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Pricing & Competition In The Beer Industry:

Abstract: The beer industry in the United States is continually changing and therefore companies in this industry must be versatile. Their versatility comes in a variety of forms, from changing their product offering, to changing their strategic goals, and finally, recognizing opportunities and threats. This paper explores many aspects of the industry though the use of Porter's five forces model. I will analyze the internal rivalry present in the industry, any buyer or supplier power that is present, entry barriers that exist, and any substitutes and threats that face the industry. Furthermore, I will closely analyze the effect that craft brewers and microbreweries have had on the industry. It is my contention that craft brewers have taken market share and sales away from the largest brewers in the industry. I will use two companies to perform this analysis, Boston Beer and Anheuser-Busch. Anheuser-Busch is the largest brewer in the world and Boston Beer is the largest craft brewer in the United States. I have run a regression using sales from both companies and several other factors to test my hypothesis.

Recent History and Terms
The brewing industry in the United States began in 1625 when the first brewery in America was founded. Lager beer as we know it today has changed a lot since then, and so has the industry. In the early nineteenth century the industry was highly fragmented, and competition among different breweries only existed in small geographic circles. It was not until the late nineteenth century that refrigeration and mechanical pasteurization revolutionized the industry. Companies could now transport beer across previous geographical limits.
After prohibition was repealed in 1933, the industry as it is today began to take shape. There was a sharp decline in the number of brewing companies, almost 90% from 1947 to 1995 as illustrated in Table 1. This was mostly due to four major breweries growing rapidly and realizing economies...