Introduction:

Beer culture in America is on the rise. It is an old industry with a new, and rapidly growing, consumer
base. In 2011, there were 1,989 breweries operating in the United States, which is the highest amount
since the 1880si. As any industry that is growing and strong, it is useful to know what effects, if any, its
growth has on the population of consumers, if the market has been saturated, if there is still potential
room for growth, etc. With many new graduate students looking into to prospect of opening their own
brewery and investors looking to place their money in new breweries, this could be valuable
information.
First we consider the capita per brewery from a sample of 30 U.S. states in 2011. A lower capita per
brewery would provide the consumers with greater availability, however on the contrary.
Next, we consider the gallons of beer consumed per capita in the same states, for the year of 2011. In
this report I am using capita per breweries as my independent variable, to try and discover if there is a
relationship between the number of people per brewery in a state on the consumption of beer per person.
As the number of capita per brewery decreases, does the gallons per capita consumed increase,
potentially due to higher availability of the product desired?
Data:

6
5
4
Frequency

3
2
1
0
0

100000

200000

Capita_per_Brewery

300000

The histogram for the Capita per Brewery (CpB)

data has a normal distribution, signifying that the
increase and decrease of Capita per Brewery in
each state has a fairly even distribution around the
average of 108,594 CpB.
The standard deviation tells us that the average
deviation from the mean for the sample is 54,742
CpB.
The standard error calculated explains that the
average of the random sample has a variability of
9,994.46 CpB from the population average.

10
Frequency

5
0
10 15 20 25 30 35 40 45 50 55
Gallons_Consumed_per_Capita

Regression and Analysis:

The histogram for the Gallons Consumed per

Capita (GCpC) also has a normal distribution
around the average 32.92 GCpC.
The standard deviation is 5.3 GCpC.
The standard error for the data set gives a
variability of 0.967 from the population average.

50
45
40
35
30
25
Gallons_Consumed_per_Capita
20
15
10
5
0
0

100,000

200,000

300,000

Capita_per_Brewery

The absolute value of the correlation coefficient (r) is 0.228. The value is less than 0.3, signifying a
weak or possibly no relationship between capita per brewery and gallons consumed per capita.
Assuming that there is a possible linear relationship between GCpC and CpB, we can use a
regression equation to try and predict the relationship between the two variables. The equation is:
GCpC = 35.318 - 0.000022 (CpB)
From this equation, we can infer that if there were no breweries in a state the average gallons per
capita consumed would be about 35.32. Also, for each additional person per brewery, there would be
an average decrease in the gallons consumed per person by 0.000022 gallons.
The standard error of estimate for the data is 5.247 GCpC. If CpB were not considered, the standard
error of GCpC would be 5.3GCpC, but taking into consideration the CpB, the error is decreased to
5.25 GCpC.
The R2 value is only 0.052, meaning that only 5.2% of the variation in gallons consumed per capita is
explained but the capita per brewery. This is an extremely small percentage, and signifies that the
model is not very reliable, because there is not much connection between the two variables.
Testing the regression analysis to verify that the appearance of a weak or non-existent relationship is
true, I used the t-statistic method.
The t-statistic is 1.236, which is less than the t-table value of 2.0480 at the 5% test level. This verifies
that the relationship between GCpC and CpB is not a significant relationship. With this information,
we would accept the null hypothesis that there is no relationship between the variables.
There is a possibility that we have committed a Type II error if the null hypothesis is later proved to
be false, and we have accepted it based on this sample data.

Conclusion:
The regression was not helpful due to the lack of a relationship between CpB and GCpC. Because
there was no relationship, it was not reasonable to use the regression equation to try and predict other
potential values.
Looking to create a better model, a new independent variable can be chosen. Other than availability
and variety (things effected by Capita per Brewery), another possible influencing factor on the
average Gallons Consumed per Capita, could be money available for purchasing beer, as it is not a
cheap commodity, especially if one is into Craft Beer. A possible independent variable could be
average income per household. This may produce a better regression equation, showing a clear
relationship to the differences in the average gallons of beer consumed per person in a state.
If we trust the sample data, then we know that a new brewery will have no effect on the average
gallons consumed per capita, id est, the consumption of the population will not grow with the
addition of the new brewery to counter-weight the new product supply in the market, but on the
contrary, will only decrease the Capita per Brewery ratio. In other words, it will decrease each
brewery's proportion of the market. With this in mind, if a new brewery had the option, it would be
more beneficial for them to open in a state with a higher capita per brewery, which will give them a
larger proportion of the population to supply.

i Brewers Association, "Brewers Association - FACTS." Last modified 3/26/2012. Accessed March 10,
2013. http://www.brewersassociation.org/pages/business-tools/craft-brewing-statistics/facts.