Industry evolution, resilience and regional embeddedness: the case of the Danish microbrewing industry

ABSTRACT Excess capacity and increased competition in the Danish microbrewing industry have created a burgeoning shakeout, which has been accelerated by the Covid-19 crisis. We discuss which types of firms are likely to survive this, specifically, to what extent such firms use regional embeddedness as a survival strategy. Using three different types of data, we demonstrate that firms’ regional and local embeddedness is widely used to shelter them from competition pressures. Moreover, the passion among owners and investors for the sector (and its products) alters the purely economic rationality that generally, according to theoretical predictions, determines whether firms survive industry shakeout.


INTRODUCTION
The global Covid-19 pandemic has caused the closedown of pubs, bars, taprooms and cancellations of festivals and other significant events, substantially reducing and reallocating beer sales. 1In several countries, including Denmark, the case country in this study, this has reenforced existing pressures related to a brewing industry shakeout, following a period of a build-up of excess capacity and increased competition. 2These circumstances spur a question: Which firms can survive such increased competitive pressure, and what strategies do they deploy to do so?
Even if the beer industry is highly globalized, we are particularly interested in exploring whether firms in this industry are using regional embeddedness as a strategy to shelter themselves from competition (Garavaglia, 2021).A justification for the regional focus of this research is that even if most beer consumption involves standard products from the main international producers, consumers continue to increasingly support local breweries.For example, in a survey of 1667 respondents, the European Beer Consumer Union (EBCU) found that 975 supported local breweries more during the pandemic and that 1176 intended to do so in the future (EBCU, 2020). 3Moreover, microbreweries have been found to have substantial positive benefits for regions, as they are often based in local economies (Danson et al., 2015;Gatrell et al., 2017;Reid & Gatrell, 2015), which further justifies a closer look at the dynamics behind the industry's evolution and the role of regional orientation in it.Despite the internationalization of the industry, national differences remain, which points to the need to study specific countries and localities (Danson et al., 2015;Esposti et al., 2017).We study a geographical area, Denmark, that has received sparse attention in earlier studies and where there is extensive entry and exit (Garavaglia & Swinnen, 2018;Bentzen & Smith, 2018).
Using a mixed-methods design and combining several data types, we demonstrate that in the Danish microbrewing 4 industry, firms use regional embeddedness to shelter themselves from competition and that there are indications this trend is reinforced over time.We also find that the passion among owners for the sector (and its products) extends and complements the economic rationality of the decisions that generally determine when firms exit this industry.
While regional embeddedness and passion for products in the food and drink industry are not new (e.g., Skoglund & Sjölander-Lindqvist, 2021;Warnick et al., 2018), our objective is to respond to calls in the literature (e.g., Cunningham & Barclay, 2020) for further research into the specificities of regional embeddedness; hence, we contribute a deeper description of how such regional embeddedness unfolds.We also contribute empirical insights regarding the firm behaviours in and geographical aspects of the Danish microbrewing industry with data that are more detailed and cover a longer time period than most other data on this industry.Moreover, we do so in a geographical setting, Denmark, that has rarely been investigated (see Bentzen & Smith, 2018, for an exception regarding industry survival on a general level).
The remainder of the paper is structured as follows.The next section provides the theoretical background for the problem area.Section 3 presents our mixed-methods research design, methodology and data.Section 4 provides the industry context and evolution.Section 5 explains our main results.Section 6 compares these results with the extant knowledge on the regional development aspects of this industry.Finally, Section 7 discusses our concluding remarks and derives implications as well as our study's limitations.

THEORETICAL BACKGROUND
2.1.Firm entry, survival and regional belonging Studies of general industry evolution (e.g., Malerba & Pisano, 2019) analyse entry and exit and how competition and innovation lead to uneven evolution and occasional shakeouts.Several studies have observed both the regional and general specificities of the shakeout phenomenon in the brewing industry (Cabras & Bamforth, 2016;Caroll & Swaminathan, 1992;Garavaglia, 2021;Hana et al., 2020;Horvath et al., 2001;Walter et al., 2016).Tremblay et al. (2005) find that informational deficiencies regarding firms' financial performance characterize the brewing industry.Therefore, a more intense second wave of entry occurs with a lag due to the revelation of the first entries' success, resulting in excess capacity and, subsequently, shakeout.According to these authors, the most resilient firms to the brewery shakeout occurring in the United States during the period 1998-2002 were the more experienced firms (for similar findings, see Horvath et al., 2001); however, the extant literature points to the importance of regions in firm performance and survival.For example, Wesson and Figueiredo (2001) link the performance of industry entry with the breadth of geographical focus.They find that entry scope is a significant explanatory variable in a successful entry and that microbreweries tend to target a geographical market that is too broad.Instead, geographically focused breweries have been more successful (see Umemura & Slater, 2021, for similar findings in the Japanese beer market).Moreover, they propose that during competition with large incumbents and imports, microbreweries can rely on local markets, for example, use local or regional names on their beers and breweries.This is consistent with more recent research on the role of regions in beer industry evolution (e.g., see also Bowen & Miller, 2022;Gatrell et al., 2017;Mathias et al., 2018;Skoglund & Sjölander-Lindqvist, 2021;Verhaal et al., 2015).

