America s Beer Distributors:

Transcription

1 2013 America s Beer Distributors: Fueling Jobs, Generating Economic Growth & Delivering Value to Local Communities William Latham & Kenneth Lewis Center for Applied Business & Economic Research Alfred Lerner College of Business & Economics, University of Delaware

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3 Contents I. Executive Summary...4 II. Methodology...6 III. Economic Impacts of Beer Distributors...7 Direct Effects of Beer Distributors...7 Direct Effects of Beer Distributors Capital Investment...7 Direct Effects of Beer Distributors Community Involvement...8 Interstate Component of the Economic Impacts of Beer Distributors...9 Analytical Model Used for Calculating the Impacts of Beer Distributor Activities Total Economic Impacts of Beer Distributors...9 Multiplier Effects of Beer Distributor Activities Downstream Effects of Beer Distributors Increased Economic Efficiencies from Beer Distribution in Comparison to a System Without Distributors What Beer Distributor Involvement Does for Communities What Taxes Generated by Beer Distributors Do for Communities IV. Detailed Results for the United States, Each State and the District of Columbia...19 Economic Impacts of Beer Distributors in the United States Economic Impacts of Beer Distributors by State V. Appendix About the Authors The Center for Applied Business & Economic Research at the University of Delaware

4 I. Executive Summary Economic impact analyses of the U.S. Beer industry have been performed at both the national and state levels for several decades. Previous studies that focused exclusively on the distributor tier, however, have been limited to just a few states, and most of these studies have focused almost entirely on the economic impacts of the operations of the distributors their purchases of materials and services to support their operations and the spending of employees and the resulting multiplier effects. This report, produced for the National Beer Wholesalers Association (NBWA), quantifies the magnitudes of different kinds of beer distributor activities (direct operations, capital investment activities and community involvement activities) and calculate their economic impacts. The findings for the United States include: (1) Beer distributors directly employ approximately 130,000 full-time equivalent persons in their operations. When the distributors capital investment and community involvement activities are added and their interplay with other sectors of the economy (multiplier effects) are taken into account, beer distributors generate more than 345,000 jobs across the United States. (2) Beer distributors add $54 billion to the national total value of production (gross domestic product). (3) For jobs, wages and salaries and the total value of production, the multiplier effects including the contributions from capital investment, community involvement and interstate effects are 2.7, 2.1 and 2.5. These multipliers are appropriately larger than those found in other studies because of the quantitative importance of the expanded impacts. The multipliers show how direct beer distributor activities result in total effects on their communities that are far larger. (4) Beer distributor activity generates federal, state and local taxes totaling approximately $10.3 billion. This sum can be used for various government functions. For example, it is sufficient to fund nearly 400 million hours of public school teacher instruction or to provide maintenance of nearly 400,000 miles of highways in the U.S. each year. 1 This figure does not include an additional $11 billion in federal, state and local excise and consumption taxes on beer sold in the United States. (5) Beer distribution is intimately tied to the fabric of the American economy, evidenced by the multiplier processes that connect beer distribution to the other parts of the economy. Personal services sectors are most impacted by beer distribution. Beer distribution also significantly impacts food services and drinking places, real estate, credit cards, pension funds and retail stores. (6) The existence of the distributor tier in the beer industry produces significant efficiencies for suppliers (brewers and importers), retailers and the economy by reducing the costs of transporting beer, servicing retailers and providing consumers with a wider range of choices than they would otherwise enjoy. This report follows solid 1 Teacher hours calculated at $27.50/hour and highway miles at $26,667.00/mile. 2 NBWA Report 2013 Produced by the Center for Applied Business & Economic Research, Alfred Lerner College of Business & Economics, University of Delaware

5 academic research findings in quantifying the total magnitude of these efficiencies. The transportation efficiencies that enhance consumer choice save the American economy approximately $22 billion per year. These efficiencies generated by beer distributors amount to more than $42,000 per year per retailer on average, or $116 per day every day of the year per retailer. Another way of viewing the $22 billion is in terms of social goods that can be provided to the U.S. by the efficiency gains. For example, more than 800 million public school teaching hours per year could be supported, or more than 825,000 miles of public highways could be maintained. Beer distributors also contribute to the economy through their role in reducing the cost of collection of taxes and providing easier enforcement of alcohol regulations. In this role, distributors act like quasi-government agencies that do not require public funds. (7) Beer distributors are good citizens in their communities across the U.S. They support numerous community events, a wide array of charitable activities and many activities promoting local economic development. In addition, they play a role in efforts to eliminate drunk driving, alcohol abuse and underage drinking through alcohol awareness, server training and education initiatives in schools and the media. Beer distributors economic impacts discussed for the United States as a whole, and for individual states, in the preceding paragraphs originate at the level of individual beer distributors in every state. The U.S. total discussed above is the sum of these state-level impacts because distributors impacts extend beyond their own states borders; this report quantifies this effect. NBWA Report 2013 Produced by the Center for Applied Business & Economic Research, Alfred Lerner College of Business & Economics, University of Delaware 3

