There have been three major periods of consolidation in the brewing industry, and each has been occasioned by a war. The first consolidation was caused by Prohibition, the moral war against drinking. Of an estimated 1,500 breweries in the United States when the nation went dry, only 750 breweries opened after Prohibition.
The second was caused by World War II. Servicemen overseas, most of whom had been weaned on local brews, had their first chance to try national brands that were shipped to them at the front. From 1945 to 1975, as the preference for national brands became clearer, the number of U.S. breweries went from 457 to 54.
The third and most dramatic consolidation has been caused by the ongoing marketing war between the industry's two giants, Miller Brewing Co. and Anheuser-Busch Cos., a war that began in 1969 with Philip Morris Inc.'s purchase of Miller Brewing. Together, these two brewers, with their economies of scale and enormous funds for advertising and marketing, have captured 53% of the $30 billion U.S. beer market, an increase of 15% in just four years.
Size has seemed the only way to compete, and the past decade has seen a wave of mergers and acquisitions: G. Heileman Brewing Co., which grew to national strength by acquiring regional breweries across the country, had made a tender offer, at press time, to acquire Pabst Brewing Co. and Olympia Brewing Co. (which was already 49% owned by Pabst). Stroh Brewery Co. swallowed up F. & M. Schaefer Brewing Co. and Joseph Schlitz Brewing Co. While the introduction of light beers and highly focused market segmentation has increased the costs of marketing the product, the overall market is growing at a sluggish 2.5% a year. And as costs continue to rise, growth in earnings has been anemic: Miller and Anheuser-Busch up 8% for 1981, Heileman up 5%, Stroh up 0.5%, and every other brewery down.
The only healthy growth in the market has been in the sale of imported beers, the product with which Anchor Brewing Co. and the other fledgling microbreweries must compete. Imports, which had only a minuscule 0.6% of the market 10 years ago, now make up 2.9% of the market, propelled by the new status-and taste-conscious consumer. As a consequence, the domestic brewers have begun to target that consumer as well, creating such more highly hopped and more highly priced "super-premiums" as the domestically brewed Herman Joseph from Adolph Coors Co. or Pabst Brewing Co.'s Andeker.
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