The Emergence and Survival of Microbreweries in Hungary

  • HUN-REN Centre for Economic and Regional Studies
  • Centre for Economic and Regional Studies
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This chapter investigates the emergence of microbreweries in Hungary after 2000. The privatization of the Hungarian beer industry leads to the dominance of the big multinational enterprises. Although in the early phase of the transition the number of microbreweries increased rapidly, their number had declined considerably during analyzed period. Our major findings are as follows: Microbreweries are typically short-lived, and they live only four years in average during a fifteen-year period. The entry rate of microbreweries was greater after the economic crisis than before it, while the exit rate decreased. However, in recent years, due to the new regulations on the beer market, relatively low entry costs, and rapidly growing demand for craft beers, the number of microbreweries started to increase again. New wave microbreweries efficiently reflect to the new generation demand for higher priced craft beers, and thus, they are able to create and exploit a new market segment. They concentrate on large university cities and Budapest using efficiently social media as a marketing tool.

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... Hopenhayn [47] also concluded that older firms enjoy higher profits and value. In the Hungarian beer industry, a company survives an average of 4 years, while the median value is 5.9 years; however, the mean and median lifetimes of microbreweries are less than half that of nonmicrobreweries [48]. ...
... Beside significantly lightened bureaucratic obligations, for the small-scale producers (breweries) excise duty was reduced by 50 percent. These reductions in entry barriers had a positive impact on companies and employment [48]. Also, home brewing up to 1000 litres became tax-free, which could be a competition for craft breweries. ...
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In terms of absolute alcohol consumption and total quantity consumed, beer is the most consumed alcoholic beverage in Hungary. The Hungarian beer industry is highly concentrated, the three largest, foreign‐owned companies ruled the market for almost 90% of total turnover in 2009– 2017. The study investigates the factors influencing the Hungarian beer industry’s economic perfor‐ mance, special attention given to the microbreweries. The analysis applied panel‐data linear models for the period of 2009–2017. The financial performance of breweries is represented by companies’ turnover, Earnings Before Interest and Taxes (EBIT) and profit along with explanatory variables of the age of brewery, Social Media activity, geographical location, direct sales, and impact of tax re‐ duction. Breweries with direct sales channels reached significantly higher sales, EBIT and profit. Breweries situated in or close to the capital are the most profitable due to the higher demand for high‐quality beer, in contrast, the distance from the capital had a negative impact on the firms’ per‐ formance. The Social Media activity–often used as the only promotion channel for the microbrew‐ ery–positively impacts the brewery’s profitability. Finally, tax reduction for small breweries intro‐ duced in 2012 had the most significant positive influence on the industry.
... Microbreweries use different strategies. Some use local sales channels or sell directly to nearby pubs. Others only deliver to major cities and the capital, and produce large quantities of few types of beer. On the other hand, new-wave microbreweries produce smaller quantities, but top-category premium products for paying consumers (Fertő et. al., 2018). We mainly examined breweries belonging to the third category. Due to their production method, composition, sensory and other properties, special quality beers have special properties for consumers and represent additional added value. Therefore, the Hungarian Food Code No. 2-96 concerning beer. directive had to be amended, and directiv ...
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The global craft beer market has seen a surge in consumer interest in recent years. Despite this trend, the technological challenges faced by small-scale brewery operators remain an under-explored area of research. This study aims to address this gap by examining the potential for operational failures through the perspectives of small-scale brewery managers. The research aims to provide insight into the complexities of supply chain management and the intricacies of economic processes within the craft beer industry. Additionally, the study seeks to evaluate the possibilities for sustainability within small-scale beer production. Given the exploratory nature of the study, a qualitative research design, specifically the constructivist approach of Grounded Theory Methodology, will be employed. The study will consist of in-depth interviews with the leaders of ten domestic and international small-scale breweries, focusing on market development opportunities, technological advancements, and sustainability. Small-scale breweries can be divided into three main components, which are closely related. Excessive losses during brewing, low automation and resulting food safety issues. The craft beer industry works with a loss ratio of at least 20%, which needs to be solved. The ultimate goal of this research is to propose innovative technological solutions that can improve the economic and food safety outcomes of small-scale beer production.