Strategies for regional mobilization to increase resilience against shakeout
Research concerned with regional resilience, that is, regions' ability to resist and recover from external shocks and, in some cases, reorient and renew their economic base (Martin & Sunley, 2015), has primarily focused on its macro aspects.Few studies have concerned themselves with the agency of business actors in regions and their specific capacities and strategies to cope with and mobilize regional resources (Billington et al., 2017;Soroka et al., 2020).This quest for a microlevel focus on regional resilience is consistent with the findings of Garavaglia and Borgoni (2022), who find that the role of legitimation in craft beer entry in the Italian market is driven by processes at the most fine-grained aggregation level, the municipality, rather than the national level.
In much of the literature, geography and location are the essential factors in product branding (Barlow et al., 2018;Cunningham & Barclay, 2020;Gatrell et al., 2017;Wesson & Figueiredo, 2001) and how microbreweries establish a local and regional market (Bowen & Miller, 2022;Esposti et al., 2017;Garavaglia & Borgoni, 2022;Reid & Gatrell, 2015).In microbreweries' establishment phase, their access to local resources, networks and distribution channels can contribute to storytelling and knowledge and save costs, while their local market can shield local microbreweries against national and international competition.Through local engagement, embeddedness and product differentiation, including complementary products such as tourism activities, firms can create a stable market position (Cunningham & Barclay, 2020;Danson et al., 2015;Hasman et al., 2022).The role of local markets as a factor in resilience is also driven by owners' personal attachment to their region.
However, a sustained, successful regional establishment also depends on the loyalty and identity of customers (Reid et al., 2020).Regional loyalty is enhanced by conducting place-branding initiatives at a regional policy level, but firms can also signal the value of authenticity and regional identity themselves, associating with a shared spatial-cultural landscape, which in turn can be a shelter from competition (Bowen & Miller, 2022;Gatrell et al., 2017;Schnell & Reese, 2014;Skoglund & Sjölander-Lindqvist, 2021).

Rational decision-making?
The literature suggests that decision-makers in the microbrewing industry do not necessarily follow the strict economic rationale presumed by the standard explanation of entry, exit and survival.Thus, Maye (2012, p. 485) notes that 'Most microbrewers interviewed are motivated by the production process and are not profit-maximizing entrepreneurs.' Relatedly, many entries originate with a hobby developing into a business.Homebrewers were engaged in most entries in the 1980s and 1990s in the United States (Caroll & Swaminathan, 2000;Danson et al., 2015), a figure that some estimate to be 90% (Wojtyra et al., 2020).Whereas regional embeddedness and passion for products are well defined in food industry studies, microbrewing possibly encompasses actions that are driven by passion and emotions to a larger extent than in many other industries (Cannatelli et al., 2019;Skoglund & Sjölander-Lindqvist, 2021).

METHODOLOGY AND DATA COLLECTION
To help us understand the dynamics behind the evolution and geography of the Danish brewing industry, our ontological and epistemological approach is critical realism.Critical realists assume that complex economic causalities, such as those driving industry evolution processes, exist in the real domains of the social world.Their effects must be understood within their context rather than as abstracted rationalities (Easton, 2010).In our case, we use multiple case studies, drawing on several sources of data that are useful for analytical generalization, and we critically engage with existing theoretical assumptions (Eisenhardt, 2021;Yin, 2017).Industry case studies based on a critical realist approach require triangulation and mixed methods to obtain sufficiently robust and 'thick' insights into generative mechanisms (Downward & Mearman, 2007).A mixed-methods approach combines qualitative and quantitative data in field study research designs.Mixed methods differ concerning the timing, weighing, and mixing of quantitative and qualitative data (Creswell, 2009).In our case, our primary aim is exploratory.We have used a sequential exploratory research design, where secondary data provide a quantitative backdrop to expand and corroborate our insights from qualitative research (Zachariadis et al., 2013).A series of short interviews of representatives at craft beer festivals supported our qualitative enquiries and paved the way for more in-depth interviews with case companies.
Our fieldwork began in 2019, when most of the 36 interviews were carried out.We conducted nine in-depth semi-structured interviews at sites with brewers (six interviews) and key informants (three interviews).Each interview lasted more than an hour, and there were additional short interviews (27 altogether) conducted at two beer festivals for Danish microbrewers.These short interviews at beer festivals included an owner/brewer or senior assistant who were selected based on a combination of anticipated variety in terms of the information, size of the brewery and regional distribution.Following Yin's (2017) procedure for case pre-screening, these short interviews helped identify the qualified candidates for in-depth interviews.The in-depth interviews were conducted at their location with owners and executive brewers who offered detailed insights into both their companies' operation and their financial situation, as well as the situation in the industry.Whereas the in-depth interviews were all recorded and transcribed, data from the short interviews are drawn from field notes, made in vivo, based on the interviewers' impressions and coined in their words.These notes were subsequently rewritten and supplemented to create one to one-and-a-half page minicase descriptions.
Table A1 in the supplemental data online provides case summary overviews of our in-depth interviews, together with key information on each case.Table A2 (also online) provides information on the breweries that participated in the short interviews as well as the interview guide.The content and structure of the interview guide for the indepth interviews followed that of the short interviews, but questions were phrased more openly and included questions that arose during the round of the short interviews.Such questions revolved around the cases' start-up, regional embeddedness (how, importance, development over time), industry competition, collaboration, networking and prospects.
Our secondary data include qualitative data, such as website data from the Bryggeriforeningen (Danish Brewers' Association), an industry organization counting both microbreweries and larger breweries as members.In addition, we obtained quantitative data from Statistics Denmark and Beerticker, 5 an independent consultant that monitors the Danish microbrewery industry and provides data to the Danish Brewer's Association. 6We also screened industry-specific webpages and magazines, especially The Beer Enthusiast, as this magazine offers information on recent developments in establishments and closures.We thus obtained detailed information on all 316 firms in the industry over a 20-year period, including those that have closed.Additionally, we have observed industry events and followed legislative developments.These data were scrutinized and then thematically grouped and matched with theory as we read and coded the interviews.First, open coding (using a line-by-line approach) and iterating between first-order concepts and second-order themes were performed using axial coding to connect categories and match data and theory (Strauss & Corbin, 1990).Collectively, these different types of data have provided us with a comprehensive picture of the industry dynamics and characteristics.
Finally, following interrater reliability checks (LeBreton & Senter, 2008), we presented the results for both interviewees and selected persons with vast and longterm industry knowledge for reviews to reveal any possible misunderstandings or omissions.This procedure took place during the final stage and resulted only in marginal amendments.
In the following section we organize the presentation of our results thematically, combining the insights we derived from mixing different methodologies.

