America's Beer Industry Is Still Too Consolidated, Federal Report Finds

Despite a craft beer boom, the Treasury Department's findings highlight the fact that just two major breweries corner 60 percent of the market.

Various beer bottles lined up
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Forged in the late '70s and coming into its own in the '90s, the modern craft brewing industry has changed the face of both American and global beer. These days, nearly every community in America has its own brewery, and these small brewers have set the trends, putting IPAs on tap at bars around the world and taking barrel-aging stouts to new levels of decadence.

And yet, at its core, craft beer — true, independent craft beer — has always been about one thing: us vs. them: little breweries fighting an uphill battle against global behemoths, so-called "big beer."

But despite four decades of craft breweries redefining everything we know about beer, a new government report released this week suggests that, in the fundamental battle of big beer versus independent breweries, very little has changed.

As part of the Biden administration's executive order on "Promoting Competition in the American Economy," the Treasury Department was asked to assess the American markets for beer, wine and spirits.

"Two major industry trends mark the last several decades. The first is significant growth in the number of small and 'craft' producers of beer, wine, and spirits. There are now over 6,400 operating breweries in the United States, up from a low of 89 in the late 1970s," the report states. "However, the second trend is one of consolidation, particularly at the distribution and/or retail levels for beer, wine, and spirits and at the production level for beer. In many states, there has been significant consolidation in distribution. Additionally, two brewers have dominated the U.S. markets since 2008 and today account for an estimated 65 percent of the beer market nationwide, as measured by revenue."

The report found that despite the "flourishing of small and craft producers in local markets … is unusual in a contemporary U.S. economy where many markets are dominated by a few, national brands," the beer industry still wasn't as competitive as it could be. Specifically, the Treasury found that consolidation was problematic, complaints were numerous, and many current regulations are likely hurting smaller producers more than the big ones.

Based on these conclusions, the report also made a number of recommendations, including asking the Department of Justice and Federal Trade Commission to spend more time looking into horizontal and vertical mergers, "arrangements," and acquisitions, especially craft acquisitions by major brewers and those which exclude small firms or new entrants. The Treasury also suggested that both its own Alcohol and Tobacco Tax and Trade Bureau (TTB) and individual states reassess regulations that may be placing burdens on smaller producers.

The report echoed many of the points the Brewers Association, America's craft beer trade group, has been making for decades. And so BA president and CEO Bob Pease chimed in with a lengthy statement, first thanking the federal government and then lightly insinuating that, great, now let's do something about it.

"While there remains significant work to be done at the federal and state level to translate these recommendations into improved market conditions, suggestions such as a re-examination of state franchise laws, greater direct-to-consumer access, updating trade practice regulations with an eye toward exclusionary practices, and considering the effect of small brewer acquisitions on distribution all stand to improve the ability of small firms to enter and effectively compete in beverage alcohol markets," Pease stated. "The Brewers Association remains committed to ensuring a level playing field exists for small and independent brewers and looks forward to providing feedback to federal and state lawmakers on these recommendations and how they can be translated into a safe, competitive, and modern beverage alcohol market."

One thing the 63-page report does not appear to explicitly answer, however, is this: After four decades of growth, leading to an "unusual" market with 70 times more breweries than before, how is consolidation still a problem?

Tucked into the end of the report is one potential answer: The government itself is a major part of the issue, with the Treasury suggesting that regulators may be too wrapped up in industry influence.

"[Federal regulation] may be more effective if the regulators are charged with enforcing clear rules rather than licensing, approval, and permitting schemes," the report states in its final paragraph. "The former puts the agency in an oversight role where officials are motivated to enforce the rules (to protect consumers, competition, and public health), while the latter involves arrangements unique to the industry that are more susceptible to being used to suppress competition and to giving an advantage to large, more deep-pocketed entities."

Or to paraphrase an old horror film trope: the call is coming from inside the federal government.

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