.
Breweries report selling used equipment for between 10%-50% of what it would cost new, and some expect prices to continue to drop. When Atlanta’s Orpheus Brewing announced the closure of its taproom and brewery earlier this year, it sold its Wild Goose canning line for $15,000 and Ska Fabricating depalletizer for $10,000. Orpheus founder and brewmaster Jason Pellett says those price tags are less than a tenth of what the brewery paid for them new.
“I’m glad we’re doing this when we are and not in six months, because we at least made some money on our equipment. But in six months, who knows?” Pellett says. “You’re going to end up with a lot [of equipment] that doesn’t sell and just gets scrapped, because there’s just so much excess capacity.”
This excess production capacity exists because the U.S. beer industry collectively is capable of brewing much more beer than drinkers demand. This has been the case for years: In 2019, Brewers Association chief economist Bart Watson stated the craft beer industry’s excess capacity sat at 56-57%, which would take 12 years to fill, given the 4% growth rate at the time. But today, breweries are facing a “new normal” that Watson says will continue to be defined by slow or no growth.
Given market challenges, many breweries are reluctant to significantly scale up their capacity. At the same time, more used equipment, particularly from relatively large, regional breweries, is hitting the market. If those trends continue, the used equipment market could become severely oversaturated. John Dantzler, cofounder of New York City’s Torch & Crown Brewing Co., sees it as “inevitable” that the bottom will fall out of the equipment market.
“These things tend to follow the Hemingway quote: ‘gradually, and then suddenly,’” Dantzler wrote via email. “The gradual portion is what we're seeing right now … But there will quickly come a downward spiral as more and more equipment comes up for sale (increasing the capacity supply), and prices continue to fall. That will precipitate a rush to get your equipment listed and sold before there are no more buyers left.”
Many breweries all making that decision near-simultaneously creates downward pressure on pricing that only serves to further devalue breweries’ equipment. Owners seem to acknowledge this already, with a recent Reddit post from a beer professionals community about the sale of a production facility beginning with: “Obviously I know it’s not the best environment to be looking to do this …”
The situation is made stranger by silence from those presumably most impacted by a rush of used equipment becoming available—manufacturers themselves. Good Beer Hunting contacted several companies for perspective; all declined to be interviewed for this story.
WHY IT MATTERS
A surplus of used brewing and packaging equipment for sale has mixed ripple effects for breweries and manufacturers. Breweries who are interested in scaling up benefit from relatively inexpensive tanks and brewhouses:
Emily Mobley, co-owner of Limitless Brewing in Lenexa, Kansas, says the brewery recently bought two used 30-barrel fermenters at such a good price that it was like “getting two for the price of one” compared to buying them new. Limitless purchased them from an out-of-state brewery that was closing one location.
The brewery grew its annual production to 651 barrels (BBLs) in 2021, up +63% from 2020, according to Brewers Association data, and it wants to add fermenters so it can produce more taproom-exclusive beers while still meeting demand for its flagship, JoCo Juice IPA.
Mobley says Limitless looked at 10-BBL, 20-BBL, and 30-BBL fermenters, and ultimately chose the latter because it was, paradoxically, less expensive than smaller equipment.
“As you go up in equipment size, the prices go down actually because there are not as many breweries buying that,” Mobley says. “We looked at some 10-BBL fermenters but [bidding] went higher than we were willing to go, whereas we got these 30-BBLs for what we think is a steal.” Mobley says Limitless paid $12,000 total for the tanks.
Buying up higher-capacity equipment may sound strange, but reflects the changing market for craft beer.
Intense bidding on smaller-size fermenters makes sense for companies trying to grow but doing so cautiously as the category stalls.
Meanwhile, focusing on larger tanks at rock-bottom prices means some businesses can look aggressively at future opportunities while peers shy away from committing to larger batches. But this also necessitates spending more on ingredients and other raw materials to produce larger batches.
Casey Hughes, a brewery consultant who owns Tampa-based GTH Consulting, says this isn’t unusual given today’s market conditions. He’s recently seen 90-BBL fermenters sell at auction for the same price as 15-BBL tanks. Sometimes, larger equipment will go without bids: Unsold items remaining after the initial auction of the shuttered Mikkeller Brewing Co. location in San Diego included a 30-BBL brewhouse and two 90-BBL fermenters.
“The bigger size stuff usually doesn't get bought,” he wrote via email. “No one is doing bigger expansions.”
In part, that’s because breweries large enough to require equipment like 90-BBL fermenters are the segment of the craft beer industry that’s struggling most. While brewpubs’ collective production volume was up +5% by volume last year and taproom breweries’ total production volume was up +9%, regional breweries’ were down -9%.
This creates a mismatch between buyers and sellers. Regional breweries such as Mikkeller, Night Shift Brewing, and DuClaw Brewing Co. have recently put relatively large equipment up for auction, but small breweries are mostly looking to stay small or to improve their flexibility, not to massively scale up production.
“Only a fool would see all this equipment and say, ‘It’s cheap, I should build a brewery that can make 20,000 barrels a year,’” says Pellett. “Take it from me: You want to be flexible.”
Dantzler says that a few years of easy growth and easy credit for the craft beer industry in the mid-2010s led to a lot of capacity investments (i.e., fermenters and canning lines) that are now sitting unused as growth slows. But those capacity investments came with other ongoing costs, like rent on larger facilities or salaries for more staff.
“Denial happens in two forms: First it's ‘sales growth will pick back up, we still need this equipment,’ followed by ‘I'll be able to find a buyer at a favorable price,’” he wrote via email. “When breweries realize that the former isn’t true, it could be too late for the latter. “With unique and specialized assets like brewery equipment it could take one to two years to reach a market-clearing level.”
This would be an unwelcome situation for breweries trying to recoup some money for their used equipment. It’s also potentially damaging to suppliers of new brewhouse equipment, because bargains on used equipment could dissuade breweries from buying new tanks or canning lines. (Indeed, Mobley says Limitless did consider new tanks, but decided to buy used for one reason: “The price was right.”)
Some industry watchers suspect that new equipment manufacturers themselves may be bidding on or buying up used equipment to keep prices stable. Auctions are confidential so bidders’ identities can’t be ascertained, but Dantzler says he suspects this is happening.
“If a certain brand of equipment is all getting bid to [like-]new prices, and similar equipment from a different supplier is dropping like a rock, it seems clear that there's something going on behind the scenes whereby a supplier is placing off-market bids to protect their brand equity,” he wrote via email.
There’s nothing inherently nefarious about this: Car dealers and jewelers regularly employ this practice. However, Dantzler says this does appear to be a new dynamic for the craft beer realm. It’s one that points to an equipment market, and an overall industry, that isn’t operating as it had in years past.
As is true with stocks, once sellers begin to feel nervous about the future value of their assets, they can become desperate to sell them now, creating the very pricing spiral which they’d hoped to avoid.
Words by Kate Bernot