6 II. Methodology For this report, the National Beer Wholesalers Association (NBWA) requested a broader and deeper examination of the role and value of beer distributors in the United States, highlighting the significance of this middle distribution tier (which operates within a three-tier system, where distributors source beer from brewers or importers and sell to licensed retailers). This report expands the usual economic impact analysis in five important ways 2 : (1) This report measures the volume of distributors capital investment activities including structures, vehicles, software, energy-saving technology and other equipment such as the substantial amounts of refrigeration equipment required for a perishable commodity like beer. The study adds the impacts of investments in all these areas to the usual impact of distributor operations; (2) This report recognizes that distributors impacts extend beyond their own states borders; quantifies these effects; and adds them to the usual isolated-state economic impacts. Simply adding the usual state-level impacts, which do not recognize the interstate effects, fails to account for a sizable portion of the economic contributions of beer distributors. (3) This report accounts for economic efficiencies generated by distributors and compares that with a hypothetical beer distribution system lacking distributors. (4) This report accounts for increased economic efficiencies that distributors provide to brewers and retailers by helping deliver a wide range of brands and labels, helping brewers access markets and retailers provide vast consumer choice; (5) This report measures the value distributors add in their local communities from supporting community events and local economic development to contributing to charitable causes and promoting responsible alcohol use. This report adds the impacts of these activities to the usual impacts of distributor operations. 2 This report concentrates on the economic impacts of beer distributors and their impact on the economy. As alcohol is not a product where the greatest output or lowest price is necessarily sought, this report does not address the issues of public health impact and related costs of alcohol. For example, see: 4 NBWA Report 2013 Produced by the Center for Applied Business & Economic Research, Alfred Lerner College of Business & Economics, University of Delaware

7 III. Economic Impacts of Beer Distributors This report measures the direct effects of beer distributor operations (direct effects), the effects of the operations of all indirect input producers (indirect effects) and the effects of spending induced by all employees (induced effects). Direct effects are the jobs, payroll and output created directly by the distributors in their own operations. Indirect effects are the additional jobs, payroll and output created when the beer distributors purchase goods, equipment and services from the many diverse businesses that support them. These businesses include providers of office supplies, fuel for trucks, utilities, insurance and many other business services. It is important to note that these providers do not include the suppliers of the beer and other products that are handled by the distributors. Additional rounds of indirect effects occur as providers make purchases from their own input providers. Induced effects measure the additional jobs, payroll and output created throughout the economy when the employees of the distributors or of the indirect providers, in any of the rounds, make purchases of consumer goods, other property and services or pay taxes using their wages and salaries. The total effect, or total impact, is simply the sum of direct, indirect and induced effects. Multipliers show the ratios of the total effects to the direct effects and are calculated separately for jobs, payroll and output. In addition, each kind of effect (direct, indirect and induced) consists of activities that are taxed by federal, state and local governments. This report utilizes a computer software program, IMPLAN (described further below), which is able to compute all of the indirect and induced effects of any direct effects. The report focuses next on identifying and quantifying all of the relevant direct effects, which can be used with the IMPLAN to calculate the impacts of beer distribution in the United States and in all of the individual states and Washington, D.C. Direct Effects of Beer Distributor Operations The measure of the magnitude of beer distributor operations, the direct effects, is the number of fulltime equivalent jobs in each beer distributor establishment. The number of distributor establishments in each state was obtained from Beer Serves America 3, based on NBWA members and Dun & Bradstreet data. U.S. Census data on employees per establishment for roughly two-thirds of all distributor establishments were expanded to include employment at the establishments omitted from the Census data. The resulting distributor employment figures for each state were checked by a number of state beer distributor associations for accuracy, and the figures for two states were adjusted to be more accurate. The report shows 130,152 full-time equivalent employees in 3,333 distributor establishments in the 50 states and Washington, D.C. 4 Using average wage and salary and value U.S Treasury s Alcohol and Tobacco Tax and Trade Bureau identifies over 6,000 federal beer distributor locations but many of these are establishments with licenses but which do not distribute significant quantities of beer. NBWA Report 2013 Produced by the Center for Applied Business & Economic Research, Alfred Lerner College of Business & Economics, University of Delaware 5

