Craft beer and brewing have emerged as a burgeoning market in the last decade. The variety of ales and lagers one can find at their local package store far exceeds anything seen in years prior and seems to diversify with each passing day. But as with everything good and productive, the government wants to step in. A new report from the Treasury Department has encouraged the federal government to start cracking down on the brewing industry, stating they believe actions taken by large beer producers are harming consumers and stifling competition.
The report does provide legitimate concerns regarding trends in the trade such as widespread horizontal consolidation and barriers to entry. However it fails to provide any concrete justification for their calls to use the Sherman Antitrust Act against large producers. The department claims that the presence of large conglomerates threatens the competitiveness of alcohol market. Astoundingly, they contradict themselves in the same breath, calling the brewing industry “unusually competitive” for a market dominated by 2 large brands.
These brands, Anheuser-Busch and Molson Coors, account for nearly 65% of the alcohol production market’s value. In a vacuum this may be cause for concern, but craft brewing has been unhindered by this fact. In the last 40 years 6,000 independent breweries have entered the market, and since 2010 the beer “duopoly” has lost 5% of their total market share to the vibrant craft brewing scene.
Unnecessary Interference
The popularity of craft brewery startups seems to be going strong as well, with no signs of stopping. Some projections expect these independent companies to more than double their share of the market by the end of the decade, showing that the industry has not been hampered by big name brands. Growth appears most prevalent in microbreweries which outpaces both brewpubs and regional craft breweries. Microbreweries have become more than two-thirds of independent activity in the market, and clearly have become the most popular method for entrepreneurs.
The success of craft breweries comes despite government regulations, not because of them. The Three-Tier Distribution system adopted by many states after Prohibition requires the separation of alcohol producers, wholesalers and distributors in efforts to better regulate alcohol. While major companies have little problem navigating this supply chain, independent small producers struggle to balance the increased liability created. Deregulation would do more to foster entrepreneurship and aid craft brewers than heavy-handed trustbusting by allowing them to ship directly to the consumer without jumping through hoops. The proposals made by the Treasury Department would at best do little to give aid to an industry which does not need it, and at worst cause chaos by shattering well-established brands.