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Beer Consolidation 1948-1960
Beer Consolidation 1948-1960
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Consolidation In the American Brewing Industry 2
The mid-twentieth century transformed the American beer industry from local saloon
sales to a massively consolidated industry that supplied canned and bottled beer to national
markets. This period is marked by the advent of handful giant breweries spending millions in
production and advertisement. This essay outlines the post-war transformation and
consolidations between 1948 and 1960. The sections that follow explain the context for the
consolidation and argues that small companies were either closed down or acquired as they could
not afford the capital-intensive expansion and modernization in the brewing landscape.
Unprecedented consolidation marked the period between 1948 and 1960 in the brewing
industry. Trembley et al. (2005) noted that the continual change in industry consolidation is the
most prominent feature in American brewing during this period. The number of brewers declined
dramatically, and the market share of the four largest breweriesꟷ Anheuser-Busch, Pabst, Blatz
and Schlitz increased from 19% to 75% (Garavaglia and Swinnen, 2017). In 1948, America had
466 brewers spread over 39 states and only 229 by 1960 (Carsey, 2021). During this era, brewing
became highly modernized and capital intensive. Large players heavily invested in modern
production and bottling technology and initiated widespread marketing campaigns to establish
themselves as national brands (Warner, 2010). The result was that these national firms gained
unparalleled power and put unsustainable pressure on small brewers, who responded by merging
to attain the required economies of scale and to withstand competitive pressure. The firms that
did not merge effectively shut down production and exited the market.
Another factor that contributed to massive consolidation was the shift from local to
national markets. Brewers began operating in expanded national markets, and distributed their
beers to grocery stores and taverns all over the country (Carbras and Higgins, 2016). The
Consolidation In the American Brewing Industry 3
expanded market created a need for strategically located brewing and bottling plants. It was
necessary for brewers to open up subsequent branches in order to lower the cost of long-distance
shipping. For instance, Busch brothers spent 20 million dollars to purchase land in Newark and
set up a state-of -the art processing and bottling plant to serve New York (Olge, 2019). Many
small companies could not afford such intensive capital spending and resorted to mergers and
acquisitions as a cost-effective alternative to access new markets. Examples include Perlstein and
Pabst acquisition of Hoffman beverage in Newark, and Schlitz acquisition and renovation of
Ehret brewery in Brooklyn (Olge, 2019). These acquisitions became the most preferred method
of opening satellite breweries in new cities and provided access to existing market and
The consolidation era resulted to numerous closures of many small brewers. These small
players could not effectively match the new economies of scale required in production. The main
factor that contributed to their closure was the capital-intensive requirement in the post-
prohibition and post-World War II era. After prohibition, brewers abandoned their local salon
distribution lines and shifted to widely-distributed bottled beer (Olge, 2019). This shift
demanded modern bottling equipment, distributors, and massive advertising campaigns. For
instance, Miller brewers spent over a million dollars in radio and newspaper advertisement and
an additional six million dollars to raise a bottling plant that could package two million bottles in
a single day (Olge, 2019). Many small brewers could not afford such spending on expansion as
Big brewers used lethal competitive practices that pushed out small brewers. One such
practice was to exercise power over the middlemen and force them to ship their beer only (Olge,
2019). Such practices led to distribution problems for small players in form of accumulated
Consolidation In the American Brewing Industry 4
inventories and limited distribution lines. Some small brewers who resorted to supply in their
local markets faced stiff competition due to widespread advertising campaigns and general
public distrust for cheap local beer (Olge, 2019). The just ended World War II and the resulting
hunger crisis from 1945-1948 also brought several complexities to the small players. The years
of famine relief after the war resulted in acute shortage of corn-based brewing products and
forced the use of rice and rice adjuncts (Carsey, 2021). Big players also imposed themselves here
by securing large supply contracts using their enormous purchasing power and made supply
materials scarce for small brewers (Carsey, 2021). This supply chain monopoly made many
firms to suspend production and eventually shut operations. Thus, the foreclosure of many small
brewers can be directly attributed to the lethal competitive practices of large players.
where few firms controlled a very large market segment. The main factor that created monopoly
power in the brewing industry is the shift from backyard beer sales in saloons to a full capital-
intensive commercial production that was beyond the financial capabilities of many small
brewers. Brewing giants such as Anheuser-Busch dominated the industry and spent millions of
dollars in production, advertising and distribution to urban centers. Such financial capabilities
fell beyond the scope of many small brewers who were forced out of the market. Thus, in my
opinion, intensive capital requirement in the era of corporate beer was the main factor that
created monopoly power and led to massive consolidations and exits in the brewing industry.
Consolidation In the American Brewing Industry 5
PART 3:
Important developments
Beer has always been an important part in human society and development. In pre-
historic times, the fermentation process predominantly used water and solar energy without an
in-depth study of the underlying process and function of malt-converting yeast. In my opinion,
the first major development in brewing was the discovery of yeast inbreeding and controlled
brewing technology in 1800’s (Raihofer et al., 2022). This development spurred large-scale
industrial production of beer with consistent quality. It is my first choice because it laid the
foundation for controlled industrial mass production and beer diversity since different yeast
strains produced different beer. The other important development was the introduction of beer
cans and disposable bottles to replace spring taps and kegs in social drinking saloons. This
milestone transformed beer drinking from a social to a private event, as individuals could
refrigerate and drink their beer at home, watching television. It also led to mass production of
beer to serve the wider urban markets. The third important development is the craft beer
revolution. Craft companies that produce different types of beer on a small scale satisfy the need
for diversity as multinational companies produce uniform quality and taste in beers. This is an
important development because it ended global domination of few multinationals and the
References:
Carbras, I., & Higgins, D. (2016). Beers, Brewing and Business History. Business History, 58(5),
609-624. http://dx.doi.org/10.1080/00076791.2015.1122713
Carsey, G. (2021). American Beer (1941-1948): Years of Myths, War and Famine. Master
https://www.mbaa.com/publications/tq/tqPastIssues/2021/openaccess/TQ-58-1-0108-
01.pdf
Garavaglia, C., & Swinnen, J. (2017). The Craft Beer Revolution: An International Perspective.
Olge, M. (2019). Ambitious Brew: The story of American Beer. Blue Willow Books.
Rainhofer, L., Zarnow, M., Gastl, M., Hutzler, M. (2022). A Short History of Beer Brewing:
Alcoholic Fermentation and Yeast Technology over Time. EMBO reports, 23(12),
e56355. https://www.researchgate.net/profile/Johan-
Swinnen/publication/268043355_A_Brief_Economic_History_of_Beer/links/54d9d8650
cf2970e4e7cea79/A-Brief-Economic-History-of-Beer.pdf
Tremblay, V., Iwasaki, N., & Tremblay, C. (2005). The Dynamis of Industry Concentration for
U.S. Macro and Micro Brewers. Review of Industrial Organization, 26(1), 307-324.
https://DOI 10.1007/s11151-004-8114-9
Warner, A. (2010). The Evolution of the American Brewing Industry. Journal of Business Case