The Economic Contribution of Craft Brewing in Montana

Colin B. Sorenson and Todd A. Morgan Bureau of Business & Economic Research The University of Montana October 8, 2012

Who we are & what we do

Research branch of UMs School of Business Administration
Regional economic analysis Survey research Kids Count Publications Industry analysis Manufacturing (brewing, wood products, etc.)

Prior work done by the BBER

Entities we have worked with through contracts and agreements: State of Montana DNRC Dept. of Labor DPHHS State Auditors Office The University of Montana Montana Tavern Association Montana Brewers Association US Forest Service Montana Chamber of Commerce Arch Coal Rocky Mountain Laboratories Major hospitals around the state Tribal Councils And many others

Research Approach
Research question: what would the Montana economy look like if the craft brewing industry did not exist in Montana? Good data on the income flows that the industry itself produces is a critical starting point for the analysis. BBER utilized a well respected economic model (REMI) to project how the economy would look minus brewing industry activities.

Data Collection
A survey was administered via email and phone to all Montana brewers. Production, sales, employment, compensation, expenditures, benefits. 97% of brewers (30 of 31) that operated in 2010/2011 responded to the survey. Survey data were aggregated and input into the economic impact model.

Impact Study Research Notes

Not a shutdown scenario this research imagines an economy where the industry never existed in the state. Uses operational and financial data collected from Montana brewers for calendar year 2011. All impacts presented compare a with brewing scenario to a without brewing scenario. The figures represent the total contribution of the operations of craft brewers to the Montana economy.

Research Design
Baseline Scenario (With Brewing) Model No Brewing Scenario Alternative Baseline Economic Impact (Baseline minus Alternative)

Summary Survey Data

Production (1,000 bbl)
120

Production increased from just over 87k bbl to nearly 103k bbl from 2010 to 2011 an 18% increase

100 80 60 40 20 0 2010

103 87

2011

Summary Survey Data (cont.)

Sales ($Millions)
30

Sales increased from just under $22 million to over $26 million from 2010 to 2011 a 20% increase

25 20 15 10 5 0 2010

26.1 21.8

2011

Summary Survey Data (cont.)

Employment (full & part-time jobs)
350

Employment increased from 231 to 320 from 2010 to 2011 a 39% increase

300 250 200 150 100 50 0 2010

320

231

2011

Summary Survey Data (cont.)

Compensation ($Millions)
7

Compensation increased from $5.2 million to $6.4 million from 2010 to 2011 a 23% increase

6 5 4 3 2 1 0 2010

6.4 5.2

2011

Summary Survey Data (cont.)

Brewery Expenditures ($Millions)
20

Expenditures (excluding labor) increased from $15.6 million to $18.8 million from 2010 to 2011 a 21% overall increase

18 16 14 12 10 8 6 4 2 0 2010 2011

Overall 21% 9.6

11.3

Out-of-state 18%

6.0

MT 25%

7.5

Summary Survey Data (cont.)

Employee Benefits
18 16 Number of Breweries Offering Benefit 14 12 10 8 6 4 2 0 Health insurance Dental insurance Life insurance Retirement Short-term disability Long-term Paid vacation disability Other

16

16

12 9 7 4 4

Statewide Economic Impacts Summary

Category
Total Employment Output (private sector sales) Compensation (private non-farm) Compensation (government) Population State government revenues

Units
Jobs $ Millions $ Millions $ Millions People $ Millions

Impact
434 48.4 9.8 1.8 36 1.5

Note: Impact refers to the difference between the baseline with brewing scenario, and the alternative without brewing scenario

Employment Impacts by Industry

(Number of Workers)
State and Local Government, 29 Construction, 24 Retail Trade, 14 Health Care, 10

Manufacturing, 319

Other, 38

Output (Gross Sales) Impacts by Industry

(Private Sector, $Millions)

Construction, 2.5 Health Care , 1.1 Manufacturing, 39.5 Retail Trade, 1.1 Real Estate , 0.9 Wholesale Trade, 0.9 Other, 2.4

Economic Regions & Number of Active Breweries, 2011 (33 total)

Employment Impacts by Region

250

244

200

Number of workers

150

100

57
50

65

59

9
0 Northwestern Southwestern North Central Eastern South Central

Montana Region

Output Impacts (Gross Sales) by Region

30

27.6

25

20

$ Millions

15

10

5.8
5

6.9

7.5

0.6
0

Northwestern

Southwestern

North Central

Eastern

South Central

Montana Region

Private Non-Farm Compensation and Earnings Impacts by Region

7

6.3
6 5

5.7 Compensation Impacts by Region Earnings by Place of Work Impacts by Region

4 3

2.2
2 1 0 Northwestern Southwestern North Central Eastern South Central

1.6 0.9 1.1 0.2 0.5

1.4

1.8

Montana Region Note: Earnings include proprietors income

Top 5 States for Fewest People per Craft Brewery

State 1. Vermont 2. Montana 3. Oregon 4. Alaska 5. Colorado
Source: Brewers Association, May 2012

People per brewery 27,206 30,919 31,662 35,512 39,600

Summary
The Montana brewing industry has been growing rapidly. From 2010 to 2011:
Production +18% Sales +20% Employment +39% Compensation +23% Expenditures +21%

Summary (cont.)
Operations of craft brewers produce a significant impact on the state economy Over 430 jobs, nearly $50 million in private sector sales, $9.8 million in private non-farm compensation, $1.8 million in government compensation, and $1.5 million in state government revenues exist in the economy due to craft brewing operations Jobs are spread across wide spectrum of the economy Impacts recur every year the brewing industry operates

Conclusion
We now have a baseline of the industrys current economic impact in Montana Possible future work
Revisit the analysis to quantify the change in economic impact over time Analyze potential impacts of policy initiatives or changes in legislation (e.g. 10,000 bbl limit)

Thank you. Comments/Questions?

Photo: Brewers Association

colin.sorenson@business.umt.edu todd.morgan@business.umt.edu 406-243-5113 www.bber.umt.edu