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Beer Industry Oligopoly Essay

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Introduction The brewing industry was once held to competition among many breweries in small geographic areas. That was almost a century ago. The U.S. brewing industry today is characterized by the dominance of three brewers, which I will talk about in this paper. There are many factors today that make the beer industry an oligopoly. Such factors include various advancements in technology (packaging, shipping and production), takeovers and mergers, economies of scale, barriers to entry, high concentration, and many other factors that I will cover in this paper. Over the course of the paper I will try to define an oligopoly, give a brief history of the brewing industry, and finally to show how the brewing industry today is an oligopoly.…show more content…
However, if there are not barriers to entry, companies will not be able to raise prices and realize profits.
The brewing industry it different from many other industries because it is not governed by laws regarding patents or exclusive grants. A majority firm does not control the inputs required for brewing beer and the supply for brewing materials is fragmented. There are high costs associated with entering the brewing industry, such as establishing a network of suppliers and distributing the product. It has been estimated that the construction of a four to five million barrel a year plant would cost around $250 million, and this is just the fixed cost of building and maintaining the brewery. There is an even greater amount of capital needed when the marketing activities needed to distribute beer are added in. This all means that any new entrants would have to invest heavily to establish a strong reputation and brand awareness. It may seem odd that a company of Anheuser-Busch's size is allowed by the government to maintain such a huge portion of the market. But nothing in the way Anheuser-Busch prices products or promotes them is monopolistic in nature. There is still heavy competition among other corporations because of different product offerings, which makes it more beneficial for the industry to be an oligopoly.
It is clear that the economic impact that micro breweries and craft breweries have had on
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