Abstract
This paper summarizes key insights that derive from a comparative analysis of the craft beer developments and the beer industry transformation in the various countries. Our paper starts with a discussion on the definition of craft beer (and microbreweries). First, we document when the craft beer movements started in the various countries, and how they have evolved. Then, we discuss the role of changes in demand, the role of pioneers in craft brewing, and what factors determined the re-emergence of small brewers. Some of the factors we discuss refer to the role of information, networks, regulation, capital, and technology markets. The last part of the paper concentrates on the reaction of the macro-brewers to the growth of the craft beer market.
This is a preview of subscription content, log in via an institution to check access.
Notes
- 1.
Pasteurization is a heat treatment during the packaging phase, which kills pathogens such that the beer is sterile. Micro-filtration is the phase in which the yeast particles in the fermenting mixture are removed. The purpose of these treatments is to increase the beer’s shelf life and to guarantee product consistency. On the other hand, these processes are responsible for flattening some organoleptic characteristics of “fragrance,” with a reduction in the beer’s flavor and aroma, thus contributing to the loss of a distinctive taste. Therefore, differently from craft beers, industrial beers tend to have a more homogeneous and less distinguishable taste (Eén 2010; Madsen et al. 2011).
- 2.
The vast majority of TI beers started out being brewed by a “real craft” brewery, but not all. For example, in the USA, Blue Moon was developed at a small scale by Coors. In Belgium, some surviving smaller lager brewers reinvented themselves in the 1990s and 2000s as craft brewers by launching new beers.
- 3.
In Italy, for example, there has been a discussion of whether contract brewers are craft brewers (i.e., birrificio artigianale) or not. The discussion reached the political arena, and according to a recent definition by the Italian Parliament, contract brewers are not considered “artisanal” (Garavaglia in Chap. 9).
- 4.
- 5.
Most of the takeovers were by Belgian company Interbrew, which later merged with Ambev and Anheuscher-Busch to form AB InBev.
- 6.
The dotted line on the US graph in Fig. 1.1 is an extrapolation of the number of breweries just before (1912) and after prohibition, since brewing was banned during prohibition.
- 7.
Many studies in the economic and marketing literature investigate how firms rely on consumers to develop new products and innovations. Prahalad and Ramaswamy (2004) claim that the role of the consumer in the economy has changed: consumers are connected, more informed, and active, rather than isolated and passive like years ago. The conventional process of value creation, where companies and consumers have distinct roles of production and consumption, has changed toward a co-creation interaction. Ahonen and Moore (2005) believe that consumers and their connected community activity “is the biggest change in business in 100 years.” Studies point to the role of experimental users and lead consumers in the development of new products. Lead consumers act as opinion leaders (Schreier et al. 2007).
- 8.
Elzinga et al. (Chap. 2) explain that this was accomplished by using fewer hops and by replacing malt with adjuncts. In 2000, a barrel of beer in the USA was produced with 62% fewer hops and 21% less malt than in 1950. Craft brewers started using greater quantities of hops and barley malt.
- 9.
Through the consumption of goods, consumers satisfy their wants and needs, but they also express themselves. Maslow’s famous hierarchy of needs pyramid describes how consumers are motivated by the satisfaction of needs in purchasing decisions (Maslow 1954). The largest and lowest levels of needs are related to physiological requirements for human survival (physiological and safety needs). With their physical needs satisfied, consumers move to the satisfaction of higher-order needs (love and belonging, esteem), toward the need for self-actualization. Through consumption of food, as well as other consumer goods, individuals aim at satisfying their needs: individuals use products to express who they are and the consumer–product relationship reflects crucial life themes and identity concerns (Fournier 1998). In this sense, consumers’ needs and values are “deflected” into consumption activities (Nicosia and Mayer 1976).
- 10.
