Journal of Business Case Studies – NovemberDecember 2010 Volu.docx

Journal of Business Case Studies – November/December 2010
Volume 6, Number 6
31
The Evolution Of The American
Brewing Industry
Alfred G. Warner, Penn State Erie, USA
ABSTRACT
This case provides industry and historical background to firm
specific cases in the brewing
industry. It also stands alone as an industry evolution case. This
case is intended for MBA or
upper level undergraduate classes in strategic management.
Keywords: brewing history, Anheuser-Busch, Miller,
microbrewing
INTRODUCTION

eer, if drank with moderation, softens the temper, cheers the
spirit and promotes health.” (Thomas
Jefferson)
"Let no man thirst for good beer." (Sam Adams)
Beer has been brewed in the U.S. since the Pilgrims arrived –
and it is held that they landed at Plymouth
rather than further south because beer was running short on the
Mayflower. According to the diary of one passenger:
“We could not now take time for further search...our victuals
being much spent, especially our beer..." (Beer
Institute, 2010). Whether this is the case or, as others have it,
the landing was motivated by sailors afraid of running
out of beer on the homeward voyage, beer mattered. Production
in the new colonies was in the form of ales and
porters which had traveled with British settlers. Small breweries
were operating in major cities well before the
Revolutionary War. George Washington, for example, had a
strong preference for porter, particularly from
Philadelphia brewer Robert Hare
(Baron, 1962)
and as the epigrams indicate, other founding fathers had an

equivalent appreciation. Still, beer was not by any means the
most popular alcoholic beverage in the new country:
whiskey, cider, and rum all outpaced demand for beer,
particularly since brewing ales was an iffy proposition with
respect to quality and the product was often sour. Preferences
began to change in the 1840‟s as a result of new beer
styles accompanying German immigration.
Despite the colonial beginnings, the story of beer and brewing
in the United States is mostly a German one.
Immigration from Germany over the period 1840-80 constituted
one of the two massive movements of people from
Northern Europe to the United States. The Irish, in the other
movement, were driven by the Great Potato Famine, but
German immigration was driven mostly by political unrest and
the failed revolution of 1848, though economic
distress also played a role. Germany, at that time, was a loose
confederation of states comprising the Federation,
though it was dominated by the Prussians and Austrians
militarily and politically. Both were reactionary and
resistant to new political ideas spreading from America, France,
and England, such as liberty or political freedom. A
bitter struggle for control emerged between merchants,
tradespeople, and industry on one side and the landowners

and military powers on the other. Official repression initiated
the emigration to the United States in the early 1840‟s.
This reached a head when the French Revolution of 1848
triggered a similar rebellion by liberals in
Germany (“liberal” here used in the classical sense, meaning
those who espouse limited government and extensive
individual political and commercial freedoms). Ultimately, this
revolution was suppressed and in the aftermath,
which lasted for decades, many of the participants and
sympathizers were forced to flee. Many were young,
educated or skilled, and reasonably well-to-do (Steiner, 2000).
Thus, they were able to go beyond settling at a port
of entry (as the Irish immigrants generally did) and push on to
the Midwest. The largest centers of German
immigration, at this time, included New York City and
Baltimore, but also Milwaukee, St. Louis, and Cincinnati
B
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(the so-called “German Triangle”). By 1860, over 1.3 million

German immigrants had entered the U.S., a number
which grew to nearly three million by 1890 (“Germans in
America”, 2009).
The motivation for clustering together in these cities was to
preserve some stability and security in an
uncertain new world through continuation of older traditions
and habits. In most areas where Germans settled,
German bakers, butchers and dry grocers quickly set up shop
and social groups, such as the Maennerchor (a singing
society) or the Turners (derived from Turnverein; an athletic
club), and German language newspapers (St. Louis had
seven, at one time) sustained cultural identity. And, of course, a
large contributor to both culinary habits and social
ventures was the German brewing tradition.
German beers were Bavarian lager-styled; i.e., compared to the
ales being brewed in the U.S., they were
light, effervescent, lower in alcohol, and because of the
fermentation conditions, more reliable in quality. They
quickly caught on, not only with the immigrants, but also the
larger American population. Breweries sprang up in
most northern cities and towns in great numbers. The
proliferation had several causes. Brewing was still very labor

intensive; therefore, the scale of production was quite small.
Also, transportation was not well developed, aside from
water routes. Because beer couldn‟t be shipped long distances
without spoiling, this meant that brewers had to be
local. Most sold their output within just a few miles of the
brewery. Even so, in cities such as Philadelphia and New
York, the demand was so high that dozens of brewers could
survive. By 1860, Brooklyn alone in New York City
had 50 breweries and Philadelphia had near a hundred.
Many brewers, whose firms would later dominate the American
market, got their start in Milwaukee during
the pre-Civil War period. Jacob Best‟s brewery, which would
later be called Pabst Brewing when his son-in-law,
Frederick Pabst, took over the firm), began producing beer in
1844. Joseph Schlitz purchased a share in a brewery
begun by August Krug in 1849, and by 1858, the firm was in his
name. Miller Brewing began production in 1855
(Ogle, 2006).
A REVOLUTION IN BREWING: 1865-1900
"I am a firm believer in the people. If given the truth, they can
be depended upon to meet any national crisis. The

great point is to bring them the real facts, and beer." (Abraham
Lincoln)
"Oh, lager beer! It makes good cheer and proves the poor man's
worth; It cools the body through and through, and
regulates the health." (Anonymous)
By the end of the Civil War, the U.S. had thousands of
breweries operating. Most were very small: even the
largest brewers operated plants in the 12,000 barrel (bbl)/year
range. Within 30 years, the number of brewers would
drop precipitously (see Figure 1), but large producers would be
pushing the one million bbl/year scale and overall
output increased by about 900%. What happened to the brewing
industry was similar to what was occurring in
American industry generally. This period of technological
revolution, largely driven by the introduction of the steam
engine, led to massive changes not only in transportation but
also in production (Stack, 2000).
One cause of this shift was the emergence of Midwestern
“shipping” brewers. Brewers in Milwaukee,
Cincinnati, and St. Louis found that local demand was too small
to absorb all the output of their plants so they began

to seek new markets for their beer. Best Brewing, for example
(as discussed above) was a Milwaukee brewer that
had already been supplying the Chicago market. This worked
for two reasons: first, access via Lake Michigan was
inexpensive and effective. Second, Chicago was growing at a
pace that outstripped the ability of home-town brewers
to keep pace. Later, in 1871, fire would destroy much of the
city‟s brewing capacity and Best Brewing expanded to
fill the shortfall. Still, limitations in transportation technology
made this a costly and uncommon approach. Brewers
wanting to ship had to overcome not just the intrinsic costs of
production but also the added cost of transportation
relative to the product of local brewers. Longer distances meant
higher costs, hence a less competitive position. In
addition, transportation was relatively slow and beer has a
limited shelf life. Lacking time and temperature controls,
long distance shipping was not feasible.
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Figure 1: Brewery Population 1965-1915
(Source: Stack, 2000)
The growth of the American rail network was one key to the
shift. Between 1865 and 1893, over 150,000
miles of new track were laid, connecting major cities with ever
larger numbers of smaller towns. The costs of
transportation dropped significantly and the radius that could be
profitably served by shipping brewers expanded
greatly. Even so, in order to take advantage of this, several
issues regarding how beer was shipped and marketed had
to be resolved. Perhaps the most innovative brewer in this
regard was Adolphus Busch.
Busch had married the daughter of Eberhard Anheuser, a very
successful St. Louis soap maker who also
owned (as part of a debt settlement) the Bavarian Brewery.
Anheuser didn‟t know much about brewing and when
the operation came close to failing in 1865, Busch stepped in to
purchase a share and to take over operations. Busch
was not a brew master but had worked in family breweries in
Germany and after moving to St, Louis, had gone into
business operating a brewing supply firm so he understood the

processes and the inputs well. He soon decided that if
he was to save the brewery, he would also have to expand
beyond the city. Since the northern brewers had already
penetrated the upper Midwest, he chose to target the southwest,
including Texas.
Most brewers shipped beer in wooden kegs. As long as the
brewer could control distribution through a
company saloon, this presented no problems. However, it
wasn‟t unknown for tavern owners to swap out the good
beer in a keg with lower quality product while retaining a
higher price. Busch recognized this would damage both
sales and the firm‟s reputation, so he chose to fight potential
fraud by shipping bottled beer – which required him to
develop the first large scale automated bottling line. By 1872,
his brewery was processing about 40,000 bottles per
day. Subsequent advances such as an automatic bottle washing
machine (1884) and the invention of the cork sealed
bottle cap (1891) radically increased both use and scale.
Busch was also the first brewer to pasteurize beer.
Pasteurization calls for heating the beer (and the bottles)
to just below the boiling point to kill bacteria. This improved
the longevity of the beer as it shipped and also made

production more reliable and consistent. Finally, Busch was the
first to use a refrigerated rail car for shipping
(1874). These were packed at the ends with ice, but they did
keep beer cool on the long trips to the southwest.
Shortly, mechanically refrigerated cars would be available. By
1879, Busch had expanded well beyond his original
strategy and was shipping beer to every state in the Union as
well as Japan, England, France, Germany and to
countries in Central and South America (Ogle, 2006).
0
500
1000
1500
2000
2500
3000
3500
1865 1870 1875 1880 1885 1890 1895 1900 1905 1910 1915