INDUSTRY EVOLUTION: CAPACITY AND COMPETITION
The Danish microbrewing industry has undergone cycles of ups and downs.The microbrewing trend of the 1980s in the United States was an inspiration for many potential startups, but the establishment of microbreweries in Denmark began relatively late.In the 1950s, numerous small breweries existed in Denmark.However, the number of such breweries dropped to only 12 by 2000.Since then, the total number of breweries has been increasing.Figure 1 displays this development from the year 2000 in terms of the number of breweries, entries, exits and survivals.Several trends are illustrated in Figure 1.The development of the number of breweries largely follows a standard industry life cycle and resembles a similar curve in the United States (Gatrell et al., 2017); however, in that case, the evolution began earlier.After the beginning of the current century, when there were a small number of firms and slow growth, the number of firms increased from 26 to 114 (existing firms).This levelled out until 2012, when a recurrent steady growth began.There were thus 226 breweries by the end of 2020. 7The number of entries has varied across the period.Business exits started in 2007 and have been stable for most of the period.However, the number of firms exiting began to increase in 2018 and 2019.Additionally, the survival curve seems to have become steeper in the more recent part of the period.These developments suggest that the overall prospects of industry survival are becoming dimmer and that an industry shakeout appears to have started.
Figure 1 could indicate an expanding market.However, the picture is more muddled.For example, the 2008-12 slowdown is most likely explained by the financial crisis rather than industry consolidation.Additionally, a few strong incumbents dominate the Danish market.Carlsberg and Royal Unibrew are among the 40 largest global brewers, with a combined market share of 70% of the Danish market today.Even with this dominance, Denmark has, according to Hana et al. (2020), the second-largest number of breweries per million inhabitants in Europe.Moreover, the market for specialty beers is, to no small extent, served by imported beers, and increasingly so (starting in approximately 2003-04).Imported beers now account for approximately half the consumed specialty beers in Denmark.The market also has numerous products.Product heterogeneity is illustrated by the fact that approximately 2000 new types of beers are introduced to the market annually (2019 and 2020 8 ) and that an increasing number of beers on the market are now available as canned beer (from 9% in 2018, to 19% in 2019 to 27% in  2020 9 ), as is the case in other countries (Baiano, 2021).This development has facilitated an increase in online sales, as canned beer is easier to transport.
Figure 2 illustrates the long-term trends in wine and beer consumption together with more recent trends in the sales of specialty beers.Over time, wine consumption has remained constant, whereas total beer consumption has decreased.However, the specialty beer share of total beer sales has increased, even if it is still only 6-10% of the beer market.Therefore, microbreweries must enter a declining beer market, but in an increasing market segment.Similar trends are present in other countries (Baiano, 2021).
Responses to this development by incumbents, for example, in Denmark Carlsberg and Royal Unibrew, include their own craft-style beer production, takeovers and 'tied houses' (Deconinck & Swinnen, 2016).These are also measures taken by firms in other countries (Garavaglia & Swinnen, 2018;Esposti et al., 2017); in the United States, firms have also limited the distribution channels for craft breweries (Alfaro, 2022).However, as illustrated in the next section, Danish craft brewers have identified some positive aspects of the role that incumbents play in the market.

