Anheuser-Busch (45%), Miller Brewing (23%) and Adolph Coors (10%) are the three biggest producers in the U.S. beer industry, garnering approximately 80% of market share combined (Overview, 2003). Three leading factors in the consolidation occurring in the U.S. beer industry are: flat consumption, regulatory requirements, and high taxation levels. Barriers to entry are significant and include high startup and legal costs and manufacturing and distribution economies of scale that are prohibitive to new entrants. All three of the largest brewers in the U.S. own their own subsidiaries responsible for nonbrewing functions such as canning plants, labeling, etc. Such advantages from economies of scale enable the three dominating brewers to increase operating profits. According to Standard & Poors Industry Surveys, Anheuser-Busch has ôbeen able to leverage its 45 percent U.S. market share into 75 percent of the industryÆs operating profits through significant economies of scale in the areas of raw material procurement, manufacturing efficiency and marketingö (Overview, 2003, 1).
The U.S. beer industry saw shipments decline by 3% in the first half of the 1990s, with sales at the largest three brewers gaining only slightly in the same period. Flat consumption trends, regulatory burdens, and high taxation levels have led to such declines and flat sales. However, it is flat consumption levels, particular in the U.S., that most plague the industry. In the U.S. more alcohol awareness, slower population growth and an aging population have contributed to lack of growth in consumption levels. Weak domestic consumption and declining market share for national brands has resulted in price increasing to increase margins for profitability. However, price competition has also been employed by large brewers which may lead to industry-wide pricing levels and eventually decreased operating margins. In order to respond to flat sales and weak dom...