Drink Beer for Science: An Experiment on Consumer Preferences for Local Craft Beer

Abstract

The U.S. and global beer industries include a great many smaller-scale craft breweries supplying numerous differentiated products as well as a few macro-breweries with less diverse beer portfolios. The craft and macro segments of this industry have become quite distinct, with little substitutability between the two types of beer. Furthermore, since the early 2000s the craft segment has realized consistent growth whereas large breweries have seen a steady decline in sales. Macro-breweries have responded by acquiring smaller breweries to capture a share of the craft market. This study implements an experimental approach to measure consumers’ willingness to pay (WTP) for locally produced and independently owned beer. Regression analysis clearly indicates that consumers prefer locally owned and independently produced beer, and how much they are willing to pay for those attributes. (JEL Classifications: D12, L66)

Consumer willingness to pay for sustainability attributes in beer: A choice experiment using eco‐labels

“…Another interesting finding is the insignificance of the localness attribute, which we portray through text on the label stating the beer was “Locally Brewed,” leaving the definition of local up to the consumer following Hart (2018). One potential explanation is that our lack of a thorough description of localness caused respondents to disregard this attribute and focus more on the relatively better‐explained sustainability attributes.…”

“…A landfill diversion label, featuring a growing plant, indicates that the brewer has taken steps to increase landfill diversion (e.g., investing in warehouse balers or starting recycling programs). A final label (not shown in Figure 1) indicates whether the beer is produced locally, where the respondent is to infer his or her own definition of localness following Hart (2018). Localness is depicted through text affixed the label stating the beer is “Locally Brewed.” Finally, price per six‐pack ranges from $6.99 to $11.49 with $1.50 increments, which encompasses common six‐pack prices observed from an informal survey of local liquor stores.…”

“…While existing work examines WTP for organic or locally sourced craft beer (Ha, Atallah, Bazzani, & Nayga, 2017; Hart, 2018; Waldrop & McCluskey, 2018), little prior work directly estimates WTP for sustainability attributes in beer. Carley and Yahng (2018) conduct an online survey to elicit consumer WTP for both United States craft and mass‐produced beer that is made sustainably by “saving energy and reducing carbon emissions” (Carley & Yahng, 2018, p. 7).…”

“…Indeed, consumers are likely to be familiar with beer packaging and are likely to have strong preferences for bottles or cans (Watson, 2015, 2017, 2018). We include local brewing not as an environmental sustainability attribute—as local brewing need not imply sustainable production due to the existing efficiency differences in brewing equipment for small, local brewers, and larger, regional brewers (Brewers Association, 2017d; Sturm, Butcher, Wang, Huang, & Roskilly, 2012)—but rather because the craft beer movement has been linked to consumer preference for local products (Dobis, Reid, Schmidt, & Goetz, 2019; Garavaglia & Swinnen, 2017; Hart, 2018; Miller, Sirrine, McFarland, Howard, & Malone, 2019).…”

Craft Beer as a Means of Economic Development: An Economic Impact Analysis of the Michigan Value Chain

“…Acquisitions have become common in the craft beverage industry, although beer labeling is not always clear about the transition of ownership. This is due in large part to the value beer drinkers place on independently owned breweries [20]. For a more thorough discussion of mergers and acquisitions in the U.S. beer market, see Howard [21].…”