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Shipping brewers quickly adopted these innovations and
developed their own such as the depots at major
railheads, filled with ice and designed to store beer until it
could be distributed locally. Their beers were soon
competing effectively with home town brewers. In fact, the
reliability and quality of the shipping brewers‟ products
was placing significant pressure on those smaller firms who
could compete only by dropping prices. However, the
automation of brewing had continued apace and the large
brewers had mechanized grain transport, malting towers
capable of handling vast quantities of barley at one time, large
brew kettles, huge, refrigerated lagering caverns and
highly efficient packaging lines. For example, Pabst‟s bottling
lines were so large that the bottle washing machine
had 96 spindles, each processing 75,000 bottles per hour.
Technological changes like these drove the minimum
efficient scale of production in brewing to about 100,000
barrels per year by the 1890‟s.
Shipping brewers weren‟t the only firms attaining this size.
Firms in large metropolitan areas like New
York and Philadelphia were able to adopt most of the

production technologies and were among the largest in the
country until the 1890‟s. In 1884, Best Brewing was in a
virtual tie with Hell Gate Brewing of Brooklyn at just over
200,000 barrels while the Bergner and Engle Brewery of
Philadelphia and Schlitz Brewing were just behind them.
Anheuser-Busch produced 141, 000 barrels that year. On the
other hand, the number of breweries had dropped to
roughly 2200, of which half produced less than 1,000 barrels
and three-quarters less than 4,000 barrels per year
(Stack, 2000). The cost of production differences were growing.
Supply problems and shifts in customer preferences also
affected how beer was made in this era, with
effects that persist today. The growth of industry output (per
capita consumption increased from 3.4 gallons to 15
gallons over the 1865-95 period) and poor harvesting conditions
had placed pressure on the use of six-row barley,
the American standard. Moreover, consumers were seeking
lighter and lighter beers. Six -row barley was high in
protein and the lighter the color of the beer, the more likely
unattractive globs of the protein or haze would be
evident. Thus, American brewers began searching for adjuncts
or replacement starches that could be brought into the

brewing process. Yellow corn didn‟t work as the oils turned the
brew rancid. It turned out that rice and white corn
would work, but adding them was costly – but the changes in
consumer tastes helped overcome the differential.
The lager beer introduced by German immigrants was called the
Bavarian style to contrast it with a more
recently developed (1840‟s) Bohemian lager. Inasmuch that
Bavarian style beer had caught on in the U.S. because
of its comparative lightness, Bohemian beer was even lighter
and more effervescent. Original versions were brewed
in the city of Pils (hence the name Pilsner) and the style won
international acclaim at the Vienna International
Exposition of 1873. American brewers began experimenting to
try and replicate the style with domestic ingredients
and it was found that a very acceptable version could be created
with the use of white corn and rice as adjuncts – and
sold for a premium price.
The most famous of these beers was the product of a partnership
between Adolphus Busch and an importer
named Carl Conrad. Conrad wanted a beer that would be
distinctive in an increasingly crowded field and he wanted
it to taste like a beer both he and Busch had tried before, from a
small town called Budweis where the brew was

called “the beer of kings”. Although Busch ended up using
American grains (including rice) he also specified
distinctively flavored Saaz hops and a particular yeast from
Bohemia. Busch also lined the aging vats with
beechwood strips to capture yeast and impurities and make a
cleaner beer (Ogle, 2006).
Budweiser was immediately successful. Conrad sold 250,000
bottles in 1876, the first year of production.
From 1876 to 1882, 20 million bottles were sold. Competitors
paid attention and Conrad and Busch fought a number
of legal actions against brewers both large and small who sold
beer under the Budweiser name, including Miller
Brewing. (Anheuser-Busch ended up pursuing similar litigation
until the 1970s: a small Pennsylvania brewer named
Dubois Brewery produced Dubois Budweiser until 1972 (Grace,
2005)). Partially, competitors construed the
Budweiser name as a style (the way Pilsner is in the style of
Pils) but there was no doubt that many were riding the
coattails of Busch‟s success. Conrad eventually went bankrupt
and sold the rights to the Budweiser label back to
Busch in 1883 in settlement of debts.
By the late 1890s, the brewing industry was composed of a

decreasing number of small, independent
breweries, some middle tier breweries owned as investments by
outside groups (the British were particularly
prevalent in this) and the large shipping breweries, Pabst
(formerly known as Best Brewing), Anheuser-Busch, and
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Schlitz were far and away the largest American firms and were,
in fact, the three largest breweries in the world and
Pabst was nearing the one million barrel per year output level.
THE ”NOBLE EXPERIMENT” OF PROHIBITION: 1900-1932
"Prohibition makes you want to cry into your beer and denies
you the beer to cry into." (Don Marquis)
“I believe this would be a good time for a beer.” (Franklin
Delano Roosevelt at the signing of the 21st Amendment)
Prohibition as the law of the land in the United States lasted
from the implementation of the 16
th

amendment on Jan 16, 1920 until President Roosevelt signed off
on revisions to the Volstead Act (the enforcement
mechanism for Prohibition) on Mar 23, 1933. However, the
factors driving Prohibition had been at work for decades
and well before 1920 many states, counties, and cities had
already implemented restrictions on alcohol sales and
consumption. Nor did the desire to restrict or control alcohol
end with the repeal of the 16
th
Amendment: even today,
social attitudes toward alcoholism, drunk-driving, and the like
have been characterized as “neo-Prohibition”.
Until the 1840‟s, beer played little role in U.S. alcohol
production or consumption for several reasons. Beer
production wasn‟t suitable everywhere: for example, the climate
in the southern states was too warm so beer was not
an important beverage. In addition, even in the North, the labor
needed to produce beer inputs like barley was
deemed better used in more substantial food crops. Settlers
often planted low maintenance apple and pear trees as
the necessary inputs to (hard) cider and perry (the pear based
equivalent of cider) as alternatives. Another factor was
that molasses from the Caribbean was easily converted to rum.

Finally, after the Revolution and the westward
expansion into the Ohio Valley area, over-production of grains
like corn and rye made distilling whiskey very
feasible. In short, America of the early 19
th
century was a hard-drink (and hard drinking) society:
“Americans‟
appetite for spirits stupefied and astounded foreigners. “I am
sure”, wrote an English visitor, “the American can fix
nothing without a drink. If you meet, you drink; if you part, you
drink…they quarrel in their drink, and they make it
up with a drink”” (Ogle, 2006, p. 23). Put differently, in the
early part of the century, there were about 200 ale
brewers but over 14,000 distillers.
In the 1820s, the so called Second Great Awakening, a broad
based religious movement, focused attention
on a number of social ills, including drinking. Alcohol
consumption was argued to lead to murder, prostitution, and
gambling, to destroy marriages and families, and to crush
initiative and ambition. Drink was positioned as a threat to
the future of the country. This was a very effective platform as
millions pledged abstinence from alcohol and a
number of states and territories (Maine and Vermont leading the

way) passed legislation to make it the rule for all.
Still, the initial impetus for ending drink foundered on a number
of factors. First, one of the other major social issues
in this movement was abolition or the end of slavery. This
assumed increasing prominence in the national discourse
and ultimately diverted much energy from the temperance drive.
Second, the passage of such draconian liquor laws
spawned violent resistance with lethal riots occurring in
Chicago and New York. There was the sense that the anti-
alcohol movement had gone too far, too fast. Third, the
massive immigration of Germans in the 1840‟s and „50s and
the subsequent emergence of the German brewing tradition here
was a direct repudiation to the more lurid claims of
the temperance advocates. Germans brewed and drank beer
copiously and yet were industrious and responsible,
good citizens and good family people. Beer advocates argued
this was because lager beer was not intoxicating (i.e.,
not alcohol in the sense the temperance people meant) and was
in fact a wholesome and invigorating beverage.
Finally, the Federal government had been applying excise taxes
on alcohol sales and beer provided significant
support to budget and expenditures.
The second round of the Temperance movement began roughly

in the 1880‟s. Again, the drivers were
social issues but now were arising from the increasingly rapid
pace of industrialization and urbanization of
American society. These were accompanied by increased
poverty, deplorable working conditions, over-crowding in
apartments and tenements, exploitation of workers, and overall
corruption. Reformers of all sorts were motivated to
attack these problems (such as child labor, food and water
purity, truth in advertising, public health, a minimum
wage, or the ends of patronage based political jobs); a number
of groups such as the Women‟s Christian Temperance
Union and the Anti-Saloon League (ASL) emerged to combat
drink which was viewed as exacerbating the other
problems. In particular, the tactics of the ASL were effective in
tipping the argument toward prohibition. The ASL
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didn‟t focus so much on banning alcohol as much as cleaning
up towns by eliminating the outlet. By positioning the
saloon as iniquitous and a source of disease and depravity, the
ASL made it difficult to publicly support drinking

establishments. This, and other efforts focusing on local choice
and electing anti-alcohol politicians, was effective:
by 1909, about half the U.S. was under some form of dry or
prohibition law. This was particularly important for
brewers because they typically owned or operated the saloons
and because beer consumption had soared while
stronger liquor drinking had declined. Now, rather than being
the healthful alternative to whiskey, beer was the
target.
At the end of the Prohibition drive, World War I and anti-
German sentiment became an organizing focus.
To begin, the war imposed some production problems and the
use of barley for beer rather than bread was portrayed
as unpatriotic. In addition, most brewers were of German
extraction. Supporting beer, by implication, supported
Germans and Germany. A former lieutenant governor of
Wisconsin (home of most of the largest American brewers
at the time), John Strange, claimed that “the worst of all out
German enemies, the most treacherous, the most
menacing, are Pabst, Schlitz, Blatz and Miller” (Ogle, 2006, p.
173). Members of the Busch family (owners of
Anheuser-Busch) were described as enemy agents and spies.
Brewers were also accused of purchasing and using

