Cannibalization and Output Effects

As mentioned before, data regarding just how many people the breweries in the sample employ was not available. Because of that, breweries as large as Sam Adams are considered to be just as important as the smallest microbreweries to a local economy. The rationale here was that once regional support has allowed the firm to grow large enough, it will no longer rely on local drinkers, and new entrants can enter the market without any cannibalization effect. Marketing literature seems to suggest that most craft beer drinkers are not loyal to only one brand, but rather enjoy a number of different beers, making this a somewhat safe assumption. However, perhaps it is not hard to identify some possible exceptions. To go back to the example of Sam Adams, when brewpubs are not included, Suffolk County, MA has a peculiarly low amount of craft breweries given the demographics of the county. Perhaps part of the reason for this is that its residents are really so enamored with Sam Adams and Harpoon that it would be unwise for a new brewer to expect any local support when opening up a new brewery in that town. Perhaps, in some cases, a single craft brewery can actually control the region’s craft beer market through brand loyalty. There are probably better explanations to the Suffolk County problem. Given the density of Boston and the adjacent cities, it stands to reason that locating a manufacturing operation in Suffolk County could be very expensive. Moreover, there are a number of considerably more inexpensive locations where one would still consider to be part of Greater Boston.¹⁸ It is not entirely unreasonable to believe that larger breweries may compete with new entrants for their local market, even long after they have established themselves as exporters.

¹⁸ Again, counties can be a pretty weak unit for measuring regional economies.