A Dangerous US Beer Monopoly?

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A friend of mine sent me this link yesterday.  I’m not usually on his distribution list, and I haven’t seen any replies yet so I decided to come here to talk about it before I copy and paste my article to send out to my friends.  I believe the point of him sending the link was to start a conversation on the article, I don’t necessarily believe this article in any way represents my friend’s view on the subject.  It’s five pages long so I suspect most of you won’t read it, but check it out and browse through it if you  have a minute. In the interest of time, I won’t hit every point I’d like to, so feel free to add any comments.

The author, Tim Heffernan, is worried that a monopoly in the beer market in the US will eventually cause prices to lower and increase the amount of alcohol consumed, causing the US to have the same drinking problems as the UK. He points out that there are two main beer companies in the United States, Anheuser-Busch InBev and MillerCoors, that make up 80% of the market share. He doesn’t cite any sources in the article, but from a Google search this appears to be accurate.  He says that Anheuser-Busch InBev will eventually merge with MillerCoors, and will not only have a monopoly on the product, but also the distribution.  He says this is what has happened in the UK, and I’ll take him at his word.  He says this manufacture and distribution monopoly, along with making beer more available at supermarkets, is the reason the UK has a drinking problem, and we in the US will too when this eventually happens.

The first problem with his argument is that it is a false dilemma.  Just because the UK has a more drunks per capita than the US and has less regulation (according to his article) than the US, does not mean that less regulation is the cause of of the increased drinking.  Sure it is a possibility, but there are so many other potential causes he does not look at including culture, social stigma, work hours, religion, health concerns, etc.

I, like many, used to binge drink often in my college days and I had a lot less money back then than I have now. I hardly ever drink alcohol nowadays, but the reason for me is that I need to be productive in the morning and a hangover often gets in the way of that.  I am also somewhat health-conscience. I try to maintain my weight, and be physically active.  While some people may be able to handle it, I think most people would agree that binge drinking is not conducive at all to an active lifestyle.

One of his main points is that when the beer market is monopolized, it will lower prices and cause more people to drink.  He does not say how this happens.  He doesn’t point to any other monopolies that lower prices.  In fact, it is basic economics (and the reason we have pointless anti-trust laws) that monopoly power increases prices.  Even if the monopoly is earned in a free market through efficiency, prices would still increase until others can enter the market, therefore bringing the market price back down to its equilibrium.

The facts also do not back up many of his claims in his article, so I’d be interested to hear from him where he got his data.  A Swiss bank, UBS, did a study in 2012 that shows the USA has some of the cheapest beer, relative to income, in the world already, even cheaper than the UK by a long shot!  A second source, mytravelcost.com, also backs up my claim saying that alcohol costs in the US are 44% cheaper than in the UK.  The whole premise of his article, that monopoly will lower prices and cause our streets to be flooded with drunks, is totally baseless.

Lastly, it is my personal belief that we will see the exact opposite, of what Heffernan claims, happen in the coming years.  Sure, there are two huge corporations owning a combined 80% of the beer market, but Heffernan totally ignores the “wrath of the consumer”.  Consumer tastes in the US toward beer are drastically changing.  Over the past decade we have seen a rise in the “beer snob”.  You’re seeing more and more microbrews pop up all over the place.  According to The Brewers Association, craft beers are growing by double digits each year.  In fact, in 1978 there were 89 breweries in the United State.  As of June of 2011 there were 2,126 breweries, the most ever in the US.  The previous high was 2,011 way back in 1887.  That number is trending up for the future as overall beer sales are down, but craft beer sales are rising.

My take is that this article is a poorly researched, misguided, anti-capitalist hit piece, by an author who has no clue what he is talking about at best, or an author who knows exactly what he is talking about but maliciously chose to do a temperance propaganda piece with a big corporate boogeyman to blame for alcoholism at worst.  It is clear to me that the author is against big business and alcohol in general.  He fears people having the freedom to make their own choices and does not think the general population can be trusted.  He thinks everyone should live the way he does, because he is somehow smarter or better than the average man.  Sure, he wouldn’t become a drunk with lower beer prices, but all you idiots out there will.

God Bless Freedom, Liberty, and Personal Property,

Slappy Jones II

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Lisa Small
Guest

I agree, cheaper beer prices won’t make more drunks. Sad but true, many homeless people somehow have the ability to get alcohol. If someone wants to drink, whether or not they have the money, they’ll find a way to get it, either the money or the beer. For those who don’t drink, they’re not going to start just because the price of beer drops. I can vouch for that since I don’t drink nor will I be tempted to start if prices should go down.

slappyjones2
Guest

I’d be willing to bet anything that if you polled the population, you’d find price has very little to do with the amount of alcohol consumed.

Rollo McFloogle
Guest

I was never close to being a heavy drinker by any means, but even I’ve cut back over the last year or two for the mentioned health reasons.

And being someone who has spent close to $30 on a 4-pack of beer before, I’m pretty sure that my access to cheap beer doesn’t equate to more beer.

