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November 15, 2012 8:57 AM The Beer is Too Damned Cheap

By Paul Glastris

Over the last few years, two giant multi-national companies, Anheuser-Busch InBev and MillerCoors, have managed to gain control of 80 percent of the beer market in the United States. Now they’re working to squeeze out the middle men who distribute and sell that beer, too—all in the name of cheap booze.

But is that a good idea? That’s the question Tim Heffernan poses in a probing analysis of America’s beer market in the latest issue of the Washington Monthly. In recent decades, Heffernan notes, Great Britain has allowed such “vertical integration” of its liquor industry, and the result has been rampant alcohol abuse at levels that now constitute a national crisis.

Could such a thing happen here? The answer’s yes. In fact, it already has. A hundred years ago, it was precisely that cheap booze, provided by monopolistic and vertically-integrated brewers and distillers, that led to the rampant alcoholism and family breakdown that fueled Prohibition. With the repeal of Prohibition, America carefully crafted policies to limit the power and concentration of the alcohol industry by requiring that beer makers sell their product through middlemen. And it’s those same middlemen that Big Beer is trying to put out of business today.

Read “Last Call” here.

Paul Glastris is the editor in chief of the Washington Monthly. This article was supported by the American Independent Institute.

Comments

  • Ron Byers on November 15, 2012 9:23 AM:

    I don't know Paul, John McCain's wife is one of those beer distributors the giants want to push out of the market. The McCain family have made untold millions as middlemen. The thought of them having to live on just a senator's salary because they were squeezed out of their position is just too precious. Cheers.

  • Rabbler on November 15, 2012 9:37 AM:

    Yeah. It is a mind blower how much people used to drink. Prohibition didn't happen just because sanctimonious joy killers pushed it through. Very many people drank beer instead of water and hard liquor on the weekend. Being from a big drinking state, and a drinker, I remember back as recently as the 60s anyone drunk being not remarkable at all. Horrible car accidents were blamed on the driver entirely. The culture couldn't be questioned. As long as you hadn't caused an accident and another could take the wheel, you were let off. 3 squads chasing me at 60 on 25mph sreets one time, I barely remember this, and the cops let my girlfriend drive home. Another time, just weaving not speeding, I told the cop that I told the girl I was too drunk to drive. The cop set her straight,lol.

    When I moved to another state I was amazed that there wasn't a bar at least every 2 blocks.

    Cheap alcohol, hard times. Not a good mix.

  • Zorro on November 15, 2012 9:40 AM:

    But you leave out the worst part of this: Anheuser-Busch InBev and MillerCoor makw *bad beer!*

    Lucky to live in the best beer town in the US, Philly,
    -Z

  • berttheclock on November 15, 2012 9:47 AM:

    I remember the mid sixties in KCMO, when, Anheuser-Busch would refuse to sell to certain bars if their product was the number one seller across the street. I walked into a bar across the street from the very popular Kelly's in Westport as the Fire Marshall had shut off entrance to Kelly's due to the over flowing crowd on St Patty's Day. I ordered a Bud and was told by the bartender A-H wouldn't sell to him as they were protecting Kelly's. A-H put a great number of breweries out of business by using such methods In Los Angeles, a New York brewing company tried to make inroads with one of their beers. A-H paid off grocery managers to have those crates left out in the sun outside the stores for several days before bringing into the store.

    However, I still revel in the story about the small town in the Czech Republic named for Budweiser refusing to allow A-H into town. BTW, Ninsaki Ale from Eugene, Oregon is still the best and enjoy their great Christmas ale, Sleigher.

  • ajay on November 15, 2012 9:47 AM:

    A hundred years ago, it was precisely that cheap booze, provided by monopolistic and vertically-integrated brewers and distillers, that led to the rampant alcoholism and family breakdown that fueled Prohibition.

    I think you misspelt "rampant bigotry and fundamentalist Christianity" there.

  • Gandalf on November 15, 2012 9:49 AM:

    They have a lot of audacity calling that pisswater beer.

  • T2 on November 15, 2012 9:50 AM:

    if Bud and Coors want to buy their own trucks to distribute their swill, why not? Most of inflation is due to middlemen gouging consumers every time the price of gas goes up.

  • berttheclock on November 15, 2012 9:52 AM:

    @Ron Byers, completely off thread, but, yesterday, in the Oregonian a food writer wrote a nostalgic piece on the late great Stephenson's Apple Orchard in Indendence, MO. He, included, one of their signature green rice casserole recipes. Remember that superb restaurant was one of President Trumans' favorites.

  • c u n d gulag on November 15, 2012 9:52 AM:

    You coudln't get me to drink AB, Miller, or Coors, on a bet!
    They all suck.

    And Rabbler's right: "Cheap alcohol, hard times. Not a good mix."

    So, let's legalize pot!
    Marijuana doesn't make people's tempers worsen - unless someone's "Bogarting" the joint!
    But then, no one remembers later anyway.

  • Informant on November 15, 2012 9:54 AM:

    As someone who's done work tangentially related to the three tier distribution system, all I can say is that if you're concerned about alcohol abuse, there are much better ways of dealing with it than granting a government-protected oligopoly over one part of the supply chain.

