A Concise Economic History Of The World Pdf

[Berniece Leonhardt]

Theshippers, and some local breweries, also made malt syrup. While they officially advertised it as an ingredient for baking cookies, and while its production was left alone by the government, it was readily apparent to all that its primary use was for homemade beer.

Of perhaps equal importance to the day-to-day business activities of the breweries were their investment decisions. Here, as in so many other places, the shippers exhibited true entrepreneurial insight. Blatz, Pabst, and Anheuser-Busch all expanded their inventories of automobiles and trucks, which became key assets after repeal. In the 1910s, Anheuser-Busch invested in motorized vehicles to deliver beer; by the 1920s, it was building its own trucks in great numbers. While it never sought to become a major producer of delivery vehicles, its forward expansion in this area reflected its appreciation of the growing importance of motorized delivery, an insight which they built on after repeal.

The leading shippers also furthered their investments in bottling equipment and machinery, which was used in the production of near beer, root beer, ginger ale, and soft drinks. These products were not the commercial successes beer had been, but they gave breweries important experience in bottling. While 85 percent of pre-Prohibition beer was kegged, during Prohibition over 80 percent of near beer and a smaller, though growing, percentage of soft drinks was sold in bottles.

This remarkable increase in packaged product impelled breweries to refine their packaging skills and modify their retailing practice. As they sold near beer and soft drinks to drugstores and drink stands, they encountered new marketing problems (Cochran, 1948, 340). Experience gained during these years helped the shippers meet radically different distribution requirements of the post-repeal beer market.

These expensive investments in automobiles and bottling equipment were paid for in part by selling off branch properties, namely saloons (See Cochran, 1948; Plavchan, 1969; Krebs and Orthwein, 1953). Some had equipped their saloons with furniture and bar fixtures, but as Prohibition wore on, they progressively divested themselves of these assets.

In April 1933 Congress amended the Volstead Act to allow for 3.2 percent beer. Eight months later, in December, Congress and the states ratified the Twenty-first Amendment, officially repealing Prohibition. From repeal until World War II, the brewing industry struggled to regain its pre-Prohibition fortunes. Prior to prohibition, breweries owned or controlled many saloons, which were the dominant retail outlets for alcohol. To prevent the excesses that had been attributed to saloons from reoccurring, post-repeal legislation forbade alcohol manufacturers from owning bars or saloons, requiring them instead to sell their beer to wholesalers that in turn would distribute their beverages to retailers.

Prohibition meant the end of many small breweries that had been profitable, and that, taken together, had posed a formidable challenge to the large shipping breweries. The shippers, who had much greater investments, were not as inclined to walk away from brewing.[3] After repeal, therefore, they reopened for business in a radically new environment, one in which their former rivals were absent or disadvantaged. From this favorable starting point, they continued to consolidate their position. Several hundred locally oriented breweries did reopen, but were unable to regain their pre-Prohibition competitive edge, and they quickly exited the market. From 1935 to 1940, the number of breweries fell by ten percent.

Annual industry output, after struggling in 1934 and 1935, began to approach the levels reached in the 1910s. Yet, these total increases are somewhat misleading, as the population of the U.S. had risen from 92 to 98 million in the 1910s to 125 to 130 million in the 1930s (Brewers Almanac, 1956, 10). This translated directly into the lower per capita consumption levels reported in Table 3.

The largest firms grew even larger in the years following repeal, quickly surpassing their pre-Prohibition annual production levels. The post-repeal industry leaders, Anheuser-Busch and Pabst, doubled their annual production levels from 1935 to 1940.

To take for granted the growing importance of the leading shippers during this period is to ignore their momentous reversal of pre-Prohibition trends. While medium-sized breweries dominated the industry output in the years leading up to Prohibition, the shippers regained in the 1930s the dynamism they manifested from the 1870s to the 1890s. Table 4 compares the fortunes of the shippers in relation to the industry as a whole. From 1877 to 1895, Anheuser-Busch and Pabst, the two most prominent shippers, grew much faster than the industry, and their successes helped pull the industry along. This picture changed during the years 1895 to 1915, when the industry grew much faster than the shippers (Stack, 2000). With the repeal of Prohibition, the tides changed again: from 1934 to 1940, the brewing industry grew very slowly, while Anheuser-Busch and Pabst enjoyed tremendous increases in their annual sales.

