Economics of Brewing, Theory and Practice: Concentration and Technological Change in the USA, UK, and West Germany since 1945

The modem brewing industry would seem at first sight o be an exemplar par excellence of a number of theoretical or economic postulates commonly used in business history. With its appeal to a mass consumer market and its relatively simple production technology, there were clearly opportunities to achieve scale economies. The emergence oflarge brewing companies inthe UK and USA from the nineteenth century provides case-study support for Alfred Chandler's notion of the "three-pronged investment" in production facilities, distribution and retailing networks, and managerial organization [3]; locational concentration of brewing in centers uch as Milwaukee, Munich and Burton on Trent is consonant with Michael Porter's views on the importance of industrial clusters in competitive advantage [14, pp.148-52]; brewing provides ample opportunity to test the contributions of Scherer, Pratten, Weiss and others on the minimum efficient scale of production [ 15; 16; 22]; and finally, the investment "sunk" in large-scale brewing and its endogenous expression i the aggressive promotion of major brands through advertising are central elements in John Sutton's theoretical contribution on sunk costs and market structure [18]. With brewing technology diffused fairly broadly the exploitation of scale economies depended upon the justification of large-scale investment by the effective marketing of brands sold in large volumes. Successful companies uch as Bass, Guinness, Pabst and Anheuser-Busch ertainly did this. The process naturally led onto the search for both horizontal and vertical integration by the major corporate players and to the higher concentration levels characteristic of an oligopoly [8; 12; 18]. However, comparative analysis .reveals that there are three elements which complicate the simplified theoretical exposition of the development of brewing production and retailing: 1) the impact of government regulation, and in particular the approach to mergers, vertical integration and taxation; 2) the behavior of firms, including the extent to which smaller and medium-sized