comments_image Comments

The Alcohol Industry's Plan to Give America a Giant Drinking Problem

Industry giants are threatening to swallow up America's carefully regulated alcohol industry, and remake America in the image of booze-soaked Britain.

Continued from previous page


But all is not as it appears. Two giant companies— Anheuser-Busch InBev and MillerCoors—own, bankroll, produce, control, or have distribution rights to all of these brands and hundreds more. The truly independent brewers in the nation—there are about 2,000 of them, from tiny local outfits to national brands like Samuel Adams—account for just 6 percent of the market.

Almost all the rest belongs to Anheuser-Busch InBev and MillerCoors, which now together capture nearly 80 percent of beer sales in this country. Smaller conglomerates including Pabst, Heineken, and Diageo (owner of Guinness) take up much of the remainder, but even this doesn’t capture how consolidated the market has become. Pabst, for example, does not brew its own beer: that process is contracted out to Miller.

The market forces that eventually led to this massive consolidation among American brewers took root in the mid-1970s with the passage of the Consumer Goods Pricing Act of 1975, which made it illegal for producers to set minimum prices for their goods at retail. This was ostensibly “pro-consumer” legislation: the practice of allowing producers to set their own prices limited certain types of price competition, and so could be viewed as “hurting” consumers in an economic sense. But, of course, in this case we’re talking about consumers of alcohol and not apples, and when it comes to alcohol, cheaper is not necessarily better.


No longer required to set across-the-board prices for their goods, breweries learned that they could manipulate the much smaller wholesalers to extract more favorable terms, brand support, and profit by offering lower prices to those that did their bidding. The threat of higher prices could be used to force a wholesaler to drop competing brands. Conversely, lower prices might be offered to a wholesaler who promised to push a given brand more forcefully. This ability to use pricing to “discriminate” among wholesalers gave producers another valuable return: detailed knowledge of their wholesalers’ acceptable margins. That could be used to extract profit right up to the maximum feasible limit.

Something of a countertrend to consolidation seemed to appear in the 1980s, which saw a boom in small independent craft brewers. Examples include the founding (among others) of such well-known brands as Sierra Nevada (1980), Sam Adams (1984), and Harpoon (1986). Smaller brands and brewpubs added to the mix. But few of these brewers succeeded in gaining significant market share, or even in maintaining their independence. Since big brewers had been freed up to use price discrimination to reward and punish wholesalers, they could passively pressure wholesalers into keeping competitors—particularly small, independent brewers—off the market. Meanwhile, after the election of Ronald Reagan, the Justice Department cut back sharply on enforcement of U.S. antitrust law, setting in motion an unparalleled period of consolidation across virtually all American industries, including the beer industry.

In 1980, forty-eight breweries served the fifty states, and the largest of them had only a quarter of the market. Today, again, the market is overwhelmingly dominated by two: Anheuser-Busch InBev and MillerCoors.

Here’s how it went down:

Stroh Brewery Company, founded in 1850, entered the 1980s as the eighth-largest brewery in the nation. But after a sleepy first 130 years, during which it marketed a single brand, director Peter Stroh had come to recognize that “it’s either grow or go.” Released from antitrust constraints by the new Reagan regime, grow they would. In 1981, Stroh bought Schaefer, a big New York regional, and moved to seventh. Two years later, Stroh took over Schlitz, leaping and to fourth place. By the mid-’90s, the company had also swallowed up Augsburger and G. Heileman, then the fifth-largest brewer in America. 
Coors, famously secretive in its business dealings, began the Reagan era as the fourth-largest brewer in America, with a reputation for high quality and an almost chic image in the vast East Coast market as a great beer you could only buy west of the Mississippi. Then, in 1981, Coors crossed the river, crashed through the East Coast, and hurdled across the Atlantic. In 1994, Coors purchased El Aguila in Spain and founded Jinro-Coors in South Korea. And in 1997, Molson, Foster’s, and Coors partnered to bring the Silver Bullet to Canada for the first time. Coors was now number three.

See more stories tagged with: