As if beer drinkers needed further motivation to enjoy craft beer, doing so is moving money from Wall Street to Main Street and helping the middle class. I read an article this week that small breweries’ share of the market doubled from 6% to 12%, while overall beer consumption remained flat in the five-year period from 2011 to 2016.
The article attributed low barrier to entry as the main market mechanism that enabled small breweries to compete with industry. We all know monopolies are bad, but only having a few competitors is just as bad since these Goliaths will evolve into a cartel, even without collusion.
Read a market analysis one time that identified the absolute minimum number of competitors as eight. In the beer market in 2016 there were 5,000 breweries.
I don’t want to descend into economic theory, I want to highlight that many of the goods and services we buy are not free markets. In fact, free markets do not exist on their own. Markets left to themselves will degrade into monopolies and car
tels. Ironically, free markets require a strong government to enforce market rules.
In the case of breweries, government regulations have enabled small breweries to sell directly to consumers and significantly reduce the barrier to entry. In some industries it may not be possible or desirable to enforce a free market (such as banking or utilities), and in these instances government regulation is required to contain profiteering.
The underlying message here is that having the right mix of industry and government can create a free market economy with less income inequality and more opportunity. We need both. We need to cooperate.
— Joe Criscione, President