Why are small breweries rising despite large corporate takeovers?
As a child, I enjoyed playing Monopoly with friends and family. I’d strategically buy every piece of land on the game board as fast as possible. Today, monopolies are taking over every economic sector, including the beer industry. The two dominant players in the beer industry, Anheuser-Busch InBev and MillerCoors, which controlled nearly 90 percent of beer production in 2012.
Economist worry when consolidation takes over any industry. Numerous studies show big business hurts workers and compromises innovation. Between 2002 and 2007, there was a decline in employment at breweries during an economic expansion.
Then came the surge. Between 2008-2016 the 200-year old beer brewery industry expanded by a factor of six and the number of employees in the industry grew 120 percent. More shocking, the growth occurred when consumption of beer declined in the U.S.
Wait, there’s more. Despite the decline in consumption, consumers are paying more for a better quality craft beer. There’s more…the bestselling beers in the country are losing sales. Between 2007-2016, Anheuser-Busch, MillerCoors, Heineken, Pabst, and Diageo (Guinness) shipments fell by 14 percent.
It is safe to say the craft beer revolution is in full effect. While the increase in craft beer is nationwide, cities on the West Coast such as Portland, Denver, San Diego, Seattle, and Los Angeles are leading the way with the most craft breweries. Illinois and Idaho brewing jobs increased by 10 percent between 2006 and 2016 lending to the statistic that 2016 was the best year for the creation of breweries American history.
So, what’s at the root of this craft beer boom? Why now? What’s driving the growth? The answer lies with the consumer and history.
When prohibition ended in 1933, Americans in all states voted to separate producers (brewers) from retailers (bars) which created a three-tier system where producers (tier one) sold to wholesalers or distributors (tier two), who then sold to retailers (tier three). This dividing made it hard to monopolize until after Ronald Regan became president and the Justice Department relaxed the enforcement of antitrust laws which gave birth to conglomerates.
The shift to favoring the big business gave rise to the craft beer revolution. Congress legalized home-brewing which created a wave of beer makers who weren’t afraid to experiment with new flavors. After the legalization, breweries such as the Sierra Nevada and Samuel Adams started popping up giving birth to the craft revolution. Lately, many states have made it possible for small craft breweries to open taprooms and sell directly to consumers.
While big business can have higher production, higher wages, and attract the best talent, the craft beer industry creates innovative beer tastes and has managed to stimulate employment. The craft beer craze is a movement that shows no signs of slowing down.