Malt Beverages

SIC 2082

Companies in this industry

Industry report:

This category includes establishments primarily engaged in the manufacturing of malt beverages, including ale, beer, malt liquor, nonalcoholic beer, porter, and stout.

Industry Snapshot

Beer has been a part of the American lifestyle since the birth of the country. Beer was brewed in colonial America and was made by American Indians. Through the years, beer has served cultural, spiritual, and even medicinal purposes. With nearly 80 million U.S. beer drinkers, beer has become one of the most popular beverages, behind water and tea. The addition of flavored malt beverages has helped to maintain and even enhance some industry sales, despite the health risks associated with high alcohol consumption.

Each year, the U.S. malt beverage industry produces and sells more than 2.6 billion cases of beer, or about 180 million barrels. A barrel of beer is equal to two kegs or 31 gallons, which is roughly equal to 13.8 24-unit cases of 12-ounce cans or bottles. However, the overall industry affects other markets, such as the food service and entertainment industries. According to the Beer Serves America--which is sponsored by the Beer Institute and the National Beer Wholesalers Association (NBWA)--the overall U.S. brewing industry dollar volume was $94 billion in 2006. The statistics indicated that 1.7 million jobs were created by beer production alone, with industry wages of $55 billion. Beer sales also brought in more than $36 billion in business, personal, and consumption taxes for 2006. The Brewers Association valued the economic impact created by beer at $189.3 billion. Significant growth has occurred in the craft beer industry as that segment produced 6.7 million barrels in 2006 for a growth of 12 percent, which was worth $4.7 billion.

In 2008, the industry grew 5 percent to historic levels of more than 213 million barrels of beer. According to the Beer Serves America statistics released in 2008, jobs created by beer production increased to 1.9 million, with wages rising to $62 billion. Additionally, beer sales added another $41 billion in business, personal, and consumption taxes. The economic impact created by beer totaled $198.1 billion.

Organization and Structure

According to the Beer Institute, which is the trade association for the malt beverage industry, the United States is second behind China in the world's beer production, brewing 14 percent of the world's volume, as compared to China's 19 percent. In 2006, 1,572 brewers operated in the United States with California leading with 306 breweries followed by Colorado with 108 breweries. The U.S. malt beverages manufacturing industry employs about 48,609 workers and pays roughly $3.4 billion in wages.

Three major companies hold nearly 80 percent of the market share in the United States. These breweries are Anheuser-Busch, located in St. Louis, Missouri; Miller Brewing Company in Milwaukee, Wisconsin (a subsidiary of SABMiller); and Coors Brewing Company (a subsidiary of Molson Coors Brewing Company) in Golden, Colorado. The two top-selling brands, Budweiser and Bud Light, both belong to Anheuser-Busch. Ranking second was Miller with the third-best selling product, Miller Light. Ranked third was Coors Brewing Company with the fourth most-popular beer, Coors Light.

This industry includes only those companies that manufacture beer. The industry has consistently been dominated by three major U.S. breweries, yet, regardless of size, all breweries have to sell their products through wholesalers and retailers. This distribution channel is the result of accommodating the variety of federal, state, and local regulations regarding the sale of alcoholic beverages.

Federal and State Regulation.
The Federal Alcohol Administration Act (FAA) was put into place at the end of Prohibition in 1933. Since that time, the Bureau of Alcohol, Tobacco and Firearms (ATF) has been responsible for administering and enforcing the FAA, including qualifying brewers, collecting brewer and wholesaler occupational taxes, and regulating trade practices, advertising, and labeling.

Beyond the uniformity of the FAA, regulations varied greatly among the 50 states, as the Beer Institute reported in their testimony to the U.S. Senate regarding the Malt Beverage Interbrand Competition Act. The most dramatic example of regulatory diversity is the way that states sell beer. "Open" states license retailers and wholesalers to handle the distribution and sale of alcoholic beverages. Thirty-two states and the District of Columbia are considered "open" states. The other 18 states operate under the control method, in which each state government buys and sells alcoholic beverages at the wholesale and retail levels.

In addition to federal regulations, some states set up independent agencies responsible for the administration, licensing, and enforcement of state laws and the collection of state revenues. Additionally, some state legislatures created their own Alcoholic Beverage Control (ABC) agencies with rule-making power, and 32 states have allowed citizens to vote for or against the sale of liquor in various cities or counties.

