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N E I L R E I D , U N I V E R S I T Y O F T O L E D O

I S A B E L L E N I L S S O N , U N I V E R S I T Y O F N O R T H C A R O L I N A AT C H A R L O TT E

M ATT H E W L E H N E R T , U N I V E R S I T Y O F T O L E D O

Geographic Clustering of Craft Breweries in Select American Cities

Presented to Regional Science Academy Conference on Urban Empires - Cities as Global Rulers in the New Urban World, Poznan, Poland, August 15-16,2016.

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Traditional & Craft Breweries, 1887-2015

1873 1893 1902 1911 1920 1940 1949 1958 1967 1976 1985 1994 2003 20120

500

1000

1500

2000

2500

3000

3500

4000

4500Chart Title

TraditionalCraftAxis Title

Millennials

Neolocalism

Source: The Beer Institute and The Brewers Association

4,225 breweries 4,181 craft 44 non-craft

Under 6 million barrels annually

Surpassed previous high of 4,131 in 1873

2,471 craft breweries added since 2010

Market share 12.2% volume 21.0% by $ sales

Americans consume 3.4% less beer in 2014 than 2008

Resource Partitioning

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The Appeal of Craft Beer

Diversity, Quality, Innovation, Scale

Over 150 different styles of beer with highly differentiated flavor profiles and ABV levels

Higher Quality – better ingredients

Highly experimental and innovative – craft brewers are pushing the limits of innovation in terms of reworking traditional styles and inventing new ones

Highly flexible – small batch production means that craft brewers are able to respond to changing consumer demands

Highly engaged with the consumer and the local community - neolocalism

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Explaining the Geography of Craft Beer

Studies conducted at the inter-metropolitan and inter-state scales: Inter-metropolitan

Baginski and Bell (2011), McLaughlin et al. (2016), Moore et al. (2016) Found evidence that metropolitan areas with large numbers of craft breweries have larger shares of

millennials creatives whites more educated stronger neolocalism movement

Inter-state Florida (2012), Elzinga et al. (2015)

Higher income, Population size Median age Brewpub legality Knowledge spillovers – clustering of craft breweries

No studies at intra-metropolitan scale Do craft breweries exhibit geographic clustering at the intra-urban scale?

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Why might craft breweries cluster?

Facilitates inter-brewer collaboration The modern craft beer industry emerged out of the home brewing movement

1970s onwards - formed home brewing clubs where they shared ideas, exchanged recipes, and honed their skills. Very little in the way of a formal body of knowledge. Knowledge sharing. Tacit knowledge was critical. Spatial

proximity critical. Trust building.

95% of commercial craft brewers were home brewers

This culture of collaboration continued post-commercialization

“Craft brewers open their doors to others. They share equipment and help train one another’s staffs. Trade secrets? Craft brewers take pride in having none” (Brown 2015)

The craft brewing industry has embraced transparency, cooperation, community and quality (Harper 2015)

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Collaboration

Collaborative brewing Two or more breweries come together, devise a new recipe, and brew a beer

Opportunity for brewers to step outside their comfort zone

Excites consumers and generates market buzz

2016 Cincinnati Beer Week – 5 teams of 4-5 breweries each; each choose different ingredients and were given the task of producing a beer

Great opportunity for learning

“In collaborations you see things you might never have thought of on your own” (Vinnie Cilurzo, Russian River Brewing, Santa Rosa, CA)

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Collaboration

Helping others 2014 Sierra Nevada (third largest craft brewer) opened new brewery near

Asheville, SC

Purchases enough grain for all local breweries and, due to economies of scale, sell the grain to smaller breweries at lower cost

2008 and 2013 – Hops shortage – Boston Beer Company sold hops to local craft brewers (at cost) so that their production would not be curtailed

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Brewery Hopping

Explorer• Not interested in educating

themselves on craft beer• Wants to try new styles and

flavors• Makes an effort to visit many

breweries• Experience of going to the

brewery is second only to the quality of the beer

Enthusiast• Strong appreciation for the

brewing process and its history• Strives to educate themselves

on all aspects of the industry• Wants to try new styles and

flavors• Makes an effort to visit many

breweries

Loyalist• Loyal to certain beers or brands• Know what they like• Does not strive to try new styles

and flavors• Convenience important – local

retailers

Novice• New to the craft beer scene• Learning about craft beer• Influenced by friends

Source: Carpenter at al. 2013

Allows craft beer drinkers to brewery hop

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Methodology

Do craft breweries cluster in space? Ripley’s K

One of the most commonly used univariate spatial point pattern statistics

The K-function is estimated by calculating the ratio between the number of points within a range of distances d for each point and the overall density of points in the study area Is the actual number of breweries within distance d larger than

what would be expected in the case of breweries being randomly distributed throughout the city?

Also test for clustering in relation to other on-site alcohol outlets (bars, restaurants, clubs) Kulldorff’s D statistic

Does brewers to cluster relatively more than other on-site outlets?

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Data and Cities

Data on breweries were obtained from the Brewers Association

10 Cities Austin(TX) Charlotte (NC) Chicago (IL) Denver (CO) Minneapolis (MN) New York (NY) Portland (OR) San Diego (CA) San Francisco (CA) Seattle (WA)

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Summary of Results

City Number of craft breweries

Ripley’s K (absolute

clustering)

Kulldorff’s D (relative clustering)

Austin, TX 18 No No

Charlotte, NC 17 Yes No

Chicago, IL 37 Yes No

Denver, CO 51 Yes Yes

Minneapolis, MN 21 Weak No

New York City, NY 17 Yes No

Portland, OR 52 Yes No

San Diego, CA 54 Yes No

San Francisco, CA 19 Weak No

Seattle, WA 50 Yes Yes

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Results (Ripley’s K)

Evidence of absolute clustering in 9 out of 10 cities

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Discussion

Relative clustering results suggest that clustering may be due to zoning restrictions or other barriers

While craft breweries may not be more clustered than other on-site alcohol outlets, they still do cluster Does not mean they would not choose to cluster in the

absence of such restrictions Given the collaborative environment in the industry, lack of

direct competition among different breweries and the benefits of “brewery hopping” it is likely that they would cluster anyhow

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Where to go from here?

Study microbreweries and brewpubs separately Are there differences in clustering behavior among

microbreweries and brewpubs? Often faced with different zoning restrictions (bar/restaurant vs.

manufacturing) Likely to see them cluster in different areas Many cities are moving towards relaxing zoning restrictions for

breweries

Can we predict locations of new openings? At the city level (local breweries)? At the state level (regional breweries)?

Saturation vs. “underserved” markets How does such patterns correspond with entrepreneurial spirit

of cities?

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Thank You