newspapers to spread propaganda for the Germans. None of
these accusations could stick, but they did color the
conversation. In early 1919, the last state required for
ratification of the 16
th
Amendment passed the bill. With
respect to the industry, the law was only adding insult to injury
as the temperance pressures and changes in local
laws had reduced the number of brewers to near 500.
Many brewers survived by turning to related businesses such as
baking yeasts or malt syrup. Almost all
produced some form of near beer (about 1/2 % alcohol content).
Some produced soft drinks (both Anheuser-Busch
and Pabst were in this business) or dairy products (Pabst again,
for example, but also the Yuengling family which
actually stayed in the ice-cream business until 1985). Most also
sold off other assets such as real estate. Still, this
usually was not enough to keep the doors open. By the end of
Prohibition, fewer than 200 brewers were still
functioning firms.
In 1928, as he prepared to run for the Presidency, Herbert
Hoover called Prohibition a “noble experiment”

but even then, it was creating difficulties and backlash. The
primary reason was that making alcohol illegal had
created a new, lucrative, and dangerous criminal class which
smuggled alcohol in from Canada, particularly across
Lake Erie, and from the Caribbean. Most of this was hard
alcohol (beer being too low in alcohol by volume to be
really profitable). Speakeasies or illegal saloons sprang up and
not all were hidden. Illegal distilling in the
Appalachians increased dramatically. The perceived flagrant
disregard for the law was due in part to a notably
understaffed enforcement agency, the Prohibition Bureau, which
never had more than 3,000 agents. An additional
blow to Prohibition came with the Great Depression and the
affiliated unemployment. The Federal government had
long since switched revenue streams from excise taxes on
alcohol to income tax but the radical increase in
unemployment meant that new revenue streams would be
essential. By the early 1930‟s, the Democratic Party had
made repeal part of its platform and Roosevelt carried through
on this almost immediately upon taking office.
Even so, this was not a return to business as it had been
practiced. Among the most significant regulatory
changes was the termination of the “tied house” or brewer
owned tavern. The Federal Alcohol Administration Act of

1935 established the three tier system of brewer, distributor,
and retailer that we see today. More important, though,
were the changes in taste and technology that had taken place in
American society.
Nor did social concerns that led to Prohibition disappear
although the approach has changed. The emphasis
over the past several decades has been on controlling
consumption (“responsible drinking”) rather than completely
eliminating it. This has come from public and private
institutions that study alcoholism (a term that only since
Prohibition has entered the lexicon) and have developed
programs to control it. Other private groups have taken on
drinking as well, such as Mothers Against Drunk Driving or the
National Parent-Teacher Association. The effect has
been realized in federal legislative changes that increased the
legal drinking age to 21 in 1984 (the U.S. is very
nearly alone in this: virtually all countries have established 18
as the minimum legal age (Hanson, 2009)), reduced
the maximum allowable blood alcohol content level to .08% in
1998, and limited tax deductions for alcohol at
meals. As baby boomers age, values have changed as well.
Alcohol consumption during working hours is almost
universally frowned upon, and the pursuit of healthy lifestyles

has reduced alcohol consumption. In a very real
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sense, Prohibition was just a specific phase in an ongoing
American conversation about personal rights and
obligations and the nature of the moral life.
THE NEW AMERICAN BREWING COMPETITIVE
LANDSCAPE: 1933-1990
In 1933, the year the Volstead Act was repealed and beer could
be legally produced again, the number of
brewers was around 200 though by year end had risen to a little
over 300. Just one year later, though, over 750
brewers were in business and the total hit a peak in 1935 at 766
that wasn‟t exceeded until the 1990s. In fact, until
the 90‟s, the population of brewers declined every year
(McGahan, 1991).
The reasons for the initial surge in numbers are straightforward.
Immediately, orders exceeded capacity for
many brewers because it took time to ramp up from alternative

projects (such as producing soft drinks or ice cream).
This opened opportunities for new local brewers to enter. In
addition, there seems to have been quite a few
unscrupulous (or incredibly under-qualified) owners called
“Wall Street” brewers who had snapped up assets of
failed breweries at minimal cost. Once production was legal,
they quickly solicited investment and started brewing.
However, their lack of skills made for some very bad if not
dangerous brew (Ogle, 2006).
After 1935, the brewery population dropped quickly. The post-
Prohibition environment was very different
from that of the years just before the Amendment was passed
and these factors drove decades of consolidation.
One reason was that Prohibition had, in fact, been successful in
terms of changing Americans‟ consumption
patterns. Per capita beer consumption dropped from a high of
about 21 gallons per person per year in 1914 to less
than nine in 1933. Nor was demand likely to increase much
soon: soft drinks had emerged as a strong substitute and
consumer preferences for them stayed strong. Moreover, even
though there was no Federal law prohibiting beer,
local prohibition laws were widely implemented, particularly in

the South. By some estimates, per capita
consumption of beer didn‟t reach pre-Prohibition highs until the
1970‟s. In the short term, the brewing industry
faced excess capacity problems which placed enormous cost
pressures on inefficient brewers.
Other changes in consumption patterns also affected brewer
survival. Prior to Prohibition, most
consumption had taken place in taverns and saloons so the
packaging was typically in wooden kegs. In the 1930‟s,
the bias against saloons that had been a driver of Prohibition
persisted, and consumers had switched to preferring to
drink at home. In part, this was made possible because of two
technological advances. First, mechanical
refrigeration had penetrated the market rapidly. Prior to 1920,
less than 1% of U.S. homes had a refrigerator but by
1933, that number had grown to 25%. Second, advances in
packaging, particularly the development of the steel beer
can (in 1935 and introduced by Krueger Brewing) helped
amplify the home consumption trend. Small brewers often
had difficulty with the capital cost of building canning lines and
so faced significant demand constraints.
These forces (slack local demand and the control of packaging
technology like can, bottle, or steel kegging

lines) led to the increased prominence of “shipping” brewers.
Larger brewers such as Schlitz, Anheuser-Busch,
Pabst, and others had been shipping beer for decades but the
development of a motorized delivery trucks, better
roads, and large scale refrigerated storage facilities – and
changes in the legal rights of brewers to forward integrate -
changed how distribution was done. Just as the development of
rail had expanded potential markets, new trucks and
roads vastly expanded the serviceable area for brewers as they
had previously been constrained to sites on the rail
system. In addition, trucks and roads decreased the cost of
distribution. Brewers also began to build up networks of
distributors (the new rules of the game prevented ownership of
retail outlets for brewers so distributors became the
most cost effective way to reach them) in an expanding,
regional way. The changes in packaging complemented
these moves as canned beer and steel kegs were much more cost
effective to ship. Shipping brewers were still
almost always Midwestern firms as brewers in the East and in
California usually had large enough metropolitan
areas to support their businesses without reaching out.
Still, shipping over distance created costs for brewers that local
brewers didn‟t incur. Shippers addressed

these cost differentials in several ways. One was through
continued improvement in production and packaging
technologies. The minimum efficient scale (MES) for brewers
had reached 100,000 barrels per year by 1877 but had
not increased by the 1930‟s (McGahan, 1991). Nonetheless, in-
line improvements had increased the cost penalty for
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38
not being at scale. These improvements included deployment of
refrigeration and recycling technologies that
produced a more consistent beer and reduced the need for post-
brewing pressurization processes. Thus,
technologically advanced shipping brewers could overcome part
of the cost penalty of transportation through
production efficiencies. Another tactic was to embrace the cost
difference and charge a higher price. Shipping
brewers preferred to do this because the consistency of their
beers made them a premium product versus the more
irregular quality local brews, called popular beers. Also, large
brewers were wary of being too aggressive with
pricing and driving local brewers out of business since one of

the motivations for the repeal of Prohibition was
increased employment. Aggressively driving local brewers out
of business might have had adverse political
consequences.
By the end of World War II, per capita consumption had
increased by about 50% to 19 gallons in part
because distilling had been severely curtailed during the war
and beer drinking picked up as a substitute. Shipping
brewers had augmented their strategy by opening up satellite
breweries either through acquisition (preferred because
it also provided access to the target brewer‟s distribution
network) or new plant development. This became possible
because the advances in brewing technology assured that local
differences in water wouldn‟t adversely affect the
taste of the beer. By 1946, firms such as Pabst, Schlitz and
Anheuser-Busch had expanded into the New York
metropolitan area with secondary breweries. Yet, after the war,
beer demand leveled off then declined for the next
fifteen years due in part to the resurgence of distilled spirits
(per capita consumption increased significantly) but
more importantly from demographic shifts. Beer was primarily
consumed by younger men (20-40 years) and the
size of this group was sliding toward a historic low (Ogle,

