Oregon Office of Economic Analysis

While we’re busy working on next week’s economic and revenue forecast, I have two sneak peeks this week that preview some of our upcoming research. First up is our forthcoming report on Oregon start-up breweries. Not only does Oregon lead the nation in craft beer consumption (20% of all beer sold in Oregon is craft, the U.S. is 11%) but the vast majority of the growth in local sales is driven by new breweries and their products. While the state’s legacy breweries have seen increased sales, much of their growth in recent years is outside of Oregon (either in other states or internationally.) These industry trends are certainly encouraging and also in stark contrast to new business formation and entrepreneurship at large.

The report also covers the typical growth path for start-up breweries in Oregon, including a few case studies, the fact breweries are value-added manufacturing and a so-called traded sector industry, breweries’ geographic footprint across Oregon, avenues for future growth, and a cursory look at a potential craft beer bubble. In the meantime, do read this great Thrillist article on the future of craft beer that includes/features Oregon State professor Patrick Emerson (you know him from The Oregon Economics Blog, and/or Beeronomics.) It’s a really well-done article that hits on a lot of points that are likely to emerge moving forward.

One of the key takeaways from the article, the broader craft beer discussion and our research, is that so far there are no signs that any potential bubble is bursting. Whether one is inflating or not is open for discussion, however at some point the craft beer market will hit its saturation point. Then one should expect to see more price competition, mergers and acquisitions and business failures. Contrary to many people’s perceptions, Oregon has seen brewery failures in the past decade, see Brian Yaeger’s take on closures. While many are quite small, these failures do include some long-standing and/or sizable ones (Roots Organic, Rogue’s Eugene Public House and Track Town Brewery, e.g.) However, so far Oregon breweries fail at rates that are three or four times lower than businesses overall in the state. While we expect the number of failures to increase in the future — mostly because there are three times as many breweries today than a decade ago — the industry, and broader alcohol cluster, is doing quite well here in Oregon. To the extent that Oregon is and will continue to develop a growing cluster of firms, products, knowledge and talent, it will further economic growth in the state.