{"id":725,"date":"2014-04-11T08:00:57","date_gmt":"2014-04-11T08:00:57","guid":{"rendered":"http:\/\/blogs.pugetsound.edu\/econ\/?p=725"},"modified":"2014-04-17T21:29:45","modified_gmt":"2014-04-17T21:29:45","slug":"thesis-corner-all-about-the-craft-beer-industry","status":"publish","type":"post","link":"https:\/\/blogs.pugetsound.edu\/econ\/2014\/04\/11\/thesis-corner-all-about-the-craft-beer-industry\/","title":{"rendered":"Thesis Corner: All About the Craft Beer Industry"},"content":{"rendered":"
In the past, I’ve written Thesis Corners on the\u00a0biological importance of water<\/a>\u00a0and\u00a0coffee’s link to national health<\/a>, but today’s blog will focus on the industry changes happening to another\u00a0beverage: beer. From a brewer’s standpoint, the beer business is a precious trade that stimulates one’s business savvy, scientific know-how, and an artistic expression to some degree. This week I had an email exchange with senior Eric Hopfenbeck, who tackled the entire craft brewing industry for his thesis. Read on to understand what classifies a craft brew, how this beer category is capturing market share from the Goliath beer companies, and a potential snapshot of the industry’s future. Next time you crack open a beer (if you’re over 21!), be sure to spit out these factoids to your drinking buddies.<\/div>\n

HR:<\/em>\u00a0How is a craft brewer distinct from a macrobrewer? Who are the largest players in the craft brewing industry?<\/em><\/strong><\/p>\n

EH:\u00a0Craft brewers<\/a>\u00a0are small and independent brewers who produce less than 6 million barrels of beer per year. Craft brewers typically focus on serving local communities and use innovation to create exciting new beers rather than relying on one or two flagship beers to drive their business. The top three largest players in the craft brewing industry are\u00a0Boston Brewing Co<\/a>.,\u00a0Sierra Nevada Brewing Co<\/a>. and\u00a0New Belgium Brewing Co.<\/a>, which are known for\u00a0Samuel Adams,\u00a0Sierra Nevada Pale Ale\u00a0and\u00a0Fat Tire\u00a0respectively. On the other hand, macrobrewers such as MillerCoors and Anheuser-Busch produce over 6 million barrels per year and sell their product across the country with huge marketing campaigns.<\/p>\n

\"Boilers<\/a>
Boilers at the Samuel Adams brewery. This is where all the magic happens…just under<\/figcaption><\/figure>\n

\u00a0<\/a><\/p>\n

HR:<\/em>\u00a0Why are craft brews making a comeback in the US?<\/em><\/strong><\/p>\n

EH: Consumer demand coupled with passionate brewers are the driving forces behind the return of craft beer. Consumers are loyal to their favorite local brewery and increasingly receptive to new beers altogether. Evidence shows they are willing to pay a little more money for a six pack of a new craft brew rather than the universal macrobrew. \u00a0On the production side, brewers are interested in experimenting with unconventional and exciting flavors of beers like\u00a0Oatmeal Raisin Stouts\u00a0or\u00a0Double IPA\u2019s.<\/p>\n

\"Budweiser<\/a>
Budweiser Anheuser-Busch, distributed in over 80 countries.<\/figcaption><\/figure>\n

HR:<\/em>\u00a0Can you give us an idea about the US\u2019s total beer production? Who are the major players and how much are they undercut by craft brews?<\/em><\/strong><\/p>\n

EH: In terms of total market share there are two major players,\u00a0Anheuser-Busch<\/a>\u00a0and\u00a0MillerCoors<\/a>, that represent 75% of the US beer industry. Craft brews are slowly expanding, earning 14% of market share in 2013, up from just 5% of the total market in 2012. I think it\u2019s remarkable that there are thousands of craft brewers comprising a little over 10% while two giant corporations comprise over 50% of the industry. Average beer production in the United States has been steadily decreasing since the early 1990s. In 2012, the total beer production in the U.S. was about 196 million barrels.<\/p>\n

HR: Let\u2019s talk about beer consumption now. How has this changed in light of substitute alcohol categories like wine and ciders?<\/em><\/strong><\/p>\n

EH: According to a Gallup Poll in 2013, the US\u2019s demand for beer has been decreasing since the early 1990s, while the demand for both wine and hard cider has increased. Though overall beer consumption has been declining, the craft beer category has continued to grow. Hard cider is perceived as a substitute product that is anticipated to have a large impact on the craft brewing industry in five to ten years.<\/p>\n

HR:<\/em>\u00a0Your thesis mentions suspicion about the craft brewing industry becoming an \u201casset bubble\u201d. Can you explain what this means?<\/em><\/strong><\/p>\n

EH: Essentially an\u00a0asset bubble<\/a>\u00a0is when the price of something is higher than its true value due to overly optimistic expectations about the future. With regards to the craft brewing industry, the asset bubble does not quite fit what might be happening. Instead, I examined if a quantity bubble was forming. In other words, I investigated whether the market is becoming over-saturated with brewers and would cause exit from the market.<\/p>\n

HR: So is a bubble forming?<\/em><\/strong><\/p>\n

EH: I concluded there isn\u2019t a bubble forming in the market, as the growth in the industry has been steady but not unusually excessive. Since craft breweries are very locally focused, there are many places around the country where only a few breweries have opened up, such as in Mississippi and North Dakota. Some regions, such as the Seattle-Tacoma and Boulder-Denver area in Colorado, have many breweries and therefore, those markets may not be able to accommodate for more entry.<\/p>\n

HR: What\u2019s your favorite craft brew?<\/em><\/strong><\/p>\n

EH: As a beginner in the consumption of craft brews, I like trying new beers each time I purchase beer. Recently, I enjoyed the\u00a0Quilter\u2019s Irish Death<\/a>\u00a0from Iron Horse Brewery from Eastern Washington.<\/p>\n","protected":false},"excerpt":{"rendered":"

In the past, I’ve written Thesis Corners on the\u00a0biological importance of water\u00a0and\u00a0coffee’s link to national health, but today’s blog will focus on the industry changes happening to another\u00a0beverage: beer. From a brewer’s standpoint, the beer business is a precious trade that stimulates one’s business savvy, scientific know-how, and an artistic expression to some degree. This week I had an email exchange with senior Eric Hopfenbeck, who tackled the entire craft brewing industry for his thesis. Read on to understand what classifies a craft brew, how this beer category is capturing market share from the Goliath beer companies, and a potential Continue reading Thesis Corner: All About the Craft Beer Industry<\/span>→<\/span><\/a><\/p>\n","protected":false},"author":431,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[163,167,165,166,168,164],"class_list":["post-725","post","type-post","status-publish","format-standard","hentry","category-economics","tag-beer","tag-brewing","tag-craft","tag-industry","tag-macrobrew","tag-microbrew"],"_links":{"self":[{"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/posts\/725","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/users\/431"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/comments?post=725"}],"version-history":[{"count":4,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/posts\/725\/revisions"}],"predecessor-version":[{"id":803,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/posts\/725\/revisions\/803"}],"wp:attachment":[{"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/media?parent=725"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/categories?post=725"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/tags?post=725"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}