Beer Marketer's Insights - US Beer Still Concentrated, Bart Sez, Considering How Alc Bev Laws Impact Competition

Thousands upon thousands of small brewers may have opened in the last decade or two, but "beer production is still a concentrated market," Brewers Assn prexy/CEO Bart Watson told an audience of state regulators and industry attys at the annual NCSLA conference on Maui this wk. It may seem surprising, especially to regulators familiar with issuing licenses to an influx of small producers. But in beer, the top 3 players still hold about 71 share of the US biz. And even tho the country went from about 1,500 breweries to over 9,000 in the last 20 yrs, the top 5 only lost about 5-6 share, from about 85% of the mkt to 79-80%. "In beer, the smallest six to seven thousands breweries" are still just about 1 share of the mkt. And "similar" in wine and spirits. "We have many participants, but most of them have very little market power," Bart said. Building on that point, it's "obvious that there's easy entry into alcohol," Bart acknowledged. But there are "still barriers to scaled entry." Most players are "small hospitality breweries" or small wineries focused on direct-to-consumer sales that can struggle to scale thru distribution and large/chain retail, which are still "becoming more concentrated." Beer distribution is close to a "duopoly" in "most markets," while the 5 largest grocery players do a majority of food & bev sales. Notably, many state alc bev laws were written under very different market conditions, when the producers were mostly large and distribs and retailers were small and local, he reminded. That ain't the case anymore, especially with the advent of "very large national retailers."While recognizing the "real reasons" why state alc bev laws exist, "for better or worse," they may make it "harder for small producers coming up" to "act in ways that let them easily access the market," he said. Recently, we've seen NA brands like Alani Nu and Poppi "rapidly scaled up" by "using things that would be illegal in beverage alcohol," including DTC sales. All that said, some alc bev regs, like prohibitions on slotting fees, certainly make it easier for small players to compete, Bart reminded. So he invited regulators to consider those complexities and how the laws they enforce may be impacting competition.Bart also invoked the 2022 Competition Report published by TTB, FTC and DOJ during the Biden era, reminding how the agencies posited that "horizontal geographic acquisitions" of distribs could also create barriers to scale for small players. Broadly, alc bev distribution became more consolidated over the last 70-100 yrs, Bart commented. But that consolidation "doesn't ever really increase market share." It's just one distrib getting bigger by buying the house in another (often neighboring) territory. But that "may create competitive challenges." He also flagged franchise laws, which "tie brewers to specific wholesalers" and could "create leverage" for those distribs, since "brewers who are in both of those markets" have "strong incentives not to piss you off in either market." In short, alc bev laws have "interesting interactions with antitrust" and "complicate beverage alcohol competition."

US Beer Still Concentrated, Bart Sez, Considering How Alc Bev Laws Impact Competition

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