2006).
Between these changes and the expansion and
better utilization of existing facilities (not to mention an
increase in MES to about one million barrels per year), the
industry was again faced with surplus capacity. This led to price
wars that drove additional geographic expansion
(into Western markets and Florida), exit and consolidation. The
concentration for the top five brewers increased
from 21% in 1947 to about 31% in 1958 and the top brewers
were now established as national firms (McGahan,
1991). Table 1 illustrates the dramatic changes in industry
concentration up through 2005.
The increasing concentration trend persisted into the 1970‟s,
but for somewhat different reasons than
before. Since the 1950‟s, brewers had been converging toward
a standard style American lager beer that de -
emphasized hoppiness and malt flavors in response to general
shifts in American tastes toward a blander diet (Choi
and Stack, 2005). Miller Brewing, for example, benefitted
greatly from this as the Miller High Life recipe was right
in line with these emerging preferences. On the other hand, as
brews came to taste more and more alike (due both to
convergence and improvements in processing that even smaller

brewers could attain), the value of a premium label
began to disappear and the industry saw a temporary resurgence
of the mid-tier brewers who were able to gain
ground by holding to a lower price point. Larger brewers
responded by significantly increasing marketing
expenditures, following the Procter and Gamble path of market
and customer segmentation.
Brewers bought or
sponsored sports teams and events, explored advertising in
established media (such as magazines and radio) and
television. Miller, in resurrecting the High Life label, focused
on women‟s magazines such as McCalls and Vogue.
The ratio of expenditures to sales shot up rapidly: from less
than 1% around WWII to 6-10% as a percentage of sales
by the 1970s. National brands in all sorts of consumer goods
were gaining power and this kept an almost
unsustainable pressure on small brewers to keep up.
Table 1: Top Ten brewers 1950-2005 (Source: Beer History,
2007)
1950 Brewer Share (%) 2005 Brewer Share (%)
1 Jos. Schlitz Brewing 6.08 1 Anheuser-Busch 49.5

2 Anheuser-Busch 5.83 2 Miller Brewing 18.7
3 Ballantine, Inc. 5.22 3 Molson-Coors Co. 11.1
4 Pabst Brewing Co. 4.90 4 Pabst Brewing 3.4
5 Schaefer Brewing 3.16 5 Yuengling & Son 0.8
6 Liebmann Bros. 2.73 6 Boston Beer 0.7
7 Falstaff Brewing 2.51 7 City Brewery 0.5
8 Miller Brewing 1.26 8 Latrobe Brewing 0.5
9 Blatz Brewing 0.81 9 High Falls Brewing 0.3
10 Pfeiffer Brewing 0.80 10 Sierra Nevada 0.3
Volume 6, Number 6
39
Some responded by merging with other firms to attain scale
benefits. Alternatively, and in the usual 1950s
and „60s way, many brewers merged with or acquired unrelated
partners. For example, some brewers purchased
olive oil producers, or a parts manufacturer for computers, or
mining companies or fishing fleets. Still, most deals

were within the industry and this process reduced the number of
brewers. The most well known acquisition of the
period was that of Miller Brewing by W.R. Grace, a very large
conglomerate in 1966.
Just a few years later, Grace sold Miller to Philip Morris (PM).
The marketing moves introduced by the PM
management team significantly changed competition in the
brewing industry in the 70‟s. First, PM greatly increased
national advertising for Miller and improved Miller‟s sales
dramatically. Then, PM issued in the period of rapid
product line extensions. Until then, brewers had generally
focused on one or two beer labels. Demographic and taste
changes were about to alter this. Americans were becoming
more health and weight conscious and the brewing
industry responded. Rheingold Brewing had introduced a new
style “light” beer called Gablingers but the product
flopped. Miller followed up by introducing Miller Lite in 1975
and with it the largest ad campaign in the history of
the industry (Mittelman, 2008). The success of Lite eventually
drove other brewers to introduce competitive labels
and some also developed super-premium beers such as Michelob
or Lowenbrau. The Miller management envisioned
overtaking Anheuser as the nation‟s top brewer and in fact,
Miller did grow substantially, but this was in large part

by taking share away from former leaders such as Schlitz and
Pabst.
The final major shift in the industry at this time was the
emergence of Adolph Coors Brewing as a major
player. Coors had been brewing since the 1870‟s in Colorado
and by the standards of other brewers was something
of an oddity in its degree of vertical integration and its brewing
process. Coors produced only one beer and used
“cold-filtering” rather than pasteurization to improve product
life. However, this required strict control over
temperatures (near freezing throughout) and therefore
distribution (eleven states in the West). Coors‟ production
methods intersected the drive toward the “real and sincere”
movement in personal consumption (see below in Craft
Brewing for a more detailed explanation) and Coors suddenly
became famous as a “pure” (as in the spring water)
beer. According to Maureen Ogle, some advocates went so far
as to claim that Coors was “the Chateau Haut-Brion
of American beers” (Ogle, 2006, p. 274). Sales rocketed and
Coors moved from 12
th
largest brewer to fourth by the
early 70‟s and third by 1980.

GLOBAL CONSOLIDATION VERSUS THE RISE OF THE
SMALL BREWERS: 1990-2010
The last two decades have seen two disparate trends in place.
On one hand, brewing is increasingly
controlled by a small number of global firms, most recently
reflected in the acquisition of Anheuser-Busch by
InBev. Table 1 shows the changes in market control among the
top ten brewers between 1950 and 2005. The period
has also seen a remarkable shift in the U.S. industry with the
emergence of micro or craft brewers which have come
to be the most discussed (albeit still small) segment of the
industry.
Up until 2004, A-B was the largest brewer by volume in the
world in an industry characterized by
fragmentation and national brand champions. On a global level
in 1996, the top four brewers controlled just 20% of
the market. Contrast this with soft drinks (78%), household
goods (75%) or tobacco (60%). The real concentration
in the brewing industry emerged at the national level where
share controlled by the top three brewers in mature
economies was generally in the 70% and up range (Benson-
Armer, Leibowitz, and Ramachandran, 1999).

Exceptions to this included Germany and China, where local
preference persists (which is why SABMiller operates
64 breweries in China). However, these mature markets were
slow to no growth markets. In the U.S., for example,
growth had flattened since 1980 (see Figure 2). Increasingly,
the opportunities for growth were perceived to be Asia
(particularly China), Latin America, and Russia. This was
occurring for several reasons.
First, these markets were not traditionally beer drinking
cultures but increasing affluence had begun to alter
this. Growth in Asian markets, for example, had been 6-10%
over the 90‟s with no real reason to expect a change.
Second, steep reductions in tariffs as a result of trade
liberalization had made the price of imported goods much
more competitive with domestic products. Third, customer
preferences in beer were converging in ways that favored
lagers and canning over ales and bottling. Finally, global brands
were taking hold. This led to an initial race from the
mid-90‟s to snap up domestic brewers and build brand through
them.
Volume 6, Number 6

40
Figure 2: Beer Production 1947-2007 (MM BBL)
(Source: Beer Institute, 2009)
Major players in this strategy included Heineken, South African
Brewing, Interbrew, AmBev, and Fosters.
Heineken, for example, expanded through Eastern Europe after
the fall of the Soviet Union, picking controlling
interest in breweries such as Krusovice and Zywiec in Poland,
BBAG in Austria, Volga Brewery, Shikhan Brewery,
and Patra Brewing in Russia and many others. The company
had also purchased or taken stakes in breweries in
Costa Rica, Panama, Nicaragua, and Chile as well as Middle
Eastern breweries in Lebanon and Egypt. Heineken
also purchased the leading Spanish brewer Cruzcampo from
Diageo (the firm formed from the merger of Guinness
and Grand Metropolitan in 1997). The company has also
established a significant presence in Asia with breweries in
China, Vietnam, Malaysia, New Zealand, among others (Dow
Jones, 2004; Dow Jones, 2005; Devaney, 1998; Dow-
Jones, 2003; Ragahvan and Johnson, 1999). For a partial list of
Heineken brands (see Table 2).

South African Brewing (SAB) focused initially on penetrating
markets in Africa and Asia. This move
began in the early 1970s after consolidating most of the brewing
industry in South Africa. Initially, SAB acquired
control of brewers in nearby countries in southern Africa such
as Swaziland, Botswana, and Lesotho. In 1993, SAB
made its first foray into Eastern Europe, acquiring the
Hungarian brewer Drehar. The firm followed this with
acquisitions in Poland, the Czech Republic, Romania, Slovakia,
and Russia over the next five years. SAB also
developed joint ventures in China and acquired the Foster brand
and facilities in India in 2006 (SAB Miller, 2009).
For a partial list of SAB brands (see Table 1).
Similarly, in this period, Interbrew of Belgium focused on
developing a portfolio of specialty and regional
beers such as Stella Artois, Hoegaarden, Labatt‟s, Rolling
Rock, and nearly 200 other labels (du Bois, 1996). For a
partial list of AB InBev‟s brands (see Table 2).
In contrast, American brewers made relatively small moves in
these directions. In 1993, A-B purchased an
18% stake in Grupo Modelo, brewer of Corona that was

ultimately expanded to about 50%. Modelo has been selling
Budweiser in Mexico since the late 1980‟s and that relationship
was expected to continue (Gibson, 1993). Also, in
1995, the company purchased control of Budweiser Wuhan in
China. Miller Brewing, a division of Philip Morris,
acquired a 20% stake in Molson Breweries in 1993. More
decisively, Adolph Coors Co. purchased the English
brewer Carling from Interbrew in 2001 for $1.7 billion. The
product line included Carling as the top selling beer in
England and three other brands which amounted to a 19%
market share, second highest in the U.K., and four
breweries (RealBeer, 2001). In 2004, Anheuser-Busch made its
most substantial move by acquiring Harbin Brewery
Group to complement its Wuhan operations.
0
50
100
150
200
250
1