Background and Development

The foundation of the U.S. beer industry can be traced to the times of ancient kings and pharaohs. Babylonian clay tablets more than 8,000 years old depict beer being brewed and include detailed recipes. Other writings indicate that beer was brewed by the Egyptians as early as 3000 B.C. and by the Chinese in 23 B.C. One of the world's oldest breweries still in existence is Brauerei Beck in Germany, where Beck's beer was first brewed in 1533.

Beer was first brewed in America in 1587 at Sir Walter Raleigh's colony in Roanoke, Virginia, and Puritan settlers brewed beer in Boston as early as 1620. In 1791, Congress levied the first tax on alcohol. By 1870, Adolphus Busch pioneered the use of refrigerated railroad cars to ship beer over long distances. Following the steady development of temperance groups, the Pure Food and Drug Act, more commonly known as the Volstead Act, went into effect on January 16, 1920. This act ushered in the era of Prohibition, which banned the sale, possession, transportation, and consumption of alcoholic beverages. During this 13 year period, production and distribution of millions of gallons of alcohol fell into the hands of "bootleggers."

After Prohibition was repealed in 1933, federal and state governments tightened regulations under the Federal Alcohol Act (FAA) and various state regulations. Brewers also adopted policies of self-regulation, such as the Distilled Spirits Council of the United States' (DISCUS) voluntary "code of good practice." Following Prohibition, beer was produced in 750 locations throughout the country. It was distributed to wholesalers and retailers in limited geographic regions that seem extremely small when compared to current distribution areas. By the 1930s, the primary way to sell beer was in draft form and in refillable bottles.

In order for breweries to continue expanding, however, less costly containers were needed. The beer can, introduced in 1935, filled those needs perfectly. By the end of World War II, the beer can had become such a popular container that glass companies soon created the one-way bottle to keep up with the competition. These less-expensive containers allowed brewers to ship more beer and expand markets. By 1946, breweries served markets that were at one time only accessible to local and regional companies, and this expansion soon created the nationwide market of the major breweries.

Companies began to merge to save operating expenses. For instance, in 1995 fourth-ranked Stroh Brewery Company acquired G. Heileman, the maker of Colt 45, Old Style, and Henry Weinhard, among other labels.

Causes for the stagnant market were attributed to the effects of the federal excise tax hike in 1991, unfavorable demographics (not enough 21-year-olds), and continuing health concerns regarding alcohol consumption. A bit of good news for the beer industry was that the baby-boomlet generation was about to come of age, so the flat market of 21-year-olds would soon grow.

Attempting to boost incremental sales and expand the beer market, companies continue to introduce new products, often creating entirely new segments such as light beer, nonalcoholic beer, ice beer, bottled draft beer, and clear malt liquor drinks such as ZIMA.

In 1996 light beer became the largest segment of the beer market with 37.25 percent--more than 70 million barrels. Nonalcoholic beer also helped the beer business. Although small compared to total beer consumption, the volume of nonalcoholic beer more than doubled its 1989 level and remained steady since 1991.

In an industry of mature brands, companies looked at the future of microbrews. Sales in this segment grew an average of 40 percent from 1987 to 1997. Specialty brewing in the United States grew from a $600 million industry in 1992 to a $1 billion industry in 1994. Even the big names were offering craft brews. In 1994, Anheuser-Busch (A-B), bought a stake in Seattle's Redhook Ale Brewery, while Coors Brewing Company landed Killian's Irish Red.

The undisputed leader of the microbrew segment has been the Boston Beer Company (BBC) and its product Samuel Adams. The tenth largest beer producer in the country, BBC manufactured 700 barrels in 1994, only about three one-thousandths of the beer sold in the U.S. that year. However small, this volume was still greater than the total of the next six microbrewers combined. When the BBC was founded in 1984, fewer than 40 micro-breweries existed. An estimated 500 small breweries and brew pubs have opened, with an additional 50 added each year from 1985 on.

