Who brews your beer?
by Johan F. M. Swinnen
After two centuries of consolidation and closing down of small breweries, a counter-revolution is under way. Fed up with the lack of variety and the control of large brewing holdings over their favorite drinks, beer lovers have taken their beverage back into their own hands. All over the world, new beers and breweries are emerging every day. What started as the micro-brewery movement in the USA has spread to other countries and created a remarkable turnaround in convention. For instance, in Belgium – famed for its influential beer culture – when consolidation threatened the availability of beer varieties, the fastest growing segment in the beer market is now beers brewed by monasteries and ‘abbey-style’ beers.
Until the thirteenth century, monasteries were the only places where beers were manufactured on anything like a commercial scale in Europe. Beer was brewed for the monks and for guests, pilgrims, and the poor. Later, monks started to brew beer for noblemen, to sell their brew in ‘monastery pubs’, and provide their produce for church celebrations and feasts where peasants could drink for free.
However, monastic beer production became increasingly undermined by commercial breweries from the fourteenth century onwards. Demand for beer increased with income growth, the expansion of trade and towns, and an increasing awareness of water pollution. Traveling merchants wanted lodging, food and drink, and ‘inns’ and ‘taverns’ sought to provide it. Cities of trade – such as London, Bruges, Hamburg and Munich – soon became important centers of brewing.
The decline in monasteries’ beer production was also influenced by innovation and local politics. The introduction of hops was a major innovation that would ultimately transform the global beer economy, however, it took centuries to be widely accepted because of its impact on local taxes. Before hops, local rulers taxed breweries through a tax (‘grutrecht’) on herb mixes (‘grut’) to flavor and preserve beer – of which they controlled the production and sales. While hops improved the taste and preservation of beer and allowed for transportation over longer distances, hops threatened the local rulers’ tax revenue as they could not control the sale of hops. To compensate for the lost tax income, rulers wanted to impose taxes on beer itself. Yet as monasteries were absolved from paying taxes, rulers favored seeking their supplies from commercial breweries which they could tax.
Intertwined geo-political and religious changes also played a role in the historic decline in monastery-brewed beer. During the Reformation, many Catholic monasteries were destroyed in large parts of Europe – and, with it, their beer production ceased. Inevitably, commercial breweries replaced them. The final straw was the French Revolution which clamped down on the Catholic Church. Under Napoleon, the French expansion destroyed the remaining European monasteries – and their breweries too.
Scientific discoveries in the eighteenth and nineteenth centuries also caused a dramatic transformation of the beer industry. Increased knowledge of yeast, steam engines, and refrigeration made it possible to produce new types of beer and to control the production process more accurately. Thus, the brewery industry embarked on the road to industrialization, causing notable consolidation of the market. In the USA, the number of breweries decreased from just over 1800 breweries in 1900, to only 1345 in 1915. In 1950, that number had decreased to 407, and by 1950 there were only 101 breweries still in business. Conversely, the average brewery output grew from 2.6 million liters in 1900 to 219.2 million liters in 1980. In the UK, the number of breweries collapsed from 6447 in 1900, to just 142 in 1980, whilst their average output grew from 0.9 million liters to 48.1 million liters over the same period.
Consolidation was reinforced by scale economies in distribution and the arrival of TV advertisements and globalization. During the 1980s and 1990s, breweries started looking abroad for expansion. Breweries such as Heineken (Holland), SABMiller (South Africa), and Interbrew (Belgium) acquired breweries in Eastern Europe, North and South America, and Asia. The largest brewer, Anheuser-Busch Inbev NV, is a product of the 2004 merger between (Belgian) Interbrew and (Brazilian) AmBev and the 2008 merger with Anheuser-Busch. This holding now produces 25% of the world’s beer.
Furthermore, all over the world, traditional ales largely produced with top fermentation lost market share to lager beer brewed with bottom fermentation. Lager beer (‘pils’) came to dominate the beer market globally. A further shift to even lighter beers was caused by grain shortages in the first half of the 20th century and growing consumer preferences for low-calorie products. Cheaper grains such as corn and rice were used, resulting in ‘light lager’ like Budweiser. In response to a growing demand for low calorie foods and drinks, brewers discontinued the production of dark beer and produced ‘diet’ or ‘light’ beers, such as Miller Lite. Light beer quickly became the most popular option in the US.
However, the growing domination of increasingly standardized lager and light beers produced by increasingly fewer brewing companies has led to a counter movement, which started in the US. New breweries with ‘special beers’ and ‘older’ style beer were labeled ‘microbreweries’ because of their small scale. Similar developments can now be observed in many countries. While the share of the microbreweries in the total global beer production is still relatively small, they are growing rapidly.
In countries like Belgium, beer brewing in (collaboration with) monasteries and abbeys has witnessed a remarkable revival and abbey beers are now the fastest growing segment of the Belgian beer market. Yet only a few of them – mainly the very popular Belgian Trappist beers – are still produced in monasteries. Most are recipes new and old brewed by smaller breweries, yet others are attempts by larger beer brewers to imitate the microbreweries or even take them over.
Because of their success, some of these breweries have since outgrown the ‘micro’ level, but are still labeled microbreweries because of the style of beer they are producing. Some are now referred to as ‘specialty brewers’. Paradoxically, today the largest US owned brewery is the Boston Brewing Company, which started only a few years ago as a microbrewery. This example powerfully illustrates how the global beer markets appear to have come full-circle via consolidation, global mergers, and acquisitions, back to the growth of the microbrewery.
Johan Swinnen is Professor and Director of the LICOS Centre for Institutions and Economic Performance at the University of Leuven, a Visiting Professor at Stanford University, and Senior Research Fellow at the Centre for European Policy Studies (CEPS), Brussels. He was previously Lead Economist at the World Bank and Economic Advisor at the European Commission. He is President-Elect of the International Association of Agricultural Economists. He holds a PhD from Cornell University. He has published widely on political economy, institutional reform, trade, and agricultural and food policy. His latest book is The Economics of Beer.