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The Emergence of the National Brewing Oligopoly: Competition in the American Market, 1933–1958

  • A. M. McGahan (a1)

Extract

In 1966 the Supreme Court expressed a desire to arrest consolidation of the brewing industry “in its incipiency.” This article argues that a national brewing oligopoly had already emerged by that date. In the 1930s and 1940s, restrained demand and regulatory pressure discouraged price and advertising competition and forced brewers to adopt cost-saving technologies. By the end of the Second World War, the largest brewers harbored unexploited economies of scale in processing. With relief from war shortages in the 1950s, large regional brewers expanded to pursue processing economies and secured their advantages with scale in distribution and advertising.

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1 The 14 percent is estimated from Keithahn, Charles F., The Brewing Industry (Washington, D.C., 1978), 12.

2 The Federal Trade Commission also became involved in cases charging price discrimination. Specific cases were Anheuser-Busch, Inc. v. Federal Trade Commission, 265 F.2d. 677 (1959); Federal Trade Commission v. Anheuser-Busch, Inc., 363 U.S. 536 (1960); Anheuser-Busch, Inc., v. Federal Trade Commission, 289 F.2d. 835 (1961); United States v. Jos. Schlitz Brewing Co., 253 F.Supp. 129 (1966); United States v. Pabst Brewing Co. et al., 384 U.S. 546 (1966); United States v. Falstaff Brewing Corp. et al., 410 U.S. 526 (1972). For further discussion of the effect of mergers, see Collis, David, “The U.S. Beer Industry” in chap. 3 of “The Value Added Structure of Industries” (Ph.D. diss., Harvard University, 1986), 108–12.

3 U.S. v. Pabst Brewing Co., 551–55.

4 Keithahn, Brewing Industry, 1.

5 The notes to Table 4 indicate which states were assigned to each region in the United States Brewers' Foundation reports.

6 Laufer, Stephen and Stewart, Earl D., 25 Years of Brewing (Mount Vernon, N.Y., 1958), 32.

7 Derived from statistics in the Brewers Almanac (Washington, D.C., 19541962).

8 Since the 1860s, the federal government has levied an excise tax on every barrel of beer produced in the United States. Before Prohibition, brewers were required to document the volume of beer passing from their processing plants to their bottling houses. High recycling rates and non-standard bottle sizes prevented accurately inferring the number of withdrawn barrels from a count of the number of bottles shipped by a brewer. See Baron, Stanley, Brewed in America: A History of Beer and Ale in the United States (Boston, Mass., 1962), 243–16, and Cochran, Thomas C., The Pabst Brewing Company: The History of an American Business (New York, 1948), 126–27.

9 Plavchan, Ronald Jan, A History of Anheuser-Busch: 1852–1933 (New York, 1969), chap. 4; Feldman, Herman, Prohibition: Its Economic and Industrial Aspects (New York, 1927), 4142; Downard, William L., Dictionary of the History of the American Brewing and Distilling Industries (Westport, Conn., 1980) 10; Cochran, Pabst Brewing Company, 64–65, 142–43; Chandler, Alfred D. Jr,The Visible Hand: The Managerial Revolution in American Business (Cambridge, Mass., 1977), 301.

10 Persons, Warren M., Beer and Brewing in America: An Economic Study (New York, 1938), 1315; Fosdick, Raymond B. and Scott, Albert L., Toward Liquor Control (New York, 1933), 4344; “Anheuser-Busch Compelled to Cancel Installation Contracts,” Modern Brewery (East Stroudsburg, Pa., Sept. 1934). As reported by Persons, Beer and Brewing (1942 ed.), 13, “Brewers [were] prohibited from extending financial assistance to retail beer outlets including taverns, restaurants, hotels and package stores.”

11 Anheuser-Busch, Inc., Annual Report (1938), 13. Study of Brewery Costs (New York, 1941), a pamphlet published by the United States Brewers' Association, described the cost structure of a cross-section of large and small producers throughout the country. The larger brewers—those above 100,000 barrels per year in capacity—reported production costs of $7.61 per barrel on average. Smaller-scale brewers incurred production costs of $9.65 per barrel on average. Differences in average transportation costs offset this difference. N. D. Smith, Jr., “A Highly Efficient Fleet of Trucks,” Modern Brewery (Feb. 1935), 31, reported that “Trucking is about 30% of the cost of getting beer to the customer” in his large brewery. Applying this percentage to production costs yields an estimated $10.87 per barrel in average delivered costs for a larger brewer.