The growth of the California wine industry has similar characteristics. Delacroix and Solt (1988) claim that entrants to the wine industry in California were driven by a niche formation process. Swaminathan (1995) shows that in the American wine industry between 1941 and 1990, a gradual shift in consumer demand was initially satisfied by increasing imports of differentiated wine from continental European countries, and by the entry of microwineries, which started to produce specialized products.
- 11.
For example, Chai and Moneta (2012) and Chai (2011) empirically investigate these effects and show that as household income rises, total household expenditure is distributed across different goods in an increasingly even manner, and over time there has been an acceleration in the rate at which household expenditure patterns become diversified as household income rises.
- 12.
The evolution of industries through stages from a fragmented to a concentrated structure has been analyzed by different approaches in the economic literature. Among others, the “industry life cycle” explanations (Utterback and Suarez 1993; Klepper 1996, 1997; Horvath et al. 2001) refer to the emergence of a dominant design, the occurrence of technological innovations, and the exploitation of increasing returns in R&D as the main determinants in predicting a non-monotonic time path of the number of firms in an industry, thus explaining the dynamics of industry structures that from infancy mature and concentrate.
- 13.
This “resource partitioning” explanation has found empirical support in many other industries, like the newspaper industry in the USA (Carroll 1985), the evolution of the US wine industry (Swaminathan 1995), the early American feature film industry from 1912 to 1929 (Mezias and Mezias, 2000), and the evolution of auditing firms in the Netherlands (Boone et al. 2000).
- 14.
The best-known definition is from Porter (1979): “a strategic group is a group of firms in an industry following a similar or identical strategy regarding relevant dimensions.” Firms of the same strategic group are similar in terms of cost structure, organizational structure, marketing strategies, degree of product diversification, and the perceptions and preferences of individuals (McGee and Thomas 1986). McGee and Thomas report that the emergence of strategic groups may be related to some market-specific features, among which is the stage of the product life cycle.
- 15.
The economic literature about the role of capabilities, knowledge, and prior experience of the founders of a new firm is vast. Helfat and Lieberman (2002) discuss the importance of pre-entry experience and knowledge in determining the mode and timing of entry, as well as the likelihood of survival of firms. Important sources of knowledge of new firms may come from the relation with incumbent firms, which often translates into a spin-off entry. Also, the founders of new firms have histories (Freeman 1986; Aldrich 1989) and the pre-entry experience of the founders determines the degree of similarity between the pre-entry firm’s resources and the required resource in the industry, thus influencing the success of entry (Helfat and Lieberman 2002).
- 16.
Moreover, craft brewers complain in some countries (e.g., Italy, Slovakia) that wine producers benefit from an excise duty equal to 0, which represents discrimination against beer production.
- 17.
One could argue that the craft brewers followed the so-called Judo economics strategy (Gelman and Salop 1983). Capacity limitation and small-scale entry signal friendly behavior to incumbent firms, which therefore may accommodate entry. Later, when the craft sector grew, the craft brewers had established themselves as a strong force within the market.
- 18.
Probably the most famous case of conflict among craft and macro producers is related to the AB InBev advertising during the Super Bowl in the USA in 2015, when AB InBev used its marketing dollars to promote Budweiser at the expense of craft beer. The ad asserted that Budweiser is proud to be a macro beer that is brewed “the hard way” and compared Budweiser drinkers, played by young, attractive male and female actors, to craft beer drinkers, represented negatively as bearded snobs who sniff and sip “pumpkin peach ale,” rather than real beer (Elzinga et al. in Chap. 2). This ad caused a great deal of internet buzz. AB InBev’s strategy of intensifying rivalry was unusual, both because negative advertising goes against an industry tradition which refrained from negative advertisements on other companies’ beer, and because it criticized craft beer, at a time when the company had acquired several craft brewers and established a substantial portfolio in its “craft and specialty beer network.”
- 19.
See Wall Street Journal (2015) at http://www.wsj.com/articles/craft-brewers-take-issue-with-ab-inbev-distribution-plan-1449227668.
- 20.