In the late 1990s, beer industry sales grew about 1.5 percent to 193.3 million barrels. A strong economy, coupled with the growing number of individuals over the age of 21, fueled growth to a record 197.6 million barrels in 2000. As the economy slowed in the early 2000s, however, beer shipments were expected to follow suit. The average per capita consumption of beer in the United States declined after the 1980s, reaching 22 gallons per capita in the late 1990s. Nevada led the nation with 34 gallons per capita, while the least consumption was in Utah, with 13 gallons per capita. However, because the population of individuals old enough to drink beer continued to grow, the beer industry was able to achieve growth into the early 2000s.

In March 2007, Grocery Headquarters reported that overall beer volume in the United States rose nearly 2 percent in 2006 with imports increasing by 12 percent. The Beer Institute indicated total beer production in 2006 was 197.7 million barrels, a decrease from 200.4 million barrels in 2002 with Colorado leading with 23.4 million barrels in 2006. California followed closely with 22.8 million barrels while Texas was third with 19.4 million barrels produced. Total beer shipments rose in 2006 to 207.6 million barrels from the 2003 total of 202.6 million barrels. The leading state for shipments was California with 21.3 million barrels followed by Texas with 18.8 million barrels and Florida with 14.2 million barrels. Meanwhile, the industry took note of the increasing popularity of wine as shipments for that industry have increased steadily for several years with a 3 percent increase from 2005 to 2006 but a nearly 25 percent rise from 1997 to 2006.

Consumption per capita for the entire country equaled 30.3 gallons in 2006. Nevada continued to lead all states in per capita consumption in 2006 with 44.2 gallons per person followed by New Hampshire with 43.1 gallons per person then North Dakota with 43.0 gallons per person. The state with the lowest total per capita consumption was once again Utah though their consumption decreased to 18.9 gallons per person in 2006 from 20.0 gallons per person in 2003.

Flavored alcoholic malt beverages brought in about $445 million by the mid-2000s, with popular brands including ZIMA, Mike's, Hard Iced Teas, and the introduction of Smirnoff's, Twisted V and Miller's, Brutal Fruit (targeting women).

The three big leaders in the beer industry continue to be Anheuser-Busch, Miller, and Coors. With the two top-selling brands, Budweiser and Bud Light, Anheuser-Busch dominated the domestic beer market in the mid-2000s, shipping more than twice as much beer as second place Miller.

For the larger companies, especially Miller, consolidation was the way to maintain or increase market share. In 1999 Stroh Brewery formally shut its doors, selling its Weinhard's and Mickey's brands to Miller. The rest of the Stroh brands and a brewery in Pennsylvania were sold to Pabst. The brands included Stroh's, Old Milwaukee, Schlitz, Schaefer, and Schlitz Malt Liquor. In late 1999 Miller completed its acquisition of the only remaining brewery in the Northwest, Olympia Brewing Co. In 2002, Miller agreed to merge with South African Breweries to become the world's then-second largest brewery (it moved to third position in the mid-2000s).

Current Conditions

In June of 2008, United Kingdom-based SABMiller plc and Molson Coors Brewing Company combined their U.S. and Puerto Rico operations to create MillerCoors, the world's largest brewer. The company operates 8 breweries and commands 30 percent of the market. That followed with Anheuser-Busch being acquired by rival Belgium-based InBev S.A. and renaming the company Anheuser-Busch InBev in November of 2008. The company reported revenues of $36.8 billion. "Recent deals between major beer producers likely will lead to more consolidation of what once were small family businesses," Kim Leonard noted in the Pittsburgh Tribune Review in February 2009.

With more than 3,500 malt beverage brands compared to three decades ago, per capita consumption remained relatively steady throughout the mid-2000s, however, consumption fell from 30.5 gallons per person in 2008 to 29.7 gallons per person in 2009, a direct result of the struggling economy. Of the average 29.5 gallons per capita consumption of malt beverages, Montana led the nation in per capita consumption in both 2008 and 2009 with 43.7 gallons per person, respectively. New Hampshire trailed with 43.4 gallons per person followed by North Dakota with 42.0 gallons per person and Nevada with 39.5 gallons per capita. Rounding out the top five was South Dakota with 38.7 gallons per capita. Once again, Utah ranked as the lowest per capita consumption of malt beverages in 2009.

The largest industry development occurred with the introduction of H.R. 836 the Brewers Excise and Economic Relief (BEER) Act of 2009. Under the act, the federal excise tax will be reverted back to its "pre-1991 level" of $9 per barrel for large brewers versus the current $18 per barrel and for the smaller brewers from $7 to $3.50 per barrel. This was good news for the more than 2,053 brewing companies who saw their sales fall by 2.7 percent in 2009, according to Beverage Marketing Corporation.

