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Will influx of Big Money spoil the brew?

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Portland is home to 91 breweries, more than any other city in the world (though we’re running neck- and-neck with San Diego). That’s not more per capita, that’s more than any other city, period. Those 91 businesses are responsible for a lot more of the economic vitality of Portland than people realize, according to Sam Holloway, University of Portland associate professor of strategy and entrepreneurship.

In fact, Holloway has been speaking around the country about the impact of craft breweries. His message? “If you’re a civic leader looking for a strategy to revitalize a neighborhood that’s struggling, you should think about craft breweries.”

Holloway studied the effect of three breweries in a six-block area in Eugene that has become known as the “fermentation district.” The neighborhood was run down, and now, he says, is a hotbed of culture and restaurants. The neighborhood has the breweries to thank, Holloway says.

The culture of Oregon breweries is greatly responsible for this effect, Holloway says, because nearly all the money and jobs generated from brewing beer stays local, even though much of the revenue comes from outside — tourists drawn to Portland to sample the brews, or people buying Oregon brews that have been shipped out of state.

Industry reports estimate the economic impact of Oregon breweries to be $2.7 billion a year. For every job at a brewery, studies say, 3.1 other jobs are created for people who live not just in Oregon, but in the immediate area.

“If you look at communities around these breweries, they’re all wealthy because property values are going up and good jobs are being created. ... They’re really engines of societal wealth,” Holloway says.

A year ago Holloway was invited to give a speech to civic leaders interested in revitalizing downtown in San Jose, Calif. San Jose’s downtown is a paradox, Holloway says. The city hosts many of the country’s most successful high-tech firms, yet downtown remains “an economic wasteland,” according to Holloway.

His message to San Jose’s leaders was simple — take measures to lure small breweries. San Jose’s building permit process can cost applicants up to $50,000. That might work very well at getting revenue from large corporations, but it was killing downtown because it was a barrier to people looking to start small independent companies, such as breweries.

“Breweries generally go in first because land is cheaper, then other businesses flock in,” Holloway says. “I’ve seen it all over the world.”

The model works, according to Holloway, because breweries create jobs with benefits and their relatively small profits don’t go offshore or to shareholders. But that may be changing.

According to Holloway, until a few years ago professional investors stayed away from craft breweries. There were no profits to be made in an industry where “the scale of wealth goes to the employees and the neighborhood, not to investors.”

But last year Anheuser-Busch InBev bought out Bend-based 10-Barrel Brewery and six other well-known craft breweries. So far, those local breweries appear to be operating as before. They haven’t for instance, slashed their prices, which they could do if Busch wanted to finance a price war, Holloway says.

Oregon craft brewers have never competed on price — with national beers or with one another. A six-pack from any one of them still sells for about $10. But Holloway wonders what would happen if 10-Barrel started selling its six-packs for $5. “Then the rest of us are dead,” says Holloway, who has invested in Eugene-based Oakshire Brewing.

Or maybe not, Holloway says, on second thought. Oregon’s beer drinkers, so far, have proven willing to pay more for local beer even at grocery stores, he says, “when nobody’s watching.”

But the larger question of income inequality won’t be much affected by the price of 10-Barrel beer, Holloway says. Busch already has begun investing tens of millions of dollars that are allowing 10-Barrel to expand and add jobs.

That’s good, Holloway says. So is the possibility that 10-Barrel employees under Busch might end up with higher wages and better benefits than they received before. But big picture, wealth inequality in Bend and Portland (where 10-Barrel has a brewpub) won’t be affected much by these small changes. The company’s revenue will be heading back to Busch, which will just help the rich get richer.

“It’s mostly about the transfer of wealth,” Holloway says. “The wages are good, but the profits go back to the corporations.”