  • berttheclock on November 15, 2012 9:56 AM:

    @Ron Byers, completely off thread, but, yesterday, in the Oregonian, a food writer included a recipe for a green rice casserole. That recipe was a signature dish from the late great Stephenson's Apple Orchard in Independence, MO. He wrote quite a nostalgic tribute to that favorite haunt of President Harry Truman. Wonderful food and for generations, it was the place to take your family for special occasions.

  • berttheclock on November 15, 2012 10:00 AM:

    Sorry for the double post as the first one did not appear to get through.

    However, cundgulag, you are forgetting those afore mentioned "beers", er, swill do make great anti-slug devices. Just pour some into a small dish and set out in the garden.

  • CharlieM on November 15, 2012 10:05 AM:

    Hmmm......

    Don't monopolistic arrangements tend to drive end pricing higher (that's kind of the point isn't it)? And wouldn't that counter the argument that monopolistic entities are a primary cause of excessive drinking through reduced pricing?
    I'd think that availability is more determinate. A pub on every corner all owned by the same brewer isn't going to result in cheaper beer. It would (however) greatly increase the availability.
    I've known Englishmen who seem to place a value on how close a pub is to their dwelling (the closer the better). I don't know anyone here in the U.S. that measure desirability of living space by how close it's located to a bar.
    I'd be more concerned on the integration in the industry resulting in more limited consumer choices while at the same time creating more powerful corporate entities.

  • shk on November 15, 2012 10:58 AM:

    This makes no sense. If we want to raise the price of alcohol to capture externalities or any other reason, tax it, don't raise costs through inefficient distribution methods.

  • Ken D. on November 15, 2012 11:00 AM:

    There is an easy and obvious fix to the "cheap booze" problem: raise the damn taxes. Alcohol has long generally had separate tax rates, so raise them. That is a far better solution than mandating an unnecessarily complex distribution system. Concentration is producers is a related but separate problem, but that need not be solved to deal with the "cheap alcohol" issue. Of course, if this were easy politically it would have been done by now, but that is not because it is complicated.

  • Mimikatz on November 15, 2012 11:03 AM:

    Ajay: you might read up on Prohibition. Alcohol abuse was rampant, along with child and spousal abuse. With the regulatory laws, alcohol was actually less readily available most places after repeal than under Prohibition. And the coalition that got Prohibition passed included women's suffrage advocates, Progressives and nativists as will as Christians.

    Before Prohibition could be enacted, there needed to be an alternative to liquor excise taxes. Hence the income tax was supported by the anti-alcohol faction. The Repeal faction got a huge boost from rich people who thought it would lead to repeal of the income tax.

    Read "Last Call" by Daniel Okrent. A real treat.

  • MuddyLee on November 15, 2012 11:50 AM:

    Anything that benefits "Big Beer" will hurt beer drinkers and all of America. Let's hear it for small breweries and do it yourselfers.

  • Veblen's Dog on November 15, 2012 1:19 PM:

    Just so long as they don't go after home brew again.

  • zandru on November 15, 2012 1:48 PM:

    I'm with mimikatz and against aj's flippant "I think you misspelt "rampant bigotry and fundamentalist Christianity" there."

    Working men would regularly return home, having drunk up the entire paycheck. No money for rent, for food for the children, nothing. The men thus being nonfunctional, although frequently violent. Poor role models, to say the least. A social disaster, in actual fact.

    Should anyone be surprised that the anti-booze movement was led by newly-enfranchised women?

    "dyPspr Midtown" - and everywhere else.

  • SHK on November 15, 2012 1:51 PM:

    "Don't monopolistic arrangements tend to drive end pricing higher (that's kind of the point isn't it)?"

    Actually, it is an oligopoly, not a monopoly, and they can result in prices higher, lower or the same as the competitive price. Trying to answer the question in particular instances is how industrial organziation economists make a living.

  • John on November 15, 2012 2:18 PM:

    Really? The only thing stopping people from drinking more is the price of beer? Isn't cheap beer less than $10 a case? That seems to be almost free.

  • TCinLA on November 15, 2012 3:21 PM:

    I wasn't aware that Anheuser-Busch InBev and MillerCoors made beer. The last time I sent in a sample of "It's the water!" the lab report came back that both mares were with foal.

  • TCinLA on November 15, 2012 3:29 PM:

    Sorry, what led to Prohibition was not "the rampant alcoholism and family breakdown" that resulted from vertical integration of the booze industry.

    What led to Prohibition was that 2/3 of the men in the late 19th Century were suffering from then-unknown PTSD from the Civil War, and trying to drown their nightmares with alcohol. The "family breakdown" was caused by that fact, by a society that allowed male domination to make "wife beating" a norm, and the rampant unrestrained greed of the Robber Barons of the Gilded Age with its social policies of "survival of the fittest."

    At most, the vertical integration of the booze industry was a minor player in far larger social forces.

  • Doug on November 15, 2012 7:30 PM:

    CharlieM, I don't know if you've ever been in a home in Britain, but the size of the rooms are definitely NOT conducive to a party of more than six people. Then there's the fact most homes are quite often renovated row houses, where the wall in your "lounge" (living room) is also the wall of the lounge in the house next door. If you live in a "flat" (apartment), the rooms are usually even smaller.
    Most people I met in the UK treated their local pubs more as a recreation room with a bar, which was definitely NOT "open"...