New York’s Craft Beer Explosion

How my family’s go-to middle-of-nowhere apple picking spot is now making boozy products being sold in the heart of New York City.”

By David Riccione

Last week I was walking back to my apartment in midtown east from the gym on a Friday, looking to pick up a bottle of wine (or three) before a few friends were coming over for a small soiree before the night began. I’m pretty routine in my buying habits, usually patronizing the liquor store across the street from my place. It was a nice night out and I was feeling adventurous, so I stopped first at the store closest to the gym. Upon arrival, I was greeted by an unexpected, yet somehow familiar, advertisement for 1911 Hard Cider.

This may mean nothing to you, but bear with me because it gets exciting. Most people in the city are familiar with the rise in preferences for hard cider. To me, though, what was most interesting was that this cider was brewed almost 4 hours north of the city in a relatively inconspicuous rural area just south of where I grew up, Syracuse, New York. I only recognized the advertisement because my family frequented the apple orchard that was used in the cider making process, called Beak and Skiff; so I wondered how my family’s go-to middle-of-nowhere apple picking spot was now making boozy products being sold in the heart of New York City.

The answer relies on the explosive growth of the craft beer and cider industry New York State has experienced in the last 4 or so years, one that has been catalyzed by government legislation, and could serve as an example for analogous industries in the state.

The Story Begins

In 1976, the New York State legislature passed the Farm Winery Act, making New York’s sleepy, discount oriented, low quality wine industry the 3rd largest in the union. Today, the market is valued at $4.8 billion, and has arguably the best producers of Dry Riesling in the New World. The law tripled the number of wineries in the state by creating a model which greatly reduced regulatory friction to grow grapes, and vinify wine, such that smaller makers could feasibly enter the market without the financial burden of red tape that most New Yorkers are so used to.

Then, in 2012, lawmakers, under some pressure from lobbyists in New York’s other alcoholic beverage sectors, decided to apply the same model of success witnessed in the wine industry, to craft beer. The Farm Brewing Law was passed to help prospective farm brewers in the state receive licenses to manufacture beer under the stipulation that they source their inputs locally. The model greatly reduced the regulator barriers to brewing in New York in exchange for covenants from the brewers to ultimately relocate 90% of their ingredients from New York State suppliers by 2024.

If brewers meet the state’s demands, they are also rewarded with a number of other business perks which have the potential to propel profitability. First, the state rewards brewers with a special label that identifies them for having been sourced from New York for the entirety of their supply chain. Brewers also aren’t required to have a license to serve on their premises, and can have up to five branch offices where they can market and serve their products without additional licenses. The act reduced a wide variety of regulations imposed on local brewers, and the state boasted that as a result, the review time for manufacturers to receive their licenses were cut in half between 2010 and 2014.

In 2013 the Farm Cider Law was passed, which effectively duplicated the model of the Farm Brewery Law for the cider industry across the state. By 2014, after seeing tangible growth in both industries, the State continued to promote the craft beverage industry by passing the Craft New York Act, which deregulated the production cap for micro-breweries, and launched a $2 million Craft Beverage Marketing and Promotion Grant Program and a $1 million Craft Beverage Industry Tourism Promotion Grant.

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Economics Effects in New York State

I certainly felt the anecdotal effects of the state’s deregulation and subsidization of the craft alcoholic beverage industry on my way home last Friday, but indeed the value of the laws has been much deeper and wider than my own story may indicate.

According New York State Governor’s Office, the craft-brewing industry grew almost 60% between 2013 and 2014, a significant achievement considering the Farm Brewing Law went into effect in 2013. This represented almost $3.5 billion in original economic value for the state. The Napa based Stonebridge Research Group, an established beverage sector strategic consultant, found that by 2015, 11,366 direct and indirect jobs were supported by the craft brewing industry, and just over $500,000 was generated from the industry’s tourism draw. Much like the effect in the wine industry, New York now ranks as one of the top producers of craft beer – 7th in the nation by volume.

The positive effects of the craft beverage explosion extend past the immediate growth of breweries and cideries. Indeed, every industry on the value chain for craft beer has seen dramatic growth, compounding the economic benefits. According to the governor’s office, “Barley planting is growing rapidly, only about 2,000 acres are planted in New York today… (with) No barley was planted in the state before the emergence of the craft beer industry.”

State research continued to find that “the growth of craft beer has generated employment in a variety of related industries, from metal fabrication and construction, to tourism, printing and freight.” Indeed, the biggest constraint to the overall growth of the craft beer industry has been that supporting industries are not developing fast enough to support craft beer growth. This is obviously a major issue, as craft brewers need to meet the 90% quota that underlies their license to operate.

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Should It Be Generalized?

After researching the success of targeted deregulation in craft beverage industry in New York, I had to ask myself, in a state that is notoriously plagued with burdensome red tape and high taxes: why aren’t we using this an example model for our entire state economy? Surely it must be a convincing case in support of the argument for unleashing free enterprise, and giving business the freedom and latitude it needs to compete successful on a national scale.

Of course the rebuttal is that the state, in many ways, is subsidizing this industry through free marketing, direct grants, and in some cases tax credits. So the true question might not be, why isn’t government in New York more often getting off business’s backs, but rather why isn’t government being more of a positive interventionist in the most comprehensive sense? That means the full cocktail of subsidies, tax credits, de-regulation, etc. Governor Cuomo has certainly done a good job picking and choosing one or two of these strategies for select industries like nano-tech, but why not just do it for the entire economy?

Surely New York’s slower than average economic growth, Upstate New York in particular, should warrant broader economic policy change?

 

Sources:

“Cider.” 1911 Spirits. N.p., n.d. Web. 24 Apr. 2017.

Dcazentre@syracuse.com, Don Cazentre |. “How the Wine Industry Spread across New York State and Grew into a $4.8 Billion Business (maps).” Syracuse.com. N.p., 31 Mar. 2014. Web. 24 Apr. 2017.

“Farm Brewery.” New York State Brewers Association. N.p., n.d. Web. 24 Apr. 2017.

“Governor Cuomo Announces 59% Growth in NY Craft Beer Industry in One Year.”Governor Andrew M. Cuomo. N.p., 20 Apr. 2015. Web. 24 Apr. 2017.

“Governor Cuomo Signs Legislation Instituting New Tax Credits for New York City Beer Manufacturers.” Governor Andrew M. Cuomo. N.p., 04 Oct. 2016. Web. 24 Apr. 2017.

“Highlights.” Jama 315.15 (2016): 1539. Web.

Mohrman, Eric. “The TAP New York Craft Beer Festival.” CrushBrew. West 54th Media Group, 20 Apr. 2015. Web. 24 Apr. 2017.

Prepared For The New York Wine And Grape Foundation And New York State Brewers Associatio. The Economic Impact of Craft Beer on the New York Economy, 2013 (n.d.): n. pag. Web.