Beer Economics- Supply and Demand
Beer Economics
ECO 202-002
The laws of Supply and Demand may be a simple concept except when it comes to beer. Two large beer companies have formed an Oligopoly and have taken the power from the people. Income high, or income low, beer will be purchased even if the price is not always right.
A social gathering is not social without the presence of beer. Beer has been a growing industry year after year. The craft, or microbrewery industry, has grown tremendously since the early 1980s, and the Brewers’ Association reckons that there are now over 1,500 brewing companies in the country, a level not seen since Prohibition was introduced in 1919 (Krafoff, 1). Pabst Blue Ribbon, in 1890 the most popular beer in the U.S., has seen its market share drop to 2.8%, but it has enjoyed a resurgence due to its cheap price, decent taste, and new-found cachet among urban hipsters (Krafoff, 1). The beer market is a completely open market. Anyone with a marketing idea and a recipe can get a contract brewery to make the product (Krafoff, 1). Almost every bar has a dozen taps with independent and local brews, but there are two definite brands you won’t ever have to look hard for: Coors and Budweiser.
As recently as 2004, 64 percent of the global beer market ownership was fragmented among ten beer corporations (Anderson, 5). In 2008 the merger of Anheuser-Busch (A-B) and global giant InBev created the world’s largest brewer: Anheuser-Busch InBev (ABI), followed by SABMiller (second-largest) and Molson Coors Brewing Company (fifth-largest) (Anderson, 5). To better compete with ABI’s growing world beer market share, SABMiller and Molson Coors combined their U.S. and Puerto Rico operations to establish their joint venture, MillerCoors LCC (Anderson, 5). With these massive consolidations, the two beer giants (ABI and MillerCoors) now have combined control of more than 40 percent of the world beer market and 80 percent of the United States beer market (Anderson, 5). MolsonCoors
ECO 202-002
The laws of Supply and Demand may be a simple concept except when it comes to beer. Two large beer companies have formed an Oligopoly and have taken the power from the people. Income high, or income low, beer will be purchased even if the price is not always right.
A social gathering is not social without the presence of beer. Beer has been a growing industry year after year. The craft, or microbrewery industry, has grown tremendously since the early 1980s, and the Brewers’ Association reckons that there are now over 1,500 brewing companies in the country, a level not seen since Prohibition was introduced in 1919 (Krafoff, 1). Pabst Blue Ribbon, in 1890 the most popular beer in the U.S., has seen its market share drop to 2.8%, but it has enjoyed a resurgence due to its cheap price, decent taste, and new-found cachet among urban hipsters (Krafoff, 1). The beer market is a completely open market. Anyone with a marketing idea and a recipe can get a contract brewery to make the product (Krafoff, 1). Almost every bar has a dozen taps with independent and local brews, but there are two definite brands you won’t ever have to look hard for: Coors and Budweiser.
As recently as 2004, 64 percent of the global beer market ownership was fragmented among ten beer corporations (Anderson, 5). In 2008 the merger of Anheuser-Busch (A-B) and global giant InBev created the world’s largest brewer: Anheuser-Busch InBev (ABI), followed by SABMiller (second-largest) and Molson Coors Brewing Company (fifth-largest) (Anderson, 5). To better compete with ABI’s growing world beer market share, SABMiller and Molson Coors combined their U.S. and Puerto Rico operations to establish their joint venture, MillerCoors LCC (Anderson, 5). With these massive consolidations, the two beer giants (ABI and MillerCoors) now have combined control of more than 40 percent of the world beer market and 80 percent of the United States beer market (Anderson, 5). MolsonCoors
Bibliography: Anderson, Peter, “Big beer duopoly”, Marin Institute Report, 2009, Pg. 5, 2011 <http://www.marininstitute.org/site/images/stories/pdfs/big_beer_duopoly.pdf> Boyer, Mike, “How beer defies the laws of supply and demand”, ForeignPolicy.com, 2007, Pg. 1, 2011 <http://blog.foreignpolicy.com/posts/2007/11/13/how_beer_defies_the_laws_of_supply_and_demand> Krakoff, Chip, “Beer, Competition, and emerging markets”, Emerging Markets Outlook, 2009, Pg. 1, 2011 <http://www.emergingmarketsoutlook.com/?p=787>