Oligopoly – : a market situation in which each of a few producers affects but does not control the market.
Lately we’ve been hearing a lot about the prices of beer going up. I’ve even seen a report on the local 6 O’Clock news that a 12 pack might go up a whole dollar!
This is important news, but why? It seems the price of just about everything is always going up, so what’s the big deal when beer goes up a bit? Well, the problem seems to be more than just the usual increase of prices based on the higher cost of hops or other things used to make beer.
According to this Times article about 80% of the American beer market is controlled by In-Bev/Anheuser-Busch, and MillerCoors, which is a joint venture between SABMiller and Molson-Coors.
Not so much a big deal unless they raise their prices at the same time during a period of reduced demand for their product. Is the price hike a legitimate way for these giant brewers to make up lost revenue, or is it something more? When so few players control so much of the market, like 80%, what’s stopping them from jacking up the prices even more? Is there coordination, or is it driven by the market? Hmmmm.
Still, this is America. I think that people will see that when the price of a 6 pack of Coors Lite costs the same as something produced by a local craft-brewer, perhaps more people will will be inclined to try something new. If people switch, and the big brewers then need to reduce their prices to make up for lost market share, will people switch back? I’m thinking no.
Interestingly enough, there are more breweries in the USA now than any time since 1909, and the craft brewing industry continues to see increases in sales, even in these tough times!
Is big-beer setting itself up for failure by jacking up prices, or are they still too dominant for it to really matter?
Do the math. If there are roughly 1500 breweries in the USA, that means that InBev and Molson-Coors have an 80% share and 1498 other breweries have that 20% slice of the pie. Still, perhaps this is when that slice of the pie grows?
Paul Gatza, Director of the Brewers Association said “At a time when many of the giant beer brands are declining, small and independent craft brewers are organically growing their share and slowly gaining shelf and restaurant menu space one glass of craft beer at a time.”
So what do you think? If there is an Oligopoly worthy of Government anti-trust scrutiny? Do you think the big dogs are setting themselves up for further losses by raising prices at the same time that craft-brew sales are increasing? Would a dollar price difference between two beers make a difference for you? What’s the meaning of life?