9
4
6
1
9
4
8
1
9
5
0
1
9
5
2
1
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4
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6
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2
0
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2
0
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6
Volume 6, Number 6
41
Table 2: Selected Global Brands
Heineken SABMiller AB InBev
“33” Export Aguila Alexander Keith
Amstel Blue Moon Antarctica
Anchor Castle Lager Baisha
Bavaria Club Colombia Bass
Bintang Coors Light Becks
Birell Dreher Classic Boddingtons
Buckler Gambrinus Bohemia
Edelweiss Grolsch Bozicno

Escudo Haywards 5000 Brahma
Fürstenberg Imperial Budweiser
Gold Crown Miller Genuine Draft Castlemaine
Havannah N'GOLA Dommelsch
Heineken Peroni Nastro Azzurro Double Deer
Kaiser Pilsner Urquell Franziskaner Hefe-Weissbier Hell
Kalik Snow Haake-Beck
Karlovacko St Louis Harbin
Kilkenny Tyskie Hertog_Jan
Maccabee Velkopopovický Kozel Premium Hoegaarden
Murphy‟s Irish Stout Zolotaya Bochka Klassicheskoye Jinling
Ngok Kamenitza
Rosario
Klinskoye
Sakara
Labatt Family
Salta

Lakeport Pilsener
Santa Cerva
Löwenbräu
Starobrno
Murphy's
Stolichno
Oranjeboom
Windhoek
Red Shiliang
Zagorka
Sibirskaya Korona
Zipfer
Skol
Zlaty Bazant

Spaten - Original Munich Beer
St.Pauli Girl
Staropramen
Stella Artois
Sources: AB InBev: http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/franziskaner
_weissbier.cfm
SABMiller: http://www.sabmiller.com/index.asp?pageid=1422
Heineken:
http://www.heinekeninternational.com/products_brands_brands.
aspx
In the second phase of consolidation, global brewers began to
focus on deals between peers rather than
penetration into new markets through acquisition of smaller
brewers. The first move was by South African
Breweries (SAB) when it purchased Miller Brewing from Philip
Morris for about $5 billion in 2002. The move was
driven by the need to develop revenues in US dollars versus the
depreciating South African rand and to gain access

to Miller‟s American distribution network, which would help
the growth of SAB‟s recent purchase of Pilsner
Urquell. The deal vaulted the newly named SABMiller into the
global number two position in terms of annual
volume, behind Anheuser-Busch. Two year later, Belgium‟s
Interbrew and Brazil‟s AmBev announced plans to
merge operations. This deal between the third and fifth largest
brewers in the world would move them to number
one in total brewing volume, displacing Anheuser-Busch. The
new merged firm became known as InBev (Samor
and Bilefsky, 2004).
Also in 2004, Adolph Coors Co. and Molson Brewing of Canada
initiated merger discussions. The firms
had been cooperating in cross marketing since 1998 but major
differences in control over their respective markets
(Molson was the largest Canadian brewer and controlled about
40% of the market while Coors was a distant third in
the U.S. market with 11% share) led to a protracted battle
among Molson shareholders. Moreover, since this was
positioned as a merger of equals with no premium to Molson
shareholders, Molson‟s institutional investors broadly
http://www.sabmiller.com/index.asp?pageid=1417
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/alexander_ke

ith.cfm
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/antarctica.cf
m
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/baisha.cfm
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/bass.cfm
http://www.ab-
inbev.com/go/brands/brand_portfolio/global_brands/Becks.cfm
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/boddingtons.
cfm
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/bohemia.cfm
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/bozicno.cfm
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/Brahma.cfm
http://www.ab-
inbev.com/go/brands/brand_portfolio/global_brands/budweiser.c
fm
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/castlemaine.
cfm

http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/dommelsch.c
fm
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/double_deer.
cfm
http://www.ab-
_hefe_weissbier_hell.cfm
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/haake_beck.
cfm
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/harbin.cfm
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/hertog_jan.cf
m
http://www.ab-
inbev.com/go/brands/brand_portfolio/multi_country_brands/hoe
gaarden.cfm
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/jinling.cfm
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/kamenitza.cf
m
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/klinskoye.cf
m
http://www.ab-

inbev.com/go/brands/brand_portfolio/local_brands/labatt_famil
y.cfm
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/lakeport_pils
ener.cfm
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/lowenbrau.cf
m
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/murphys.cfm
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/oranjeboom.
cfm
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/red_shiliang.
cfm
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/sibirskaya_k
orona.cfm
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/skol.cfm
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/spaten_origi
nal_munich_beer.cfm
http://www.ab-
inbev.com/go/brands/brand_portfolio/local_brands/stpauligirl.cf
m
http://www.ab-
inbev.com/go/brands/brand_portfolio/multi_country_brands/star
opramen.cfm
http://www.ab-
inbev.com/go/brands/brand_portfolio/global_brands/Stella_Arto
is.cfm
http://www.ab-
_weissbier.cfm

http://www.heinekeninternational.com/products_brands_brands.
aspx
Volume 6, Number 6
42
opposed the deal, one investor arguing that while this made the
new firm larger, on a global scale it wasn‟t large
enough. Many supported a potential counter bid from Ian
Molson, a disaffected family member and maj or share
holder. The dispute dragged on until February, 2005 when
shareholders finally approved the merger. Throughout
this, SABMiller had been engaged in discussions with Ian
Molson and late in the process sparked rumors that it was
going to offer a counterbid of its own (Berman and Frank, 2004;
Chipello and Frank, 2004; Frank, Lawton, and
Chipello, 2005; Carter, 2005; Chipello and Lawton, 2005).
Two years later, SABMiller and Molson Coors reached an
accord on a joint venture for the United States
and Puerto Rico called MillerCoors. This venture would push
combined share for the firms to about 30% and annual
revenues to $6.6 billion. Deal benefits were predicated on
combining the geographically complementary systems of

the two firms to achieve economies in brewing, distribution, and
transportation that were estimated to reach $500
million per year (Philips, 2007; Kesmodel and Ball, 2007).
In the most recent (and largest) move, InBev‟s bid for A-B
broke on June 12, 2009, with an offer of $65 per
share or a premium of 35% to Anheuser-Busch‟s 30 day stock
price average. The motivations included access to
distribution in the U.S. for InBev and negotiating power over
inputs. InBev was very strong in Europe and Latin
America but marginal in North America and Anheuser-Busch
was just the opposite. Both had operations in China.
InBev‟s CEO Carlo Brito argues that the new firm could also
gain some restructuring benefits through selling off
theme parks and division that makes cans and bottles. Another
possibility was reduction in advertising and
marketing. Anheuser-Busch spends about $500 million in ads
and $300 million in sport sponsorship per year though
some analysts argue that in a flat market, this move could also
trim sales. On the other hand, A-B‟s brewery
operations were already the most efficient in the industry and
the lack of market overlap made economies of scope
through joint transportation or production difficult. Nor was
restructuring benefits through closing plants perceived

as feasible (Economist, 2008a, 2008b, 2008c); Foust, Ewing,
and Smith, 2008; Kesmodel and Kamitsching, 2008;
Vranica and Kang, 2008).
Initially, this bid met with a great deal of resistance from the
Busch family members on the board, St. Louis
and Missouri politicians, and from “patriotic beer lovers”
(Economist, 2008c) manifesting protectionist concerns.
A-B‟s executives described the bid as undervalued and
proposed as an alternative, stock price strengthening moves
such as selling the theme parks and the bottling/canning
business for a combined $4.5 billion as well as
implementing cost cutting measures that could save $750
million to $1 billion per year (Kesmodel, Kamitsching,
and Cimilluca, 2008). A-B also tried to purchase the portion of
Mexican brewer Modelo that it didn‟t already own
(about 50%) as this could have made the firm too large to
swallow. However, this plan fell through and in mid-July,
InBev sweetened the deal to $70 per share or $52 billion. The
A-B board capitulated. By November, 2008
shareholders from both firms had approved the deal and United
States Department of Justice had also granted
approval.

InBev moved quickly to create a new cost-conscious
environment in St. Louis. Anheuser-Busch had been
long known as one of the best employers in the area. For
example, employees typically received two cases of beer
per month, the firm lavished tickets to the baseball Cardinals
across the firm, and executives were accustomed to
first class travel and accommodations. Now, even before the
deal had completely closed, 1,400 employees (about
6% of the workforce) were laid off. By January, 2009, it had
suspended retiree life insurance and plans to stop
contributions to company pension plans by 2012. InBev put the
fleet of A-B corporate jets on the market, slashed
planned marketing expenditures for the Vancouver and London
Olympics, and reduced new ad development
significantly. In addition, InBev has changed the relationship
with vendors by extending the terms on accounts
payable to 120 days from 60 or fewer (Kesmodel and Vranica,
2009; Dalton, 2009).
CRAFT BREWING GROWTH
“Nothing quenches the thirst like a Wheat Beer, or sharpens the
appetite like an India Pale Ale. Nothing goes as
well with seafood as a Dry Porter or Stout, or accompanies

chocolate like an Imperial Stout. Nothing soothes like a
Barley Wine. These are just a few of the specialty styles of
beer.” (Michael Jackson, the Beer Hunter, 1942-2007)
Volume 6, Number 6
43
Small scale brewing in the United State is often described as
“micro-brewing” but that term has some quite
specific scale connotations and “craft brewing” is a more
general term. According to the Brewers‟ Association, craft
brewers can be defined as those who focus on traditional styles
or beer (such as an all-malt flagship beer), are
independent (less than 25% equity controlled by an alcoholic
beverage industry firm that is not already a craft
brewer) and are relatively small (less than 2 million bbl per year
production) (Brewers Association, 2009a). From a
scale perspective, the industry exhibits five or six segments.
Microbrewers are firms that produce less than 15,000
barrels per year. Brewpubs are also small and sell at least 25%
of the beer they produce on site (usually through a
restaurant/ pub environment). Regional brewers are those that

produce between 15,000 and 2 million bbl per year.
These can be either craft brewers (like Sierra Nevada or
Boulevard Brewing of Kansas City) or standard lager
brewers. Large (also called national) breweries are those with
over two million barrels of production per year.
Finally, a contract brewer is a firm that hires another to brew
for it, either on a complete basis or as a supplement to
existing production facilities (Market Segments, 2009). The
growth of craft brewing in the U.S. has been
remarkable. In the mid 1980‟s, the number of breweries in the
country reached an all time low (41 firms running 89
breweries) with the industry being divided into two sets:
national brewers (some successful, some failing) and
regional brewers, almost all of which were increasingly in
economic straits. Since that time, the number of breweries
has exploded to over 1,500 (see Figure 3). Given that the
brewing industry exhibits concentration characteristics of
maturity, what factors account for the dramatic change? There
are likely a number of causes, both regulatory and
demographic.
Figure 3: Brewery Population, 1947-2007