12 Chandler, Visible Hand, 301.

13 Arnold, John P. and Penman, Frank, History of the Brewing Industry and Brewing Science in America (Chicago, Ill., 1933), 99; Plavchan, , History of Anheuser-Busch, 10–11; “The History of Brewing in St. Louis,” Modern Brewery (Sept. 1934); Cochran, , Pabst Brewing Company, 11, 74101. Quality was associated with consistency in flavor over each produced batch. The shipping brewers produced lighter lager with greater consistency, so lightness also tended to be associated with quality.

14 Arnold and Penman, History of the Brewing Industry, 92–98; Baron, Brewed in America, 230–31; Cochran, Pabst Brewing Company, 11–12. From 1934 to 1958, all brewers withdrew an average of 6.4 percent of annual volume in January, and 6.3, 7.5, 7.9, 9.0, 9.9, 10.6, 10.5, 8.9, 8.2, 7.4, and 7.4 percent in each subsequent month. This pattern indicates strong seasonality, with sales in August 63 percent higher on average than sales in February. From Brewers Almanac (1940, 1944, 1946, 1949–54) and Modern Brewery Age Blue Book Edition (New York, 19411949). Temperature variations explain seasonal drinking patterns, although they do not shed light on differences in annual consumption between regions. Shih, Ko Ching and Shih, C. Ying, American Brewing Industry and the Beer Market (Brookfield, Wisc., 1958), 49, make this point vividly by mapping seasonality against temperature variation in six large American cities.

15 Elzinga, Kenneth G., “The Beer Industry,” in The Structure of American Industry, ed. Adams, Walter, 7th ed. (New York, 1987), 205; The History of Brewing (New York, 1937), a pamphlet, 1112; Arnold and Penman, History of the Brewing Industry, 99; Jackson, Michael, ed., The World Guide to Beer (Englewood Cliffs, N.J., 1977), 12.

16 Cochran, Pabst Brewing Company, 78.

17 I am not aware of any record that a brewer attached the same brand name to beer brewed in a second facility before Prohibition. The brewing process was apparently sufficiently fragile to preclude second facilities for producing beer of similar quality at comparable cost.

18 Brewers Almanac (1940–59); Modern Brewery Age Blue Book Edition (1941–43). Throughout this study, seven brewing regions are cited: Northeast (with 280 breweries in 1935), East North Central (with 131), West North Central (218), Southeast (15), South Central (17), Rockies (21), and Pacific (70). The sum of these figures does not exactly equal the total reported on Table 1 because these are year-end figures, whereas Table 1 indicates the maximum in operation over a particular fiscal year. “North” refers to Northeast, East North Central and West North Central regions; “South” to South Central and Southeast. See also Downard, Dictionary, 242–43.

19 See Baron, Brewed in America, 339–41; Downard, Dictionary, 71–72; Bull, Donald, Friedrich, Manfred, and Gottschalk, Robert, American Breweries (Trumbell, Conn., 1984), 10.

20 “The History of Brewing in St. Louis,” Modern Brewery (Sept. 1934); Arnold and Penman, History of the Brewing Industry, 86–87.

21 Cochran, Pabst Brewing Company, 13–18, 202–3; Laufer and Stewart, 25 Years, 33–34, provide a striking list of post-repeal mechanical innovations; Ghobadian, Abby, The Effects of Technological Change on Shift Work in the Brewing Industry (Brookfield, Vt., 1986), 3335.

22 Chandler, Visible Hand, 256–57; Shih and Shih, American Brewing Industry, 13; Brewers Almanac (1949–59, 1976); Horowitz, Ira and Horowitz, Ann R., “Firms in a Declining Market: The Brewing Case,” Journal of Industrial Economics 13 (March 1968): 145; Collis, “The U.S. Beer Industry,” 116. See Table 6.

23 Persons, Beer and Brewing (1938 ed.), 7–8; Arnold and Penman, History of the Brewing Industry, 102–3, 175–82, 184–85; Feldman, Prohibition, 61–64; Baron, Brewed in America, 323–24; Cochran, Pabst Brewing Company, 343; Elzinga, , “The Beer Industry,” in The Structure of American Industry, 4th. ed. (New York, 1971), 192; Downard, , Dictionary, xviii.

24 For surveys and discussion of the brewing process, see Jackson, World Guide, 10–12; Downard, Dictionary, 115; Cochran, Pabst Brewing Company, 102; Arnold and Penman, History of the Brewing Industry, 87–92.