References
Acitelli, T. (2013). The audacity of hops: The history of America’s craft beer revolution. Chicago: Chicago Review Press.
Adams, W. J. (2006). Beer in Germany and the United States. Journal of Economic Perspectives, 20(1), 189–205.
Agarwal, R., & Audretsch, D. B. (2001). Does entry size matter? The impact of the life cycle and technology on firm survival. The Journal of Industrial Economics, 49(1), 21–43.
Ahonen, T. T., & Moore, A. (2005). Communities dominate brands, London: Futuretext.
Aldrich, H. (1999). Organizations evolving. London: Sage.
Allyn, M. (2015). Dogfish Head’s sam calagione squares off against budweiser. Retrieved from http://www.mensjournal.com/food-drink/drinks/dogfish-head-s-sam-calagione-squares-off-against-budweiser-20150218.
Alworth, J. (2015). The beer Bible. NewYork: Workman Publishing.
Bentzen, J., & Smith, V. (2018). Entry, Survival and Profits.The Emergence of Microbreweries in Denmark. In C. Garavaglia & J. Swinnen (Eds.), Economic perspectives on craft beer: A revolution in the global beer industry. London: Palgrave Macmillan.
Boone, C., Bröcher, V., & Carroll, G. (2000). Custom service: Application and tests of resource-partitioning theory among Dutch auditing firms from 1896 to 1992. Organization Studies, 21(2), 355–381.
Cabras, I. (2018). Beer On! The evolution of micro and craft brewing in the UK. In C. Garavaglia and J. Swinnen (Eds.), Economic perspectives on craft beer: A revolution in the global beer industry. London: Palgrave Macmillan.
Carroll, G. (1985). Concentration and specialization: dynamics of niche width in populations of organizations. American Journal of Sociology, 90(6), 1262–1283.
Carroll, G., & Swaminathan, A. (1992). The organizational ecology of strategic groups in the American brewing industry from 1975 to 1990. Industrial and Corporate Change, 1(1), 65–97.
Carroll, G., & Swaminathan, A. (2000). Why the microbrewery movement? organizational dynamics in the US brewing industry. American Journal of Sociology, 106(3), 715–762.
Chai, A. (2011). Reviving a wants-based empirical approach to analysing household spending. Discussion Papers in Economics, No. 2011–05, Department of Accounting, Finance and Economics, Griffith University.
Chai, A., & Moneta, A. (2012). Back to Engel? Some evidence for the hierarchy of needs. Journal of Evolutionary Economics, 22(4), 649–676.
Chlebicka, A., Fałkowski, J., & Lichota, J. (2018). From macro to micro: The change of trendsetters on the polish beer market. In C. Garavaglia & J. Swinnen (Eds.), Economic perspectives on craft beer: A revolution in the global beer industry. London: Palgrave Macmillan.
Clemons, E. K., Gao, G., & Hitt, L. M. (2006). When online reviews meet hyper differentiation: A study of the craft beer industry. Journal of Management Information Systems, 23, 149–171.
Dann, K. (2015, November 18). Budding beer entrepreneurs take it to the next level with gypsy brewing. The Guardian. Available at https://www.theguardian.com/small-business-network/2015/nov/18/budding-beer-entrepreneurs-gypsy-brewing.
Deconinck, K., Poelmans, E., & Swinnen, J. (2016). How beer created Belgium (and the Netherlands): The contribution of beer taxes to war finance during the Dutch revolt. Business History, 58(2), 694–724.
Deconinck, K., & Swinnen, J. (2016). Tied houses: Why they are so common and why breweries charge them high prices for their beer. In I. Cabras, D. Higgins, & D. Preece (Eds.), Brewing, beer and pubs. A global perspective. London: Palgrave Macmillan.
Delacroix, J., & Solt, M. E. (1988). Niche formation and foundings in the California wine industry 1941–84. In G. R. Carroll (Ed.), Ecological models of organizations. Cambridge, MA: Ballinger.