(Source: Beer Institute, 2009)
The prototype for the small brewer of the last two decades is
probably the Steam Beer Brewery of San
Francisco. Fritz Maytag (of the appliance Maytags) took an
interest in and then sole control of this very old brewery
which first opened in 1896 to make a peculiarly West Coast
style lager. The brewery had limped along for several
decades on the verge of failure, mostly because it made very
bad, sour beer. Maytag took control of the brewery in
1969 and changed the strategy to emphasize ingredients such as
European two-row barley and whole hops. He also
understood that the small scale of the brewery meant that it
would never be cost competitive with the large brewers.
However, the local market was already open to higher priced
beers from Europe so the newly named Anchor
Brewing would stay small but dedicated to traditional brewing
arts – at a premium price point. Within a few years,
Anchor Steam was regarded as one of the best beers available
and a sign that a small brewer could thrive (Ogle,
2006).
At about the same time (1978) President Carter repealed a
regulatory artifact of the end of Prohibition that

outlawed home brewing. This was perhaps more bowing to the
inevitable as home brewing had never really died and
Volume 6, Number 6
44
was, in fact, becoming very popular on both coasts. Still, the
repeal spawned a tremendous growth in the hobby as
brewers could now acquire malted grains, yeasts and hops that
let them create or replicate beer styles that were not
possible to purchase. The skills that many home brewers
developed in the garage or basement provided the technical
foundation for the next step: commercial brewing. Jack
McAuliff was an early home brewer (when it was still
technically illegal) and went on to start New Albion Brewing,
usually described as the first real microbrewery.
While New Albion failed fairly quickly, it was at about the
same time that two other home brewers - Ken Grossman
and Paul Camusi – started up Sierra Nevada Brewing which
ranked in 2009 as one of the top ten brewers in the U.S.
Again – home brewers Michael Laybourn and Norman Franks
started Mendocino Brewing in the late 1970s. This
startup in Hopland, CA is notable because it was the first

brewpub. Mendocino is still brewing beer.
The growth of “lifestyle” based consumption in the 1970‟s and
„80s was another driver of the craft brewing
movement. The 1980‟s and 90‟s saw the emergence of the
“educated class” or the white collar meritocracy. The first
great bump of baby-boomers graduated college in the 1970s.
Since then, the growth of information technology (and
the shifting nature of jobs around that technology) as well as
the shift away from manufacturing employment has
meant the development a large number of the well educated and
well compensated. Brooks (2000) has argued this
has led to a certain style of consumption. The educated class
rejects conspicuous consumption of luxuries (such as
boats or furs) but embraces spending a great deal for necessities
(albeit at a very high end) and a cultivated
appreciation of (versions of) commonplace goods. Brooks
describes the ethos as one focusing on the ”authentic,
natural, warm, rustic, simple, honest, organic, comfortable,
craftsmanlike, unique, sensible, sincere” (Brooks, 2000,
p. 83; Binkley, 2007). Thus, we have seen the emergence of
firms like Starbucks, Republic of Tea, Viking, Whole
Foods, and so on.

These purchasing patterns readily extend to beer, particularly
with respect to local breweries as an
alternative to the uniform products of mega-breweries. Early on,
this manifested as a growth in import beer sales in
the early 1980s. While this has persisted, the real growth has
been in the conscious consumption of locally and
regionally produced beers that emphasize either a resurrection
of old styles of beer (such as ales, porters, stouts,
lambics and the like) or particularly American interpretations of
these styles such as American Pale and pumpkin
ales, and rye and chile beer. As an illustration of this growth,
the Beer Advocate website lists reviews of over 13,000
labels in the American Ale section (Beer Advocate, 2010). In
addition, while beer is generally regarded as a blue-
collar beverage and wine a more upscale and white collar drink,
the craft brewing industry‟s approach to product
development has tapped a demographic that overlaps with that
of wine drinkers: craft brew consumers are young
(wine drinkers tend to be older) but both are affluent, and well
educated. In fact, many craft brew consumers are also
wine drinkers, which is not true of more traditional beer
consumers. This is why drinking craft beers is increasingly
being positioned as a wine-like experience (Student, 1995;
Adams, 2009; Hallinan, 2006).

In this context, then, the standard American lager may have
been perceived as too mainstream, bland, or
boring to fit well with the new consumption patterns. The arc of
product development in American beer has always
been toward lighter beers (lagers vs. ales in the 1840‟s,
Bavarian vs Munich styles in the 1870s, the effect of
prohibition on American tastes vis a vis bitterness, carbonation
(the Coca Cola effect), the effect of increasingly
national markets and subsequent product characteristics for
single product solution, and changing economics of
brewing). Over this period, brewers reduced the amount of
malted barley in brew recipes from 36 pounds per barrel
to 24 (which diminished the body of the beer), the total
fermentables from 49 to 35 pounds (reducing alcohol
content as well), and hops from 0.65 pounds to 0.22 (reducing
the bitterness of the beer) (Choi and Stack, 2005).
Another factor was the near universal penetration of
refrigeration into homes. While refrigeration made packaging
for home consumption possible (and profoundly changed
industry distribution), it had another effect. Cold
temperatures do not permit oils and esters in foods to become
volatile so refrigerator-cold beer has very little flavor
or aroma. Thus, what makes up a beer matters less and less as
the dominant perceptions are of temperature and

carbonation.
Ultimately, these factors point toward a convergence of styles
resulting in beers that are very uniform in
terms of production and quality control but deficient in flavor
and aroma compared to other styles of beer. This
approach may have reached its nadir by 1984 when Falstaff
introduced generic beer.
The confluence of these factors – changes in regulation, taste,
and the experience in brewing – led to the
dramatic growth in breweries in the U.S. in the 1990s. To be
sure, this was not a smooth growth process. The
industry has experienced an ongoing shakeout among small craft
brewers for several reasons. First, many failed to
make the production scale transition from kitchen to plant.
Brewing 500 gallons of beer is a very different process
Volume 6, Number 6
45
than brewing five gallons. One of the results was that craft beer
often wasn‟t that good. A 1996 Consumer Reports
test indicated that many highly regarded craft beers were

actually flawed, stale, or sour. Second, even if the early
entrepreneurs knew how to make beer, they often weren‟t very
effective business managers. According to one craft
brew executive, the brewers who are succeeding “are the ones
that have either made the transition themselves to
learn how to be more savvy business people or created a
partnership with someone who does” (“Craft Brewers”,
2007).
AUTHOR INFORMATION
Dr. Alfred Warner is an Associate Professor of Management at
Penn State Erie focusing on business strategy and
international business issues. Research interests are in industry
and firm level response to technological change and
industry evolution.
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_and_freedom.html
Running head: PEOPLE DIAGNOSED WITH MENTAL
CONDITIONS 1
PEOPLE DIAGNOSED WITH MENTAL CONDITIONS
2
People Diagnosed with Mental Conditions
Brenda Rouse
HCA430: Special Populations
Instructor: Pamela Hardy
January 17, 2017
Introduction
Mental conditions are very common in America as well as in
other countries. In America, about 26.2 percent of citizens
therein aged 18 and above suffer from a mental disorder every
year. The residential population in America that suffers from a
mental disease in accordance with the application of the same to
the census conducted in 2004 is about 57.7 million persons.
Nevertheless, since mental conditions are spread widely across
the country and in all populations, the primary populations that
experience the burdens of mental illnesses is found in the much
smaller concentration that accounts for 6 percent. Additionally,
mental conditions are the leading cause of disability in not only
America but also in Canada for people aged about 15 to 44
years. In America, the diagnostic for mental conditions find
their diagnosis from the diagnostic and statistical manual for
mental disorders (Jans, Stoddard & Kraus, 2004). This paper,
therefore, seeks to provide insight pertaining this given
population in Miami, Florida.
Impact of gender and age on the vulnerability of this group
Miami, Florida ranks highly among the most populated places in
the United States. Similarly, Miami, Florida has persons in its

given population that suffer from mental conditions (Jans,
Stoddard & Kraus, 2004). Gender is a factor that plays a
significant role in the way that people in Miami, Florida are
affected by mental conditions. The most affected populate
therein is women as compared to men. This is because gender is
a determinate factor when it comes to mental conditions that
affect people. The reason behind this determinate factor pertains
the differential control that each given gender has over the
different given determinants of their mental health. The most
prevalent form of mental health in women as compared to men
is depression and is of a persistent nature (World Health
Organization, 2000). On the other hand, age is also a
determinate factor for mental health conditions among people.
In Miami, Florida, the most affected persons pertain those
between 18 and 25. Nevertheless, the older population suffers
more from depression as compared to the younger population
therein.
Intersection of social, political, and economic factors affecting
vulnerability
Among the said population of people who have mental
conditions, many health and medical issues intersect with
political, social, and economic factors (Brown, Mason, Spokane,
Cruza-Guet, Lopez & Szapocznik, 2009). These problems range
from issues such as housing, inadequate education, as well as
poverty among much more and can be categorized as
socioeconomic factors. The most vulnerable population among
those who have mental conditions pertains those suffering from
chronic mental conditions, for instance, bipolar disorder,
schizophrenia, attention deficit disorder and major depression.
Additionally, the other factors that affect them certain issues
such as living with abusive families, being homeless, being
immigrants as well as being refugees. To this effect, the needs
of this population are not only severe and debilitating but also
vital. Their problems vary from one-dimensional ones to more
complex ones based on poor health and poor health outcomes.

