5. Analysis- The Copenhagen Microbrewey Cluster
5.2 Determining the Cluster Power
After establishing that there are indeed cluster activities of microbreweries in the Copenhagen area, in the following section of this research I will determine the cluster power. For this purpose, I will make use of the 12 points stated by Rosenfeld (2007) and cross reference them with the data gathered through the interviews.
43 5.2.1 Research and Development capacity
In context of R&D, it is to mention that the basics of brewing will stay always the same. R&D in the microbrewery industry in context of the final produc,t is focused on the establishing of new styles of beers, flavor creation as well as quality improvement. Raw materials used in the beer
production will play therefore a vital role. In context of the production process on the other hand, I will look deeper in the introduction of new equipment to ease the brewing process as well as opportunity creation for microbreweries.
A large role in the product development in this context plays collaboration. As mentioned in the previous section it allows microbreweries to share their knowledge as well as get insights in the daily operation of fellow microbreweries. Asked about the context of innovation in the
microbrewery industry, S. Wagner (2021) refers to the raw materials. According to him firms get inspired, by fellow cluster participants, which gained access to new resources such as hops or yeast on the market. This leads to discussions in between the microbreweries, how new raw materials impact the final product, if it is an improvement or not. Furthermore, S. Wagner refers to differences in between the operations of microbreweries, some being more traditional, whilst others taking a more experimental approach:
“You learn from each other and also somebody else perhaps is more adventurous in terms of a certain technique or a certain style or have bought certain equipment where you can straight up ask them how is this working for you? How are you working with it and you don't mind sharing the knowledge because these are also people who hopefully are a bit inspired by you and can come to you for the same sort of advice in terms of things where You have taken leaps.” (S. Wagner, 2021;
p.2, Question 5)
Next to the importance of new raw material, the equipment used in the brewing process plays a vital role on the quality of the final product. A Knage (2021) refers in this context to the technology used in the brewery. According to her, technological advancement can have a multitude of impact on the final product. At first, she mentions the extraction of flavors out of the raw materials such as hops. Newly developed equipment allows a better extraction of these. A further aspect of the importance of technological advancement is concerned with the quality preservation after the production. As an example, A. Knage (2021) mentions the so called “Ultra-Meter”, allowing the
44 brewery to measure the oxygen values during the packaging process to prevents quality loss over time (A. Knage, 2021).
Whilst innovation happens by communication and learning in between microbreweries, during the interviews I found no evidence of dedicated facilities to R&D in the Copenhagen area. Looking at the nature of microbreweries being SME´s going hand in hand with limited financial resources this fact does not come at a surprise. It is on the other hand to mention, that Carlsberg brewery, a large and well established MNE is operating in Copenhagen. Whilst Carlsberg could potentially be considered as part of the cluster, due to the foundation the company established in previous years, the brewery not classified as microbrewery by any means, but they incorporate a
department committed to R&D. The Carlsberg Research Laboratory played already in the past, a vital role to the brewing science technology. Their focus is the quality improvement as well as flavor enhancement (Carlsberg Group, 2021).
5.2.2 Knowledge skills
In this section I will analyze, if skills in terms of work force as well as entrepreneurial skills are readily available in the Copenhagen area. One indicator for the availability of skills is to look at the development of the microbrewery industry over a period. In the interviews, the interviewees were asked about the development of the microbrewery industry. J. Storm (2021) mentioned in this context, that he experienced an increase of microbreweries in and around Copenhagen in the last decade. A. Knage (2021) further mentions that out of her experience the beer quality improved over the last years. Next to technological advance, she refers to better personal in this context.
Skills are further enhanced, by the sharing of knowledge in multiple instances. S, Wagner (2021) mentioned in this context again the importance of collaborations. As an example, he mentioned a recent collaboration with the Spybrew company involving an New England style hazy IPA.
“And Jens, the owner of Spybrew said straight up that they wanted to do a hazy New England IPA, which we are kind of known for at Dry and Bitter. And he said I don't know how. So we kind of had an agreement that we would kind of like, Yeah, well, this is also knowledge sharing, and you were and he's like, oh, but I only have these in these hubs, like and you use all this exotic stuff. And I said, Okay, well, I'll bring a couple of bags.” (S. Wagner, 2021; p.4, Question 11)
45 This approach clearly shows how a collaboration can lead, to enhancing the knowledge skills of a brewery, by supporting each other. Evidence, of sharing knowledge on this basis was found as well during the interviews with A. Knage and J. Storm (2021) both emphasizing the enhancement of skills through the sharing of knowledge during collaborations. But not just collaborations lead to the exchange and enhancement of skills. Whilst they grant deeper and more specific insights, regular exchange among breweries as well as on beer festivals has proven to enhance the skill base according to the interviews.
