Wednesday, April 19, 2006

I can taste summer

Summer is rapidly approaching and I can sense it. There is a certain change of pace in the school routine that occurs about 10 days before the the end of the semester and this is it. No pop gen on Thursday. Class next week is just to watch presentations. I have to give mine May 2nd. The last speciation class is just presentations too. I have to turn mine in April 28th. No problem. Me and reinforcement in sticklebacks are like this. Oh. You can't see me cross my fingers.

I only have to give two more lectures and more importantly, I only have to write two more lectures. Writing and giving NEW lectures is pretty much the worst part about being a graduate student, and, I imagine, a professor. I can't wait until next semester when I just have to dust off my old notes, reread the readings and walk into class. So much easier. So much less stressful.

The beer class is going ok. I've recently discovered some great new sources that I will definitely incorporate into next years class (ok, a couple new lectures, it won't kill me). I found perhaps the ultimate book not only for a couple lectures in class, but for fending off the rabid know-nothing beer dorks on and those you meet in actual real life. That are constantly citing figures that are suspect at best. They found them through a google search from some other beer dork's homepage.

Anyway, the book that I will carry proudly wherever I may trod is called The US Brewing Industry: Data and Economic Analysis. Written by Victor and Carol Tremblay, published by MIT press in 2005. I'm not sure when the library received it because I did another brief bibliographic survey early last fall and it didn't turn up.

Anyway, it has got all the numbers I want.

Yesterday, I lectured from a paper by Anita McGahan about the development of the American Brewing Oligopoly from immediately post-repeal to 1958. During this time the market share of the top 20 brewers increased from 35% to 68%. This was the beginning of the development of our current brewing industry, dominated by "the big three", Anheuser-Busch, Miller and Coors. I knew that their market share has dramatically increased since 1958, but I was having trouble finding all the relevant numbers. But search no more.

Get this, Anhheuser-Busch's (AB) market share in 1950 was 5.83%. At the time, there were several breweries competing actively for the number one spot. Milwaukee's Schlitz was number one with a 6.08% market share. Ballantine from Newark NJ had a 5.22% market share, Pabst 4.9% etc. But after a steady march of progress in the 1950s, AB pulled decisively away from the pack in 1958 and 1959. By 1960 its market share was 9.56% with Schlitz running a distant second at 6.42%. AB has continued to lead all domestic brewers up to the present day. Both Miller and Schlitz made a serious run at AB in the 1970s when the latter climbed steadily and rapidly through 17%, the low 20s, and ultimately settling at 27.06% market share in 1979. Miller accomplished a meteoric expansion when they moved from 8.55% in 1975 to 20.96% in 1979. Poor Schlitz peaked in 1975 at 15.48%.

What are the numbers today? Well, the latest figures Tremblay and Tremblay have are from 2002:

AB- 55.1%
Miller- 21.47%
Coors- 12.28%

Now this is before the Coors-Molson merger, so I'm not sure how that affected these numbers, but I'm pretty syre Coors-Molson is still in third place. Also, Miller merged with a Brazilian and a South African company to form SABmiller I think after 2002, but I'm pretty sure that didn't allow them to take AB out. (turns out this happened in 2002, so the numbers above are accurate to this)

Talk about Oligopoly?

The reason why the American brewing industry developed an oligopoly, according to McGahan, was because the economy of scale that was developed through new brewing technologies in the first half of the 20th century made the most profitably breweries the ones that could brew 1 million barrels (bbl) or more. The barrel is the standard brewer's volume measure and equals 31 gallons. For example, Coors brews about 23 million bbl/year these days.

With this massive increase (from 100,000 bbl/year) in the amount of beer being brewed and in conjunction with technological improvements in bottling, shipping and refrigeration, the only option for these large brewers was to expand into other markets. This led to a flurry of aquisitions and new brewery construction in the 1940s, 1950s and 1960s and continued at a slower pace until the present day. For example Strohs was purchased in a messy several way deal in 1999 by Miller, Pabst, and Yuengling.

Once there was no new markets to expand into, the intensity of advertising increased dramatically, ultimately resulting in the beer ad industry we're all so familiar with today.

I think I'll blog about a specific brewery next time.

McGahan, Anita M. 1991. "Emergence of the National Brewing Oligopoly: Competition in the American Market, 1933-1958." Business History Review 65, no.2: 229-284.

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