8 of production data for the wholesaling industry within each state, the figures for direct wages and salaries and total value of production, the totals for the U.S. are approximately $10 billion in wages and salaries and $22 billion in production. Direct Effects of Beer Distributor Capital Investment The economic model used to calculate impacts includes beer distributors in a broader industry. This industry does not normally have the kinds or quantities of capital investment required by beer distributors. For example, beer distributors require substantial quantities of refrigeration equipment because beer is a perishable product. Refrigeration is required not only within the distributor s facility but also in the trucks used to transport beer from the distributors to the retailers. The refrigeration equipment itself creates needs for additional capital in the form of structures that can be compartmentalized and refrigerated. Because refrigeration requires high levels of energy, beer distributors find it worthwhile to invest in energy saving technologies and even in their own generation. Some already are using efficient, compressed-naturalgas-powered trucks, and many have solar generation as part of their operations. This investment spending is the source of additional direct effects that produce economic impacts just as the direct operation expenditures do. In order to appropriately account for the additional capital spending that beer distributors undertake, data from state beer distributor associations was examined; several identified the volume of investment made by their members. Maine s figure was $8 million on state sales of $330 million, or about 2.4 percent of sales. Michigan provided information only on the total value of vehicles and structures that implied annual investment of those two types of about 2 percent of sales, which would indicate a higher percentage when all kinds of investment are included. The NBWA s Distributor Productivity Report gave us sales data for typical firms. Detailed data from individual distributors showed expenditures for structures and other forms of capital investment averaged about $800,000 per year for a typical five million case per year distributor. These data indicated annual investment activities amounting to at least 2.4 percent of annual sales, similar to the result for Maine. Based on the various sources, it was determined that a conservative estimate of annual investment would be at least 2.2 percent of sales. This figure together with state sales provided us with annual direct investment expenditures by state. Direct Effects of Beer Distributor Community Involvement Beer distributors are involved with their communities in many important ways. Some of this involvement is partially accounted for in the direct operations of the distributors. For example, when a beer distributor supports a responsible alcohol-usage program at local schools or when educational materials are produced by the distributor, the expenditures associated with those activities are accounted for as part of the distributor s overall direct operations. What is not accounted for, however, is the value of the benefits of various education programs to the communities from responsible alcohol usage. In addition to education programs, beer distributors also are involved in many volunteer and charitable activities. The funds that they provide to all kinds of charitable and community 6 NBWA Report 2013 Produced by the Center for Applied Business & Economic Research, Alfred Lerner College of Business & Economics, University of Delaware

9 agencies allow those agencies to make expenditures in the community to accomplish their goals. These expenditures are the source of additional direct effects that produce economic impacts just as the direct operation and investment expenditures do. There is considerable variation in both the nature and the extent of charitable and volunteer community involvement activities by beer distributors and their employees. Some brewers encourage distributors who specialize in their products to donate at least a penny per case. The Michigan Beer & Wine Wholesalers Association reports annual contributions by its members of approximately $4.5 million and, using its figures for relative volumes of beer and wine, which amounts to approximately 4.6 cents per case. Detailed data from individual distributors showed charitable and community involvement activities that amounts to about 2.2 cents per case. Based on the various sources, a conservative estimate of annual community involvement would be at least 2.2 cents per case for the average distributor for charitable activities not accounted for in overall direct operations. This figure, together with state case sales, provides an annual direct community involvement expenditures by state. The figures used for beer distributor community involvement do not include the charitable contributions or the volunteer activities, of the distributor owners or employees. This figure also does not include the value of contributions distributors make in community activities using paid employees because these activities are counted as part of the direct operations of distributors described above. Interstate Component of the Economic Impacts of Beer Distributors A narrow view of the economic contributions of beer distribution to a state includes only the effects of the distributors within that state, without allowing for any of the feedback stimulus that arises from out-of-state indirect input producers making purchases of their inputs in the state. For example, if a distributor in New York purchases office equipment in New Jersey, there is no impact on New York of the out-of-state purchase. But there is an effect on New Jersey derived from beer distributor activity in New York. In addition, if the office equipment supplier in New Jersey makes purchases of equipment from New York, those purchases should be attributed to the stimulus that originated with the New York beer distributor. Such effects are often not calculated in economic impact analysis. If the impact region is extended to the whole U.S., such interstate feedback effects are eliminated. Thus a true representation of the total impact of beer distributors on the U.S. only can be obtained by calculating impacts for the U.S. as a whole. Simply adding the narrowly defined state-level impacts would understate the true impact. For U.S. beer distributors, the understatement amounts to approximately 45 percent of the total impacts. Thus it is critically important to capture the interstate component of the economic impacts. The methodology of this report restores the missing interstate effects state-by-state. This is done for direct operations, capital investment and community involvement activities. The analytical model used for calculating the impacts is described in more detail in a box below. Total Economic Impacts of Beer Distributors After identifying the magnitudes of each of the direct effects identified in the paragraphs above for operations, investment and community involvement using the IMPLAN model, correcting for interstate effects, to calculate the indirect, induced and tax impacts for each of the states, Washington, D.C., and the U.S. the total effects for each state, Washington, D.C., and the U.S. are the sums of the direct, indirect and induced effects in each for jobs, wages and salaries and the total value of production. Multiplier Effects of Beer Distributor Activities The relationship (the ratio) between the total impacts, after all rounds of indirect and induced spending have been accounted for, and the direct effects is the multiplier effect. The initial direct spending has a ripple effect through the economy as successive rounds of spending and re-spending magnify its impact. In each round of spending and re-spending, some of the additional spending is lost from the local economy because some money goes into saving NBWA Report 2013 Produced by the Center for Applied Business & Economic Research, Alfred Lerner College of Business & Economics, University of Delaware 7