25 Dr. Schwarz, Robert described procedures for incremental upgrades in a speech entitled “More Efficient Brewery Operation” printed in the Proceedings of the Annual Meeting of the United States Brewers Association (New York, 1938), 157–68; see especially 162–67. Also see Joseph Obergfell, “Brewery Management and Employee Relations,” Modern Brewery (Jan. 1935), 41–42, 69; Shih and Shih, American Brewing Industry, 24–25; Feldman, Prohibition, 306–9.

26 “Does Remote Bottling Doom the Small Brewer?” Modern Brewer (East Stroudsburg, Pa., Oct. 1938), 26, 8486; Cochran, Pabst Brewing Company, 123.

27 Baron, Brewed in America, 243–44, 323; Cochran, Pabst Brewing Company, 123–28, 201; Downard, Dictionary, 27–28.

28 Baron, Brewed in America, 245–46; Cochran, Pabst Brewing Company, 126–27; The History of Brewing, 7; Arnold and Penman, History of the Brewing Industry, 100–101, 165–67; “Selecting and Installing Beer Meters,” Modern Brewery (Dec. 1934), 29.

29 G. Heileman Brewing Company, Annual Report (1935); Cochran, Pabst Brewing Company, 369, 381–87; “The Battle Rages: Glass versus Tin or Bottle Against Can,” Modern Brewery (Dec. 1935), 58–65, 78–82; Bull et al., American Breweries, 10; Downard, Dictionary, 44; Baron, Brewed in America, 327.

30 The Brewers Almanac (1940–59, 1976) reports the number of wholesalers and brewers in the United States from 1887 until 1917 and from 1934 through 1958. Prior to Prohibition, the number of wholesalers per brewer increased steadily from 1.46 in 1887 to a peak of 8.72 in 1914. After repeal, this ratio more than doubled to 20.29 in 1935.

31 Cochran, Pabst Brewing Company, 386–88; Baron, Brewed in America, 327–28. At the 1938 USBA conference in New Orleans, representatives of several large breweries favored a resolution supporting a federal ban on bottling away from breweries. A smaller brewer asked for a poll of brewers by mail—an action that would have captured the opinions of local brewers not in attendance at the convention, who would presumably object. (It is not clear from the proceedings whether the poll was taken.) Proceedings of the Annual Meeting of the United States Brewers Association (1938), 56–65.

32 Persons, Beer and Brewing (1942 ed.), 37.

33 See Cochran, Pabst Brewing Company, 142–43, 161; Downard, Dictionary, 4–5.

34 Cochran, Pabst Brewing Company, 386; figures reported in the Brewers Almanac indicate that wholesalers reached over eight times as many retailers (on average) after Prohibition than before. There were only about 1.4 retailers per wholesaler in the peak years prior to Prohibition.

35 See Fred E. Kunkel, “Solving the Distributor's Problems,” Modern Brewery (Sept. 1934), 53–58, 98; “A Highly Efficient Fleet of Trucks,” ibid. (Feb. 1935), 31–33; “This Efficiency Contest Woke up Our Delivery Men,” ibid. (June 1935), 64; “How Brewers Keep Delivery Costs Down,” Modern Brewer (March 1937), 49.

36 Downard, Dictionary, 10; Persons, Beer and Brewing (1942 ed.), 38–39. Cochran, Pabst Brewing Company, esp. 217, 384 and Baron, Brewed in America, esp. 260–63 describe advertising in the nineteenth century. Persons, Beer and Brewing (1942 ed.), 39, estimates that cumulative advertising expenditures between 1933 and 1941 were $100 million. The figure in the text is based on volumes reported in Table 1 and a price of $0.30 per gallon.

37 One brewer used the trade press to try to persuade his counterparts to restrain themselves: “… [O]pposition to the excessively large beer sign is becoming stronger every day. The public is proclaiming through legislatures, and in no uncertain terms, that it does not desire to see the entire fronts of all four buildings on the corner covered from the roof to the ground with immense signs shouting to the world that so and so's beer is on tap.” From A. B. Bechaud, “Comments on Brewery Sign Advertising,” Modern Brewery (Oct. 1934). Also see George Applegren, “Millions Spent on Beer Advertising,” ibid. (Jan. 1935), 32–34.