Those who have complicated health issues face much vital
comorbid as well as combined health risks than those who
experience one mental health illness. In Miami, Florida, those
with mental conditions are affected by many political factors.
For instance, despite having a very large population in America,
the funding directed towards mental health care was reduced as
well as all the bills focused towards catering for those with
mental health conditions were rejected.
New model program
Since the risks that face those with mental health conditions are
many, the response awarded them, therefore, need to be not only
multi-sectoral but also multi-layered. To this effect, the
broadest strategies therein involving a program well applicable
to them includes those that helps in focusing not only in one are
but also in many (Mrazek & Haggerty, 1994). Therefore, the
new model program will be focused on behavioral impacts of
those who have any mental condition. One such strategy
involves focusing on nurturing the core attributes of an
individual in their different life stages, for instance, self-
esteem, as well as resilience. Another approach of the program
pertains not only early recognition but also early prevention of
both behavioral and emotional issues, more so, during their
adolescent and childhood lives. The other strategy involves
providing both livings as well as working conditions that will
help with their psychosocial growth as well as their self-
determination.
Other strategies associated with the program include that which
will assist in promoting meaningful interactions not only
between the given social groups therein but also within. The
reason behind this program pertains that mental health issues
depict themselves in every life stage. Therefore, the risk of
exposure runs mostly in the most formative stages such as in
pregnancy and family violence, which have great ease of
affecting the mental predisposition of mental disorders for years
or even years later.

Evaluation of their needs and continuum care
The program will provide an integration of not only mental but
also physical treatment associated with mental health such as
psychosocial disabilities as well as mental care through primary
care. This is because the treatment will be not only affordable
but also cost effective. Additionally, the other service that will
be integrated into the program pertains health services on a
long-term basis for the old people in the community herein.
More so, because it will help cater for their varying needs,
especially their physical health needs, which make them more
vulnerable to premature deaths. Some physical health risks
include heart problems, which can be easily affected by
depression, as well as other physical injuries, which may lead to
adverse outcomes for those with mental health conditions. The
health care services will, therefore, be of great help in tracking
their physical health at all care levels.
Conclusion
In conclusion, people with mental health conditions need
particular attention to meet their needs efficiently and
effectively. Therefore, the need arises for a program that will
focus centrally on their needs, more so, in Miami, Florida where
the population therein in large. Additionally, the program needs
also to focus on other things that revolve around mental health
as even the most little thing is of major importance to this
population.
References
Brown, S. C., Mason, C. A., Spokane, A. R., Cruza-Guet, M. C.,
Lopez, B., & Szapocznik, J. (2009). The relationship of
neighborhood climate to perceived social support and mental
health in older Hispanic immigrants in Miami, Florida. Journal
of aging and health, 21(3), 431-459.
Jans, L., Stoddard, S., & Kraus, L. (2004). Chartbook on mental
health and disability in the United States. An InfoUse Report.
Mrazek, P. J., & Haggerty, R. J. (Eds.). (1994). Reducing risks

for mental disorders: Frontiers for preventive intervention
research. National Academies Press.
World Health Organization. (2000). Women's mental health: an
evidence-based review. Retrieved on 10 January 2017, from
http://apps.who.int/iris/bitstream/10665/66539/1/WHO_MSD_M
DP_00.1.pdf
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A-B InBev Explores Consolidating Distribution Network
JUNE 24, 2009, 8:15 A.M. ET
By David Kesmodel
Anheuser-Busch InBev NV is looking into consolidating its
network of independent U.S. beer distributors—perhaps by
owning many more distributors itself—according to an analyst
report that represents a potential blow for the beer
titan's roughly 600 distributors.
Management at the maker of Budweiser and Stella Artois is
studying the concept of someday selling as much as 50% of

its U.S. beer volume directly to retailers through its own
distributors, up from 7% today, according to the report
Wednesday by Melissa Earlam, a UBS analyst who recently met
with company leaders.
Such a move would allow Anheuser, the world's largest brewer
by sales, to lower its costs and grab gross margins
currently flowing to distributors. Even if the brewer doesn't
pursue that path, the threat of such a shift could compel
more of its independent distributors to merge, which would help
lower the brewer's costs, Ms. Earlam wrote.
"At the least, we believe this is a powerful negotiating tool with
distributors," she said.
The report marks the first serious indication that the Leuven,
Belgium-based brewer intends to put the squeeze on its
distribution network to improve its own profitability.
Potentially billions of dollars currently flowing to distributors
could be at stake.
InBev rapidly has reduced costs at Anheuser since acquiring the
company for $52 billion last fall. But its distributors
so far mostly have been spared the knife.
In the U.S., the vast majority of alcohol products are sold
through distributors under a complex regulatory system
erected after the repeal of Prohibition. State laws generally
require that makers of alcoholic beverages sell them to

distributors, which mark up the prices and ship the products to
bars and stores, which then sell them to consumers.
Anheuser today has 13 distributors of its own in cities such as
New York, Denver and San Diego, and could seek to
acquire more of them as opportunities arose. But such
ownership isn't permitted in some states. Also, existing
distributors enjoy certain legal and contractual protections that
can make it difficult for alcohol producers to replace
them.
Some retailers and producers have gone to court to challenge
the so-called three-tier system in recent years, seeking to
cut out distributors and conduct sales directly from suppliers to
consumers or suppliers to retailers. Some efforts, most
notably in the wine industry, have been successful, but in many
cases courts have upheld state laws that require sales
to go through distributors.
Page 1 of 2A-B InBev Explores Consolidating Distribution
Network - WSJ.com
6/24/2009http://online.wsj.com/article/SB124584478314047047.
html
The UBS report suggests Anheuser intends to work within the

existing regulatory system—rather than challenging it—
to explore consolidation. "At the time of the A-B acquisition ...
ABI had thought that 20% direct distribution was
possible in the U.S. market," Ms. Earlam wrote. "ABI now
believes in theory 50% of volumes could ultimately be sold
through direct distribution."
The brewer's chief rival, MillerCoors LLC, has pushed for
consolidation among its distributors since SABMiller PLC
and Molson Coors Brewing Co. combined their U.S. units to
form the joint venture last year. However, it hasn't tried to
buy distributors itself. The process has sparked controversy and
a number of lawsuits by distributors, but has resulted
in a more consolidated network.
MillerCoors's distribution network is more streamlined than
Anheuser's. For instance, in Indiana, Anheuser works
with 20 distributors, while MillerCoors works with two.
Some industry observers, such as Credit Suisse analyst Carlos
Laboy, have predicted that Anheuser eventually would
try to overhaul its distribution model in the U.S. "Wake up and
smell the coffee," Mr. Laboy told distributors at
industry newsletter Beer Business Daily's annual conference
earlier this year. "There are many family firms who have
misestimated their vulnerability to ABI's wealth-creation

agenda."
The beer company dramatically reduced its number of
independent distributors in Brazil over the years, although that
country lacked so-called franchise laws that protect many U.S.
distributors from being jettisoned arbitrarily by beer
makers.
Anheuser is working on slashing debt incurred from the deal
that combined Brazil's largest brewer with the dominant
U.S. producer. Anheuser recently agreed to sell its Korean unit
for $1.8 billion, among other asset sales.
Write to David Kesmodel at [email protected]
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Page 2 of 2A-B InBev Explores Consolidating Distribution
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6/24/2009http://online.wsj.com/article/SB124584478314047047.
html

BRUSSELS -- Suppliers are feeling the pressure of doing
business with
Anheuser-Busch InBev NV, as the brewing giant tries to
negotiate new contract
terms as part of a cost-cutting effort to help pay for last year's
purchase of
Anheuser-Busch.
Those efforts are crucial to help AB InBev pay down its debt of
about €40
billion ($52.89 billion) -- most of it taken on last year to buy
Anheuser-Busch --
and minimize its substantial interest payments. The company
aims to cut $2.25
billion in annual costs by 2011.
Holding about a quarter of the global brewing market with
heavyweight brands
such as Budweiser and Stella Artois, AB InBev is expected to
wield new power
over suppliers. The brewer said in March that it expects to save
$110 million this
year just from "procurement scale" -- the advantage in buying
from suppliers
that arises from its bigger size.
But AB InBev's hard-charging style has sparked a backlash from
some suppliers,
who say the company is using its size to muscle much smaller
companies into
accepting its terms. Some also complain that AB InBev's new
management, led
by Carlos Brito, has upended the long-standing relationships
they had with
Anheuser Busch.

