When you think of a brewpub, the first thing you might envision is a microbrewery such as Devil’s Backbone, so first I will clear up that misconception. In sum, a microbrewery is simply the location at which the beer is produced, whereas a brewpub is an on-site restaurant where the microbrewery can sell directly to customers. Some states impose a three-tiered system under which the brewpub business model is prohibited. In those states, breweries must first sell to a wholesaler who then distributes to retailers such as bars or grocery stores.
The graph below exhibits the growth of microbreweries as compared to brewpubs across the US from 2007 to 2014. As you can see by the contrast in growth, the brewpub business model is not growing nearly as rapidly as pure microbreweries. A brewpub forces you to incur the costs 
of both a restaurant and a brewery, which is often too high for a smaller microbrewery to handle. However, as of late brewpubs are popping up more frequently and for good reason. Brewpubs allow microbreweries to market their less popular craft beer to new customers who may not want to make a trip to a brewery just to try a beer. Additionally, brewpubs allow breweries to inject some of their own identity in a restaurant that will attract more customers. It is safe to say that once more states lift their three-tiered regulatory systems brewpubs will be much more popular across the country.
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Where do restaurants make their money? Does that shift the business case for a brewpub?
Legislatures have been trying to remove regulations on microbreweries so they don’t inhibit growth in the sector, hoping to increase overall production and distribution. Pennsylvania recently lifted the requirement of a brewpub license to sell onsite pints of draft beer for microbreweries. I’m curious to see if this will affect the growth of brewpubs in the area.
http://www.pennlive.com/food/index.ssf/2015/06/brewery_beer_sales_pennsylvani.html
As we spoke to in class today, restaurants make their money from drink sales. With this in mind, the revenue from brewpubs is largely dependent on the amount of beer they sell. The business model of brewpubs also centers around the customer’s experience in providing the consumer a place to relax and enjoy the beverages. I think of the food at a brewpub as more of a complement that adds to the brewpubs ambiance. With this being said, brewpubs hold an advantage over microbreweries in providing the consumer with the product (beer) and the experience (venue and food).
In addition, most brewpubs can fall identify themselves more as a restaurant than a bar and can attract people under 21 to their establishment. This works well for college kids where not everyone in a group would be 21, which makes the place popular for people to hang out whether they can drink or not. It also can attract parents and their kids to come, with the parents enjoying a few drinks while the kids have a meal. Depending on the individual case, brewpubs can have a much more diverse customer base than a microbrewery, increasing potential revenue and popularity in a town or city. I think this gives brewpubs more potential to grow than microbreweries.
While I think the alcohol-profit nature of restaurants is a boon to brewpubs, I think there is also a downside. Because a brew pub will almost certainly be exclusively selling their own product, they have a rather narrow customer base. You are only going to attract customers and make sales to people who not only like beer with dinner, but your beer. You risk losing the folks who would instead want wine or a cocktail with dinner.
However, due to the nature of a brewpub, it seems unlikely that offering complimentary products is a good idea.
How does the bundling of products differ from a brewpub and a restaurant that may also have nice beers on tap?
Devils Backbone is an interesting case as they started as a brewpub about an hour from Lexington, and expanded into a full-on microbrewery after the success of the brewpub at the base of Wintergreen Resort. I’ve talked to the owner of DB and I asked him why the Outpost doesn’t also sell food. He said the main reason is because DB supplies many of the local Lexington restaurants, and he didn’t feel it would be right to also compete with them.
Wyatt provides some nice comments on the transition from brewpubs to microbreweries, but one thing that we have noticed is that this mindset and fascination of local small breweries is growing quite rampantly. In the link below you can see that since 2007 the total numbers of US Breweries has increased by over 100% from roughly 1500 in ’07 to about 3500 last year. Up until 2012, brewpubs were the largest portion of these statistics but in recent years microbreweries have been growing at a much faster rate. This is because they have been able to distribute their beers to more venues. A lot of these microbreweries have sold to local restaurants and local retailers rather than the majority in-house at the restaurant.
https://www.brewersassociation.org/statistics/number-of-breweries/
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