38 Fosdick and Scott, Toward Liquor Control, 14–16. Also see Feldman, Prohibition, 41–42; Blocker, Jack S. Jr, American Temperance Movements: Cycles of Reform (Boston, Mass., 1989), 134–36.

39 Downard, William L., The Cinncinati Brewing Industry (Columbus, Ohio, 1973), 137, outlines some of the these effects.

40 Fosdick and Scott, Toward Liquor Control, 3; Aaron, Paul and Musto, David, “Temperance and Prohibition in America: A Historical Overview,” in Alcohol and Public Policy: Beyond the Shadow of Prohibition, ed. Moore, Mark H. and Gerstein, Dean R. (Washington, D.C., 1981), 140–52; Blocker, American Temperance Movements.

41 Asbury, Herbert, The Great Illusion: An Informal History of Prohibition (Garden City, N.Y., 1950), especially 134–35, 291–312, 326–27; Feldman, Prohibition, esp. 351–69; Fosdick and Scott, Toward Liquor Control, esp. 3–9, 22; Downard, Dictionary, 47; Duis, Perry R., The Saloon: Public Drinking in Chicago and Boston, 1880–1920 (Urbana, Ill., 1983); Warburton, Clark, The Economic Results of Prohibition (New York, 1932), 245–56; The History of Brewing, 11–12; Downard, Cincinnati Brewing Industry, 131. Aaron and Musto, “Temperance and Prohibition in America,” 157–73, discuss these issues in much more detail.

42 Fosdick and Scott, Toward Liquor Control, 14–16; Aaron and Musto, “Temperance and Prohibition in America,” 57–73; Duis, Saloon, 230–303; “Budweiser Pulls Ahead,” Forbes (1 March 1968), 33.

43 What are the Facts About Beer…? (New York, 1942), a pamphlet, last page. Beer is removed from the brewery either in “packages”—that is, in bottles or cans—or in kegs for sale on draft for consumption on the retailer's premises. Before Prohibition, only about 25 percent of beer sold was in packages. Persons, Beer and Brewing (1938 ed.), 22.

44 Tedlow, Richard S., New and Improved: The Story of Mass Marketing in America (New York, 1990), 251–74, describes improvements in refrigeration from the nineteenth century through the 1930s. The major impetus for the widespread acceptance of household refrigeration over these two decades came from vast improvements in electrification, the invention of Freon, rising incomes in the 1920s, and construction of a mass distribution system for appliances. Until the invention of Freon in the 1930s, the stability of temperature in refrigerators, although probably high enough to make home-brewing possible, was also probably not high enough to assure homogeneity across batches.

45 Cochran, Pabst Brewing Company, 385–86; G. Heileman Brewing Company, Annual Report (1935).

46 “Business is Better!” Modern Brewery (May 1935), 24; Shih and Shih, American Brewing Industry, 108, 113; Downard, Cinncinati Brewing Industry, 137. According to the Brewers Almanac (1940), federal excise taxes per barrel were $6.00 in 1933 and $5.00 thereafter through June 1940. Shih and Shih, American Brewing Industry, 109, estimate average state taxes for the years 1933 through 1939 at $1.05, 1.11, 1.12, 1.18, 1.23, 1.24, and $1.28. The $6.15 per barrel tax amounted to about 4 cents per 12-ounce bottle, about half the price charged by the brewers for the beer itself.

47 Feldman, Prohibition, 74–87; Shih and Shih, American Brewing Industry, 16; Downard, Dictionary, xviii; Cochran, Pabst Brewing Company, 391.

48 Brewers Almanac (1977); Fosdick and Scott, Toward Liquor Control, 3–5, 52–55; Arnold and Penman, History of the Brewing Industry, 185.

49 “Does Remote Bottling Doom the Small Brewer?” Modern Brewer (Oct. 1938), 26.

50 Asbury, The Great Illusion, 329–30; Warburton, Economic Results, 245; Baron, Brewed in America, 320, 325–26; Arnold and Penman, History of the Brewing Industry, 17–18, 143, 183–85; Blocker, American Temperance Movements, 133–39; The History of Brewing, 22–24; “Cooperation—Not Compulsion!” Modern Brewery (April 1935), 24. Also see the brewers' “code of practice” in Persons, Beer and Brewing (1942 ed), 44; Modern Brewery and Modern Brewer (July 1934 to Dec. 1939), various issues.