Depenbusch, L., Ehrich, M., & Pfizenmaier, U. (2018). Craft Beer in Germany—New Entries in a Challenging Beer Market. In C. Garavaglia and J. Swinnen (Eds.), Economic perspectives on craft beer: a revolution in the global beer industry. London: Palgrave Macmillan.
Eén (Director). (2010). Volt: Is de ene pils de andere? [Motion Picture].
Elzinga, K. G., Tremblay, C. H., & Tremblay, V. (2015). Craft beer in the United States: History, numbers and geography. Journal of Wine Economics, 10(3), 242–274.
Elzinga, K. G., Tremblay, C. H., & Tremblay, V. J. (2018). Craft beer in the United States: Strategic connections to macro and European brewers. In C. Garavaglia & J. Swinnen (Eds.), Economic perspectives on craft beer: A revolution in the global beer industry. London: Palgrave Macmillan.
Fertő, I., Fogarasi, J., Major, A., & Podruzsik, S. (2018). The emergence and survival of microbreweries in Hungary. In C. Garavaglia & J. Swinnen (Eds.), Economic perspectives on craft beer: A revolution in the global beer industry. London: Palgrave Macmillan.
Fournier, S. (1998). Consumers and their brands: Developing relationship theory in consumer research. Journal of Consumer Research, 24(March), 343–373.
Freeman, J. (1986). Entrepreneurs as organizational products: Semiconductor firms and venture capital firms. In G. Libecap (Ed.), Advances in the study of entrepreneurship, innovation, and economic growth, Vol. 1: Entrepreneurship and innovation: The impact of venture capital on the development of new enterprise. Greenwich, CT: JAI Press.
Garavaglia, C. (2010). Birra, Identità Locale e Legame Territoriale. Agriregionieuropa, 6(20). Available at http://agriregionieuropa.univpm.it/.
Garavaglia, C. (2016). Thinking about entry of firms: A theoritical discussion. International Business Research, 9(2), 46–73.
Garavaglia, C. (2018). Birth and diffusion of craft breweries in Italy. In C. Garavaglia & J. Swinnen (Eds.), Economic perspectives on craft beer: A revolution in the global beer industry. London: Palgrave Macmillan.
Garavaglia, C., & Castro, D. (2018). The recent advent of micro producers in the Spanish brewing industry. In C. Garavaglia & J. Swinnen (Eds.), Economic perspectives on craft beer: A revolution in the global beer industry. London: Palgrave Macmillan.
Gelman, J. R., & Salop, S. C. (1983). Judo economics: Capacity limitation and coupon competition. The Bell Journal of Economics, 14(2), 315–325.
George, L. M. (2009). National television and the market for local products: The case of beer. The Journal of Industrial Economics, 57(1), 85–111.
George, L. M. (2011). The growth of television and the decline of local beer. In J. Swinnen (Ed.), The economics of beer. Oxford: Oxford University Press.
Gokhale, J., & Tremblay, V. J. (2012). Competition and price wars in the U.S. brewing industry. Journal of Wine Economics, 7(2), 226–240.
Gómez-Corona, C., Escalona-Buendía, H. B., García, M., Chollet, S., & Valentin, D. (2016). Craft vs. industrial: Habits, attitudes and motivations towards beer consumption in Mexico. Appetite, 96(1), 358–367.
Gourvish, T. R. (1994). Economics of brewing, theory and practice: Concentration and technological change in the USA, UK, and West Germany since 1945. Business and Economic History, 23(1), 253–261.
Gourvish, T. R., & Wilson, R. G. (1994). The British brewing industry 1830–1980. Cambridge: Cambridge University Press.
Hannan, M., & Freeman, J. (1984). Organizational Ecology. Cambridge MA: Harvard University Press.
Helfat, C. E., & Lieberman, M. B. (2002). The birth of capabilities: market entry and the importance of pre-history. Industrial and Corporate Change, 11(4), 725–760.