National and regional shippers increasingly dominated the market. Breweries such as Anheuser-Busch, Pabst and Schlitz came to exemplify the modern business enterprise, as described by Alfred Chandler (Chandler, 1977), which adeptly integrated mass production and mass distribution.

World War One had presented a direct threat to the brewing industry. Government officials used war-time emergencies to impose grain rationing, a step that led to the lowering of the alcohol level of beer to 2.75 percent. World War Two had a completely different effect on the industry: rather than output falling, beer production rose from 1941 to 1945.

During the war, the industry mirrored the nation at large by casting off its sluggish depression-era growth. As the war economy boomed, consumers, both troops and civilians, used some of their wages for beer, and per capita consumption grew by 50 percent between 1940 and 1945.

The other important change concerned how beer was sold. Prior to Prohibition, nearly all beer was sold on-tap in bars or saloons; while approximately 10-15 percent of the beer was bottled, it was much more expensive than draught beer. In 1935, a few years after repeal, the American Can Company successfully canned beer for the first time. The spread of home refrigeration helped spur consumer demand for canned and bottled beer, and from 1935 onwards, draught beer sales have fallen markedly.

From 1980 to 2000, beer production continued to rise, reaching nearly 200 million barrels in 2000. Per capita consumption hit its highest recorded level in 1981 with 23.8 gallons. Since then, though, consumption levels have dropped a bit, and during the 1990s, consumption was typically in the 21-22 gallon range.

Beginning around 1980, the long decline in the number of breweries slowed and then was reversed. Judging solely by the number of breweries in operation, it appeared that a significant change had occurred: the number of firms began to increase, and by the late 1990s, hundreds of new breweries were operating in the U.S. However, this number is rather misleading: the overall industry remained very concentrated, with a three firm concentration ratio in 2000 of 81 percent.

Although entrepreneurs and beer enthusiasts began hundreds of new breweries during this period, most of them were very small, with annual production levels of between 5,000 to 100,000 barrels annually. Reflecting their small size, these new firms were nicknamed microbreweries. Collectively, microbreweries have grown to account for approximately 5-7 percent of the total beer market.

Microbreweries represented a new strategy in the brewing industry: rather than competing on the basis of price or advertising, they attempted to compete on the basis of inherent product characteristics. They emphasized the freshness of locally produced beer; they experimented with much stronger malt and hop flavors; they tried new and long-discarded brewing recipes, often reintroducing styles that had been popular in America decades earlier. Together, these breweries have had an influence much greater than their market share would suggest. The big three breweries, Anheuser Busch, Miller, and Coors, have all tried to incorporate ideas from the microbrewery movement. They have introduced new marquee brands intended to compete for some of this market, and when this failed, they have bought shares in or outright control of some microbreweries.

A final dimension of the brewing industry that has been changing concerns the emerging global market for beer. Until very recently, America was the biggest beer market in the world: as a result, American breweries have not historically looked abroad for additional sales, preferring to expand their share of the domestic market.[5] In the1980s, Anheuser-Busch began to systematically evaluate its market position. While it had done very well in the U.S., it had not tapped markets overseas; as a result, it began a series of international business dealings. It gradually moved from exporting small amounts of its flagship brand Budwesier to entering into licensing accords whereby breweries in a range of countries such as Ireland, Japan, and Argentina began to brew Budweiser for sale in their domestic markets. In 1995, it established its first breweries outside of the U.S., one in England for the European market and the other in China, to service the growing markets in China and East Asia.[6]

Downard, William. The Cincinnati Brewing Industry: A Social and Economic History. Ohio University Press, 1973: A good history of brewing in Cincinnati; particularly strong in the years prior to Prohibition.

Downard, William. Dictionary of the History of the American Brewing and Distilling Industries. Westport, CT: Greenwood Press, 1980: Part dictionary and part encyclopedia, a useful compendium of terms, people, and events relating to the brewing and distilling industries.

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