Market trends
All the managers and owners we talked to were aware of the overall trend towards increasing craft beer production, excess capacity in the industry and declining overall beer consumption.Nevertheless, interviewees considered the possible negative impact of an overall contracting beer market and increased competition among craft brewers weak and mitigated by their perception of the flow of new opportunities.They believed in their products and in their ability to provide customer value.Almost all pointed to their expansion or status quo when asked about their five-year business prospects. 10However, what was defined as market offerings varied, alluding to their quite different framings of the market and industry.One recurrent interpretation was that overall beer production has little to do with craft beer consumption.Several of the persons interviewed linked craft beer consumption to the local aspects of the 'craft movement', an overall megatrend towards buying locally produced, sustainable and crafted products (as opposed to industrial produce).While this trend is in line with what has been called 'neo localism' (Flack, 1997) in the literature, as identified in several microbrewery studies (e.g., Eberts, 2014;Schnell & Reese, 2014;Skoglund & Sjölander-Lindqvist, 2021), it has also been subject to scepticismremarks claiming that explanations along these lines are too narrow in an internationalized market (Hasman et al., 2022).Even among the craft beer producers, some distinguished themselves and targeted specific segments of craft beer customers, as illustrated in this quotation: We are focusing on winning prizes and producing exclusive beers for restaurants.Hence, we distribute our beers in specialty shops and concentrate more on resembling wine than beer.That typically brings us to a different customer group than other craft brewers.
(co-owner, brewery e) This, and other breweries, characterized the market by following the resource partitioning of markets model (Caroll & Swaminathan, 1992, p. 2000), where craft beer is a niche product; they also saw themselves as a niche within a niche.Hence, several respondents noted that the possibilities for extending craft beer sales are far from exhausted and that several market segments are still relatively unexplored.
Relatedly, among microbreweries, we observe a sense of community and a shared idea of the (unfair) competitive pressure from large breweries who seek to enter the craft brew market (other recent studies have offered similar observations; Barlow et al., 2018;Mathias et al., 2018;Verhaal et al., 2015;Wallace, 2019).To a large extent, microbreweries identify themselves in opposition to such large, industrial incumbents (Barlow et al., 2018;Caroll & Swaminathan, 2000;Pozner et al., 2022); hence, their characterizations of the market fit with what the literature has called an oppositional market (e.g., Verhaal et al., 2015).Large firms impose price competition pressure through their production volumes and methods, their choice of ingredients and their focus on industrial brewing processes (rather than hand brewing).Several interviewees point out that large firms borrow the craft beer image and deliver something that is not craft beer at retail prices that are below the production costs of craft brewers (Garavaglia & Swinnen, 2018).Furthermore, they compete unfairly in the pub and bar markets, raising entry levels for small breweries by offering bar equipment to the bars and price incentives to monopolize the beer taps, squeezing out local craft brewers (Deconinck & Swinnen, 2016).In contrast, another subject during the interviews was that the larger firms have an interest in maintaining a vibrant beer-drinking culture and thus support smaller breweries in various ways, such as supporting events and offering access to labs and equipment (for similar findings for the Scottish setting, see Cunningham & Barclay, 2020).