51 The History of Brewing (1937). Baron, Brewed in America, 325–26, describes both the evolution of federal agencies during the 1930s and this new amorphous regulatory effort arising as the brewers cooperated with authorities. The tenor of the relationship between brewers and federal authorities is apparent in monthly issues of Modern Brewer, a trade publication. The urgency of the problem and convergence of opinion on the threat of further regulation led to competition among the trade associations themselves. See “August Busch, Jr. Organizes Independent Brewers Association,” Modern Brewer Feb. 1936), 9–11. For an example of cooperative code-making, see “Amendment to the Code of Fair Competition for the Alcoholic Beverage Industry,” Modern Brewery (Jan. 1935), 77. Federal courts demonstrated that they were willing to enforce adherence to the Code: See Frederic P. Lee, “Enforcement of the Brewers' Code,” Modern Brewery (April 1935), 27.

52 What are the Facts About Beer … ?. Blocker, American Temperance Movements, 95–129, indicates that federal Prohibition was instituted after temperance efforts were galvanized into an anti-saloon movement. Also see Modern Brewery (July 1934), 40.

53 Fosdick and Scott, Toward Liquor Control, vii–xi, 18–9, 56–61, 63–93; also see Arnold and Penman, History of the Brewing Industry, 143; George S. Manning, “What are the Drys Doing?” Modern Brewery (June 1935), 37–42; “What the Drys are Doing,” Modern Brewery (July 1935), 31–34; Baron, Brewed in America 329–36.

54 Joseph Obergfell, “Brewery Management and Employee Relations,” 41–42, 69; C. C. Reeder, “The Brewing Code is a Practical Plan,” Modern Brewery (Oct. 1934); “;Beer Costs, Prices and Profits,” ibid. (Nov. 1935), 41–45, 75–80; Charles G. Burck, “While the Big Brewers Quaff, the Little Ones Thirst,” Fortune (Nov. 1972), 106. In 1934, the Federal Alcohol Control Administration held hearings to determine whether price cutting was “destructive.” The brewers established minimum prices soon after repeal. Modern Brewery (July 1934), 25–29.

55 “Editorial: The Desire is There—What about Action?” Modern Brewer (Feb. 1937), 17. A great number of pages in these issues were devoted to discussion of Federal Alcohol Administration hearings as well.

56 Proceedings of the Annual Meeting of the United States Brewers Association (1942), 92–93.

57 Baron, Brewed in America, 325.

58 “Governmental Cooperation with the Brewing Industry,” Modern Brewery (Oct. 1934); “New York Master Brewers Review Federal Loan Plans,” ibid. (June 1935), 31–34.

59 Brewers Almanac (1946, 1949–59); Modern Brewery Age Blue Book Edition (1941–47, 1949).

60 U.S. v. Jos. Schlitz, 152 and accompanying text; see “What George F. Horluck Says about the Northwest Beer Outlook,” Modern Brewery (Jan. 1935), 35, 65; Pluta, Joseph E., Regional Change in the U.S. Brewing Industry (Austin, Tx., 1983), 5356.

61 See Elzinga, Kenneth G., “The Restructuring of the U.S. Brewing Industry,” Industrial Organization Review 1 (1973): 111–12.

62 Lehman's statement is reported in What are the Facts About Beer…?. See also Modern Brewery and Modern Brewer (1933 to 1939), various issues; “Success in Public Relations,” Modern Brewery Age (New York, March 1940), 15. The authenticity of the claims in brewing association pamphlets was at times suspect. One entitled American Beer and Ale (New York, c. 1942) went so far as to claim that “Beer in itself is definitely not fattening” (p. 21).

63 Persons, Beer and Brewing (1942 ed.), 13.

64 For examples, see Alvin Griesedieck's letter to shareholders in the Falstaff Brewing Corporation's Annual Report (1941); “‘Be Thankful You're American,’ Theme of Holiday Beer Ads,” Modern Brewery Age (Dec. 1942), 49; Baron, Brewed in America, 332.

65 Aaron and Musto, “Temperance and Prohibition in America,” 156–57; Duis, Saloon, 298–303; Blocker, American Temperance Movements, 117–18; The History of Brewing, 11–12. In September 1918, the United States Congress, Senate Subcomittee on the Judiciary, began its Hearing on Brewing and Liquor Interests and German Propaganda, S. Rep. 307 (Washington, D.C., 1919). Baron, Brewed in America, 302–6, makes this point, noting that anti-German fever during these years was so strong that symphony orchestras refused to play Beethoven's and Brahms's works, and sauerkraut was renamed “liberty cabbage.”