... Globally, mergers and acquisitions strongly contributed to a dramatic consolidation of the beer industry in the 1990s and 2000s. This was most dramatically demonstrated in Eastern Europe, where, after the collapse of the communist regime in 1989, the privatization of previously state-owned breweries led in the 1990s to the takeover of local breweries by multinational brewers such as AB Inbev,³ Heineken, and Carlsberg (Van Herck et al., 2012;Fertő et al., 2018;Chlebicka et al., 2018;Pokrivčák et al., 2018). ...
... This occurred across the global (Garavaglia & Swinnen, 2018a, 2020 Clemons et al. (2006) claim that in the United States, hyper-differentiation increases the diversity in craft beer and ultimately the prices of beer as well as consumer satisfaction. Consumers who value craft beer positively are willing to pay higher prices (Garavaglia & Swinnen, 2018b;Elzinga et al., 2018;Fertő et al., 2018). Therefore, firms need to know the factors that consumers identify with craft beer. ...
... To give an impression of the size of the market, in the year 2016 global beer consumption was estimated at approximately 186.89 million kilolitres (Kirin Holdings Company, 2017), up slightly from a figure of 183.78 million kilolitres the preceding year (Kirin Holdings Company, 2016). In concert with this increase in the consumption of beer, there has also been a marked increase in the number of innovative microbreweries operating in many countries (e.g., Hungary, North America, UK, and Italy; Fertő, Fogarasi, Major, & Podruzsik, 2018;Price, 2018) experimenting with beer. For example, Sailors Grave Brewing™ in Australia have been experimenting with the use of products such as seaweed, mushrooms, grapefruit, pumpkin, and yoghurt in their beers ( ...
This review critically evaluates the literature concerning the impact of visual appearance cues (including colour, foam, and cloudiness) on people's perception in the beer category. The authors assess both the sensory expectations that are elicited by the visual appearance of beer, and the extent to which those expectations carry-over to influence the actual tasting experience. Beer is a particularly intriguing category to study since the differing production rules in different countries mean that there is not always the same scope to modify the colour in order to meet perceived consumer demands. What is more, there is currently disagreement in the literature concerning the impact of beer colour and foam on people's expectations of beer prior to tasting, and their multisensory flavour perception on tasting. Given how much beer is consumed annually, it is surprising that more research has not been published that assesses the undoubtedly important role of visual appearance in this beverage category. Part of the reason for this may simply be that it is difficult to create consistent experimental stimuli given the rapid transition of the head of the beer post-serving.
Even beer being the most consumed alcoholic beverage around the world, there is not enough information generated for craft beers produced in Latin America, for either volatile profiles or physicochemical studies. In this work, the chemical and volatile components of ten commercial Blond Ale and nine Indian Pale Ale (IPA) beers from the Uruguayan market were studied using GC-MS. Principal component analysis applied to the data allowed differentiation among the two groups of samples while the volatile compounds and physicochemical parameters responsible for these differences were identified. The physicochemical properties revealed a great diversity between all beer samples even within the same beer style. The main significant differences were obtained for alcohol, polyphenols, bitterness, colour, and pH. Most Blond Ale beer samples were differentiated from IPA ones by raw fermentation aroma compounds such as 1-pentanol, 1-hexanol, hexanoic and isobutyric acids, 4-vinyl guaiacol, and 5,5-dimethyl-2(5H)-furanone. This is the first work that contributes to the knowledge of Uruguayan craft beers. The study also showed the ability of most of the Uruguayan microbreweries to brew Blond Ale and IPA craft beer styles that meet international standards for physicochemical quality.
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Research on those variables that have been shown to influence the consumer’s choice of beer is reviewed. The focus is on the choice of whether to drink beer as opposed to a beverage from another category, and to a greater extent, the choice between different types of beer. Inspired by previous research on a diverse array of factors that have been shown to influence food and beverage choice, the review examines how beer choice is driven by consumer variables (covering biological, psychological, and socio-cultural factors), product-intrinsic attributes (the sensory aspects of the beer itself), product-extrinsic attributes (external sensory characteristics, such as packaging), and contextual and environmental influences. These situational factors refer to variables such as the location where choice/consumption takes place (i.e., on- versus off-trade), as well as the context, occasion, and reason for drinking. Current trends related to choice and consumption, such as the emerging interest in beer-food pairing, are also examined. The review groups these attributes which affect people’s beer wanting, choice, and purchase in order to understand the beer consumer’s choice process. Along with general conclusions, a number of key directions for future research are also presented, given that the relative contribution of each type of factor on consumer’s choice behaviour is still unclear.
