I don't agree with this, and it's not because I have a biased or vested opinion as an owner (after all, where you sit is where you stand.) Yeah yeah, easy money is over. Everyone with a first mover advantage that didn't parlay that into growth and investment has lost that opportunity. Are we talking about a small craft producer turning into a national brand? Hell, that's always been a long shot. Are we talking about new business failures and failure to launch? I don't think that's new, I think it's just becoming more visible through places like ADI, etc. Remember, 80% of startups fail on average. This business is no different. Like I said, that first mover advantage that might have lowered this rate to 60% - that's gone, but all that means is it's no different from trying to open up a franchise sandwich shop.
First, I don't understand how you define or easily identify brand saturation in a market. From my position, if the market sufficiently fragmented such that smaller players are able to gain or retain enough market share to be viable, what does it matter the aggregate number of brands? How is it that the wine market is not sufficiently brand overloaded? I personally think that the Scotch section is incredibly confusing and cryptic, but it continues to grow. In addition, the bulk of the craft brand growth has been local/regional, with very few being in national distribution. There is no single national "shelf", unless you are a major national player, everything else comes down to the local shelf. And not even all of the local shelves, but the local shelves that matter. A single strong specialty spirits retailer can move more product in a month than dozens of nondescript mom and pop corner liquor shops. Why would you even bother to waste your time with the latter (more on this later).
Is it about the ability to respond to market changes? Craft distillers can very rapidly adjust their business models to account for short-term preferential changes in the marketplace. We have the advantage of agility. If tomorrow, anchovy vodka was the next hot thing, most of us could be in the artisan anchovy vodka business relatively quickly. A national producer would not have similar agility. We have the advantage of being significantly more agile in the marketplace, this should not be overlooked.
Also, are new entrants able to grow the size of the overall market themselves? You might think the question is a little bit silly, how can new market entrants grow a market that major players have trouble doing whilst spending tens, if not hundreds of millions in aggregate, on advertising? But I I think the answer is that they can, by virtue of being local, and by virtue of being experiential.
IMHO, that word, "experiental" is going to be the key, and it's not going away. I think the last piece is the key differentiation that craft brands have over nationals, the ability to be experiential. But what the nationals can't do, is appeal to the experiential buyer at mass-scale. They can only be experiential in so far as their marketing material takes them. I don't think that translates into local market dynamics. Awareness is not experience.
How can you ignore the demographic change that is driving this longer-term market shift? A shift which clearly has legs. Every retailer is incredibly focused on this. Every consumer service business is incredibly focused on this. Even the financial services industry is spending millions on this. And hell, who wants to be caught dead in a bank branch? What kind of "experience" is that?
There are dozens and dozens and dozens of studies and articles talking about this paradigm shift, there are probably just as many consultancies that state that they have the secret keys to be able to navigate this. But, the fact is, nobody has figured this out yet. It's fair game.
I'll just leave a few keywords and concepts here, which I think are really important to think about. This is not your father's Oldsmobile.
Experience, not Things
Authenticity, Sincerity, No Bullshit.
Social (as in Conspicuous) Consumption
In Collaboration, actually Listening
Environmental and Social Conscience
Local and Artisanal
Respect, and Respected
Unique and Limited, not Mass Market and Undifferentiated
I firmly believe that a new craft distillery entrant in a crowded craft market can absolutely destroy the incumbent players if they master this experience component, and can scale it. Let that be a warning to anyone sitting on their ass. A millennial marketing to a millennial will absolutely beat the pants off you. Are you still hanging onto that trope about your great uncle Cletus' secret recipe? Sorry, they don't give a shit about that. Doing a private spirits pairing at the hot local restaurant, with a custom menu designed by it's hot local chef? Pretty food, pictures plastered all over Instagram, now we're talking. Personally? I don't think this demographic is interested in mass market anything. It's about creative differentiation, limited availability, having a brand image that a demographic wants to be associated with. It's not about being able to spend massive marketing budgets either.
It should be the national brands who are shaking in their boots.