Oligopoly Watch The latest maneuvers of the new oligopolies and what they mean Monday, October 22,

2007

Big beer and small beer

A recent issue of the New York Times featured an op-ed by Garrett Oliver, the brewmaster of microbrewery Brooklyn Brewery entitled "Don't Fear Big Beer" (10/19/27). Oliver's argument is that the planned consolidation of Miller and Coors in the US is a matter of little concern to their small competitors. As he puts it, " America's 1,500 craft brewers are undaunted by the prospect of a juggernaut that would have 30 percent of the domestic market [MillerCoors]. The age of American industrial brewing is over ." His point is that while big breweries see constant declines in sales, the craft breweries (microbreweries) are seeing double-digit growth. Fine words, and one has to be glad that many craft brewers, like Brooklyn Brewery are prospering (though others are failing). But Brooklyn Brewery had an income of $11 million in 2005 (the latest figures I could find). With a savvy business plan and an appeal to those who want their beer both special and local, and good for them. As a private company, its owners may be very happy with the revenue stream. But MolsonCoors, by far the smallest of the US big three, grossed $5.8 billion in 2006. For them, $11 million is less than a day's receipts. And for Anheuser-Busch and the combined MillerCoors, it is less than a rounding error. In that sense, Oliver is right, there should be no fear since his company only nominally in the same business as Big Beer. As he puts it: "MillerCoors is not a threat to craft brewers but a warning: we should not walk the road of overexpansion or be tempted by the lowest common denominator of the mass market." But the reason for the lack of fear s that the craft breweries are sill almost insignificant by Big Beer standards. And certainly, should a craft brewer become a significant competitor, it will be gobbled up by one of the big boys. In fact, that has been the strategy of InBev (Interbrew), which has swallowed up mid-size local craft breweries worldwide, including Belgium's Leffe, Jupiler, and Hoegaarden, among the most famous of craft brewers. Likewise, Japanese brewing giant in 2006 bought Canadian craft brewer Sleeman (Unibroue). And companies like Anheuser-Busch and Coors have their own craft brands and pseudo-microbrews, often with no proclaimed connection with their parent companies. A $10 or $20 million brewery may well be beneath the notice of Big Beer, but should a craft brewery stick its head above the ground cover, it is likely to be given an offer its owners can't refuse and get swallowed up by a bigger company. Big Beer companies may be dinosaurs, but no scurrying little mammal dare leave the underbrush. The age of the dinosaurs is far from over.

8:48:49 PM

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 Copyright 2007 Steve Hannaford . Last update: 11/1/2007; 5:34:35 PM .