Us Beer Industry Overview Essay Example
Market Structure
The beer industry is widely known for been an oligopoly. However, in our approach, we will explore the possibility of analyzing microbreweries in particular from a monopolistic competition market structure perspective. The beer market oligopoly is composed by three big players: Anheuser-Busch which holds 48 % of the market share, Miller Brewing Co., with 18% and Coors Brewing Co. with 11%. Please refer to the below graph and table for information regarding the market share held by the remaining companies. (Market shares are shown based on shipments of 205.6 million cases in 2005 and 210 in 2006)
Based on the above market shares, we calculated the concentration ratio of the three big players and the Herfindahl Hirshman Index for the industry. Both measures confirm that the Beer Industry is indeed a highly concentrated one as the concentration of the big three players is almost 80% and the HHI is well above the 1,800 threshold.
Market Analysis The demand in the beer market is characterized by flat consumption trends although we can currently identity two growing markets: First, a domestic niche market for microbreweries, and second, the international market that is currently been targeted by our big national brands. Another very strong market trend is the consolidation of many national brewers. This consolidation has been driven by the increased regulatory burdens and taxation in the industry as well as by changes in demographics: greater alcohol awareness, slow population growth, aging population, etc. Through consolidation, brewers can accomplish economies of scale and other supply chain synergies. Parallel to this trend, there has also been an expansion of specialty brewers (microbreweries) that target more sophisticated and knowledgeable beer drinkers. The players in this market focus on differentiation and therefore can afford to charge premium prices for their products. This is actually the niche
The beer industry is widely known for been an oligopoly. However, in our approach, we will explore the possibility of analyzing microbreweries in particular from a monopolistic competition market structure perspective. The beer market oligopoly is composed by three big players: Anheuser-Busch which holds 48 % of the market share, Miller Brewing Co., with 18% and Coors Brewing Co. with 11%. Please refer to the below graph and table for information regarding the market share held by the remaining companies. (Market shares are shown based on shipments of 205.6 million cases in 2005 and 210 in 2006)
Based on the above market shares, we calculated the concentration ratio of the three big players and the Herfindahl Hirshman Index for the industry. Both measures confirm that the Beer Industry is indeed a highly concentrated one as the concentration of the big three players is almost 80% and the HHI is well above the 1,800 threshold.
Market Analysis The demand in the beer market is characterized by flat consumption trends although we can currently identity two growing markets: First, a domestic niche market for microbreweries, and second, the international market that is currently been targeted by our big national brands. Another very strong market trend is the consolidation of many national brewers. This consolidation has been driven by the increased regulatory burdens and taxation in the industry as well as by changes in demographics: greater alcohol awareness, slow population growth, aging population, etc. Through consolidation, brewers can accomplish economies of scale and other supply chain synergies. Parallel to this trend, there has also been an expansion of specialty brewers (microbreweries) that target more sophisticated and knowledgeable beer drinkers. The players in this market focus on differentiation and therefore can afford to charge premium prices for their products. This is actually the niche