66 Rubin, Jay L., “The Wet War: American Liquor Control, 1941–1945,” Alcohol, Reform and Society, ed. Blocker, Jack S. (Westport, Conn., 1979), 237–39.

67 This may also have been because the brewers were accused in 1918 of attempting to “keep young German immigrants from becoming real American citizens.” Hearing on Brewing and Liquor Interests and German Propaganda, 1: 3. Also see Baron, Brewed in America, 305.

68 Modern Brewer (Jan. 1940), 15; Anheuser-Busch, Inc., Annual Report (1941); “A Struggle to Stay First in Brewing,” Business Week (24 March 1973), 44.

69 “The Tax Increase is On,” Modern Brewery Age (July 1940), 11. See also Blocker, American Temperance Movements, 138–39.

70 Persons, Beer and Brewing (1941 ed.), 29; Brewers Almanac (1988), 76; Downard, Dictionary, 236; Rubin, “The Wet War,” 238–40, provides an excellent survey of the factors influencing the failure of the pro-Temperance movement during the Second World War in comparison to its success in 1919.

71 Rubin, “The Wet War,” 250.

72 Baron, Brewed in America, 334; Rubin, “The Wet War,” 239. See also: “The Road to Prohibition is Paved with Indifference,” Modern Brewery Age (May 1944), 15.

73 Falstaff Brewing Corporation, Annual Report (1941–44), letter to stockholders; G. Heileman Brewing Co., Annual Report (1951); Baron, Rrewed in America, 334–35; American Brewer Statistical Section (New York, 1948), 48. Price controls probably did not significantly bind the brewers. See John Collins, “How Will Price Controls Affect Brewery Profits?” Modern Brewery Age (June 1951), 27–29, 97–98. The number of pounds of malt products dropped from 35.0 per barrel on average in January of 1943 to a low of 23.5 in July 1945 and then rebounded to 31.0 by November 1947. The trend in usage of all relevant agricultural products followed the same general pattern and fell to 82 percent of the 1943 poundage by mid-1946, recovering to 94 percent by the end of 1947. American Brewer Statistical Section, 54. The fact that the total volume of agricultural products did not reach former levels may also reflect greater efficiency and a taste for lighter beer.

74 Bull et al., American Breweries, 10; Cochran, Pabst Brewing Company, 397.

75 In 1943, Anheuser-Busch created a “Deferred Capital Expenditures Fund” in its accounts earmarked for “financing capital expenditures immediately after the war or as soon as wartime restrictions permit.” Anheuser-Busch, Inc., Annual Report (1937). Also see Falstaff Brewing Corporation, Annual Report (1940–46). In the 1942 Falstaff Report, for example, the president wrote, “obviously, due to restrictions, plant expansion could not be considered and investment in plant property was limited to essential repairs.” In the report for 1944, he wrote “By 1942 the sales of Falstaff had increased to the point where they absorbed [the firm's] entire capacity…. As a result the sales volume for 1942, 1943, and 1944 was practically the same. Due to wartime restrictions it was impossible to increase the capacity of the plants.”

76 U.S. v. Jos. Schlitz, 152ff.

77 Cochran, Pabst Brewing Company, 373–75.

78 Anheuser-Busch, Annual Report (1944). For an example of another brewer's expansion plans, see Falstaff Brewing Corporation, Annual Report (1945).

79 Keithahn, Brewing Industry, 90; Economic Report of the President (Washington, D.C., 1989), 373. Prices are in real 1946 dollars deflated by the Consumer Price Index for Food and Beverages.

80 Keithahn, Brewing Industry, 8, 43; Douglas F. Greer, “Product Differentiation and Concentration in the Brewing Industry,” Journal of Industrial Economics (July 1971), 207; Fraundorf, Kenneth C., “The Social Costs of Packaging in the Beer and Soft Drink Industries,” The Antitrust Bulletin 20 (Winter 1975): 810, 814. Also see Table 3. Sutton, John, Sunk Costs and Market Structure (Cambridge, Mass., 1991), 287–95, provides an excellent analysis of the interaction between technological and advertising strategies during this period.

81 Shih and Shih, American Brewing Industry, 46; Edward H. Vogel, Jr., “Per Capita Beer Consumption Fails to Keep Pace with Competing Products, Modern Brewery Age (Nov. 1954), 38; Brewers Almanac (1988); Keithahn, Brewing Industry, 88.