Charles Drexel
Guest
I’m going to refute what all three of you are saying. I think all three of you are extremely motivated and are part of an exception in America today. Many people raking in a comfortable income, and also not so hefty income, unfortunately, do not live by your standards. If you go down to the Jersey shore in the summer time and thrust yourself into the binge drinking bar market, you will find that many adults between twenty and thirty flock to the bars with the best beer specials. Certainly, some incentive is to see heavily acclaimed bands but if… Read more »
Charles Drexel
Guest
My point needs clarification. Many people that go to Ocean Drive would otherwise not have had it not been for the beer specials. In hindsight, I had six years of experience observing groups and groups of people staying put partying at houses staying away from the bars until it came time for dollar specials. Needless to say, those people, many of them my friends, would flock to the bar at those prices and get obliterated. They would get as many drinks as possible per order as if it was the last chance they could drink. They certainly drank more than… Read more »
Lisa Small
Guest
Charles, yes there are people who do look for the specials. But that’s because there are specials and they know it. But what if specials didn’t exist? It’s like people who look for bargains. They go where the bargains are. But what if bargains didn’t exist and the playing field was level? What if everyone had the same cheap prices? Would they buy more? I don’t think so. They would just choose the store they like best, that’s closest to them and probably the most organized and clean. It’s the same with those who drink. If those people at the… Read more »
Charles Drexel
Guest
Hi Lisa. Not sure if I misunderstood you but the fact is certain bars in that market have better/cheaper deals and draws in more people and they drink more than they normally would. Another point, I hear it all the time. People who once went to Gap, Macys, and Express becoming converts to Kohl’s, Marshalls and TJ Max because of the low prices. I know plenty of stories of people who buy more than they normally would have because of Kohl’s cash rewards. The strategy actually works rather well based on all of the anecdotes I’ve experienced. From friends, to… Read more »
Lisa Small
Guest

What I’m saying is that cheaper beer prices isn’t going to cause someone to become a drunk or an alcoholic. I think that was what the article was suggesting. Also, I think you’re missing the point of beer prices dropping all around. So if they are all the same price everywhere people will do what they’re already doing except they will have more a choice as to where they want to do it.

Cornwall Hoggins
Guest
Charles, I am not sure I see your point. You have a group of friends who used to drink at a house and now drink at a bar. How did the beer specials create more drinkers? It seems like the same number of drinkers, but a different location. So what the article is saying is that if prices are are lower, we will have more drunk people everywhere. What I think slappyjones2 is saying is that the people who do not drink are not refusing booze because they can’t afford it. Rather, there are millions of reasons why people choose… Read more »
Charles Drexel
Guest

I never said lower prices would create more drunks. I am saying those who drink are very likely to drink more if prices are lowered. I think the article possesses some plausibility.

Charles Drexel
Guest

I am not in any way saying non-drinkers will become drinkers or drunks. I am simply talking about how lower prices could create more practicing drinkers crossing the line.

Charles Drexel
Guest

Cornwall, In response to your first question. Friends, who would otherwise not go to a bar and much rather sit at their house anddrink casually were enticed to go to the bar because of the beer specials. They hated the crowds, but because of great specials, they said “what the heck, I’ll go.”

Charles Drexel
Guest

Once at the bar they found themselves slipping into inebriation. Listen, I don’t want my anecdotes to get out of hand. I just think the article has some plausibility

Rollo McFloogle
Guest

Lower prices will likely result in the purchase of beer to increase, that’s basic supply and demand. Prices drop as the demand weakens relative to the supply.

What the original article was saying, however, was that as the demand increases and the supply remains stable or decreases, the prices will continue to fall. That’s nonsense.

slappyjones2
Guest
Rollo makes a good point and I don’t want to just start to pile on your comments and rewrite things that have already been written. What Tim Heffernan says is that if the US beer market is monopolized, prices will lower and our streets will look like William Hogarth’s ‘Gin Lane’ painting. The ironic twist here is that Hogarth was contrasting the evils of drinking gin in ‘Gin Lane’ with the merits of drinking beer in ‘Beer Street’. Haha, you can look it up yourself. What I am saying is that we already have some of the cheapest beer prices… Read more »
Charles Drexel
Guest

OK. Makes more sense. It was my misunderstanding that Heffernan was saying “lower prices will cause current drinkers to drink more and cause more drunks.” That’s where the confusion was with the other commenters.

Blue Dot Special
Guest

The bar special argument as it pertains to incentivizing people to drink more does not make much sense, as even the cheapest bar special likely doesn’t compare to purchasing a case to drink at home. The cheapest regular special I’ve ever seen is $1 for Miller High Life. At an estimate of $15 per case for 30, we’re talking half the cost — or double the consumption if the argument is mathematically true.

slappyjones2
Guest

You’re absolutely right. That is one of the many reasons I think Tim Heffernan’s article makes no sense at all. Beer can’t really get much cheaper than it already is in the United States.

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