10 or non-local purchases. This is why multipliers have values for smaller states that are typically not as large as they are for larger states. A multiplier s size depends on the residency of the workforce, the average wages paid and the portion of intermediate purchases that are supplied locally. The multiplier is the numerical relationship between an original change in economic activity and the ultimate change in activity that results as the money is spent and re-spent through various sectors of the economy. An example of re-spending is when an employee of a distributor spends some of her wages on locally produced goods. The production of the goods the employee purchases, such as groceries or entertainment, is economic activity that can be indirectly attributed to the operations of the distributor. Thus, a one-dollar increase in local distributor operations results in expansion of total economic activity of more than one dollar throughout the rest of the economy. There are several kinds of multipliers used to assess the economic impacts of any kind of activity. The ones utilized in this report are for jobs, wages and salaries and the total value of production. The effects of beer distributor activities can be measured in terms of the value of the output they produce, the number of individuals they employ and the wages and salaries they pay to those employees. Just as one dollar of output produced by a distributor has a total effect of creating more than one dollar s worth of output in the impact economy (this is the value of production multiplier), a single job at the distributor can be given credit for creating more than one job in the economy (this is the employment multiplier). 5 Likewise, an additional dollar of wages paid to one distributor employee results in more than one additional dollar of total income for the impact region s households (this is the income multiplier). Downstream Effects of Beer Distributors Traditional economic impact analysis connects direct activities to the firms that provide them with inputs and the firms that, in turn, provide those input suppliers with inputs. These connections in economic terms are referred to as upstream in the sense that the connections are going back toward the raw material resources on which the economy relies. All of the preceding discussion focuses on impacts of upstream activities. For beer distributors, the upstream material input supplies do not include the beer they sell (which is distributed by the distributors). Distributors add value by paying wages and salaries and by purchasing their inputs (trucks, fuel, warehouses, utilities, computer systems, refrigeration, etc.) from upstream input providers. They use their inputs to produce their output for the benefit of the downstream consumers retailers, restaurants, bars and households. These benefits lead to further economic impacts which are often omitted from traditional economic impact analysis. In the following paragraphs, several downstream effects that add significantly to the upstream economic impacts of beer distribution are described. These downstream effects include: 1. The efficiencies derived from the distribution system, including: a. The transportation cost savings that the distributor tier permits b. The increased consumer choice attributable to the operation of the three-tier beer distribution system; 2. The community economic benefits that flow from distributor community involvement activities (in addition to the upstream impacts of the input purchases associated with these activities as measured above); and 3. The community benefits derived from the taxes generated as part of the upstream economic impacts. Increased Economic Efficiencies from Distribution in Comparison with a Distribution System without Distributors The existence of the distribution tier in the beer industry produces significant efficiencies to the economy. By having fewer direct connections between the 5 An employment multiplier is the total change in full-time equivalent (F.T.E.) jobs generated in the local economy for each direct change of one F.T.E. position in the economy. (Note that one F.T.E. can be a full-time job, or it can be two or three part-time positions with total hours worked equaling one full-time job.) 8 NBWA Report 2013 Produced by the Center for Applied Business & Economic Research, Alfred Lerner College of Business & Economics, University of Delaware

11 Brewer #1 Brewer #2 Brewer #3 Retailer #1 Retailer #2 Retailer #3 Retailer #4 Retailer #5 Figure 1. Inefficient beer distribution without the wholesale tier Brewer #1 Brewer #2 Brewer #3 Beer Distributor Retailer #1 Retailer #2 Retailer #3 Retailer #4 Retailer #5 Figure 2. Efficient beer distribution with the wholesale tier saves $22 billion per year. NBWA Report 2013 Produced by the Center for Applied Business & Economic Research, Alfred Lerner College of Business & Economics, University of Delaware 9

