Drink Beer for Science: An Experiment on Consumer Preferences for Local Craft Beer

The U.S. and global beer industries include a great many smaller-scale craft breweries supplying numerous differentiated products as well as a few macro-breweries with less diverse beer portfolios. The craft and macro segments of this industry have become quite distinct, with little substitutability between the two types of beer. Furthermore, the craft segment has realized consistent growth whereas large breweries have seen a steady decline in sales since the early 2000s. Macro-breweries have responded by acquiring smaller breweries in an attempt to capture a share of the craft market. My other (ongoing) research has shown positive consumer preferences for local craft beer and mixed responses to acquisitions, but without controlling for consumer definitions of “local” or knowledge of acquisitions. This study implements an experimental approach to measure consumers’ willingness-to-pay (WTP) for locally produced and independently owned beer. During the month of January 2018, customers at a local beer bar were asked to participate in an experiment in which they compare their initial beer selection with ten other beer offerings from the bar, selected at random; they were given some information about location and ownership of the breweries for these selections, details varying among participants. To conclude the experiment, participants were tested for their knowledge of acquisitions. The result is a dataset consisting of consumer demographics and their WTP that is independent of supply side effects. Hedonic analysis clearly indicates that consumers prefer locally owned and independently produced beer, and how much they are willing to pay for those attributes.