Going Out Of Business

March 25, 2020 The Beer Professor Leave a comment

Last September, one of the breweries in my town, Toledo, OH, closed. Black Cloister Brewing Company had opened its doors in March 2015. It was located in the heart of downtown Toledo, and was one of the many businesses contributing to the vibrancy of our city center. The announcement that it would close was sad news. In closing Black Cloister was not alone. While we do not yet have data for 2019, we do know that in 2018 a total of 213 breweries closed across the United States. Breweries, like other businesses, close for a variety of reasons. These include a poor location, cash flow problems, expanding too quickly and aggressively, etc.

Black Cloister Brewing Company in downtown Toledo closed in September 2019

To examine the closure of craft breweries from a national perspective, I used data available on the website of the Brewers Association. The data I examined was only for craft breweries producing 15,000 barrels of beer or less. So it did not include the so-called Regional Breweries that produce more than 15,000 barrels of beer annually.

As you can see from the first graph below (green bars), the number of breweries that closed increased each year between 2010 and 2018. In 2010, fifty-four breweries closed. In 2018, the number of breweries that closed was two hundred and thirteen. Indeed 2017 and 2018 seem to have been a bad year for breweries. In addition to the 2018 closures, one hundred and ninety-five breweries closed in 2017. These raw numbers suggest that, year after year, breweries are finding it tougher to stay open.

However, part of the reason why the number of breweries closing increased each year was because there were simply more breweries. So to asses whether breweries were finding it harder to survive, we really need to look at the number of breweries closing as a percentage of breweries that existed. For example, there were 1,525 breweries in the United States in 2009. In 2010, fifty-four breweries closed. The fifty-four breweries that closed in 2010 represent 3.5% of the breweries that were open in 2009. Looking at the second graph, it is clear that the year-to-year variation in the percentage of breweries that closed was very small. The percentage ranged from 2.4% in 2012 to 3.6% in 2017. These data show considerably less variability from year to year.

Another way to look at brewery closure rates is to compare them with similar businesses. This, of course, begs the question as to what is a “similar” business. Many craft breweries are, after all, part manufacturer, part bar/restaurant. A 2014 study of 81,000 full-service restaurants over a 20-year period by Tian Lou of the U.S. Bureau of Labor Statistics and Philip B. Stark of the University of California, Berkeley showed that 17% closed within twelve months of opening. The same study found that the median lifespan of restaurants to be approximately 4.5 years. So it seems that craft breweries are faring quite well compared to full-service restaurants. Having said that, it is probably an unfair comparison. Full service restaurants are a mature industry, in contrast to craft breweries which are still in growth mode,

As a geographer, my interest lies in detecting the existence of any spatial patterns in brewery closures. Along with my colleagues Isabelle Nilsson of the University of North Carolina, Charlotte and Oleg Smirnov and Matt Lehnert of the University of Toledo, we examined craft brewery closures in Chicago, IL, Denver, CO, and Portland, OR between the years 2012 and 2016. One of the things we were interested in investigating was whether being geographically isolated versus being part of a cluster of breweries impacted the chances that a brewery would close. There is evidence from a number of different industries that being part of a cluster (a brewery district) is beneficial. To craft beer drinkers, geographic clustering of breweries inside a city is attractive because it makes it easier for them to brewery-hop, and visit several breweries within the space of an afternoon or an evening.

Our study showed that the brewery closures do not appear to occur where a concentration of breweries exist. Rather, they tended to occur in more residential areas, outside of downtowns. Closed breweries had an average of one other brewery within a one mile radius, while those that were still open as of 2016 had an average of 2.5 other breweries surrounding them. Of the breweries in our analysis that closed, 58% had no other breweries within a mile. Of the breweries that remained open, 26% had four or more breweries within a mile, while 9% had ten or more breweries within a mile.

