Tuesday, June 6, 2017

Prohibition "halted the rise of small local brewers"

From a lengthy article titled "The End of Craft Beer":

Prohibition (1920-1933) interrupted the progress of the American brewing industry. A little known fact: it also halted the rise of small local brewers, who had been growing at a faster rate than the national breweries since 1895 and had steadily been cutting into the big boys’ profits.[7] Prohibition was hardest on them because they did not have the capital reserves to weather the hard times or switch production to non-alcoholic goods. By the time Prohibition ended, the field had winnowed and the giants were poised to conquer it.

Conquer it they did. The second half of the twentieth century witnessed a formidable concentration of the brewing industry. There were 421 mass-producing beer companies in 1947, but only 24 in 2000, three of which—Anheuseur-Bush, Miller, and Coors—accounted for nearly 89% of U.S. beer production. The consolidation of the post-World War II market bore little resemblance to that of the late nineteenth century. The brewers of the industrial revolution had proudly touted their quality and consistency. The postwar breweries, by contrast, shifted to selling lifestyle. Technological advances, once a driver of quality, now served to cut production costs. Small firms had to discount their beer just to compete, leading to price wars that they were destined to lose.

To put it simply—the costs of entering the beer market were high, profit margins slim, and the chance of failure great. All economic signs from 1980 on should have pointed to futility for small breweries. Yet this was precisely when craft beer flourished. Just as the industry was consolidating at the top, diversity in production was increasing at the bottom. Eighteen microbreweries were producing beer in 1984. A decade later the number was 537. By 2016, it was over 3,000.

There were structural reasons for the rise of craft beer.