Survival and resilience
The interview data and an earlier analysis of firms' financial performance in the industry (Berlingske Business, 2014) indicate that a substantial number of firms continue operating despite not performing well financially.As an indication of the industry's situation, we have ranked craft breweries based on the available data for their 2019 equity capital.Only a smaller group has what would be considered sustainable equity.A substantial share of the breweries in our 316-firm sample (15%) has negative equity, and even more (30%) have equity close to zero.Other examples from our data on microbreweries' financial performance indicate that solidity is higher in the Copenhagen area, where there are more business angels.
Such poor economic performance in some nevertheless persistent firms means that theory-based predictions of how a shakeout in this industry unfolds need moderation.Among the managers we talked to, a common perception was their strong passion and positive belief in their business opportunities.One interviewee from a historically successful brewery perceived the competitive pressure as a type of cleansing process that would help eliminate less serious investors and provide more space to dedicated brewers, as illustrated by this quotation: I would not mind a shakeout.There are currently too many business actors in Europe and Asia.We sell much of our beer in the U.S., but we are losing shares.There is too much beer, even in the states.And it worries me that virtually any IT billionaire thinks it is sexy to own a brewery.Hey!I am in this to make a living.They are just having fun.
(part-owner of brewery a, and brewer) This quotation implies a similar categorization in other interviews.Brewers frequently use it to label people who have entered the brewing industry with limited specific prior knowledge about craft brewing but a fascination with the product, production and market (Verhaal et al., 2015) and substantial financial capital and investment willingness.In some cases, investors had entered the market for craft brewing because they deemed this business complementary to their primary activity, as in brewery b, where such individuals were primarily interested in the brewhouse's prime location and the critical role of craft brewing in maintaining real estate value: I became a brewery owner by coincidence.The financial crisis bankrupted the former brewer and owner of this building.
His bank asked him to sell the building.By chance, I came across the location and wanted to buy the building as a form of investment.I leased the space to the previous owner.
Later, the board forced him to step down from this brewing business as well.I thought the building would lose value without the brewery, so I decided to keep it running.I knew absolutely nothing about brewing.
(owner of brewery b) A somewhat similar experience was described by the owner of brewery c who had also entered the industry without much prior knowledge of the basic economics and production of beer but had a personal attachment to the region: I met with an old pal at a bar in Skagen.Two hours before meeting up, I had no clue that I should engage in brewing.But I ended up deciding to buy in on it.… I realized that all cities had a brewery but HOME CITY.It was also a motivation that a city like HOME CITY ought to have one.
(owner, brewery c) 5.3.Regional embeddedness as a strategic response to competition pressure Importantly, several brewers identified regional embeddedness as an important factor in both their identity and their competitiveness.For example, the majority (threequarters) of firms involved in the short interviews stated that they had some form of regional embeddedness and that there were indications that this was a lasting trend during increased competition.This was referred to as a means of 'going under the radar of competition through the local market', as one respondent expressed it.The 'sense of the region', important for creating differentiation among craft brewers, is a recurrent theme in beer industry research (Bowen & Miller, 2022;Flack, 1997;Gatrell et al., 2017).In the extant research on localism and craft breweries, local belonging is thus partly constructed by brewer location and partly by branding activities.
In addition, knowledge exchange and ongoing interaction with local customers have helped craft brewers match the demand for novelty and boost their new products.Customers have helped build the reputations of local brewers by rating new brews online in craft beer communities or sharing narratives about brews and the circumstances leading to them, which has been echoed in social media communications by local breweries.In other Industry evolution, resilience and regional embeddedness: the case of the Danish microbrewing industry 1929 REGIONAL STUDIES cases, viral marketing, originating in local events, has helped build a reputation that extends beyond the regional space.One example included a beer label from a local brewery that was considered offensive in Sweden, a neighbouring country market, and had been banned by Swedish national authorities.However, the story went viral on social media and the local news, as devoted customers shared the story.Ultimately, this helped the local brewery build its reputation well beyond its local region.A recurrent theme in our interviews related to how local and regional actors' and customers' passion had been translated into active and supportive activities to support a local brewer and build the local brewing experience.This included and extended beyond local branding.Mobilizing local support and cocreating localized, valuable experiences, such as touristic events (tastings, facilityguided round-tours, etc.), occasional brews developed for theatrical performances, or cultural celebrations in their local area were seen by both brewers and local constituents as important.These activities were part of their strategies for survival in a competitive market as well as their creation of a perception of authenticity and belongingness among actors in their region.Both rural and increasingly urban beer producers referred to such activities in their local market as an essential base for selling craft brews: We quickly realized that we should brew for the local community.And this does not include nearby cities, such as Skagen, Løkken, and Thisted, each with its hinterland.So, we decided on HOMETOWN and parts of Aalborg.We survive due to a combination of people liking our beer and wanting to support us.
(brewer, brewery e) I am convinced that our name, CITY brewery, attracts and maintains support more than in other similar towns.We are 'pure' locals … when we acquired the brewery, we quickly realized that we should focus on the local customers.
(owner of brewery b) Hence, while our research supports the notion that craft brewers draw on spatiality in their branding efforts, we also observed a combination of different features that drive how this embeddedness strategy unfolds.Stabilizing and maintaining the distribution of beer is a critical part of brewing.When selling through selective channels and doing much of the distribution themselves, brewers thrive and fare better by developing and defending local and regional markets.There are more independent taprooms and drinkers of craft beers in large cities who seek novelty and new taste experiences.Even here, customer loyalty and the narrow scope of markets are key factors in microbreweries' strategies (Mathias & Fisher, 2021).Some of the Copenhagen-based breweries in our sample were thus focused on selling to customers and bars in a narrowly defined part of the city. 11Many owners were personally engaged in their local community and saw themselves as paying something back to their local community (Skoglund & Sjölander-Lindqvist, 2021).Such local and regional attachment extended beyond small breweries, as semi-sized breweries, such as Amager and Thisted, maintain strong local support and customer bases while simultaneously selling outside their regional location. 12Moreover, there are strong personal and identification traits involved in staying in business.Some brewers and owners commented that they have strong social affiliations with the craft beer community and therefore see their work as much more than a job; rather, it is a way of living.These statements echo findings in sociological explorationsfor example, a study of London's suburbs (Wallace, 2019) concerning brewer's lifestyles and identities, suggesting that place is essential for craft brewers, as is their opposition to incumbents, which is part of their defining identity (Verhaal et al., 2015).
The extended rationalities linking belongingness and pride as critical levers for prolonged industry engagement, despite poor economic outcomes, provide an additional explanation for the breweries' regional resilience in the shadow of a possible shakeout.Whereas brewers generally linked this to the development of the regional and local community, including job creation, others saw the brewing business as a pastime or hobby, at least initially: You do not get rich from owning a brewery.It is a part-time hobby.
(co-owner, brewery d) We started as 18-year-olds because we could not help it, and we still don't have much of an income to speak of.But, back then, we had loads of free beer!(co-owner and brewer, brewery a) In summary, several of the interviewees not only thrived on the local resources they had mobilized but also espoused an interest in maintaining their regions' ability to thrive and prosper.They defined the identity contribution of local microbrewing as an integral and contributing component.This mirrors research on other industries that suggests actions with goal-oriented elements shared with others are an important coping strategy in regional enterprises (Wrobel, 2015).

