Craft Brews & Economic Development: The Rules are Changing

New York acreage dedicated to the production of hops has already doubled since last year and growers have invested more than $2 million in hops production over the last two years.

As economic developers, we often discuss leakages, supply chains, and industry clusters—and what more fun way to explore these topics than through the lens of craft beer, cider, and spirits.

It's hard to imagine small, craft alcohol businesses being a significant force in economic development—until you realize how integrated this industry is with agriculture, tourism, and urban revitalization. Many states are trying to leverage these linkages and the current interest in craft alcoholic beverage production to promote economic development, New York being one of them. Over the past several years, New York has been working to promote its micro-alcohol industry by enacting legislation to incentivize the creation of new breweries, cideries, and distilleries; streamline regulations; and reinforce linkages with agriculture and tourism.

To conduct "research" for this article, I visited a friend at his new job at Nine Pin Cider Works in Albany, NY. In February 2014, Nine Pin received the first "farm cidery" license in the State. This new designation stipulates that 100% of the apples used in Nine Pin's ciders must come from New York. Nine Pine takes this requirement a step further, using apples only from the orchard-rich Capital District and Hudson Valley regions of New York.

This regulation represents one way in which New York is attempting to capitalize on the growth of craft alcohol producers. In addition to the farm cidery license, New York has established farm brewery and farm distillery licenses. To hold one of these licenses and produce a New York–labelled product, the beverage must be meet quotas for locally sourced ingredients. "Farm ciders" are already required to source 100% of their apples from New York orchards. For breweries, this requirement is beginning at 20% of hops and 20% of all other ingredients sourced in New York and gradually increasing over the next 10 years to allow New York farmers to catch up to this new demand. By 2024, at least 90% of the hops and 90% of the other ingredients used in a "farm brewery" must be sourced from within New York.

Farmers cannot respond to this incentive quickly enough.  As more and more breweries try to source their hops and other ingredients locally, farmers have attempted to increase their output. New York acreage dedicated to the production of hops has already doubled since last year and growers have invested more than $2 million in hops production over the last two years. The growth of craft breweries and the new legislation has created a new opportunity for a valuable crop that can be grown throughout the state. Unlike grape production, which is limited to certain regions, most areas of New York can grow hops to supply the burgeoning craft beer industry.

To encourage the production of hops, New York has dedicated $350,000 to research on key brewing ingredients to determine the varieties and production methods that could increase New York's output. 

New York and other states are also capitalizing on the benefits that craft alcohol production can have for the tourism industry. Craft alcohol production enhances the tourism possibilities in a community, providing unique experiences to a tourist that cannot be replicated elsewhere. To enhance the value of the beverage industry to tourism, New York has initiated the Taste NY campaign. Taste NY markets the State's local food and beverage industry through a combination of traditional marketing and strategic promotion. Local products are on display at locations with high tourist traffic, such as along major highways and at airports. Individual New York regions have also capitalized on the tourism benefits of craft alcohol production. The Buffalo Niagara Enterprise, which promotes economic development in Western New York, has created a brew trail to guide tourists and residents through a chain of craft breweries.  

However, New York's interest in craft alcohol production extends beyond supply chains, linkages, and tourism. These beverage industries can also have a profound effect on the surrounding community. The occasion that drew me to Nine Pin was a "Ciders and Sliders" event being hosted by the cidery, in partnership with local food truck Slidin' Dirty. The Nine Pin tasting room, formerly an abandoned marble warehouse, was buzzing with patrons who were experiencing a product produced in their own backyard, from ingredients sourced from around their region, while enjoying food from a local vendor. Up and down the street are lively local breweries, distilleries, and beer gardens in an area that I'm told was, in the not too distant past, mainly abandoned warehouses and vacant buildings.

The craft alcohol industry has been recognized for its ability to rehab abandoned spaces, creating a place that draws in the community and tourists and sparks a larger urban revitalization. Communities across the United States are actively encouraging breweries to occupy abandoned urban spaces in hopes of revitalizing abandoned or dilapidated neighborhoods. The list of cities and neighborhoods that have been transformed as a result of (or in conjunction with) the establishment of a brewery range from Cleveland and Brooklyn to much smaller, rural communities. Breweries and other craft alcohol producers can attract residents and tourists who may not visit the area otherwise, leading to the potential for complementary businesses to start in the area. Additionally, craft breweries typically pay a wage that is higher than other hospitality industries.

According to the Brewer's Association, New York ranks 6th for number of barrels of craft beer produced per year at 859,535. However, it ranks 19th for number of gallons per capita, suggesting that New York's craft beer market is not yet saturated and that there continues to be room for growth. With the benefits of this potential growth to agriculture, tourism and urban areas, it will be exciting to watch how this industry continues to affect New York State.

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