82 “Why the Demand for Beer Will be High Through 1953,” Modern Brewery Age (Jan. 1949), 19; “Sales Prospects Bright for 1951,” ibid. (Dec. 1950), 21.

83 Brewers Almanac (1949), 21; ibid. (1953–58). Even then its forecasts were optimistic for every year between 1953 and 1958, but only by 0.7 to 2.6 percent.

84 Laufer and Stewart, 25 Years, chronicle these advances in detail. As early as 1941, articles in the trade press with titles like “Thermal Death Rates During Pasteurization” and “Progress in Beer Filtration” (Modern Brewery Age, Feb. 1941) supplanted coverage of impending legislation and changes in Brewing Codes.

85 Collis, “The U.S. Beer Industry,” 118; Ghemawat, Pankaj, “Adolph Coors in the Brewing Industry,” Harvard Business School Case 9–388–014 (Boston, Mass., 1987), 23.

86 American Brewer Statistical Section (1953), 77. The G. Heileman Brewing Company's Annual Report (1955) indicates that almost every major plant improvement involved upgrading packaging and bottling operations.

87 There is evidence of scale-related adjustment pressure in Anheuser-Busch, Inc., Annual Report (1949) where August A. Busch, Jr., the firm's new president, indicated that “break-even points are rising and it requires an ever increasing volume of business to overcome these high costs.”

88 The G. Heileman Brewing Company, Annual Report (1955) estimates industry aggregate capacity at 125 million barrels.

89 The company, based in Milwaukee, first committed to continuing leadership in the Chicago market by expanding its Peoria Heights distribution facility into a fullfledged brewery after Falstaff's second source proved successful. Bull et al., American Breweries; Burck, “While the Big Brewers Quaff,” 106.

90 Pabst's preference for separate distribution systems dated from the nineteenth century when it had trouble in its dealings with saloons. Cochran, Pabst Brewing Company, 142–43, 378–79.

91 Scherer, F. M., et al. , The Economics of Multi-Plant Operation (Cambridge, Mass., 1975), 248.

92 Cochran, Pabst Brewing Company, 398.

93 Bull et al., American Breweries.

94 “Budweiser Pulls Ahead,” 29.

95 Anheuser-Busch, Inc., Annual Report (1952).

96 “Millions Go to Polls for Miss Rheingold Elections,” Modern Brewery Age (Aug. 1948), 47; Jackson, World Guide, 207; Shih and Shih, American Brewing Industry, 63. Statistics developed from data reported in the Brewers Almanac (1954–62) indicate that industry average advertising to sales ratios increased steadily from 2.6 percent in 1946 to 5.1 percent in 1951. Also see “Brewery Advertising Outlays Show Constant Upward Curve,” Modern Brewery Age (Sept. 1955), 35–38.

97 Shih and Shih, American Brewing Industry, 62; “Budweiser Pulls Ahead,” 33. See also Greer, Douglas F., Industrial Organization and Public Policy (New York, 1984), 353–54; Scherer et al., Economics of Multi-Plant Operation, 248.

98 Bull et al., American Breweries; U.S. v. Jos. Schlitz, 152ff.

99 Brewers Almanac (1951–58).

100 Downard, Dictionary, 45; Shih and Shih, American Brewing Industry, 68; “Michigan Brewing Industry Sets New Sales Mark in '47,” Modern Brewery Age (Feb. 1948), 47; “Michigan Brewing Industry Sets All-Time Sales Record in 1953,” ibid. (March 1954), 52. Also see “Local, Regional Beers Best Sellers in Home, Nearby Markets, Surveys Show,” ibid. (July 1955), 37–38.

101 Falstaff Brewing Corporation, Annual Report (1957).

102 Ibid. (1947–58); Elzinga, “The Beer Industry” (1971 ed.), 202; Bull et al., American Breweries, 10 and index; Downard, Dictionary, 71–72, 93; Burck, “While the Big Brewers Quaff,” 107; Baron, Brewed in America, 341; Downard, Cincinnati Brewing Industry.

103 “A Struggle to Stay First in Brewing,” 45; Falstaff Brewing Corporation, Annual Report (1951), 11–12; G. Heileman Brewing Company, Annual Report (1950–51). Falstaff's Annual Report (1955), 5–6, states that “One of the company's basic principles is that the distributor must be successful before the company can succeed. In keeping with this principle, Falstaff directed a larger amount of effort in 1955 toward aiding distributors, particularly in the area of sales training.”

104 “Budweiser Pulls Ahead,” 33.