How does 'regional embeddedness' unfold?
In addition to constituting the primary market, locals were identified as important in several other respects, that is, they were mobilized as loyal consumers, ambassadors and owners, functioned as helping hands in producing and marketing beer, acted as part-time volunteers and helped as distributors.'When we try opening our brewery bar for a few days a week next summer, we expect to staff it with some of our volunteers and hang-arounds, at least in the beginning' (owner, brewery d).
In addition to the mobilization of local resources, regional embeddedness often can be seen physically in products and breweries (Melewar & Skinner, 2020;Sjölander-Lindqvist et al., 2019).Beers and breweries 1930 Poul Houman Andersen and Jesper Lindgaard Christensen

REGIONAL STUDIES
frequently have names linking them to localities (Bowen & Miller, 2022;Reid & Gatrell, 2015;Schnell & Reese, 2014;Wesson & Figueiredo, 2001) and histories.Several brewers' local endowments are displayed in the shape of their unique histories or ingredients, which they use to differentiate and create novel beer types or flavours or to tell different narratives and express different customer experiences; in some cases, they even signa their opposition to and stigmatize large incumbent producers (Pozner et al., 2022).
We had some organic malt made locally last year for the first time.It provided us with the opportunity to brand a local beer with the name of the supplier.… Moreover, we have sampled some local hops from the woods near this supplier, and we've considered using that in the branding as well, but it is likely to become too expensive to use on a large scale.
(owner, brewery c) This perspective is also reflected in our quantitative data on the Danish breweries.For example, almost half (48%) of the 316 brewery names in our database have some local or regional indication or place-specific name.
Regarding the local names of their beers, 1013 beers are registered with a local name.An additional 821 private label beers have, over the past 10 years, used a local name.The importance of local names was also evident in our interviews.Most respondents in the 36 interviews pointed to regionally embedded histories and/or localities as important factors in their branding.Even inside larger urban areas, such as Copenhagen, local labels increasingly flourish among microbrewers as a way of creating a locally rooted differential advantage through loyal consumers.Furthermore, many of the interviewees pointed to a link with tourism as an important part of branding, and several expressed an intention to intensify this collaboration.Moreover, some saw possibilities for selling their products together with complementary products.

Networking and other knowledge dissemination and sourcing
Our studies of craft brewers' networking and collaboration resemble some of the established perceptions of networking and yet differ from these.Informants described how microbreweries use intensive experimentation and product and consumption experience-based innovation in collaboration with users: We work with our customers and develop occasional or signature beers for them.For instance, in Aalborg, John Bull Pub hosts the local chapter of the Liverpool Fan Club, and we have designed a specific beer for them, which they serve when Liverpool is playing a match.(owner, brewery b) In one case company, the local chapter of the beer enthusiasts' association was partly responsible for product development: The local chapter of the beer enthusiasts has recently developed two beers for us, which are part of our product range.A couple of representatives from the local chapter participate in our test kitchen and decide on beer types and flavours.Once they settle on the style and taste, the brewer becomes involved.
(owner, brewery b) Brewing companies were generally actively involved or had been actively involved in a beer enthusiast consumption community and had received support from such a community for different purposes.
Other craft brewers are potential collaborators in building a shared interest and understanding of craft beer's virtues.We found several examples of joint ventures and collaborations between breweries concerning contract brewing, bottling, joint purchasing of brewing equipment, etc.; however, generally, the informal networking activities between brewers dominated such relations, rather than formal networks or collaborations among breweries and owners: Interviewer: How is your network and collaboration with other breweries and owners of breweries?Owner: We honestly don't engage in these.I rarely talk to other breweries and owners.He does (pointing to his master brewer).He goes to fairs, network meetings, and informal exchange of brewingand obtains relevant information, right?(brewer confirming).
(owner, brewery d) Generally, brewers participate in local, national and international craft beer competitions and fairs and offer information through newsletters and websites.They frequently host meetings with an active consumption community, which also conveys new trends to brewers, shares new insights about production methods, etc., and is an essential part of brewers' business intelligence.Local, national and international fairs, conventions and beer festivals are crucial meeting places where brewers engage in knowledge exchange, receive customer feedback, learn about industry trends and perform idea generation for product development.Additionally, they contribute to local economic development (Cabras et al., 2020).The informal but widespread network of brewers also serves other purposes, such as bridging specialists and sourcing information about new and used brewing equipment, conducting recruitment efforts and job searches and obtaining information about the quality and reliability of suppliers as well as learning of contract-brewing possibilities.

DISCUSSION
Several important issues have been revealed in this study of the Danish beer industry.Section 5.3.onwards emphasized the importance of regional markets and branding in strategies for surviving competition pressures.Another strategy for small firms to compete is to share resources and information by engaging in networking (e.g., Cunningham & Barclay, 2020;Lotfi et al., 2021;McGrath & O'Toole, 2013), something we explored in Section 5.5.Below, we discuss these issues and our finding that 'ordinary' rationalities rarely impact decision-making in this industry (as found, for example, in Section 5.2).