Hills, G., Lumpkin, G. T., & Singh, R. P. (1997). Opportunity recognition: Perceptions and behaviors of entrepreneurs. Frontiers of entrepreneurship research. Wellesey, MA: Babson College.
Horvath, M., Schivardi, F., & Woywode, M. (2001). On industry life-cycles: delay, entry, and shakeout in beer brewing. International Journal of Industrial Organization, 19(7), 1023–1052.
Johnson, S. (1993). On Tap Guide to North American Brewpubs Clemson, South Carolina, WBR Publications.
Klepper, S. (1996). Entry, exit, growth and innovation over the product life cycle. American Economic Review, 86(3), 562–583.
Klepper, S. (1997). Industry Life Cycles. Industrial and Corporate Change, 6(1), 145–182.
Li, F., Shi, Y., Boswell, M., & Rozelle, S. (2018). Craft beer in China. In C. Garavaglia & J. Swinnen (Eds.), Economic perspectives on craft beer: A revolution in the global beer industry. London: Palgrave Macmillan.
Madsen, E. S., Pedersen, K., & Lund-Thomsen, L. (2011). M&A as a driver of global competition in the brewery industry. Aarhus: Aarhus University.
Maslow, A. H. (1954). Motivation and personality. New York: Harper.
Mason, C., & McNally, K. (1997). Market change, distribution, and new firm formation and growth: The case of real-ale breweries in the United Kingdom. Environment and Planning A, 29(2), 405–417.
McGee, J., & Thomas, H. (1986). Strategic groups: Theory, research and taxonomy. Strategic Management Journal, 7(2), 141–160.
Mezias, J. M., & Mezias, S. J. (2000). Resource Partitioning, the Founding of Specialist Firms, and Innovation: The American Feature Film Industry, 1912–1929. Organization Science, 11(3), 306–322.
Mittelman, A. (2008). Brewing Battles A. History of American Beer. NewYork: Algora Publishing.
Muniz, A. M., Jr., & O’Guinn, T. C. (2001). Brand community. Journal of Consumer Research, 27(4), 412–432.
Murray, D. W., & O’Neill, M. A. (2012). Craft beer: penetrating a niche market. British Food Journal, 114(7), 899–909.
Nelson, R. R., & Consoli, D. (2010). An evolutionary theory of household consumption behavior. Journal of Evolutionary Economics, 20(5), 665–687.
Nicosia, F. M., & Mayer, R. N. (1976). Towards a sociology of consumption. Journal of Consumer Research, 3(2), 65–75.
Ninomiya, M., & Omura, M. (2018). Government regulations and microbreweries in Japan. In C. Garavaglia & J. Swinnen (Eds.), Economic perspectives on craft beer: A revolution in the global beer industry. London: Palgrave Macmillan.
Nye, J. (2007). War, wine and taxes. Princeton: Princeton University Press.
Péli, G., & Nooteboom, B. (1999). Market partitioning and the geometry of the resource space. American Journal of Sociology, 104(4), 1132–1153.
Poelmans, E., & Swinnen, J. (2011). A brief economic history of beer. In J. Swinnen (Ed.), The economics of beer. Oxford: Oxford University Press.
Poelmans, E., & Swinnen, J. (2018) Belgium: Craft Beer Nation? In C. Garavaglia & J. Swinnen (Eds.), Economic perspectives on craft beer: A revolution in the global beer industry. London: Palgrave Macmillan.
Pokrivčák, J., Lančarič, D., Savov, R., & Tóth, M. (2018). Craft Beer In Slovakia. In C. Garavaglia, & J. Swinnen (Eds.), Economic Perspectives on craft beer: A revolution in the global beer industry. London: Palgrave Macmillan.
Porter, M. E. (1979). The structure within industries & companies’ performance. Review of Economics and Statistics, 61(2), 214–227.
Prahalad, C. K., & Ramaswamy, V. (2004). Co-Creating unique value with customers. Strategy and Leadership, 32(3), 4–9.
