As ILSR’s Ron Knox writes in a new Slate piece, the beer industry was supposed to be different than other economic sectors. While industry after industry consolidated over the past few decades, the number of companies brewing beer in the U.S. grew exponentially. He explains that while we all thought craft beer producers were a small, local, democratized bunch,
Two global beer titans have managed to maintain their grip on the industry largely by influencing how beer is distributed and what is found on store shelves. Almost 90 percent of beer sold in most places in America is handled by distributors whose primary customer is one of the two big brewers, giving AB InBev and Molson Coors outsize control over which beers appear on bar taps and in retail coolers. Meanwhile, the two companies have purchased about 20 smaller “craft” beer brands—brands that then fill taps and shelves where independent brews might otherwise appear.
Why didn’t those thousands of craft breweries ultimately topple AB InBev and Molson Coors?
The problem isn’t starting a brewery. The barriers to entry are sufficiently low that every American city now has a busy craft-beer scene. Indeed, there are over 4,500 beer companies brewing fewer than 7,500 barrels a year.
Nevertheless, Ron explains, industry structure in almost every single state forces brewers to sell to monopoly distributors, which have deep contractual ties to monopoly brewers.
It’s a preposterous system. And in a world where AB InBev and Molson Coors themselves own multiple craft brands, those category captains can simply recommend to retailers their own brands—providing customers with the illusion, but certainly not the reality, of choice.
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