Marty Walsh is a Strong Towns member and community and business development specialist based in Chatfield, MN. Today, he's sharing a guest article about the rise of craft brewing and what it means for other small industries.
Over the last few months, there have been a number of articles in the business and feel good media about the important role breweries have played in breathing life into small towns and distressed communities across the country. Many talk about the jobs, the taxes, the community and the cachet that are brought on by IPAs and Berliner Weisses, but few have talked about why craft beer has been so successful in these places, or the broader picture about what we can do with that success.
To give you an idea of how much the American brewing industry has boomed in the last few decades, here’s a quote from the Brewers Association website that describes that state of the industry at the end of the 1970’s:
By the end of the decade, the beer industry had consolidated to only 44 brewing companies. Industry experts predicted that soon there would only be five brewing companies in the United States.
And here is where we sit now:
The craft brewing industry contributed $67.8 billion to the U.S. economy in 2016, more than 456,000 jobs.
That’s at over 6,000 small independent craft breweries in all 50 states. This change took place in less than 40 years.
And so one has to ask, why beer? How did beer turn the consolidation ship around and go from laying off thousands to popping up on the corner of every community when other industries were shrinking and consolidating? And if we know that, can we figure out which other industries might be able to do it too? What can we learn from craft brewing’s success?
I’ve identified a few main reasons that craft beer has been so good at bucking the trend:
- Quantifiable quality control
- Balance between automation and artisan design
- Local only, highly unique offerings at each establishment
- Could be downscaled
- Producers interact with consumers constantly
- Brewing translates a “feeling” into a design
- Low barrier to learning the skills
- The product is purchased in small quantities
Let’s dive a little deeper on some of these points. First, beer has metrics: Original Gravity, Final Gravity, Flocculation Rates, Alcohol by Volume, etc. These can be measured, and can be designated as targets during the “design phase” so that they can be adjusted in future batches or be repeated. Any industry that is going to attempt to have multiple producers making product at scale will need to be able to use metrics to create a consistent product and to evaluate performance. Fortunately, the advent of on-demand manufacturing and affordable portable computing power means that, with some effort, anything that should be measured and calibrated likely can be, even at a very small scale.
Another key element is the blend of automation and artisan design. There is feeling, emotion, passion and je ne sais quoi that goes into making a really good beer, but none of that matters if a brewer cannot turn to her brewing machines and say “go forth and ferment!” and come out with the desired brew. Small brewers need to occupy the gray area between less economically viable art and creatively devoid mass production if they want to survive, and this gray area is exactly where we need to be looking for our new artisan industrialists.
One more feature of many small craft brewers is their local only availability. Some of this is artificial, due to states having regulatory authority over alcohol, but some is technical. Fresh beer doesn’t travel well. This helps brewers develop a stronger brand and identity, and it allows for unique flavors to grow up slowly through collaboration and sharing. Look no further than the difference between West Coast, East Coast, Northeast, Midwest and English IPAs for evidence of this. The challenge in replicating this may be in seeing where the regulatory structure worked well, and where it hurt. Other industries trying to replicate what beer did will have to strike a balance between creating a local flavor and market with taking advantage of the global economy to access niche markets farther afield.
A final key element to examine more deeply is the low barrier to learning the skills and relatively low barrier to entering the industry. Just about anyone can pick up homebrew supplies for under $100 and produce something that’s non-toxic. And there are many incremental steps before going commercial that one could take to prove themselves, avoiding a lot of heartache and lost money. Even once commercial, it is easy to expand bit by bit and grow strong. Any sector that seeks to replicate craft beer likely will need this attribute or something similar.
Tomorrow, in the second article in this series, I’ll discuss why breweries have ended up in so many small and isolated communities, and what other craft manufacturing industries can learn from beer’s success.
About the author
Marty Walsh is a Community and Business Development Specialist for the firm Community and Economic Development Associates of Chatfield, MN. Marty has worked or volunteered in Community Development and Small Business Development for the last 8 years, including as the Executive Director of the Main Street program in Mason City, Iowa. His academic background also includes finance and economics, and his professional background includes sales and consulting in the alcoholic beverage industry. He has been a Strong Towns reader for many years. Marty lives with his wife and daughter in rural Rochester, MN. Follow him on Twitter at @serialhobbyist1.