This document summarizes research on the geographic clustering of craft breweries in select American cities. The researchers analyzed data on breweries in 10 cities to test for absolute and relative clustering. They found evidence of absolute clustering in 9 cities using Ripley's K statistic, but mixed results for relative clustering compared to other alcohol outlets using Kulldorff's D statistic. While craft breweries may face zoning restrictions, their collaborative culture and benefits of "brewery hopping" suggest they still tend to cluster together. The researchers suggest further studying microbreweries and brewpubs separately to see if their clustering behaviors differ. They also propose exploring how to predict locations of new craft brewery openings.

1. 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 A T C H A R L O T T E
M A T T 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
1
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.

2. Traditional & Craft Breweries, 1887-2015
0
500
1000
1500
2000
2500
3000
3500
4000
4500
1873
1888
1892
1896
1900
1904
1908
1912
1916
1920
1935
1939
1943
1947
1951
1955
1959
1963
1967
1971
1975
1979
1983
1987
1991
1995
1999
2003
2007
2011
2015
AxisTitle
Chart Title
Traditional
Craft
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
2
Resource
Partitioning

3. The Appeal of Craft Beer
3
 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

4. Explaining the Geography of Craft Beer
4
 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?

5. Why might craft breweries cluster?
5
 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)

6. Collaboration
6
 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)

7. Collaboration
7
 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

8. Brewery Hopping
8
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

9. Methodology
9
 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?

10. Data and Cities
10
 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)

11. Summary of Results
11
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

12. Results (Ripley’s K)
12
 Evidence of absolute clustering in 9 out of 10 cities

13. Discussion
13
 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

14. Where to go from here?
14
 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?

15. Thank You
15