Bakersfield, CA has an evolving brewery district. Source: Bakersfield.com

Whenever a craft brewery closes in a community, it is not unusual for a local newspaper to run a story that asks whether the local market has hit saturation point with respect to the number of craft breweries. Has the craft beer bubble bust is another commonly asked question. In fact, as I was thinking about writing this blog entry the Virginia-Pilot newspaper reported the closure of Coelacanth Brewery in Norfolk, VA. And the story’s headline read, asked the question – Is the craft beer bubble bursting?” It is a question that has been asked for several years now, in markets ranging from Cleveland, OH to Grand Rapids, MI. More often than not, however, the feeling is that in most markets there is still room for growth. In a piece in Crain’s Business Chicago, Dalton Baker wrote about craft brewery closures and declining craft beer sales in the city of Chicago, IL. Baker describes the Chicago craft beer market as mature, a characteristic that it shares with Denver, CO, San Diego, CA, and Seattle, WA. I think there is no doubt that certain markets are nearer saturation than others. On the other hand, there are places where the market is under-served by craft breweries. The city I live in, Toledo, OH is one of them. It has, I believe, significant room for growth.

In a recently published end-of-decade piece published in Forbes, Chris Funari asked a number of brewers to gaze into their crystal ball and share their thoughts on what the next ten years might bring for the craft segment of the brewing industry. Kim Jordan, Co-Founder of New Belgium Brewing believes that industry will experience a shakeout, which will result in a significant number of brewery closures. The net result will be a smaller population of breweries. Daniel Kenary, Co-Founder and CEO of Harpoon Brewery seems to agree. He believes that the recent growth is “unsustainable” and that “the fast money will try to leave as quickly as it entered” . Tom Wilkes, writing in Beer & Brewing, believes that the future may be brighter for breweries at opposite ends of the size spectrum – small breweries and very large breweries. The small ones can focus on the local market and develop a loyal customer basis from the surrounding community, while the very large brewers have the capital to engage in effective marketing and distribution. But those in the middle, who are “attempting to fight for that retail and grocery and tap handles” may find the future challenging.

Of course, as I sit here today the world is in the grip of the Covid-19 (Coronavirus) pandemic. Across the United States, Governors have ordered bars and restaurants to close temporarily as part of the efforts to minimize the spread of the virus and flatten the curve. With their taprooms closed, craft breweries are offering curbside pick-up and home delivery. The impact on sales is potentially devastating. For some breweries, that were already struggling, this represents the final nail in the coffin, and closure has already been announced. Depending upon how long restrictions associated with Covid-19 last, 2020 could be a record year for brewery closures.

Wine, Women, and Basketball – But What About Beer?

March 16, 2020 The Beer Professor Leave a comment

The University of Toledo (UT), where I work, has a men’s and a women’s basketball team. I am not a basketball fan, so I really do not follow the fortunes of either one. On average, I probably attend a college basketball game once every five years or so. Back in January one of our doctoral students forwarded me an e-mail she had received promoting upcoming games for both the men’s and women’s teams. I am sure I had received the same e-mail, but upon seeing from the subject line that its content was about basketball, had probably deleted it. In sending me the e-mail, the student drew my attention to two upcoming UT basketball games – one involving the men’s team and one involving the women’s team. The men’s game was promoted as “Men’s Basketball Craft Beer Night”, while the women’s game was promoted as “Women’s Basketball Wine Night”. Fans were invited to come early to the Men’s game and sample some craft beer beforehand; come to the Women’s game and sample some wine beforehand. The student who brought these promotional ads to my attention questioned whether those responsible for them had given much, if any, thought to gender stereotypes. For both ads were clear examples of gender stereotyping – beer for the guys and wine for the gals. When I first saw these ads, I have to admit, they made me cringe.

In defense of the ads, one might argue that the UT Athletics Department were simply recognizing the reality that more craft beer drinkers are male than female, and more wine drinkers are female than male. According to a 2018 Nielsen Harris on Demand survey, 68.5% of craft beer drinkers who drink craft beer “at least several times a year” are male; 31.5% are female. Interestingly, the survey identified two markets where female craft beer drinkers outnumber male craft beer drinkers – Portland, OR and Providence, RI. In contrast, a 2018 study by Sonoma State University found that 60% of wine drinkers are female, and 40% are male. Despite these demographic differences, I will still submit that the the ads were an unnecessary exercise in gender stereotyping. Why not simply advertise the first game as being one where craft beer would be available beforehand, and the second as one where wine would be available beforehand?

