2
Beer
Causes of Structural Change

Douglas F. Greer

Between 1976 and 1981, the sales of Schlitz beer plunged 42 percent. In desperation, Schlitz sponsored a live TV taste test during halftime of the 1981 Super Bowl. One hundred beer drinkers who claimed Michelob was "their brand" did the tasting. They quaffed Schlitz and Michelob from unlabeled mugs. When asked to choose which beer they liked best, not knowing which mug was which beer, fifty of these tasters pulled the switch for Schlitz and fifty picked Michelob. During NFL playoff games a few weeks earlier, similar taste tests of two hundred confirmed Budweiser drinkers showed 48 percent choosing Schlitz over Bud. Claiming triumph, Schlitz took out full-page ads in college newspapers to spread the news that half of all loyal Budweiser and Michelob drinkers tested "preferred Schlitz over their own beer."

The tests were legitimate. But their true meaning was a bit different than the impression left by Schlitz. That is to say, most all mass-produced American beers taste alike, a fact confirmed by numerous blind taste tests more carefully controlled than the Schlitz tests.1 Given two beers that taste the same, and given the law of averages, people forced to decide between the two will normally choose 50-50. It's like a coin toss.

All in all, we could say that Schlitz proved its beer to be equal to Budweiser and Michelob. But the taste tests failed to win converts for Schlitz. Its sales continued to tumble, Stroh acquired the company in 1982, and today the Schlitz brand is difficult to find. There is a lot more to selling beer than brewing one that tastes good.

Schlitz is only one example among many. This chapter explores more broadly the immense structural changes that the beer industry has experienced over the past five decades. In 1950, scores of regional brewers thrived with brands popular regionally but unknown nationally--brands such as Grain Belt, Pearl, Iron City, Narragansett, and Blitz-Weinhard. Concentration was relatively low. In 1950 the leading brand nationally, which accounted for less than 7 percent of sales nationwide, happened to be Schlitz. Moreover, each company focused on just one brand and a few packages. Anheuser-Busch specialized in Budweiser, for example, and Miller brewed hardly anything besides Miller High Life. Now Anheuser-Busch (A-B) and Miller dominate the industry. Together they account for roughly two thirds of all American output. Their brands are too numerous to remember easily--ranging from Natural Light and O'Doul's (Anheuser-Busch) to Meister Brau and Milwaukee's Best ( Miller).

Several other topics will also attract our attention. We will study distribution, for instance. However, structural change will occupy center

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