"All of our members have seen huge changes since InBev took
over AB," said
Ruth Evans, chief executive of the U.K.-based Brewing, Food &
Beverage
Industry Suppliers Association.
In January, AB InBev told suppliers world-wide of a new
policy: Payment for
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EUROPEAN BUSINESS NEWS
AB InBev Suppliers Feel Squeeze
Smaller Companies Complain of Brewing Behemoth's Newfound
Muscle
Updated April 17, 2009 12:01 a.m. ET
By MATTHEW DALTON
AB InBev Suppliers Feel Squeeze - WSJ
1 of 3 1/4/17, 5:30 PM
goods can
occur as
late as 120
days after

AB InBev
gets an
invoice
from a
supplier.
Existing
contracts
call for
payment
in as little
as 30 days,
suppliers
said.
While AB
InBev has
said it
wants to
help its
suppliers
transition
to the new
system,
"we may
have to consider an alternative supplier if the revised standard
terms and
conditions of payments would not suit the current supplier," the
brewer said in
an emailed statement. The move is aimed at reducing AB
InBev's working-
capital needs, analysts said. If the brewer can more closely
align its payments to
suppliers with the cash coming in from sales, it can reduce the
cash it needs to
operate the business, a major benefit amid the current financial

crisis, when
short-term financing is expensive.
InBev took on average about 60 days to pay suppliers,
according to ING analyst
Gerard Rijk, while Anheuser-Busch took even less time to pay.
Extending
average payment by an additional 30 days could free up an
additional €800
million in working capital, Mr. Rijk said.
InBev bought Anheuser-Busch, whose St. Louis brewery is
above, last year. ASSOCIATED PRESS
2 of 3 1/4/17, 5:30 PM
Suppliers are resisting the changes. "It's unacceptable," said
Elisaveta Kinsey,
commercial and procurement director at MaltEurop, one of the
world's largest
malt producers.
Other malt producers say AB InBev is going further. German
malt producer
Avangard Malz, a subsidiary of Avangard Bank, and Belgium-
based Boortmalt
claims AB InBev is refusing to take contracted deliveries of
their product.
AB InBev said the economic crisis has prompted the brewer to
renegotiate

contracts with its European malt suppliers. "No contract has
been unilaterally
canceled," AB InBev said in a statement. "They are being
renegotiated to align
the supply and demand reality we are facing. We are doing this
while
maintaining a reasonable volume with all" suppliers, the
company said.
Write to Matthew Dalton at [email protected]
Copyright 2014 Dow Jones & Company, Inc. All Rights
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3 of 3 1/4/17, 5:30 PM
A key ingredient in 3G Capital Partners LP’s recipe for
reshaping the U.S. food
industry—reflected in its roughly $49 billion deal to acquire
Kraft Foods Group
Inc.—is an arcane-sounding financial tool that slashes costs by
focusing on
details as minute as how to make photocopies.

On Wednesday, 3G confirmed plans for its H.J. Heinz Co. unit,
which it bought
two years ago, to buy the maker of Kraft cheese products and
Oscar Mayer deli
meats. The transaction extends the Brazilian private-equity
firm’s acquisition
spree in the food industry, where its previous purchases include
Burger King
Worldwide Inc. and Canadian coffee-and-doughnuts chain Tim
Hortons Inc.
The latest deal would unite two of the industry’s biggest names
in a company
with combined revenue of about $28 billion and a roster of
brands that are
traditional staples of American kitchens but are struggling to
keep pace with
shifting consumer tastes.
This copy is for your personal, non-commercial use only. To
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http://www.djreprints.com.
http://www.wsj.com/articles/from-heinz-to-kraft-zero-based-
budgeting-sweeps-across-america-1427308494
BUSINESS
Kraft-Heinz Deal Shows Brazilian
Buyout Firm’s Cost-Cutting Recipe
3G Capital’s strategy features ‘zero-based budgeting,’ a tool to
slash costs by focusing on
details as minute as how to make photocopies
March 25, 2015

By DAVID KESMODEL and ANNIE GASPARRO
–– ADVERTISEMENT ––
Kraft-Heinz Deal Shows Brazilian Buyout Firm’s Cost-Cutting
Re... http://www.wsj.com/articles/from-heinz-to-kraft-zero-
based-budge...
1 of 4 1/6/17, 3:49 PM
At Kraft, as it has elsewhere,
3G plans to implement
something called zero-based
budgeting, an austerity
measure that requires
managers to justify spending
plans from scratch every year.
The technique has triggered
sweeping cost cuts at
3G-related companies including Heinz—from eliminating
hundreds of
management jobs to jettisoning corporate jets and requiring
employees to get
permission to make color photocopies.
Investors have grown increasingly aggressive about second-
guessing
management’s operational decisions and use of capital. Several
activist
investors, including Nelson Peltz and William Ackman—himself
a personal
investor with 3G—have praised the Brazilian firm’s cost-cutting
methods.

Investors’ enthusiasm was evident in Kraft’s stock price
Wednesday, which
soared 36% on the merger news.
Other food and beverage companies are embracing 3G’s
financial tool, in part
out of fear that they, too, could become targets of activist
investors or stronger
rivals. Big packaged-food companies have been particularly
appealing targets for
zero-based budgeting. Steeped in history—Heinz traces its roots
to 1869 and
Kraft to 1903—many of them are fighting rapid shifts in
consumer tastes away
from processed foods such as Cheez Whiz and Ore-Ida Bagel
Bites toward items
deemed fresher or healthier. That’s sapped growth and made the
companies ripe
for cost cuts.
“Every board needs to be on notice, that they have to take very
similar lessons”
from 3G’s cost-cutting or risk being outmaneuvered by leaner
rivals, said Bruce
Cohen, analyst with consulting firm Kurt Salmon.
Under the deal, Heinz shareholders, including Warren Buffett’s
Berkshire
Hathaway Inc. in addition to 3G, will hold a 51% stake in the
new company,
which will trade publicly. Kraft shareholders will hold 49%, and
receive a special
dividend of $16.50 a share, representing 27% of Kraft’s closing
price on Tuesday.
The companies didn’t disclose a value for the deal, but based on
Kraft’s market

capitalization following the announcement, investors pegged it
around $49
billion.
The combined
company, Kraft Heinz
Co., will apply
zero-based budgeting
at Kraft just as Heinz
did after 3G bought
the ketchup maker in
2013, 3G managing
partner and Heinz
Chairman Alex
Behring told reporters Wednesday. The tool will be “an integral
part of the
integration process here,” he said.
Zero-based budgeting requires managers to plan each year’s
budget as if no
money existed the previous year, rather than using the typical
method of
MORE ON HEINZ, KRAFT DEAL
Kraft, Heinz Brands Need Some Catching Up
Deal-Hungry Brazilians Came Knocking, Found Welcome Mat
Kraft, Heinz to Merge, Forming Food Giant
Heard on the Street: Buffett and Heinz Say Nuts to Soup
Will Chicago or Pittsburgh Lose More Jobs?

Kraft-Heinz Deal Shows Brazilian Buyout Firm’s Cost-Cutting
Re... http://www.wsj.com/articles/from-heinz-to-kraft-zero-
based-budge...
2 of 4 1/6/17, 3:49 PM
adjusting prior-year spending. That forces them to justify the
costs and benefits
of each dollar every 12 months. So, for example, once-
successful divisions that
have fizzled can’t keep spending like they did in their heyday.
The system,
pioneered as a business tool decades ago by a former Texas
Instruments Inc.
manager, initially wasn’t used widely in corporate America.
As much as anything, zero-based budgeting is a symbol of the
new reality for U.S.
business: Activists are pressing at all sides, giving
managements little room for
slack or bloated budgets. This ethos has seeped into nearly
every boardroom,
prompting pre-emptive steps that emulate the activists
themselves.
The effects of this change are improved shareholder returns and
dividends. But
on the flip side, it has made the work for employees more
rigorous and, some
would argue, more ruthless.
At Heinz, which already had undergone years of cost cuts, 3G
quickly set out to
make deeper changes, paring staff at its Pittsburgh headquarters

and gutting
individual offices in favor of open floor plans. It slashed
Heinz’s overall head
count by about 1,480, or 4% of the world-wide workforce, shut
several factories
and grounded corporate jets.
Similar cutbacks jolted Anheuser-Busch Cos. after it was
acquired in 2008 by
InBev, in which 3G co-founder Jorge Paulo Lemann was a major
shareholder.
InBev quickly began retooling the U.S. brewer’s cushy
corporate culture,
mandating coach flights for Anheuser-Busch managers used to
flying first class
and curbing freebies like tickets to St. Louis Cardinals games.
“There’s sometimes extravagance that exists at some of these
firms, and then
there’s just bureaucratic waste,” said former Anheuser-Busch
president Dave
Peacock. “It’s painful because of the uncertainty and the
change, and anytime
you have to let people go. But I also would tell people, ‘The
team matters more
than any of us.’ ”
The rigors of zero-based
budgeting can stretch down to the
most mundane elements of
corporate life. After chicken
processor Pilgrim’s Pride Corp.
adopted it a few years ago, it
scrutinized how much paper it
used to print documents, how
much soap employees used to

Journal of Business Case Studies – NovemberDecember 2010 Volu.docx

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