Of course, this type of stereotyping is nothing new. A 2012 study by researchers at The University of Liverpool and Liverpool John Moores University found that alcohol-related ads in women’s magazines were primarily focused on champagne and sparkling wine, while alcohol-related ads in men’s magazines focused on beer. Indeed, craft beer and gender stereotyping is a topic I have written about before.

Not only do many women enjoy craft beer, but they also are a number of women who own breweries and/or commercially brew beer. Last month, I attended the annual Nebraska Tourism and Adventure Travel Workshop in Nebraska City, NE. In addition to giving a presentation at the workshop, I was also a member of a panel on “Maximizing Your Exposure with Partnerships”. There were three of us on the panel. I was the only male. The other two panel members were Jessica Kraus, co-owner of Lost Way Brewery in Holdrege, NE and Jessi Hoeft of First Street Brewing Company in Hastings, Nebraska. The panel was moderated by Gabby Ayala, Executive Director of the Nebraska Craft Brewers Guild. Jessica is also Executive Director of the Holdrege Chamber of Commerce. These are smart, intelligent, successful women who know what they are talking about when it comes to beer and the craft brewing industry. For me, it was honor to share the stage with and learn from them.

Sharing the stage with (left to right) Gabby Ayala (Nebraska Brewers Guild), Jessi Hoeft (First Street Brewing), and Jessica Kraus (Lost Way Brewery) at the 2020 Nebraska Agritourism & Adventure Travel Workshop (Photo Credit: Nebraska Tourism Commission)

Unfortunately, and undeservedly, female brewers are often less highly regarded than their male counterparts. A recent study by researchers at Stanford University found that “craft beer described as produced by a woman is evaluated more negatively than the same product described as produced by a man.” According to Sarah A. Soule, one of the researchers on the project, “our research suggests that customers don’t value and are less inclined to buy traditionally male products if they think they’ve been manufactured by women . . . There’s an assumption that your woman-made craft beer . . . won’t be as good.”

It is easy to forget that before men arrived on the scene, brewing beer was primarily a task done by women. Indeed, in both Mesopotamia and ancient Egypt the beer that was brewed was done so almost exclusively by women. It was the same in pre-industrial Europe, where making beer was just one of a number of household tasks performed by women. Such was the case for Katharina von Bora, wife of the 16th century leader of the Protestant Reformation, Martin Luther. Von Bora brewed all the beer for the Luther household. And her husband loved it, often heaping praise on his wife’s brewing skills. In one of his many letters, Luther wrote, “I keep thinking what good wine and beer I have at home, as well as a beautiful wife.” In discussing the historical role of women as brewers, Allison Schell of the National Women’s History Museum refers to it as a “forgotten pairing“. What an apt description. It became forgotten because, in shifting from an economy based on agriculture to one based on manufacturing, the brewing of beer moved from small-scale home production to larger scale commercial production – and when that happened, men took over the brewing process.

Katharina von Bora brewed the beer for the Luther household
Source: Wikimedia Commons

So when it comes to beer and the brewing industry we (and by that I mean men) need to treat our female peers with respect. Whether they are brewers or consumers we have to understand that their gender does not define them. Rather, they are defined by their love, passion, and knowledge of beer. They are co-equals and partners in this wonderful journey that we, who love are craft beer, are taking.

Understanding Beer Tourists

March 8, 2020 The Beer Professor Leave a comment

During the month of February I gave two presentations on the topic of beer tourism. The first was at the Beer Marketing and Tourism Conference in St. Petersburg, FL, while the second was at the Nebraska Agritourism and Adventure Travel Workshop in Nebraska City, NE. Beer tourism is a topic I wrote about in a previous blog entry in 2017. In June, I will be traveling to Fort Myers, FL to make a presentation on the same topic to interested stakeholders in that community. There is no question that interest in beer tourism is growing. Tourism officials and others in a myriad of places are recognizing that beer tourism represents an opportunity to bring new dollars into their communities. There have been a small number of studies that estimate the economic impact of beer tourism. A 2019 study of the nearly 94,000 beer tourists who visited Kent County, MI (home of Grand Rapids) estimated their economic impact to be $38.5 million. The 2017 Oregon Brewer Festival, which was held in Portland, OR had an economic impact of $23.9 million. Finally, the 2018 release of Pliny the Younger by Russian River Brewery had an economic impact of $3.36 million on Sonoma County, CA.

