Industry Concentration and the Entry of Craft Producers into the Global Beer Market

This chapter documents and explains the transformation of the beer industry through the rise and success of craft breweries over the past three decades, providing key insights that derive from a comparative analysis in various countries. The advent of craft breweries ended a century of consolidation of breweries, resulting in the domination of a few global multinationals, and the homogenization of beer. In those countries where the degree of industry concentration was lower in the late twentieth century and the number of breweries per capita was higher, the manifestation of craft brewing occurred later. The homogenization of the traditional beers, and changes in consumer preferences, played a key role in the advent of craft beer. In addition, peer effects and government regulations contributed in sustaining the diffusion of craft brewing. An important part of the discussion focuses on the role of governments that have influenced the craft beer market through regulations. The chapter concludes with the analysis of the reaction of the macrobrewers to the growth of the craft breweries. Initially, macrobreweries did not strategically react as long as the craft breweries were considered too small to represent a real threat. However, the beer produced by craft breweries soon started to gain a larger market share. Hence, macrobrewers responded to the growth in craft beers in several ways: producing a craft-style beer themselves, directly entering the craft beer market through acquisitions, and through distribution limitations tactics.