Craft breweries have never been more prominent in the American beer industry. Nevertheless, major distribution networks remain dominated by large brewing conglomerates, and many consumers do not have access to a wide variety of craft beers. This situation is largely the product of “three-tier” distribution systems, which were designed in the post-Prohibition era to prevent vertical integration between brewers and retailers. This paper identifies three primary vertical restraints on market entry and growth for craft brewers: large brewing conglomerates’ anti-competitive practices in influencing wholesalers’ brand portfolios, franchise laws restricting a small brewer’s ability to alter or terminate their contract with a wholesaler and unprecedented consolidation in the corporate brewing sector. It conducts an evaluation of potential policies to mitigate such restraints and thereby expand choice and competition in American beer markets. It recommends that brewers comprising a small proportion of a distributor’s business be exempted from state franchise laws.
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