Thanks to these studies, and a number of others undertaken by academics, we actually know quite a bit about beer tourists – their demographic profile, travel preferences, and travel patterns. We know, for example, that somewhere between 60 and 66% of beer tourists are male, 75-84% are under the age of fifty, 60-80% have at least a Bachelor’s degree, and 40-45% live in households whose annual income exceeds $80,000. In short beer tourists tend to be male, young, well-educated, and are economically well-off.

We also know that beer tourists do not stray far from home. Seventy-five percent of the beer tourists who visit Kent County, MI live in the state of Michigan, while 83% of those traveling to Santa Rosa, CA for the 2016 Pliny the Younger Release were from the state of California. Not only do most beer tourists travel short distances, they also visit a destination for a couple of days – 95% of the beer tourists who visit Kent County, MI do so for two nights or less. Indeed, the average length of stay in Kent County was 1.6 nights, while those who traveled to Santa Rosa, CA for the Pliny the Younger Release in 2019 stayed for an average of 1.8 nights. Perhaps not surprisingly, beer tourists travel in small groups of between two and four people (think a couple or two couples, traveling together).

Research by Jennifer Kraftchick and her colleagues at the University of North Carolina in Greensboro suggests that the primary reason why craft beer drinkers visit breweries in other towns and states is to taste craft beer in the breweries where it is brewed. Visiting a craft brewery in another community often provides the craft beer drinker the opportunity to taste beer that is unavailable in their home town. This is consistent with other research which suggests that craft beer drinkers like to travel from brewery to brewery tasting the beer and enjoying the unique ambience of each brewery.

The aforementioned characteristics of beer tourists are insightful for towns and cities looking to market their communities to beer tourists. For example, I advise communities to focus their marketing efforts to a 150 mile radius. Depending on the community the number of people living within a 150 mile radius can be quite large. For example, there are 18.7 million people within a 150 mile radius of the city I live in, Toledo, OH. I also suggest targeting short-stay tourists, promoting their community (and their breweries) as an ideal ‘weekend getaway’. If a community has a brewery district, I suggest marketing it – emphasizing the ease of moving from one brewery to another (e.g., on foot, by bicycle, or by Uber). Identifying, and making the potential beer tourist aware of complimentary activities is also a good idea. Beer tourists travel with spouses, partners, and friends – some of whom may not be beer drinkers. So providing information on, for example, wineries is smart marketing. Or perhaps your community has a variety of outdoor recreational opportunities such as hiking or kayaking – if that is the case, then think about ways to cross-market breweries with these activities.

Having attracted tourists to your community, it would be nice if they enjoyed themselves so much that they decide to return at a future date. Kent County, MI has been particularly successful at getting beer tourists to return for repeat visits. Sixty percent of beer tourists surveyed as part of the Kent County, MI study indicated that they had visited Kent County at least once during the previous twelve months. A return visit by a beer tourist indicates that the previous visit had been an enjoyable experience. So having your community’s breweries put their best foot forward and showing visitors a good time is critical. The same goes for other places (e.g. hotels, restaurants, museums, etc.) that beer tourists may visit. Remember, most beer tourists who visit your community live within a couple of hours drive – give them a reason to return, and they will.

Beer tourism is growing in popularity. More and more communities are embracing it. At the Beer Marketing and Tourism Conference that I attended last month in St. Petersburg, FL, there were representatives from a number of Destination Marketing Organizations (DMOs) in attendance. I chatted with a number of them over the three days of the conference. There is no question that the DMOs I chatted with appreciate the benefits that beer tourism can bring to their communities.

TheBeerProfessor

Monthly Archives: March 2020

Going Out Of Business

Wine, Women, and Basketball – But What About Beer?

Understanding Beer Tourists

Musings on Beer