This data clearly shows that knowledge in context of microbrewery activities is readily available in the Copenhagen area. The data has further shown that the enhancement of skills and skill labor is a common occurrence in the local industry.
5.2.3 Human Resource Development
A further aspect to consider in the context of skilled labor force as well as entrepreneurial skills are the availability of educational institutions. At the time of this research, the city of Copenhagen hosts a multitude of higher educational facilities. In context of entrepreneurial skills to mention is the Copenhagen Business School, offering a multitude of courses with an entrepreneurial context.
Furthermore, the university is offering multiple educations in context of marketing as well as management, needed in microbreweries (CBS Course catalog, 2021). Next to the business aspect, the Scandinavian School of Brewing is in Copenhagen offering the opportunity to become a certified brewer, by finishing their master program (Scandinavian School of Brewing, 2021). A further aspect to mention in context of education is the general Danish approach toward the quality of live, making it attractive. Whilst course can be found for national as well as international students, the Danish government further supports aspiring graduates financially, hence improving the quality of live.
5.2.4 Proximity of suppliers
For the brewing process, multiple raw materials, as well as technological equipment is required.
Contributing towards the cluster power, is the proximity of the suppliers of resources. The information gathered in the interviews in this context are twofold. Whilst some of the resources
46 are readily available locally, others must be sourced globally. The main resource locally available, according to the interviewees, is the Danish malt, which is also used by the Dry and Bitter Brewing Company as well as Amager Bryghus. In terms of hops as well as yeast required, A. Knage (2021) mentions that they are imported. Whilst their hops is sourced from the United States, the required yeast is imported from Italy. S. Wagner (2021) refers to the suppliers in a similar manner. The hops are imported by the same American supplier as it is the case with Slowburn, from the firm called Yakima. As a reason for this choice, S. Wagner (2021) mentions the high quality as well as the specific aroma, provided by this supplier. But also, in context of brewing equipment the firms differ by quite some margin. Whilst Amager Bryghus, had it brewing plant custom build towards there need by a Danish company, Dry and Bitter as well as Slowburn, sourced their tanks from foreign suppliers. Also, in terms of packaging the equipment used differs. One common aspect is the distribution two brew pubs. Here all interviewees mentioned the use of so called “Key Kegs”.
Key keg is a plastic keg producer located in the Netherlands; hence the kegs must be imported (Key Keg, 2021). In terms of packaging for the private consumer, all the interviewees mentioned to use metal cans. For this packaging process a canning line is needed. Whilst J. Storm (2021)
mentioned that the canning line from Amager Bryghus was imported from Italy, S. Wagner mentioned in a follow up question past the interview, that his product was sourced from the United Kingdom.
In context of the cluster power, it is to say at this point, that the local availability of resources is limited. Whilst some equipment as well as resources are locally available, most supplies and suppliers are foreign based.
5.2.5 Capital Availability
Throughout the interviews, the approach to raise capital to begin with variety amongst the firms.
J. Storm (2021) stated during the interview, that he took the traditional approach by taking a bank loan to start his brewery. As stated previously in this research, he got granted a bank loan which combined with the safe capital by the founders allowed the foundation of the brewery. He further mentioned that he had the advantage of founding the brewery pre the financial crisis of 2008, which made, according to him, the grant of a loan easier. The fact that the loan was granted in the first place, is on the other hand a good indicator, that banks in Copenhagen indeed understand
47 and trust in the industry. This is underlined by the fact that a follow up loan was granted to
Amager Bryghus, to expand their operations. In the case of Slowburn Brewing, the founders decided to take a different approach, by taking multiple loans from private people interested in the industry. According to A. Knage (2021), this allowed Slowburn to start the operations without any obligations toward any stakeholders.
“Because we also worked out the business model while doing it, because we had to pitch our idea to friends and family and people that we thought might be interested in the so how we did it was that we have taken like, like multiple small loans with people that we're excited about the project.