Networking
On the surface, our findings regarding the Danish craft beer industry seem to indicate that cooperation between breweries is limited.However, we have found that even if collaboration at the firm/owner level remains limited, there are three nuances of this conclusion meriting further discussion.First, we have found extensive informal networking among brewers, even if owners/managers engage in sparse collaboration.Second, although many breweries stated that they could do even more regarding this, several claimed to collaborate with partners outside of breweries.These include tourist organizations (breweries d and f), events (brewery a and f), producers of raw materials (breweries c and d) and various forms of specific partners, such as political organizations (brewery c), festivals (brewery b), beer consumer associations (brewery b) and industry associations (brewery e).Third, we have found a strong sense of community among craft breweries and a shared pride and identity in terms of being 'true' craft brewers (Wallace, 2019).Even though craft brewers recognize that the large, established breweries contribute positively to the industry development, there is still an 'us and them' feeling between craft breweries and large, industrial incumbents, spurring the shared incentive to help other craft breweries (Mathias et al., 2018).
These findings suggest that while the bulk of the network literature focuses on the formal collaboration between industry participators of the same type, there is a need to explore the informal networking, creation of informal communities and networking more deeply at different organizational levels and with varying types of partners in studies of networking (Winter, 2017).
The Danish craft beer industry's geography indicates that agglomeration effects do not play a substantial role in the upsurge and rapid growth of the industry.We have identified two aspects that nevertheless confirm some of the ideas put forward in the economic geography literature on the positive effects of clustering and agglomeration (Porter & Ketels, 2009).First, we have found evidence for regional orientation as a resilience factor.The increase in online sales of beer during the pandemic has partly outweighed regional loyalty, as online sales can potentially dissolve geographical aspects (conversely, these could work to maintain consuming 'local' beer despite being in other parts of the country/other countries).Hence, whereas neo localism continues to be an important factor in explaining craft beer evolution, additional explanations are relevant, including the brewing tradition in a region and the degree of internationalization of the beer market (Hasman et al., 2022).
Although the above finding is not in itself a direct indication of clustering effects, a complementary finding supports the existence of such effects.We have found evidence that fairs, conventions and beer festivals constitute essential meeting points for some brewers and breweries, rendering the same mechanisms that 'ordinary' clusters leverage.A part of the cluster literature has defined such meeting topics as 'temporary clusters' due to their shared characteristics with other clusters that are usually studied (Bathelt & Schuldt, 2008;Maskell et al., 2006).Trade fairs, etc., are viewed as events creating relational spaces where otherwise distant actors are temporarily proximate, enabling knowledge exchange opportunities and providing a basis for longer term relationships.

