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Brewing Growth: The Economic Development Potential of Craft Beer

  • Date September 18, 2017
  • Hour 2pm
  • Room GSSI room C
  • Speaker Neil Reid (University of Toledo)

ABSTRACT 

At the end of 2016 the number of craft breweries in the United States stood at over 5,000. This is an impressive number; in 2010 there were only 1,754 such establishments. In 2015 sales of craft beer reached $22.3 billion, which represented 21% of total beer sales that year. Increased consumption of craft beer is driven by beer drinkers demanding beer that is more flavorful, of higher quality, and more diverse than the beer produced by large-scale producers. Craft beer is being produced in increasing quantities by small-scale, independent, breweries that have strong connections with their local communities.

There is a growing recognition in many parts of the United States that the craft beer industry represents an economic development opportunity. This has resulted in initiatives at both the local and regional scales to create a business climate that is conducive to the growth of the industry.

At the local level elected officials recognize that craft breweries can play a key role in the revitalization of distressed neighborhoods. This has resulted in craft breweries being included in neighborhood revitalization plans. Craft breweries are attracted to distressed neighborhoods because of the availability of inexpensive space in old abandoned buildings. Thus craft breweries can be found in old churches, funeral homes, automotive dealerships, fire stations, and a variety of other unique spaces that they adaptively reuse.

While most of the growth of craft breweries is organic and bottom-up (i.e. they are started by people living in the community) there has been a few cases where states have had the opportunity to attract a large craft brewery (known as a regional craft brewery) to one of their communities. This has occurred when a craft brewery has expanded their market reach to include several dozen or more states. As their markets expanded geographically the transportation costs associated with getting beer to consumers in distant states increased. To reduce transportation costs a number of these craft breweries opened second production breweries. Competition between states and communities to attract these new breweries has been intense.

The potential of craft breweries to boost tourism in a community or a region is widely recognized. As a result many places are developing what are known as ale trails as a way to promote its craft breweries. Beer festivals are another attraction for beer tourists. There are dozens of craft beer festivals across the United States every year, which attract both tourists and local residents.

Finally, the U.S. brewing industry is highly regulated by federal, state, and local governments. Many state and local governments have discovered that some regulations are not supportive of the industry and indeed, can deter its growth. As a result, many state and local governments have modified existing and introduced new legislation to create an environment that is friendlier to the craft brewing industry.

This seminar will explore all of the above issues.