12 first and third tiers (brewers/importers and retailers), transportation needs are reduced. At the same time, fewer transactions are required and less selling and marketing effort is needed. Prior studies have found that these distribution efficiencies are substantial. Figures 1 and 2 illustrate the fundamental efficiency added by the distribution tier. In this small hypothetical example, Figure 1 shows that, without a distribution tier, all three of the brewers would have to interact with each of the five retailers 15 interactions in each delivery period. The interactions would have to include potentially separate ordering, marketing, merchandising, transporting and billing transactions a total of 75 interactions. In Figure 2, the number of interactions falls dramatically as both brewers and retailers each only have to deal with a distributor. Because beer is perishable, without the refrigerated storage provided by distributors, the number of delivery trips and related transactions would be even higher without the distributor tier. In reality, the number of brewers in the U.S. is more than 2,000 and growing, and the number of licensed retail outlets for beer sales (beer and liquor stores, bars, hotels, restaurants, grocery stores, etc.) is in excess of 500,000. In addition, most retailers receive deliveries multiple times per week, some more than once per day, so the number of potential transactions without beer distributors is truly vast. The sort of distribution shown in Figure 1, direct from brewers to retailers, would not be possible for many of the smaller brewers (namely craft brewers). Many craft brewers could not achieve their current sales volumes without distribution. While all brewers benefit from the refrigerated distribution and warehousing provided by distributors, small brewers especially benefit. A larger number of brewers increases the range of beer choices provided to today s consumers. The increased number of small brewers that provides consumers with a wider range of choices is possible only with distribution. In addition, choice is increased through the larger brewers who can distribute their increasingly diverse product lines more quickly through the distribution tier than they could without it. Economists universally recognize that an increase in independent consumer choices The Analytical Model Used for Calculating the Impacts of Beer Distributor Activities The analytical model used for calculating the impacts of beer distributor economic activities in this report was developed by the Minnesota IMPLAN Group. Their IMPLAN (IMpact analysis for PLANning) software is a well-recognized, standard tool for modeling impacts in regional economies. The IMPLAN modeling system is based on the pioneering work of Nobel Prize winner, Wassily Leontieff. IMPLAN uses official U.S. government data sources for production, employment, wages, incomes and taxes for more than 400 detailed industry classifications as specified by federal statistical agencies such as the Department of Labor s Bureau of Labor Statistics and the Department of Commerce s Bureau of Economic Analysis. IMPLAN permits us to keep track of the number of incremental full-time-equivalent employees employed by all of the companies that have direct, indirect and induced effects. We also keep track of all the incremental labor income paid to all the employees as well as all of the taxes and fees paid to state, local and federal government entities. IMPLAN also provides the option to incorporate interstate effects. increases efficiency and consumer well-being. Other efficiency gains flowing from the existence of the distribution tier include the centralized collection of state alcohol taxes from a smaller number of distributors rather than from the larger number of retailers in each state. In addition to all of these efficiencies, the magnitude of which is described below, there are significant contributions that beer distributors make to both brewers and retailers in their operations. These are described in the box on the next page entitled The Valuable Services Provided by Beer Distributors within the Three-Tier System. 10 NBWA Report 2013 Produced by the Center for Applied Business & Economic Research, Alfred Lerner College of Business & Economics, University of Delaware

13 Valuable Services Provided by Beer Distributors to Brewers, Retailers, Customers and the General Public Valuable Services Provided by Beer Distributors to Brewers, Retailers, Customers and the General Public Efficient access to markets for ALL beer brands»» Placement of an increasingly large variety of beers on retail shelves»» Without distributors, each supplier would have to negotiate with many independent retailers rather than with only a select number of distributors Access to expanded markets through the use of refrigerated transport and storage Distributor responsibility for out-of-code, breakage, or beer that cannot be sold for whatever reasons when taking possession of the beer from brewers E-commerce and other technological capabilities for doing business with retailers Payment on-receipt, allowing brewers to avoid financing inventories Specialization by brewers in brewing without concern for distribution Additional Valuable Services Provided by Beer Distributors Especially to Craft Brewers Serving as the primary agent in enabling the growth of craft beers facilitating placement of an increasingly large variety of craft beers on retail shelves Providing a localized sales force for craft beers that build brands through store level merchandising, product promotion, marketing initiatives and local event sponsorships. Valuable Services Provided by Beer Distributors to Beer Retailers and Their Customers Investing significantly in local marketing of beer brands, enabling retailers to offer an unparalleled selection of beer to consumers Building brands through store level merchandising, product promotion, marketing initiatives and local event sponsorships Ensuring reliable and predictable product availability including frequent delivery, refrigerated warehousing, inventory management and space management Safeguarding product quality and integrity by identifying potential problem products and removing them from the marketplace Making a greater variety of beers available than would be possible without the three-tier distribution system Stocking and rotating shelf sets as part of direct store delivery Providing quality control through removal of outdated products Replenishing out-of-stock items quickly Providing professional merchandising services for special promotions, upcoming events and activities in the community Cleaning and replacing keg tap lines where legally permissible Sponsoring in-store tastings where legally permissible Introducing advanced in-store consumer-service technologies such as computerized choice assistance Providing server training Keeping an open dialogue with retailers regarding best practices for responsibility in advertising NBWA Report 2013 Produced by the Center for Applied Business & Economic Research, Alfred Lerner College of Business & Economics, University of Delaware 11

