While it's boom times for craft breweries across the U.S., one city in Massachusetts rises above the rest for beer entrepreneurs.

Somerville, located northeast of Cambridge and academic institutions like Harvard and MIT, has been named the best city for brewery businesses, according to a new report by Chicago's Digital Third Coast. The marketing agency ranked 30 cities with a population larger than 50,000 people across two dimensions: business environment and business costs. Digital Third Coast evaluated those factors based on six metrics, like brewery license cost, percentage of the population over the age of 21, and the state excise tax per barrel of beer. 

Somerville tops the list because brewers there enjoy several major advantages. The city boasts a large number of legal drinkers--85 percent of the population is over 21, which makes sense given the Boston area is home to 35 colleges--and a healthy taproom environment, with 4.3 breweries per 50,000 people. Additionally, the costs of doing business are lower in Somerville than in other cities. The excise tax, which is paid for by the business but typically passed on to the consumer, is only $3.30 for each 31-gallon barrel of beer. That's minuscule compared to the maximum brewery excise tax, paid by Tennessee-based brewers, which is $39.89 per barrel, says Collin Czarnecki, a researcher for Digital Third Coast. What's more, the annual licensing fee is $44 in Somerville, which is one of the lowest in the country. By contrast, brewers in Washington, D.C., must pay around $6,000 a year, Czarnecki adds. 

A low excise tax and annual licensing fee is a huge relief for brewery founders, as taxes can be the most expensive aspect of making beer, according to a 2012 analysis by the Beer Institute, a national beer trade association. On average, about 45 percent of what consumers pay for a pint goes to applicable taxes, the analysis notes. 

Of course, not all local brewers specifically chose Somerville because of its business benefits. David Kushner, a co-founder of Remnant Brewery in the city's Union Square neighborhood, worked in local taprooms and wanted to launch a brewery in the market he knew. 

"We were looking more foot-traffic potential, because location was even more important then," says Kushner, noting Remnant only sells its beer on the premises and doesn't distribute to restaurants or retailers. "If you're selling 
pints of beer, you want to be in a place where people come and stay." 

Kushner launched Remnant in May 2018 and produced 850 barrels in the company's first year of business--that's about 26,350 gallons of beer. While Kushner wouldn't disclose how much revenue Remnant has booked since launching, he said since May of this year, the brewery has been selling about 20 percent more beer than last year. 

The biggest reason for Remnant's growth most likely has to do with the rising popularity of craft beer across the country. Retail sales of the beverage climbed 7 percent in 2018 to $27.58 billion, according to the Brewers Association, a trade group that represents small and independent brewers. What's more, craft beer now makes up about 24.2 percent of the $114.2 billion U.S. beer market. As American consumers chug more craft beer, brewers are racing to quench their thirst: the Brewers Association reports the number of breweries in the U.S. has increased from just under 1,500 in 2007 to more than 7,000 as of July of last year. 

Still, there are downsides to launching a brewery in Somerville. Available real estate can be expensive, says Winter Hill Brewery co-founder Breck Bailey. The average asking rental price for retail space in Somerville is $27 per square foot, according to market data collected by the Mayor's Office of Strategic Planning and Community Development. Compare that to Austin, Texas, another bustling metro area, which sees average asking rental prices of $17.98 per square foot, according to real estate firm Austin Tenant Advisors. That's on top of the high costs attached to running a brewery, which include the purchase and maintenance of distilling equipment and liability insurance, Bailey notes.

Winter Hill launched in 2016 and has since tripled its initial staff to accommodate the increase in business. Somerville's bustling startup community helped stoke Winter Hill's popularity, says Bailey, who declined to share revenue. "The small business scene is very vibrant," he says. "That opens up a lot of unique opportunities to work with other businesses." 

To be sure, there are places in the U.S. where breweries are equally plentiful--Colorado, for one, is home to five of the cities featured on Digital Third Coast's list, and four of those cities have a least six or more breweries per 50,000 residents. Just don't mention it to Somerville's brewers. "I don't think we could have found a better spot than Somerville," says Kushner. 

Published on: Jul 18, 2019