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Could New York City’s Booming Craft Beer Market Be on the Brink of a Bust?

Glass of light beer on a dark pub.
Craft beer brewed by small-scale microbreweries is easily the fastest-growing sector of the American beer industry, especially in New York City. Currently, there are 19 microbreweries that are part of the city’s Brewers Guild packed into the five boroughs. Last year, craft beer accounted for 20% of the country’s $101.5 billion in beer sales — no small chunk.

Despite New York’s craft beer craze, however, a Bronx microbrewery recently filed for bankruptcy after just two years of being in business.

According to Crain’s New York Business, City Island Beer Co. filed for Chapter 7 bankruptcy protection late last month, listing assets of about $13,000 and liabilities of nearly $260,000.

The brewery’s filing also listed $253,844 in unsecured claims to creditors. As a contract brewery, City Island didn’t brew its own beer in-house — instead, it made its pale ale at a separate facility in Massachusetts.

Industry experts told Crain’s New York Business that City Island’s demise likely wasn’t the result of growing competition on the local craft beer market and subsequent loss of market share. Instead, they believe the brewery simple wasn’t able to keep up with the high costs of operating in New York CIty.

“There is still ample appetite in the region if you can make the economics work,” Bart Watson, chief economist of the Brewers Association, said. “If anything, breweries and brewpubs have the additional advantage of differentiating themselves on their offerings—they often have beers no one else is offering.”

Chapter 7 bankruptcy, which is primarily aimed at individual consumers, is the most common form of bankruptcy in the U.S., with 728,833 Chapter 7 bankruptcies filed throughout 2013. During a Chapter 7 bankruptcy, the filer’s debts are discharged in exchange for a liquidation of the filers’ assets.

Is City Island’s bankruptcy a sign that New York’s craft brewery phenomenon is facing an impending bust?

It’s not likely. With City Island going under, Bronx Brewery and Gun Hill Brewing Co., two of the borough’s remaining microbreweries, will likely see an influx of new visitors. And with America’s interest in unique, high-quality brews showing no signs of waning, New York City’s breweries will likely be enjoying healthy demand into the future.