14 Valuable Services Provided by Beer Distributors to Brewers, Retailers, Customers and the General Public (cont d) Valuable Services Provided by Beer Distributors to the General Public Fostering a responsible beer industry. Distributors educate retailers and consumers and provide resources that promote safe, moderate and responsible consumption. Distributors help balance responsibility with robust competition and vast consumer choice. Tracking product and ensuring tax collection. Distributors maintain detailed records that make transparent the chain of custody of alcoholic beverages from suppliers to retailers. In many states, distributors also ensure the timely payment and complete collection of state and local taxes and licensing fees. Another way in which efficiencies attributable to beer distributor operations contribute to the economy is through their role in reducing the cost of tax collection and providing easier enforcement of alcohol regulations. In this role, distributors act like quasi-government agencies that do not require public funds. 6 The existence of the distribution tier also produces significant efficiencies to the economy by providing consumers with a wider range of choices than they would otherwise enjoy. Small brewers are able to reach wider markets through the access distributors provide so that consumers have more choice. Some small brewers would be unable to survive without distributors because wider distribution enables the small brewers to achieve the economies of scale that enable them to compete more effectively with major brands. Competition among wholesalers can take the form of competition in terms of the variety of brand offerings, including the variety of smaller brewers offerings that a distributor is able to carry and promote. One indicator of the range of choice provided by beer distributors is the number of different items they carry. In 2011, the average distributor had more than 500 different SKUs. 7 Economists agree that an important indicator of the value to consumers of a wider range of choices is their willingness to pay for the choice, as is true in the case of a variety of premium, imported and craft beers made available to consumers only because of the existence of the distributor tier. Estimates of the magnitude of the value of increased consumer choice and transportation/distribution efficiencies to the U.S. economy are in the billions of dollars. Sibley (2008) calculates that, without a distribution tier, more than three times as many resources would be required to connect producers with retailers if the same level of consumer choice as exists now were preserved. So the added value of the distribution tier (in terms of efficiencies it creates) amounts to roughly double the amount of resources actually used with the existing distribution system that includes the distribution tier. The transportation/distribution efficiencies that preserve consumer choice benefit the American economy at an estimated total value of approximately $22 billion per year. 8 This value generates state-level benefits in proportion to the size of beer distribution in the state (gallons consumed) and the relative sizes of the beer distribution and beer retail sectors in the state, as influenced by differential regulation across the states. This report calculates the value of the efficiency benefits for each state. 6 An employment multiplier is the total change in full-time equivalent (F.T.E.) jobs generated in the local economy for each direct change of one F.T.E. position in the economy. (Note that one F.T.E. can be a full-time job, or it can be two or three part-time positions with total hours worked equaling one full-time job.) 7 A recent survey by A.C Nielsen ( revealed that there were 10,366 active SKUs for beer over the whole US during the most recent 12-month period. Alcoholic beverages in general provide more consumer choices than any of the other FDA categories surveyed. 8 In comparison, Steve L. Barsby and Associates found a similar magnitude for wine and spirits distributors in the early 1990 s, indicating this estimate is reasonable, given overall inflation, expansion of the sector and the relative size of beer distribution in comparison with wine and spirits. 12 NBWA Report 2013 Produced by the Center for Applied Business & Economic Research, Alfred Lerner College of Business & Economics, University of Delaware

15 These efficiencies of beer distribution amount to more than $42,000 per year per retailer on average, or $116 per day every day of the year. These values differ from state to state. Another way of appreciating the magnitude of the downstream efficiency gains resulting from the existence of the distribution tier is to calculate how much other valuable social goods could be provided by the efficiency gains. For example, for the U.S. as a whole, $22 billion could support more than 800 million public school teaching hours per year, or more than 825,000 miles of public highways could be maintained. What Beer Distributor Involvement Does for Communities The economic impacts of community involvement activities are larger than those that were included in the upstream impacts described above (generating direct jobs, salaries and wages and production in the nonprofit sector). In addition to the impacts generated by the direct effects, the programs have large community benefits that are not captured by the direct expenditures and their multiplied effects. Where allowed by state regulations, distributors contribute to economic development in their communities by participating in and, where allowed, providing products for festivals, fairs, competitions and other events that enhance the quality of life in their communities (thereby contributing to local economic development). The value of these benefits is large but undocumented. State beer distributor associations websites and a large number of individual distributors websites provided additional information used to compile an extensive collection of descriptions of these activities, which is indicative of the broad scope and significance of these activities. As case studies of individual distributor community involvement activities, we visited two medium-sized distributors (five million case-equivalent volume) and interviewed their senior staff responsible for community involvement activity. NBWA Report 2013 Produced by the Center for Applied Business & Economic Research, Alfred Lerner College of Business & Economics, University of Delaware 13

16 Case Study 1 The company has a substantial annual budget for charitable donations that does not include personal donations from each of the partners in the company or the donations of employees. The budget covers cash contributions, product donations, matching funds programs, etc. that are benefitting hundreds of organizations within the company s distribution footprint. The largest recipients include: A private foundation that provides training for disabled veterans returning from duty, and financial support to families of fallen soldiers; A community run for a nationwide program that honors fallen veterans with 5k runs every year on September 11; A nonprofit agency that provides for educational support programs to children at risk in the local school district; A program that provides matching funds to help families of soldiers lost or wounded; A citizens advisory committee that administrates such programs as D.A.R.E. and other alcohol and drug educational programs within local schools; Responsible Alcohol Marketing Program training for retail establishments, where each licensed account receives free training for management and staff regarding responsible serving; Several programs that support child victims within the community; A club that sponsors several programs supporting services for autistic children within the community; and An acting program for children and adults with disabilities. In addition the company supports national charities such as the American Red Cross. Case Study 2 For this company, this report concentrated on the activities for which the company made significant in-kind donations. Such contributions are an important part of beer distributors activities in both the charitable and community development areas. Often these are fundraising events and the use of the funds raised, which are far in excess of the value of the resources contributed by the distributors, are a multiple of the efforts of the company. The list below includes the community events supported by this company during the first eight months of the year. In addition, the company supports national charities such as the Alzheimer s Association, March of Dimes and the Little Sisters of the Poor. 14 NBWA Report 2013 Produced by the Center for Applied Business & Economic Research, Alfred Lerner College of Business & Economics, University of Delaware