Industry Leaders

Anheuser-Busch, Inc.
Anheuser-Busch, Inc. is the world's second largest brewer (behind InBev of Belgium) and the main subsidiary of the Anheuser-Busch Companies, based in St. Louis, Missouri. With 12 breweries, Anheuser-Busch accounted for a 48.4 percent share of all beer sales in the United States while producing 60 varieties of beer and alcohol beverages including naturally brewed beers, non-alcoholic beers, and imports for U.S. distribution. Worldwide sales reached 125 million barrels by 2006 for net sales of $18.0 billion.

Anheuser-Busch had an estimated 11 percent share of the worldwide market in 2006 with brands sold to more than 40 countries. In 2004, the company purchased the Harbin Brewery Group in China, adding 13 breweries to its ranks. Anheuser-Busch employs over 44,000 people and works with approximately 900 independent wholesale distributors. Other beer-related Anheuser-Busch subsidiaries are Anheuser-Busch International, Inc.; Anheuser-Busch Agricultural Resources, Inc.; Metal Container Corporation; Anheuser-Busch Recycling Corporation; Busch Entertainment Corporation; St. Louis Refrigerator Car Company; Manufacturers Railway Company; Precision Printing and Packaging Inc.; Eagle Packaging Inc.; Longhorn Glass Corp.; and the Busch Properties Inc.. Anheuser-Busch brands are Budweiser, Bud Light, Budweiser Select, Bud Dry, Bud Ice, Bud Ice Light, Michelob, Michelob Light, Michelob Ultra, Michelob Ultra Amber, Michelob Honey Lager, Michelob AmberBock, Michelob Golden Draft, Michelob Golden Draft Light, Busch, Busch Light, Busch Ice, Natural Light, and Natural Ice along with a variety of specialty brews.

Adolphus Busch, founder of the Anheuser-Busch Brewing Company, immigrated to the United States in 1857, arriving in St. Louis via New Orleans. In 1861, Adolphus married Lilly Anheuser, and after serving a short time in the Union Army, he returned home and joined the management of his father-in-law's brewery. In 1869, Adolphus purchased half ownership of another brewery, called the Bavarian Brewery, which was restructured with his father-in-law, Eberhard Anheuser, as president and Busch as secretary. In 1879, the company was renamed Anheuser-Busch Brewing Association. Upon the death of Eberhard Anheuser, Adolphus Busch became president of the brewery. He continued in this position for the next 33 years until his death in 1913. Anheuser-Busch was the first brewer to use pasteurization to help keep beer fresh in transit, and most packaged beer is still pasteurized today. In 2006, August A. Busch IV was named president and CEO of his ancestors' company.

Miller Brewing Company.
The Miller Brewing Company is a wholly owned subsidiary of the United Kingdom"s SABMiller--the third largest brewery in the world. The company, whose corporate headquarters are in Milwaukee, Wisconsin, was sold by Philip Morris Companies Inc. in 2002 to South African Breweries for $5.6 billion and then changed their name. With approximately 6,500 employees, the company operates seven breweries in the United States, five manufacturing plants, a glass-bottling plant, a hops processing plant, a malting factory, and a packaging/printing plant. The Miller Brewing Company produces over 40 million barrels of beer each year. The company's major brands are Miller High Life, Miller Lite, Miller Genuine Draft, Meister Brau, Milwaukee's Best, Leinenkugal's, and Icehouse. Miller products are distributed to retailers in the United States, Puerto Rico, and the Virgin Islands by a network of about 700 distributors. The company's products are also sold in approximately 40 countries worldwide, including U.S. military bases.

The Miller Brewing Company was founded by German immigrant Frederick Miller, who settled in Milwaukee after a brief stay in New York City. He bought the Plank Road Brewery in 1855, and soon after opened a 20-acre park or "sommer-garten." After Frederick's death, the Milwaukee Brewery was passed on to Miller's children. The W.R. Grace Co. purchased most of the children's stock in the Miller Brewing Company in 1966. Philip Morris Inc. purchased the company in 1969 and the rest of the family's stock in 1970.