Rationality in decisions to exit
We see an essential need to extend the discussion of business rationalities beyond the model suggested by orthodox theory.The rational economic man model assumes that human decision (and action) is based on human anticipation of the economic consequences (profit/loss) of particular events; hence, the maximization of a financial return in this decision-maker model has been questioned (March, 2006;Winter, 2017).Relatedly, early on, Porter (1980, pp. 273-274) identified what he deemed significant pitfalls for managers not deciding to exit industries at the right time.These pitfalls stem from a standard definition of economic (non)rationality, such as a lack of adequate information, a tendency towards positive information search, and an information processing bias, including the suppression of unpleasant realities.
Our findings provide some support for these propositions, but there are two problems with this perspective.First, most managers in the craft beer industry are exceptionally well informed, but they also frame the logic of their business and prospects of value creation somewhat differently than those prescribed by the abovementioned model.Second, owners' idea of what the personal benefits and costs of remaining in the industry include do not follow a strictly economic, rational calculus.As in other craft beer studies (e.g., Cannatelli et al., 2019;Danson et al., 2015;Maye, 2012;Skoglund & Sjölander-Lindqvist, 2021), we find strong indications of rationalities that are vastly different from the 'economic man' rationality that underpins most theories and studies of industry and firm behaviour.Decision-making is guided by motives other than profit maximization.This applies to the decisions to enter or (not) exit the industry, as exemplified by the quotations in Section 5 by owners who became involved in the industry more or less by coincidence.
We have shown how such regional embeddedness materializes in breweries.We further point to the impact of non-economic rationalities on the survival of firms.Although formal collaboration and networking are limited at the owner/brewery level, we have found that knowledge exchange occurs, albeit in different forms than are often depicted in cluster studies.From a broader perspective, the nexus between regional 'islands' of more resilient markets and the internationalization of the national market (indicated by the 50% market share of imported specialty beers) generates exciting questions about the beer industry's economic geography.
Furthermore, we have found that the industry displays large heterogeneity in several dimensions, including the degree of professionalism, geographical scope, product range and image (Wesson & Figueiredo, 2001).The literature on the regional aspect of industry life cycles (Audretsch & Feldman, 1996) posits that industry decline happens faster when heterogeneity is low; in turn, this, together with increasingly locally oriented customers (EBCU, 2020), contributes to explaining why the predicted shakeout has not surfaced at full scale.Another explanation is that the Covid-19 pandemic has spurred massive state aid to prevent business defaults, which has also benefitted many of the firms in this industry and our sample.
Investors in the microbrewing industry have often upheld their assets rather than exiting when their profits decrease.This is in line with insights from the literature on entrepreneurial behaviour (Lerner et al., 2018) and on business angels (Warnick et al., 2018), which point out that (local) business angels often invest in specific industries and firms based on motivations other than pure profit maximization.Business angels thus share with the owners, brewers and managers a combination of fascination with the industry, products and production, on the one hand, and their regional belonging and investment focus, on the other.
In the discussion section, we pointed out some theoretical implications of this study, especially regarding networking and rationality.Additionally, we observe some implications for management and breweries.First, innovation and industry diversity aid resilience against increased shakeout pressures.This means that managers must be alert to business adaptability.Specifically, distribution is problematic for many microbreweries, and the pandemic has spurred a future rethinking of distribution channels, such as online sales.Creating resilience calls for new ways to engage local resources to find unconventional sales, distribution and marketing channels.Second, an important implication for managers is that they need to heed their nearby markets, storytelling and local engagement.Maintaining local support calls for active engagement in local communities.Again, this has been reinforced during the pandemic, as many others continue to jockey for position.Third, as pointed out above (in Section 2.1) entrepreneurs must consider the geographical scope of their market upon entry.A broad, diverse market segment is generally not advisable.Fourth, the passion of entrepreneurs is generally a good and important driver and a critical element in local resilience, but it also has a dark side.Compassion can turn to obsession and blindness to economic realities.Finally, we have identified extensive informal, horizontal collaborations in the industry, especially among brewers.To leverage craft breweries' diversity and mitigate their liabilities of smallness, they could engage in formal collaboration to prevent opportunistic behaviour and extend their collective branding and common marketing of craft beer (Lotfi et al., 2021).
Despite increasing the validity and reliability of our results by using several types of data in this study, some limitations are evident.We studied an extended period, two decades; however, as indicated in the introduction, this industry is currently experiencing increased competition in the ongoing Covid-19 period.The crisis due to Covid-19 has accentuated the present study, making it particularly interesting to update our results by following the industry's evolution.Despite excess capacity and increased competition, a severe shakeout is not yet visible in the data, but it would be interesting to observe whether a shakeout and/or consolidation takes place.Finally, the level of our study's generalization can be questioned.Although Wesson and Figueiredo (2001) claim that the microbrewing industry is a useful context with relevance to other industries, we note some limitations.We studied a small industry in a small country, and we have no substantial evidence that repeating this study in another context would render similar results.On the other hand, since we have no reason to believe the contrary, we encourage research along these lines in different geographical and institutional settings.

DISCLOSURE STATEMENT
The authors declare no potential conflicts of interest concerning the research, authorship and/or publication of this article.Ethics and consent of information were respected when working with informants.

NOTES
1.The Danish Breweries Association conducted two surveys with its members and found that every second brewery experienced a 60% reduction in sales during the second quarter of 2020.One in four respondents said they were at risk of closing shortly (Bryggeriforeningen (Danish Brewers' Association), 2020).In a survey in June 2022, half the respondents were still experiencing the aftermath of the Covid crisis, reporting that they were still at risk of closing.Similar surveys in other countries, such as the United States, confirm this picture.2. This study is relevant beyond Denmark.According to an April 2020 survey among 525 companies conducted by the US craft beer industry trade group, the Brewers Association, 60% of small US breweries believe that upholding social distancing measures would force them to close by mid-July.A total of 14% said they were either planning to close or would not survive more than four weeks.Another 45.8% responded that they would survive between one and three months.3. Some of the respondents were EBCU members, but they make up a small part of the overall sample.4. 'Microbrewing' often denotes a cap on brewery size and/or ownership.However, the term is also used to characterize the mode of brewing where microbrewers often define and market themselves in opposition to large breweries (Verhaal et al., 2015).Specifically, their identity relates to their creativity, originality, heterogeneous products, ingredients and flavours (Verhaal et al., 2015;Mathias et al., 2018;Pozner et al., 2022).Even if the term also covers brewing other beverages, in our case, we limit our focus to beer production. 5. See https://beerticker.dk/.6.Our final industry register has several advantages over other existing data sources.For example, we combine, as a criterion for being an active firm, not only the company register number but also that the firm has launched a beer on the market and has obtained operational approval as a producer of goods for consumption.7.This number grew to 242 in 2021.The data for 2021 do not have the same level of detail as in previous years.8.The Danish Breweries Association and Beerticker.dkestimate that the Covid crisis caused a drop in the number of new beers on the market.9. See https://beerticker.dk/.10.The interviews with the breweries were all conducted pre-Covid; hence, the statements we received do not necessarily contradict the survey results obtained in the Breweries Association surveys mentioned above in note 1. 11. Examples include Hvidovre Bryghus, Birkerød Bryghus and Lyngbeer.12. Thisted Brewery has 3000 attendants, all owning at least one share, in their annual general assembly, primarily locals.The town of Thisted has 14,000 inhabitants.Amager Bryghus sells its products in 10 countries.