Chief Economic Traits of the Beer Industry

One of the reputed benefits which have allowed the new craft beer industry to grow and thrive is the better profit margins possible for making beer and ale on premises. Business scholars Kleban & Nickerson (2011) have noted that “Since 2006, the craft beer industry has been able to

     In this paper I will be talking about the U.S. beer industry and in short an overview of the brewing industry worldwide. I will talk about the barriers to entry, economies of scale, government intervention, pricing, current market trends, product differentiation, and imports. The focus being mainly on the U.S. brewing industry oligopoly. The U.S. brewing industry has three major players: Anheuser-Busch, SAB Miller, and Coors/Molson. Anheuser-Busch is currently the largest brewer in the world, producing over 100 million barrels a year. Anheuser-Busch currently owns over 50% of the market in the United States, with Miller trailing behind at 20% and Coors at about 11% with the rest of the market occupied by imports and craft breweries. When analyzing any industry, how easy it is for newcomers to enter the market is a great importance. If there are high barriers to entry

A documentary film made in 2009, Beer wars features and describes the American beer industry distinguishing between the large and small breweries. The large breweries feature some main corporate companies like Coors Brewing Company, Anheuser-Busch, and Miller Brewing Company whereas the small breweries include craft beer producers like Moonshot 69, Stone Brewing Company, Dogfish Head Brewery, Yuengling, and others. The documentary shows how the beer market is controlled through advertising and lobbying, which is harmful for the competition in the market. There is a reason why the small companies are falling behind and the large corporates are controlling the market, which in turn makes it essentially oligopoly economy.

There are a few special characteristics to consider when we analyse the Craft Beer Market. The first is that there are many different competitors in this singular market. The number of producers of Craft Ale and Beer in the past 10 years has increased drastically as “Britain now has more breweries per head than any other country in the world”(Walker, 2014). Also, a lot of different companies have appeared that 's sole purpose is to brew beer. This was applicable to BrewDog in the early stages of its growth, however as it has expanded it has found new

The Merger Between Two Major Beer Competitors, the Market Structure for Beer, and it’s Effect on Consumers

The Beer Industry in Australia is highly lucrative and is made up of 209 businesses. This industry brings in over 5 billion dollars in revenue and grows of a rate of 0.1% annually (Ibis World, 2015). The industry though, in the past 5 years has undergone some tough conditions. Per capita the consumption of beer has declined dramatically. Out with the old in with the new. Premium beers and ciders have now replaced the traditional XXXX and Carlton Draught. A trend across a lot of industry’s not just the beer industry has seen consumers wanting better quality product rather than a larger quantity’s. As the beer industry isn’t just exclusive to Australia overseas competitors have taken advantage of this ‘quality market’ and sell their premium branded beer in Australia. This has obviously had a great affect on the amount of Australian brewed beers being purchased in Australia. With such increase in demand for craft beers the past decade has seen a growth to about 150 breweries in 2015. The new and ‘trendy’ companied such as Burleigh Brews are now the biggest challenge for the larger companies. Introducing low carb beers and different blends are some of the strategies these companies are using to overcome the smaller businesses except it still remains a challenge for breweries that have been for years. Beer industry brings in revenue of 4.8 billion dollars and a total profit of 765.3 million dollars. Australia has 209 registered beer manufacturing business’s with a predicted

The world beer industry is still fragmented with the four major companies only accounting for 22% of the worldwide market. Hence it was expected that there are chances of consolidation. The aim of industry rationalisation is gathering economies of scale in production, advertising and distribution. But the cost structure –high ratio of fixed versus variable costs – and different local tastes dampened the consolidation process in the brewery industry. Rationalisation through shifting to modern production facilities requires high investments, often in unstable economies. That is why capital expenditures in these markets should spread over a longer periods to ensure profitability also in early stages. Local brands are often established for centuries and an integral

The trend towards premium beer consumption has slowed somewhat in the recent economic downturn; however, down-trading is limited and there are notable instances of consumers continuing to trade up, both into beer and, within the category, into premium products. Over the past decade, the beer industry has seen significant consolidation and this trend continued during 2008. On a pro forma basis, beer sales by the top 10 players now total approximately 65% of total global sales compared to less than 40% at the start of the century. In recent major developments, the division of Scottish and Newcastle’s business between Carlsberg and Heineken was completed during the first half of 2008 while InBev acquired Anheuser-Busch in November 2008.

It can be said that all four factors; politics, economical, social and legal are all intertwined as one factor affects another. In relation to politics the rules and regulations set by the government ultimately affects the economic side of the beer industry. Due to the lack of growth and profit there are closures, which means socially there are loss of jobs. Furthermore, from a legal aspect

Industry rivalry is considered high because of the acquisition, the decline of the beer consumption, and the rise of the craft-brewing sector. Competition among the beer companies in the industry is based on brand and quality. In recent years, the industry has also consolidated quite notably with the top two

Beer consumption had declined by 2.3% due to the increased sales of wine and sprit drinks. Now people are aware of health concerns and the impact of high taxes on alcoholic beverages by the government. More than ever, beer is starting to appeal to younger drinkers between the ages of 21-27. These types of consumer have not yet developed any loyalty a specific brand and still have a high impact on the industry. Again, big name competitors took over market share with their larger distribution infrastructure. Furthermore, the trend of light beer grew in market share and grew to 50.4% of volume sales of barrels of beer.

Global beer market development over the last 18-24 months has led to the leading players becoming increasingly isolated at the top of the rankings, with little chance of smaller players challenging their hegemony. Even with its sizeable investment, Heineken is struggling to keep in touch with the big three. As such, it is entirely feasible that second tier companies, behind the major three, may group together to amass scale and distribution. One such possible triumvirate is Heineken, Molson Coors and FEMSA.

The brewing business is extremely competitive. As lager has advanced into fully grown category, the industry has encountered an escalation in mergers and acquisitions, product differentiation and global strategy. Overall 650 beers compete across the nations in this category, the top 10 defraying over $22M annually (Taylor 2004). The market is dominated by the giant 10 brands that form up 77% of the market. The top 20 occupy 87% which leaves Tiger and its 0.1% SOV to battle against the remaining 620 premium beers for 13% of the market. Included in this last 13% are power house global brands like Heineken Export, Corona, Stella Artois and Becks (Taylor 2004).

This case is centred on the European brewing industry and examines how the increasingly competitive

These industry tendencies combined with the nature of the overall beer market present a number of opportunities for major companies who have already gain a large amount of market shares such as SABMiller. However, the analysis of Porter’s five forces indicates a low industry ROE level.