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Economic Concepts in the Beer Industry

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There are more than 2000 brewers but three control 78% of the beer market. Anheuser-Busch controls approximately 45%, Miller Brewing maintains a 23% share, and Adolph Coors controls 10%. Anheuser-Busch's twelve breweries produce more than sixty varieties of beers in a number of families with operations around the world and distribution to over 60 countries. A few of these families are Budweiser, Michelob, Busch, Natural, Bicardi, and Grolsch. Miller Brewing produces more than 130 million barrels of beer annually and has operations in 40 countries with hundreds of brands. In July 2002, South African Breweries purchased Miller Brewing Company, forming one of the largest brewers in the world, called SABMiller plc. Brands range from Miller, Milwaukee's Best, Leinenkugel's, Peroni, Sparks, and Fosters. Adolph Coors produced 42.1 million barrels in 2006 through 12 breweries and more than 40 brands distributed to over 30 countries. Brand names include Coors Light, Milson Canadian, Coors, Killian's Irish Red, Keystone, Blue Moon, and Zima.

Beer is distributed through a system called the "three-tier" distribution system. The three-tier system was established by the 21st Amendment to the Constitution and state and federal governments in the wake of the repeal of Prohibition as a means of checks and balances at each tier level. The first tier consists of brewers and importers, followed by wholesalers, and lastly with the retailers. The brewers and importers manufacture the beer and in the case of importers, import it into the country, then sells the beer to wholesalers who then sell and ship it to retailers. Besides manufacturing the beer, brewers are also responsible for providing market support and assistance to wholesalers, providing point-of-sale materials, providing consistent supply of the product, maintaining a consistently quality product, and notifying the wholesaler of changes in product, ownership of company, changes in marketing strategy and provide adequate lead time for introduction of new items or product design changes.

Beer wholesalers occupy the middle tier of the three-tier system. The 21st Amendment instituted the necessity of a middle tier for a variety of reasons. First, retailers are now protected from control previously used by the suppliers, or brewers. Second, it encourages consumption in moderation. Third, the process allows for more controlled and accurate collection of state and federal taxes. Finally, it allows individual states to regulate the licensed beverages in a manner that reflect their own practices and beliefs.
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