The local food and drink movement was built post-Great Recession and is experiencing its first major blow since its advancement. One industry that is especially struggling right now is the craft beer industry. Once stay-at-home orders were put in place, restaurants, taprooms, and brewpubs across the country were forced to close their doors for the foreseeable future. Some hoped to survive through innovative sales tactics such as home delivery or making hand sanitizer, but for most – those who rely on 80-100% of their sales coming from their taproom – it is impossible to sustain this pattern.
The Brewers Association, the primary organization for craft beer, has surveyed breweries on the affects COVID has had on business and daily operations. The results of the survey, released on April 7, 2020, show 2% of breweries are already planning on closing their doors and 12% expect to close their doors permanently if conditions remain unchanged for another month. This number jumps to a staggering 46% if the circumstances linger another three months. This, of course, has major consequences on local communities, who could see the landscape of their downtown change drastically from just a few months prior. But one area that has been overlooked is the major implications local agriculture.
Craft beer growth began in late 2000s and exploded in early 2010s, and while growth has slowed, new breweries continued to emerge across the country. Bart Watson, Chief Economist of the Brewers Association, states over 8,200 craft breweries were in-operation at some point in 2019, a record number dating back pre-Prohibition. For comparison purposes, there were 1,653 breweries in 2009, and today, 80% of adults live within 10-miles of a brewery. This explosion in craft can be largely attributed to the local food and drink movement, and it also sparked a movement towards hyper local agriculture for beer’s inputs, particularly hops.
Hops are a specialty crop traditionally grown in the Pacific Northwest states of Washington, Oregon, and Idaho. However, 29 states now report some level of commercial hop production. In a recent study out of Pennsylvania State University and the University of Toledo, the authors find a positive relationship between the number of craft breweries in a state and the number (and total acres) of hop farms in that state. In other words, as the number of craft breweries in a state increased, so too did the desire for local hops as inputs to local beer. Local hop farms became more appealing as many thought brewers and beer consumers would be willing to pay premiums for locally sourced ingredients, though the literature on the specific topic is rather scarce. These new farmers rely predominantly on nearby craft breweries to buy their hops.
But these small, local breweries who sell primarily in their taprooms are the same ones purchasing local hops and are at the highest risk of closing their doors. If these breweries are forced to close their doors, who is going to buy these local hops? That is the difficult question.
What makes the situation more complex is that hops are perennial crops, meaning they grow back each year without replanting. These non-PNW hop farms are newly established operations in the early stages of the crop life, which can range from 7 to 15 years. Many of these businesses are now hitting peak harvest years and will be searching for buyers for this year’s upcoming harvest. If their nearby breweries close, they are forced to search for new buyers, many of which likely have pre-existing contracts with other hop farms. If they cannot find buyers, they cannot make profits, and the decision of whether to rip the plants out of the ground will at least cross the growers mind.
One potential solution is for states to implement farm brewery legislation. Few states have implemented this sort of legislation, and New York has the most developed law of its kind. Specifically, farm brewery legislation would be a voluntary, opt-in policy that would require those breweries to brew their beer with a certain percentage of state grown inputs. For simplicity, assume the legislation only applies to hops, as expanding to barley would be more restrictive. The common incentive for this legislation in the past has been that breweries enrolled in the program benefit from relaxed regulations on permit requirements, allowing for self-distribution and serving other alcoholic beverages other than beer (e.g., cider). Why could this work?
Small craft breweries are searching for ways to survive during these extraordinary times. Farm brewery legislation could provide an avenue of survival, particularly if the voluntary program provided some sort of direct, immediate relief to brewers that federal legislation has been slow to provide. By incentivizing the use of locally grown inputs, farmers would also benefit, as their buyers and potentially new buyers would remain in business, thus reducing uncertainty as to the future of their crop. State governments would also benefit from this program’s development, as they could sustain the local food system their communities have spent nearly a decade building from scratch. State governments have been investing in local food as a means to provide a boost to the local economy.
The structure to such legislation could resemble that of New York’s Farm Brewery Law, where in year 1, 2020, breweries enrolled in the farm brewery program must brew with a minimum threshold of state grown hops (for New York, this started at 20%). Then, as state economies begin to recover, the minimum threshold increases incrementally, mirroring the policy from New York. Brewers then voluntarily choose to remain in the program, abiding by the new threshold – which will continue to increase periodically – and maintaining farm brewery status. If a brewer chooses to remove themselves from the farm brewery program, they lose all perks associated with the license. However, the hope is that the short-run aid and use of local inputs would be enough to bridge the gap between the pending local brewing industry collapse and stable conditions.
These hyper-local food systems are exactly that: a system. When one component of the system struggles the entire system struggles. Brewery closings would have devastating consequences on the local agriculture build around it. If there were ever a time to implement farm brewery legislation, now would be the time.