So instead of them like buying a share, they are just lending money at a really good interest and of course, being patrons getting a lot of fear and benefits like that.” (A. Knage, 2021; p.5, Question 11)
Using private people, eased their process of raising capital, combined with good interest rates for the investors, creating a win-win situation. As A. Knage (2021) further mentioned, they had to pitch the business model to their private investors. In getting granted multiple loans that way it is needless to say, that the investors understood the business model.
The Dry and Bitter Brewing Company took a different approach. This is based on the structure of their business. S. Wagner (2021) mentioned that previous to the foundation of the brewery, he was already a partial owner of the brew pub Fermentoren in the city of Copenhagen. The profits gained through this bar were used as financial capital to start the brewery. This was done by buying share of a brewery collective and slowly purchasing more and more brewing equipment over time leading to the full ownership at the time of this research.
Whilst this data shows that sources of capital are readily available, and banks understand the business model behind microbreweries, the data clearly shows, that multiple approaches can be taken in terms of raising the capital to begin with.
5.2.6 Access to specialized services
In the microbrewery industry multiple services in form of accountants, lawyers as well as
technological services are required. These are, due to the nature of microbreweries being smaller
48 firms, in many cases sourced outside. The cluster power increase if these kinds of services are close and readily available. Asked about this topic, J. Storm (2021) mentioned that Amager Bryghus is using local accountants as well as lawyers and consultants of multiple sorts based in Copenhagen. S. Wagner (2021) mentions on this topic:
“Lawyers I mean like lawyers and account. At a certain point, they become necessary. I mean, like, you grow to a certain size. And then you start thinking about holding companies. And then you start thinking about these. I mean, they simply and also in order to make sure I mean, like you're juggling larger and larger numbers. And it becomes more and more in transparent whether or not that your business is actually making money or not, because you're also making a lot of
investments at the same time.” (S. Wagner, 2021; p.8, Question 22)
Asked past the interview, where these are located, he is similar to Amager Bryghus referring to Copenhagen as the main source. Slowburn as well, uses local sourced accountants, as mentioned in the interview by A. Knage (2021) but has due to their size compared to well established
breweries less needs for outside services.
The data therefore clearly shows that outside specialized services are readily available, and can be sourced locally in the city of Copenhagen.
5.2.7 Machine and Tool Builder
As already established previously in this research, much technological equipment is required in the brewing industry. Determining the cluster power in this context is the availability of machinery, close by maintenance staff as well as the relationship between the equipment producer and the firms of the cluster. As established in the previous section, much of the equipment used in the brewing process is sourced internationally. S. Wagner (2021) mentions, that the availability of maintenance for tools and machinery is heavily dependent on the location you purchase machinery from, whilst equipment purchased locally can be maintained by the local personal, foreign purchased equipment can involve waiting times.
49 5.2.8 Intensity of Networking
This section is a crucial aspect in the determination of cluster power. A good interaction in between the firms in terms of cooperation, sharing of knowledge, joint production as well as problem solving significantly strengthens the power of the cluster. Whilst I touched upon this phenomenon previously, I will analyze these aspects in depth in this section. In term of a good cooperation on regular basis, I found multiple evidence during the interviews. Once again to mention in this aspect, are collaborations between local microbreweries. As I already outlined in the previous sections, collaborations in between breweries can have multiple reasons. One aspect I left out so far is the social aspect. When asked about collaboration specific, and what reasons are behind them, S. Wagner (2021) mentioned the pleasant time you have during collaborations. The staff is coming together and has a great time. A. Knage (2021) mentioned the importance of the social level as well during collaborations. Similarly, J. Storm (2021) mentions:
“Normally, it's normally, it could be two things. It's just the people you know, and like to drink beer with you make a coollab, just for the fun of it. And it could also be if you want to learn more about the people at the brewery…” (J. Storm, 2021; p.4, Question 17)
In terms of joint production, it is in the nature of collaborations in the microbrewery industry, to produce a beer in joint effort at one of the participants breweries. In terms of knowledge as well as Resource sharing, S. Wagner mentions:
“So we collaborate through resource sharing through knowledge sharing, through equipment sharing, try to find ways in which to interact and help each other I mean…” (S. Wagner, 2021; p.1, Question 3)
As already established in the previous sections, a further aspect of collaborations is the sharing of knowledge, as well as gaining insights about other microbreweries operations. In context of
problem solving, I will refer in this section again to the previous mentioned example by mentioned by S. Wagner (2021) during the interview. Here he explains how collaborations can lead to
problem solving instances for a microbrewery. Specifically, he mentioned the collaboration with the Spy Brew microbrewery, resulting in Dry and Bitter Brewing teaching them, how to brew a New England style IPA. Also, the general aspect of knowledge sharing was evident throughout all the interviews. Whilst collaboration account for the main in-depth interaction in between
50 microbreweries in and around Copenhagen, it is not the only way of breweries, to interact with each other. As A. Knage (2021) mentioned during the interview, it is common that the local microbreweries exchange knowledge through regular communication. These can involve new raw materials, as well as technology allowing to improve the quality as well as ease the process of brewing itself. J. Storm (2021) referred on this matter of being in contact with multiple
microbreweries. He refers to common exchange of resources as well as brewing equipment amongst microbreweries.