17 TYPE OF EVENT Restaurant - Raise Money for Police Chiefs Restaurant - Raise Money for Employee with Medical Bills Fire Company - Raise Money for Volunteer Fireman EQUIPMENT USED Trailer 2 Coil Boxes Trailer Church Festival - Raise Money for Students - Restaurant - Raise Money for Rugby Team Keg Box Community College - Raise Money for Culinary Arts - Oyster Eat - Raise Money for Volunteer Fireman Church Festival - Raise Money for Church Local Fire Co. - Raise Money for American Cancer Society Trailer Coil box Coil box American Heart Association - Raise Money for Stroke Victims - Church - Raise Money for Cancer Prevention Trailers, Coil Box SPCA - Habitat for Humanity - Hope, Love, Courage - Breast Cancer Prevention Meals on Wheels Coil Boxes Ministry of Caring - Outreach - Church Gala - Auction to Raise Money for School Cancer Charity Event American Legion Pool Tournament Coil Boxes 2 Coil Boxes Coil Boxes Community College - Raise Money for College Golf Scholarships - Fire Co. - Raise Money for Volunteer Fireman - Fire Co. - Raise Money for Local Fire Co. Trailer Raise Money for Children s Beach House - City Grand Prix Event Trailer, Coil Box Habitat For Humanity - Raise Money for Youth - Trinidad Cultural Association - Raise Money for Youth - Fright Land - Raise Money for Kid s Cancer Prevention Local Car Race Greek Festival - Raise Money for Church Italian Festival - Raise Money for Church Community Festival - Raise Money for the Arts Jazz Festival Trailer Trailers, Coil Box Trailers Trailers Trailer Trailer NBWA Report 2013 Produced by the Center for Applied Business & Economic Research, Alfred Lerner College of Business & Economics, University of Delaware 15

18 State Education Association - Scholarships - Contractors Picnic - Raise Money for Orphans Trailers Habitat for Humanity - Raise Money for Youth - Pirate Crawl - Tall Ship Support Church Carnival - Raise Money for School Programs Church Carnival - Raise Money for School Programs Craft Fest - Raise Money for July 4th Association Church Carnival - Raise Money for After School Programs Ice Cream Fest - Craft Beer Event Elks - Charity Event to Raise Money State Fair Restaurant Show Blues Festival Community Fair - Raise Money for Community Association Local Fire Co. - Raise Money for Volunteer Trailer Trailer, Coil Box Trailer, Coil Box Trailer, Coil Box Trailer, Coil Box 2 Coil Boxes Coil Box Trailer, Coil Box Coil Boxes Trailer, Coil Box Trailer, Coil Box Trailer, Coil Box Golf Outing - Raise Money for Friends of Police - Beef & Beer - Raise Money for Trooper s Daughter Polish Fest - Raise Money for Church Germany Festival Annual Brewfest Winery - Craft Festival Fireman s Convention Trailer, Coil Box Trailer, Coil Box Trailer, Coil Box Coil Boxes Trailer, Coil Box Trailer, Coil Box What Taxes Generated by Beer Distributors Do for Communities This report calculates the amounts of taxes generated as part of the upstream economic impacts. These taxes go to federal, state and local governments. These taxes are used in a variety of ways that produce social benefits. For example, if all the taxes generated as a result of the direct activities of beer distributors were used to support public education, they could fund more than 375 million hours of teaching per year. Or, if they were used to support public infrastructure, they could provide maintenance for more than 385,000 miles of public roads per year. This tax figure does not include federal, state and local excise and consumption taxes collected on alcohol. 16 NBWA Report 2013 Produced by the Center for Applied Business & Economic Research, Alfred Lerner College of Business & Economics, University of Delaware

19 III. Detailed Results for the United States, Each State and the District of Columbia The tables on the following pages present the results of our economic impact analysis using the methodology described in the preceding section. The first two pages of tables are for the United States as a whole. Many of the results shown there were highlighted in the Executive Summary and the Methodology. Two pages of tables for each of the states and Washington, D.C., follow in alphabetical order. NBWA Report 2013 Produced by the Center for Applied Business & Economic Research, Alfred Lerner College of Business & Economics, University of Delaware 17

