It's about the beer
Gina Miller and Bill Keeper
The monopolies are coming. In almost every economic sector, including television, books,
music, groceries, pharmacies, and advertising, a handful of companies control a prodigious
share of the market.The beer industry has been one of the worst offenders. For example, what
does Blue Moon, Boddingtons, Pilsner Urquell, and Goose Island just to name a random four
have in common—all are owned by two companies: Anheuser-Busch InBev and MillerCoors.
This duopoly controlls nearly 90 percent of beer production. Okay, you knew that, Bill.
My point is this sort of industry consolidation troubles not only me but serious economists.
Research has found that the existence of corporate behemoths stamps out innovation and
hurts workers. But here's some good news - in the last decade, something strange and
extraordinary has happened. Between 2008 and 2017, the number of brewery establishments
expanded by a factor of six, and the number of brewery workers grew by 120 percent. Yes, a
200-year-old industry has sextupled its establishments and more than doubled its workforce in
less than a decade. Even more incredibly, this has happened during a time when U.S. beer
consumption declined. Sorry Bill, I'm not complaining in this month's column, I'm celebrating!
Projections from early 2018 numbers are even better. They count nearly 70,000 brewery
employees, nearly three times the figure just 10 years ago. Average beer prices have grown
nearly 50 percent. So while Americans are drinking less beer than they did in the 2000s
they’re often paying more for a superior product (a good thing for the economy). Meanwhile,
the best-selling beers in the country are all in steep decline, Anheuser-Busch, MillerCoors,
Heineken, Pabst, and Diageo, are still tumbling, Davids are ascendant, and beer is one of the
unambiguously happy stories in the U.S. economy!
Consolidation was supposed to crush innovation and destroy entrepreneurs, but breweries are
multiplying, even as sales shrink for each of the four most popular beers: Bud Light, Coors
Light, Miller Lite, and Budweiser. And that my good friend is the power of craft beer!!
That's it from me, chug-a-lug, Bill.....see you next time!
Hello Gina -
Once again you've taken me by surprise. No rants, complaints, or angry rhetoric from you is
different - ha, just teasing. Actually your point is well made. There is a power to craft beer that
has been, and to some extent, still is underestimated.
But where does this power come from? I think that at the end of the day the simple answer is
consumer demand,.This is because craft drinkers want fuller flavor, greater variety, and have a
sincere desire to support local business. Look Gina, it's easy to see that craft breweries have
focused on tastes that were underrepresented in the hyper-consolidated beer market. Large
breweries ignored burgeoning niches, particularly IPAs and sours, and generally still do.
But as I see it the underlying story concerns America’s regulatory history, and how a certain
combination of rules can make innovation bloom or wilt. Think about it. In the early 20th
century, alcohol producers owned or subsidized many bars and saloons. These establishments
were known as “tied houses giving them a vertical monopoly, At the end of Prohibition,
lawmakers felt that smashing these vertical monopolies was critical to promoting safe drinking. A
This led to a “three-tier system” in which producers (tier one) sold to independent middlemen
that were wholesalers or distributors (tier two), who then sold to retailers (tier three). My point is
that The modern alcohol sector is specially designed to promote variety. Still with me Gina?
By dividing the liquor business into three distinct groups, these state-by-state rules made the
alcohol industry deliberately inefficient and hard to monopolize. Then in 1978, Congress
approved a resolution that legalized home-brewing, unleashing a generation of beer makers
who experimented with flavors far more complex than the simplicity of Schlitz, Budweiser, and
other basic brews that reigned for decades.
More recently, many states have made exceptions for small craft breweries to sell beer directly
to consumers in taprooms. These self-distribution laws are another key to craft's reach and
power. Technically, they create an exception to the cherished three-tier system in a way that
advantages smaller breweries. But economists and beer fans realize that rules like this can help
small firms establish a fanbase and while encouraging others to enter the industry.
This is great time to be a drinker of craft beer, don't you think?!
Here's looking at you Gina