This data clearly shows high interactions amongst local microbreweries in the Copenhagen area.
Interactions involving sharing knowledge, problem solving, resource sharing as well as a good social environment are a strong aspect of the Copenhagen microbrewery cluster.
5.2.9 Social Infrastructure
A further aspect of the cluster power is the social infrastructure. A cluster power increases if participants of the cluster interact regularly with local business or civic associations. A vital role in this context, plays the relationship between those. Asked about interaction with close by business A. Knage (2021) mentions at first the multitude of business in the Copenhagen area. She further mentions the importance of a good relationship toward bars as well as beer shops. On reason therefore is a feedback on the quality for the brewery:
“Hey, you know, I've experienced some oxidation in your kegs. I don't know, maybe you should go get I mean, just like not, not just to criticize, but really to help each other. And that kind of
openness is something that and yeah, that I hub, especially also from the bars to the breweries…”
(A. Knage, 2021; p.3, Question 5)
This communications lead, according to her to a good relationship between each other, whilst guaranteeing as well, to sell the best quality possible and maintain the standards set by Slowburn Brewing. A further aspect in the case of Slowburn is the background of the founding partners. A.
Knage (2021) mentioned in this context her experience as an employee at the beer bar
Fermentoren as well as multiple beer shops she worked for that lead to informal relationships pre the foundation of Slowburn Brewing.
51 J. Storm (2021), refers at first two the two bars partially owned by the brewery, located in the center of Copenhagen. According to him, this allowed the brewery to get their beer easier into the bars. Due to the nature of the partial ownership by the brewery, they interact on informal bases (J.
Storm, 2021). A further aspect of relationship between Amager Bryghus and local business are supermarkets. Their beer can be found in multiple supermarket chains, in the district of Amager in Copenhagen (Rema 1000, Kvickly; 2021). The relationship towards those is on the other hand at the time of this research unclear. Similar to Amager Bryghus, the Dry and Bitter Brewing Company is as well represented with their owned bar Fermentoren, in the center of Copenhagen.
The gathered data in context of the social infrastructure clearly shows a multitude of interactions and networks with private businesses in the Copenhagen area, whilst many of the connections are based on informal interactions this can be clearly laid out as a strength of the Copenhagen
microbrewery cluster.
5.2.10 Entrepreneurial Energy
Entrepreneurial energy focuses on the development of the cluster in context of its size. It raises the question of new entrance and an expansion of the participating firms. Asked about the development of microbreweries in the Copenhagen area, A. Knage (2021) refers at first to the history of microbreweries and craft beers. According to her Mikkeler, laid the foundation in introducing the Danish population to craft beer in the first place. This led to a development in Denmark leading on the one hand to the popularity of craft beer as well as a rise in the quality standards set by the breweries. In context of an increase in microbreweries she mentions:
“And, it's just really exciting to see the business grow. And I think that we've also created a
stronger bond over the years, because more and more physical breweries are coming to the scene and the and there's a really good atmosphere, and we all try to help each other out. “(A. Knage, 2021; p.2, Question 3)
This statement includes two crucial aspects relevant under the topic of entrepreneurial energy. On the one hand, it shows that a local increase in the microbrewery industry in the form of new and upcoming breweries. The statement on the other hand confirms that new breweries are included in the cluster as A. Knage refers to interaction with new entrants as well as supporting them. Also