Coors Brewing Company.
The Adolph Coors Company was founded in 1873 and became a subsidiary unit of Molson Coors Brewing Company with their merger in 2005 with the Molson Brewing Company (which changed its name to Molson Coors). Headquartered in Golden, Colorado, it is the third-largest brewer in the United States with 2004 sales of $5.84 billion having sold approximately 42.1 million barrels of beer in 2006. The Coors Brewing Company employs 8,300 people and works with 500 independent distributors. The Coors Brewing Company is the only brewery that does not pasteurize any of its beer. Instead, it uses a sterile filtration process that the company developed in the late 1950s. Coors is the only company with a complete line of draft or non-pasteurized beers.

The Coors Brewing Company operates two breweries, including the world's largest single-site brewery. Coors products are sold in 30 countries worldwide. The company also has licensing agreements to brew and distribute Coors products in Japan, Canada, Scotland, and Korea. Coors has 40 brands which include original Coors, Coors Light, Molson Canadian, Coors Extra Gold, George Killian's Irish Red, Keystone and Keystone Light, Blue Moon, Winterfest (a seasonal brew), ZIMA, and Coors NA (a nonalcoholic beer).

German immigrant Adolph Coors founded the Coors Brewing Company. Upon his arrival in the United States in 1868, Adolph spent many years as a laborer and saved his money to fulfill his dream of owning a brewery. One day Adolph Coors found an abandoned tannery in the town of Golden at the base of Table Mountain. He and other investors remodeled the tannery and soon began brewing Coors beer. By 1880, Adolph was able to buy out his investors. The company survived Prohibition by divesting in other industries, including a cement manufacturing facility and a porcelain plant. The Coors Ceramics Company has been one of the world's largest producers of industrial technical ceramics, and the sole supplier of chemical porcelain used in the United States, Mexico, and Canada.

Workforce

The U.S. Department of Labor's Bureau of Labor Statistics (BLS) reported in May 2006 that 169,700 workers were in the beverage manufacturing industry. There were two primary segments within the industry: production workers and transportation and material moving occupations. Production workers comprised 27.31 percent, or 46,340 workers, with a mean annual salary of $33,820. Packaging and filling machine operators and tenders were the primary occupational category within that category with 19,910 workers earning a mean hourly wage of $14.53. Transportation and material moving occupations accounted for 26.32 percent of the industry, or 44,660 workers. The dominant occupation within this category is drivers and sales workers with 11,220 workers earning a mean hourly wage of $15.06. Overall, the BLS indicated that the beverage industry was very stable with only 1,000 jobs expected to be lost by 2014.

According to the 2002 Economic Census (completed every five years), the U.S. beer industry employed approximately 28,042 people, a decrease from 34,251 workers in 1997. Production workers comprised 19,349 of that total. The top states that are home to the largest number of brewery employees were Colorado and California.

America and the World

Beer imports for 2005 totaled 21.7 million barrels according to the Beer Institute, with the largest markets for U.S. beer being Mexico, the Netherlands, and Canada. An increase in imports to the United States was attributed to the U.S. consumer's desire for high quality, full-bodied brews; lower total alcohol consumption, and acclimation to higher prices for both domestic craft brews and imported brands. Among the world's best-selling beers, only Heineken, the Danish Carlsberg, and Guinness may be regarded as truly international.

North American and Caribbean countries (Mexico, Canada, Panama) were leading countries exporting to the United States, followed by the Asian/Pacific region (Taiwan, Korea, Hong Kong).

Faced with stagnant domestic consumption rates, U.S. companies turned to the international arena to expand their markets. Anheuser-Busch considered opportunities from Latin America to Europe to the Far East. In keeping with its strategic plan, Anheuser-Busch reworked its agreement with Kirin, the number one brewer in Japan. Instead of brewing 65 percent of their beer in Japan, Kirin would brew 100 percent of Anheuser-Busch's beer under a licensing agreement. Kirin would also sell Anheuser-Busch's products and Anheuser-Busch would discontinue its separate sales force in Japan. Anheuser-Busch currently makes and markets Kirin's beer in the United States.

U.S. companies looked for markets with financial strength and disposable income, such as Latin America and the Asian marketplace. In fact, it seemed that beer companies throughout the world were rushing into the exploding markets of Thailand, Vietnam, and most importantly China, which many predicted would become the largest beer market in the world.

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