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This book investigates the birth and evolution of craft breweries around the world. Microbrewery, brewpub, artisanal brewery, henceforth craft brewery, are terms referred to a new kind of production in the brewing industry contraposed to the mass production of beer, which has started and diffused in almost all industrialized countries in the last decades. This project provides an explanation of the entrepreneurial dynamics behind these new firms from an economic perspective. The product standardization of large producers, the emergence of a new more sophisticated demand and set of consumers, the effect of contagion, and technology aspects are analyzed as the main determinants behind this ‘revolution’. The worldwide perspective makes the project distinctive, presenting cases from many relevant countries, including the USA, Australia, Japan, China, UK, Belgium, Italy and many other EU countries.
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This paper summarizes key insights that derive from a comparative analysis of the craft beer developments and the beer industry transformation in the various countries. Our paper starts with a discussion on the definition of craft beer (and microbreweries). First, we document when the craft beer movements started in the various countries, and how they have evolved. Then, we discuss the role of changes in demand, the role of pioneers in craft brewing, and what factors determined the re-emergence of small brewers. Some of the factors we discuss refer to the role of information, networks, regulation, capital, and technology markets. The last part of the paper concentrates on the reaction of the macro-brewers to the growth of the craft beer market.
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European Union regulation on quality food products (protected designations of origin (PDO) labelling) is expected to sustain competitiveness within the agricultural sector. This paper examines the impact of this policy on the survival of cheese firms over the period 1990–2006 in France. We show that such a policy (Appellation d'Origine Controlée) reduces exiting risk for smaller firms. However, smaller firms still have a lower survival rate compared with larger ones that cannot be compensated by the quality label effect.
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The purpose of this paper is to examine whether the dynamics of industrial organization differ in the Netherlands from what has emerged as a Stylized Fact in other countries. Because the Netherlands has pursued a unique set of institutions and policies comprising what has become known as the Polder Model, the factors leading to firm failure may systematically differ from those in other countries. We address this question using a longitudinal database from Statistics Netherlands (CBS) that identifies over two thousand firms in manufacturing and then tracks their performance over time.
Nous étudions les facteurs qui déterminent la propension des firmes à cesser leur activité. La productivité individuelle de la firme n’est pas directement observée mais estimée selon l’approche proposée par Ackerberg et al. (2006). Elle est ensuite introduite dans une équation de sortie à côté d’autres variables. On utilise un panel non cylindré de 5 849 firmes des industries agro-alimentaires françaises observées entre 1996 et 2002. La probabilité de cesser l’activité est négativement reliée à la productivité individuelle et l’âge de la firme. Au-delà de ces premiers résultats bien connus, nous montrons aussi que le niveau des coûts irrécupérables peut constituer une barrière importante à la sortie. La relation entre la propension à la sortie de la firme et le degré de concentration de l’industrie est marquée par la présence d’un seuil de retournement : d’abord croissante, la relation devient décroissante une fois ce point dépassé.
This paper surveys the Industrial Organization literature on firm survival. We find that, in retrospect, the econometric specifications used in this area have progressively become more sophisticated, addressing issues such as discrete time, unobserved heterogeneity and competing risks. We also identify a number of firm- and industry-specific covariates that provide largely consistent results across samples, countries and periods. On the other hand, the evidence is less clear-cut with regard to ownership and spatial factors.
This work examines the effects of productive efficiency on the survival of firms in the Greek food sector. Technical and scale efficiency scores are computed within a data envelopment analysis (DEA) framework and are used as explanatory variables in a parametric (Weibull) survival model. High technical efficiency increases the median survival time and lowers the hazard rate of exit. As the scale efficiency of a firm operating either at increasing or decreasing returns to scale approaches one (1), its theoretically maximum value, the expected median survival time, is maximized for all types of exits. Developments in biotechnology, the evolution of alternative food supply networks, innovations in the food sector and competition policy are likely to affect technical and scale efficiency of food manufacturing firms. Results unraveling the effects of technical and scale efficiency on the survival of firms in the food sector are of particular relevance to food policy makers.
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