20 United States Based on 3,333 Beer Distributor Establishments in the United States IMPACT MEASURES TOTAL STATE, LOCAL & FEDERAL TAXES PAID* Beer Distributors Are Significant Businesses in Their Communities: The Economic Impact of Beer Distributor Business Operations United States Beer Distributor Operations 130,152 $10,228,071,424 $21,703,112,704 Operations of All Indirect Input Producers 48,188 $2,783,744,768 $7,339,222,016 Stimulus Induced by Spending of All Employees 145,154 $6,828,197,888 $20,968,853,504 Total Impacts on the United States from Beer Distributor Operations 323,493 $19,840,014,336 $50,011,189,248 $9,872,566,850 Beer Distributors Make Substantial Capital Investments in Their Communities: The Economic Impact of Beer Distributor Investment in Structures, Vehicles, Software, Energy Saving Technology and Other Equipment Total Impacts on the United States from Beer Distributor Investment 20,666 $1,122,094,208 $3,812,999,168 $383,640,900 Beer Distributors Are Good Citizens of Their Communities: The Economic Impact of Beer Distributor Support of Community Events, Charitable Activities and Local Economic Development Total Impacts on the United States from Beer Distributor Community Involvement 1,494 $64,666,432 $175,495,360 $20,644,060 Total Economic Impact of Beer Distributor Operations, Investment and Community Involvement = Sum of Beer Distributor Impacts on the United States from Operations, Investment and Citizenship 345,653 $21,026,774,976 $53,999,683,776 $10,276,851,810 Multipliers *Economic impact taxes only; does not include an added $11 billion in federal, state and local excise and consumption taxes on beer sold in the U.S. 18 NBWA Report 2013 Produced by the Center for Applied Business & Economic Research, Alfred Lerner College of Business & Economics, University of Delaware

21 United States How the Total Economic Impact is Distributed Across Selected Industries BUSINESS SECTOR NAMES Personal Services 17,766 $803,365,408 $1,424,369,536 Food Services and Drinking Places 15,693 $316,977,440 $899,869,696 Real Estate Establishments 11,040 $204,006,608 $1,720,195,456 Employment Services 6,774 $205,480,240 $271,790,336 Nondepository Credit Intermediation and Related Activities Securities, Commodity Contracts, Investments and Related Activities 5,187 $409,029,888 $783,673,984 4,509 $245,445,632 $629,432,640 Retail Stores - General Merchandise 4,313 $118,502,664 $235,480,976 Added Economic Benefits Due to Efficiencies of Wholesale Beer Distribution: Transportation, Transactions, Marketing and Consumer Choice in the United States National Total of $22 Billion in Efficiency Benefits National Total Per Retailer Annually $42,168 National Total Per Retailer Daily $116 Number of Teacher Hours Supportable by Efficiency Benefits Annually, or 804,580,079 Miles of Highway Maintenance Supportable by Efficiency Benefits Annually 827,562 Description of Community Involvement Activities Beer distributors across America are involved in a wide variety of charitable, economic development and community-building activities. In addition they are good corporate citizens in their support of energy conservation, recycling and other green initiatives. United States beer distributors also play a vital role in alcohol awareness and education. Taxes Generated by Beer Distribution Benefit Communities Across the U.S. The total taxes collected in the United States by federal, state and local governments are sufficient to fund 375,843,193 teacher hours or to provide maintenance for 386,579 miles of highways in the United States for a year. NBWA Report 2013 Produced by the Center for Applied Business & Economic Research, Alfred Lerner College of Business & Economics, University of Delaware 19

22 Alabama Based on 47 Beer Distributor Establishments in Alabama IMPACT MEASURES TOTAL STATE, LOCAL & FEDERAL TAXES PAID* Beer Distributors Are Significant Businesses in Their Communities: The Economic Impact of Beer Distributor Business Operations Alabama s Beer Distributor Operations 2,356 $161,574,304 $342,905,056 Operations of All Indirect Input Producers 760 $36,159,825 $98,708,478 Stimulus Induced by Spending of All Employees 2,261 $88,461,127 $284,248,916 Total Impacts on Alabama from Beer Distributor Operations 5,377 $286,195,256 $725,862,450 $158,907,639 Beer Distributors Make Substantial Capital Investments in Their Communities: The Economic Impact of Beer Distributor Investment in Structures, Vehicles, Software, Energy Saving Technology and Other Equipment Total Impacts on Alabama from Beer Distributor Investment 325 $15,106,829 $45,010,162 $4,497,745 Beer Distributors Are Good Citizens of Their Communities: The Economic Impact of Beer Distributor Support of Community Events, Charitable Activities and Local Economic Development Total Impacts on Alabama from Beer Distributor Community Involvement 25 $877,266 $2,508,003 $240,040 Total Economic Impact of Beer Distributor Operations, Investment and Community Involvement = Sum of Beer Distributor Impacts on Alabama from Operations, Investment and Citizenship 5,726 $302,179,352 $773,380,616 $318,256,284 Multipliers *Economic impact taxes only; does not include an added $218 million in federal, state and local excise and consumption taxes on beer sold in Alabama. 20 NBWA Report 2013 Produced by the Center for Applied Business & Economic Research, Alfred Lerner College of Business & Economics, University of Delaware