Bottling Up Innovation in Craft Brewing: A Review of the Current Barriers and Challenges

Abstract

Build a better mousetrap, the old saying goes, the world will beat a path to your door. Brew a better beer, however, and regulators will tie your door shut with red tape. Start-ups in the craft brewing industry face formidable barriers to entry in the form of federal, state, and local regulations. These barriers limit competition and innovation, reducing consumer welfare.While customers and new entrants are harmed, these regulations can be a privilege to incumbent firms and industries. There are various political and historical reasons for the persistence of these rules, despite the fact that they lack economic justification. Policymakers interested in economic development should eliminate regulations to help firms overcome confusing and unnecessary barriers to entry and to level the playing field between established firms and their newer, smaller rivals.