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Craft beer industry helping to power Michigan’s economy

Russ White MSU Today
Trey Malone

Michigan State University has published a first of its kind study, published in the journal Beverages, that shows the respectable economic impact of burgeoning beer and craft beer's entire value chain on the state of Michigan.

Trey Malone, MSU agricultural economist, is the study's lead author. 

“The idea of craft beer isn't very old,” says Malone. “A craft beer or a craft brewery itself has less than six million barrels, which I know sounds like a lot, but relative to some of the big players in the beer industry, that's a drop in the bucket really. One important attribute of craft beer is that it has to be independently produced. It has to be owned by a small private company, and that's something that's very important in the modern era where mergers and acquisitions are standard practice.

“In our study we really tried to spend a lot of time understanding the value chain. Most people think they can go buy a beer and that beer is local just because it was brewed there. Well, in Michigan, we have a lot of very interesting aspects to the value chain itself, especially with regards to hops. Now, we have a lot of malting barley in the state, too, that we're trying to develop. Spartan Barley is one that's really interesting. On the hops side, we're actually the fourth largest hops producing state in the country, and the other three are in the Pacific Northwest. This creates a lot of very interesting opportunities for us to imagine a world where we have this vertically integrated hops beer value chain that almost no other state could have.

“We are in the middle of a really large project looking at the effect of what's called terroir. Wine drinkers will know a merlot grape is supposed to have a different flavor profile if it's grown in France than if it's grown in California. We're applying the same concept to beer.”

And every dollar spent on craft beer makes its way back to the growers in Michigan.

“You really are supporting a local economy every time you purchase something from a small Michigan brewery. And that's not necessarily the case in the places like Oklahoma where when you buy your beer there, and as soon as the beer is purchased, the dollars kind of circulate outside of the state. Michigan doesn’t have to be that way.

“The reason I think it's important to think about all of this as a value chain is that there are a lot of pieces of value added that don't necessarily lead to an increasing supply. Artists work on labels, for example, and the actual distribution itself is valuable. It's not just the inputs that really go into the beer, but it's everything that goes along the line.”

Michigan had three microbreweries in 1993. Today, there's more than 330, and that number is growing. In comparison, Michigan has more than twice as many breweries than the entire U.S. had in 1978. Michigan ranks fourth in the number of breweries first east of the Mississippi River, and 11th overall in terms of craft beer production. To feed this growth, hop and barley production have grown exponentially in quantity and quality, and Malone feels there's potential for more growth there.

Credit MSU University Communications

“Michigan itself is uniquely positioned to take advantage of its geography in a way that most other states could never imagine.”

Malone says legislators can help the cause by eliminating some of the extensive regulations impacting the industry.

“We've found that the more laws that exist, the fewer breweries that you have. One of the best ways a state's legislature can promote its beer industry is by simply allowing people to innovate and create beer with minimal government intervention.

“What is important about that is to understand that relative to some other industries that we might hold near and dear, this one actually creates much more economic value than people realize. And I think that that's an important thing for us to re-emphasize as we move forward in this craft beer space.”

What are challenges and opportunities ahead for Michigan’s craft brew industry?

“One of the most interesting things for the industry, and for drinkers for that matter, is something called a harvest ale and wet hopping. Most of the craft beers that you drink are dry hopped, and that's a fun, more flavor-forward way to add hops to a beer. Wet hopping involves harvesting and taking the cone and putting it in the beer within 24 hours of harvesting. Almost no other state can do that outside of the Pacific Northwest. That's something that we actually do very well because we can actually get the hops from Traverse City to Grand Rapids in a hurry. The really exciting thing is that we have this opportunity to consume beers that most places could never imagine. The more consumers buy into this unique flavor profile of the beers in Michigan, the better off the industry will be.”

Malone talks about his role as an agricultural economist and says there’s a burgeoning hemp industry growing in Michigan.

“We'll have almost twice as many hemp farmers in Michigan as we do tart cherry growers this time next year.”

MSU Today airs Sunday afternoons at 4:00 on 105.1 FM and AM 870.

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