Craft beer brings cheer to economy

John Kooti

Although I am not an expert in the economy of beer breweries, I thought to devote this column to the growth of craft beer, since the cover story of this edition is on craft breweries.

According to the Brewers Association for Small and Independent Craft Brewers, the number of U.S. breweries increased from 1,813 in 2010 to 5,301 in 2016. U.S. Department of Treasury of Alcohol and Tobacco Tax and Trade Bureau data reports the number of breweries increased from only 2,343 in 2010 to more than 8,300 in 2017.

Bart Watson, chief economist at the Brewers Association, attributes the discrepancy to the inclusion of breweries in the planning stage, closed breweries, large breweries and other types of beer (such as flavored malt) in the government statistics. The data from the Brewers Association measure the total number of active small and independent breweries, which count for 98 percent of the total number of breweries in United States.

The association also tracks the number of breweries opening and closing. The number of brewpubs opening increased from 114 in 2012 to 229 in 2016, while the number closing jumped from 28 in 2012 to 44 in 2016. The number of microbreweries opening during the same time period increased from 348 to 596, while the number of closing increased from 16 in 2012 to 52 in 2016. It seems that only 2 percent of brewpubs and microbreweries close in a year.
Nevertheless, either measure shows significant growth in the number of breweries in the U.S. since 2010. This incredible growth is mainly attributed to the popularity of craft beer.

The number of microbreweries increased from 620 in 2010 to 3,132 in 2016. U.S. beer production in 2016 reached more than $107 billion in retail sales, of which $24 billion was generated from craft beer sales.

While the volume of total U.S. production of beer remains the same, craft beer production increased by 6 percent in 2016, although it was significantly lower than prior years. Data provided by the Brewers Association show the production of craft beer increased by more than 140 percent since 2010.

According to an economic impact study conducted by Watson, the associations chief economist, small and independent American craft brewers contributed $55.7 billion to the U.S. economy in 2014. That figure includes the total impact of craft beer as it moves through the three-tier system (breweries, wholesalers and retailers), as well as all non-beer products sold in brewpubs and taprooms, such as food and merchandise.

“With a strong presence across the 50 states and the District of Columbia, craft breweries are a vibrant and flourishing economic force at the local, state and national level,” Watson said in his study. “As consumers continue to demand a wide range of high-quality, full-flavored beers, small and independent craft brewers are meeting this growing demand with innovative offerings, creating high levels of economic value in the process.”

The same study shows that in 2014, Pennsylvania had 205 craft breweries — an average of 2.2 breweries for every 100,000 people older than 21. The commonwealth ranked seventh in the nation for number of craft breweries. These craft breweries produced just shy of 4 million barrels per year, which was first in the nation. It had a total economic impact of $4.5 billion, making it second in the nation following California.

In the same year, Maryland had 65 craft breweries producing more than 282,500 barrels a year, making it 36th in the nation, according to the study. The breweries had a total economic impact of $652 million.

West Virginia had 15 craft breweries and a total economic impact of $211 million per year, ranking it 44th.

Of course, this was three years ago; several craft breweries have opened just in the Crossroads area alone.

According to the Economic Modeling System (EMSI), the brewery industry employs more than 70,000 people in the United States. Of that, more than 2,900 are in Pennsylvania. There are 591 jobs in and 77 jobs in West Virginia. By 2025, the estimated number of jobs in the brewery industry is expected to increase to 80,600 in the U.S.

Of that, 3,600 would be in Pennsylvania, 840 in Maryland and 100 in West Virginia.

The employment numbers generated by EMSI do not include brewpubs; if brewer-restaurants are included, the employment numbers will be much higher.

Cheers!

John Kooti is a professor of finance and dean of the John L. Grove College of Business at Shippensburg University. His email is JGKooti@ship.edu.