Sammartino, A. (2018). Craft brewing in Australia, 1979–2015. In C. Garavaglia & J. Swinnen (Eds.), Economic perspectives on craft beer: A revolution in the global beer industry. London: Palgrave Macmillan.
Schreier, M., Oberhauser, S., & Prügl, R. (2007). Lead users and the adoption and diffusion of new products: Insights from two extreme sports communities. Marketing Letters, 18(1/2), 15–30.
Sutton, J. (1991). Sunk Costs and Market Structure. Cambridge, MA: MIT Press.
Swaminathan, A. (1995). The Proliferation of Specialist Organizations in the American Wine Industry, 1941–1990. Administrative Science Quarterly, 40, 653–680.
Swaminathan, A. (1998). Entry into new Market Segments in Mature Industries: Endogenous and Exogenous Segmentation in the US Brewing Industry. Strategic Management Journal, 19, 289–404.
Swinnen, J. (Ed.). (2011). The Economics of Beer. Oxford: Oxford University Press.
Swinnen, J. (2017). Some dynamic aspects of food standards. American Journal of Agricultural Economics, 99(2), 321--338.
Swinnen, J., & Briski, D. (2017). Beeronomics: How Beer Explains the World. Oxford: Oxford University Press.
Tappi, D. (2005). Clusters, adaptation and extroversion. A cognitive and entrepreneurial analysis of the marche music cluster. European Urban and Regional Studies, 12(3), 289–307.
Toro-Gonzalez, D. (2018). Craft brew industry in Latin America: The case of Colombia. In C. Garavaglia & J. Swinnen (Eds.), Economic perspectives on craft beer: A revolution in the global beer industry. London: Palgrave Macmillan.
Tremblay, V. J., & Tremblay, C. H. (2005). The US brewing industry: Data and economic analysis, The MIT Press.
Utterback, J., & Suarez, F. (1993). Innovation, Competition, and Industry Structure. Research Policy, 22(1), 1–21.
Van Dijk, M., Kroezen, J., & Slob, B. (2018). From pilsner desert to craft beer oasis: The rise of craft brewing in the Netherlands. In C. Garavaglia & J. Swinnen (Eds.), Economic perspectives on craft beer: A revolution in the global beer industry. London: Palgrave Macmillan.
Van Herck, K., Swinnen, J., & Deconinck, K. (2012). How the East was won: Supply chain restructuring in the Eastern European beer market. German Journal of Agricultural Economics, 61(4), 213–222.
Van Tongeren, F. (2011). Standards and international trade integration: A historical review of the German ‘Reinheitsgebot’. In J. Swinnen (Ed.), The Economics of Beer. Oxford: Oxford University Press.
Wall Street Journal. (2015). Available at http://www.wsj.com/articles/craft-brewers-take-issue-with-ab-inbev-distribution-plan-1449227668.
Weersink, A., Probyn-Smith, K., & Von Massow, M. (2018). The Canadian Craft Beer Sector. In C. Garavaglia, & J. Swinnen (Eds.), Economic Perspectives on Craft Beer: A Revolution in the Global Beer Industry. London: Palgrave Macmillan.
Weiner, J. (2014, March 26). A Fight is Brewing. The New York Times Magazine. Available at https://www.nytimes.com/2014/03/30/magazine/a-fight-is-brewing.html.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Appendix 1
Rights and permissions
Copyright information
© 2018 The Author(s)
About this chapter
Cite this chapter
Garavaglia, C., Swinnen, J. (2018). Economics of the Craft Beer Revolution: A Comparative International Perspective. In: Garavaglia, C., Swinnen, J. (eds) Economic Perspectives on Craft Beer. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-58235-1_1
Download citation
DOI: https://doi.org/10.1007/978-3-319-58235-1_1
Published:
Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-319-58234-4
Online ISBN: 978-3-319-58235-1
eBook Packages: Economics and FinanceEconomics and Finance (R0)