105 U.S. v. Jos. Schlitz, 152ff.; “NBWA Conclave Warns of Anti-Trust, Monopoly Trends,” Modern Brewery Age (Oct. 1948), 31.

106 Greer, Industrial Organization, 354; G. Heileman Brewing Company, Annual Report (1953).

107 G. Heileman Brewing Company, Annual Report (1953), 6.

108 “Budweiser Pulls Ahead,” 28; “A Struggle to Stay First in Brewing,” 45; U.S. v. Jos. Schlitz, 152ff.

109 “A Struggle to Stay First in Brewing,” 45; “Brewers, Distributors Glad About Price Hike, but Retailers Howl,” Modern Brewery Age (Aug. 1956), 43; Elzinga, “The Beer Industry” (1987 ed.), 207; Brewers Almanac (1940–59); Modern Brewery Age Blue Book Edition (1941–43); Anheuser-Busch v. Federal Trade Commission, 680; “Bud Violates Robinson-Patman, Small Brewers Group Charges,” Modern Brewery Age (Aug. 1954), 36. Falstaff's policy was to maintain prices as low as possible as well. Falstaff Brewing Corporation, Annual Report (1956), 3.

110 “Budweiser Pulls Ahead,” 28; “A Struggle to Stay First in Brewing,” 45; Elzinga, “The Beer Industry” (1987 ed.), 207; Anheuser-Busch v. Federal Trade Commission, 677.

111 “Budweiser Pulls Ahead,” 29, reports capacity of 9 million barrels and sales of 5.6 million barrels.

112 “A Struggle to Stay First in Brewing,” 45; “Budweiser Pulls Ahead,” 28; Anheuser-Busch, Inc., Annual Report (1957), 4.

113 U.S. v. Jos. Schlitz, 152ff.; Table 5; Bull et al., American Breweries, index.

114 Bull et al., American Breweries, index; Elzinga, “The Restructuring of the U.S. Brewing Industry,” 104; Shih and Shih, American Brewing Industry, 54; “Budweiser Pulls Ahead,” 29, 33; Baron, Brewed in America, 341; Anheuser-Busch, Inc., Annual Report (1955), 2; U.S. v. Jos. Schlitz, 162ff.

115 Anheuser-Busch, Inc., Annual Report (1953), 10 and (1954), 2. Also see Tables 1 and 7.

116 Baron, Brewed in America, 341; “Budweiser Pulls Ahead”; “A Struggle to Remain First in Brewing.” Falstaff also acquired a California brewery, but perhaps because it did not also expand eastward, it did not achieve the same level of national market penetration as its larger counterparts. Falstaff Brewing Corporation, Annual Report (1952), 4.

117 U.S. v. Jos. Schlitz, 162ff; Bull et al., American Breweries, index; Shih and Shih, American Brewing Industry, 54–55.

118 Anheuser-Busch, Inc., Annual Report (1957), 4; “Budweiser Pulls Ahead,” 29–33; Collis, “The U.S. Beer Industry,” 111–12; Elzinga, “The Beer Industry” (1987 ed.), 212.

119 Bull et al., American Breweries, 10, index; Elzinga, “The Beer Industry” (1971 ed.), 104; Keithahn, Brewing Industry, 127; U.S. v. Pabst Brewing Co., 546.

120 Keithahn, Brewing Industry, 43; Greer, Douglas F., “The Causes of Concentration in the U.S. Brewing Industry,” Quarterly Review of Economics and Business 21 (Winter 1981): 94; Brewers Almanac (1954–62).

121 Keithahn, Brewing Industry, 43, 106; Brewers Almanac (1954–62); G. Heileman Brewing Company, Annual Report (1958). Also see Table 3; the major regionals and shipping brewers are included together in the category “assets over $5 million.”

122 See, for example, G. Heileman Brewing Company, Annual Report (1952).

123 U.S. v. Jos. Schlitz, 162ff.; Bull et al., American Breweries, index. Also see Table 2.

124 Chandler, Alfred D. Jr, Scale and Scope: The Dynamics of Industrial Capitalism (Cambridge, Mass., 1990), chronicles these trends in detail.

125 According to the Brewers Almanac (1988) there were 105 breweries in 1985. Keithahn, Brewing Industry, 12, estimated the four-firm concentration ratio in 1977 at 63 percent.

126 Keithahn, Brewing Industry, 4.

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The Emergence of the National Brewing Oligopoly: Competition in the American Market, 1933–1958

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