After several flat years, the American craft beer business is riding high. A slew of amazing new beers from talented and passionate brewers have hit the market. Craft beer is the fastest-growing segment of the booze business, swelling by 12 percent last year. Prices are strong, and 2007 promises to be an even better year than 2006.

It’s great to see craft beers—what used to be called microbrews—succeed after years of slogging. But at the same time, it makes me nervous.

I keep thinking about billboards that appeared along I-95 in Philadelphia back in 1996. They were for Independence Brewing, which had created Betsy Ross Kristall Wheat, a crisp, spicy beer that made Philly summers a lot more bearable. The signs read, “Independence—Enjoy It While It Lasts.” Little did they know.

Craft brewing saw phenomenal growth in the early 1990s: Annual sales volume surged at rates of 30, 40, and even 50 percent. Unsurprisingly, that success garnered attention. Hugh Sisson, founder of Clipper City Brewing in Baltimore, remembers running into the money frenzy when he started out in 1996. “I hadn’t been open two or three weeks, and I was getting calls from California wholesalers about selling our beer,” he says. “I hadn’t been open six weeks when I got a call from an equity firm about investing and going public.” Sisson ignored the offers, choosing to keep his operation small, and Clipper has found solid success with bold, nichey beers like Small Craft Warning Über Pils, a pumped-up pilsner that balances massive malt with a big, bitter hop hammer.

Other brewers were less wise. A flood of fly-by-night operators slapped cute labels on plain-Jane lager from older regional breweries, and inexperienced brewers put out horrors that soured and foamed, damaging craft beer’s reputation. Overeager investors were concerned only with driving up sales volume quickly in order to have bigger numbers when a company went public. Some brewers sold product at a discount and dampened everyone’s profits, as brewers were caught in the rush.

A few excellent beermakers went delirious with optimism. Independence, for example, opted to cash in with a $6 million initial public offering, then blew the profits on plans that were too ambitious, thinking the money would continue to flow like water. Half a million alone went into that billboard campaign, which didn’t actually mention beer and left many people baffled. Eventually, the billboards could be taken literally: Independence didn’t last. Basing its business on the hope that astronomical growth rates would continue indefinitely sent it into a death spiral.

The craft-beer business took years to recover.
 
Now, things are back on track, and craft beer’s reputation has been restored. It gets covered regularly in mainstream media and is being taken seriously by a growing number of chefs. As I said above, growth is heating up.

But if things start soaring, I fear we may soon see the return of the Easy Money Gang. “If growth stays around 12 to 15 percent, it lasts,” Sisson says. “But too much speculative activity always starts actions that are destructive to a market. Maybe we need the beer version of the Federal Reserve Board—an Alan Greenspan to warn us against irrational exuberance.”

Paul Gatza is director of the Brewers Association, an industry group based in Boulder, Colorado, that gives craft-beer makers a voice. He thinks craft brewing may not attract the same attention from investors this time. “Judging by the trade shows I’ve been at recently, it looks like a lot of the new money has headed in the direction of tea, bottled water, energy drinks, and malt liquors,” he says. “This new investment will still go more toward other beverages as long as those beverages are showing greater perceived potential for return.”

Gary Fish, founder of Deschutes Brewery in Bend, Oregon, sees speculative investment as inevitable but refuses to worry about it. “Yeah, it’s going to happen,” he says. “Does it concern me? No. We just show up at work every day and work hard, do the best we can.”

Maybe I worry too much. But I still can’t help wondering how many of today’s great beers I should enjoy…while they last.

Lew Bryson has been writing about beer and spirits since 1994. He is the  author of three books: Virginia, Maryland, & Delaware Breweries,  Pennsylvania Breweries, and New York Breweries. His writing has appeared in New Brewer, Cheers, and BeverAge, and he is the managing editor of Malt Advocate.