tag:blogger.com,1999:blog-3471471289744825428.post251157598815912623..comments2024-03-11T00:31:41.186-07:00Comments on The Oregon Economics Blog: Beeronomics: Anti-TrustPatrick Emersonhttp://www.blogger.com/profile/17242234148546323374noreply@blogger.comBlogger12125tag:blogger.com,1999:blog-3471471289744825428.post-74531474867205886042009-09-02T13:32:21.364-07:002009-09-02T13:32:21.364-07:00...and a sore loser. I'd like to say I'm s......and a sore loser. I'd like to say I'm shocked but I can't seem to muster those words.<br /><br />You obviously care for nothing more than your own opinion.Ralphhttps://www.blogger.com/profile/15935553689879498648noreply@blogger.comtag:blogger.com,1999:blog-3471471289744825428.post-83583855404624931172009-09-02T09:01:43.266-07:002009-09-02T09:01:43.266-07:00Ralph, your disappointments, much like your specul...Ralph, your disappointments, much like your speculations about my intentions, trouble me little.Jeff Alworthhttps://www.blogger.com/profile/02930119177544342495noreply@blogger.comtag:blogger.com,1999:blog-3471471289744825428.post-2506494920424503412009-08-31T12:14:45.116-07:002009-08-31T12:14:45.116-07:00I'm disappointed again Jeff. When faced with f...I'm disappointed again Jeff. When faced with facts that don't support your case you stop responding. Game, set, match. Good look to you in the future.Ralphhttps://www.blogger.com/profile/15935553689879498648noreply@blogger.comtag:blogger.com,1999:blog-3471471289744825428.post-55268828989382822422009-08-28T18:32:26.451-07:002009-08-28T18:32:26.451-07:00If I have put forward any supposition it is simply...If I have put forward any supposition it is simply "Innocent until proven guilty". This discussion has two fronts, so I'll let you choose which you want to follow.<br /><br /><i>Market Share</i><br /><br />Grocery stores are beer are like apples and oranges. You may as well have pulled something out like Standard Oil or Pepsi versus Coke. The "market" in which they compete is nothing like beer. I don't need beer, but I do need food. The most accepted place to get food is a grocery store. My access to beer isn't limited by its availability in a few select outlets.<br /><br />Also, my choice of beer isn't limited to a two brands. According to the brewer's association there are over 1500 breweries that make beer in the United States of America. The largest number of breweries to exist in over 100 years. An average of over 30 breweries in each state. The craft breweries alone produced over 4 million barrels of beer (an increase of 5% over last year). While the larger breweries are seeing a decrease in volume.<br /><br />The production from "macro" breweries is shrinking (check your own blog).<br /><br />You keep suggesting that consumers can't choose between a "macro" and a "micro" when clearly they are choosing between the two. If beer volume is down overall and craft beer sees a surge, did new demand just surface?<br /><br />Distributors are now to culprit? I can go to BFE and walk in to a crappy quick-e-mart and find stuff besides BMC.<br /><br /><i>Price</i><br /><br />As a home brewer I know the prices I pay for raw ingredients has gone up about 40% over the last two years. I don't have the luxury of long term contracts with growers of my raw ingredients. My volumes are too low. I presume other brewers face increased prices as well and have had to raise their prices they charge. There are several factors I can't know in regards to MC's price increases.<br /><br />I'll try and keep a running list of why they might increase prices:<br />Raw Ingredients<br />Labor<br />Increased capital costs<br />Shareholders (long list of things, so let's just call it this)<br />Because they can (price elasticity)<br /><br />BMC enjoy economies of scale that I'm sure most craft brewery would love have.<br /><br />Take a look at the dairy industry if you want to go off about price fixing. There are so many more worthy eggs to be broken on price fixing that some cheap beer increasing $0.10 a can.Ralphhttps://www.blogger.com/profile/15935553689879498648noreply@blogger.comtag:blogger.com,1999:blog-3471471289744825428.post-28631186079130060542009-08-28T17:14:14.794-07:002009-08-28T17:14:14.794-07:00Ralph, in response to the NYT's "supposit...Ralph, in response to the NYT's "supposition," you offer your own. It will be the Justice Department to determine whether there is enough evidence of anti-competitive behavior to warrant an investigation.<br /><br />But neither your speculation nor the Times' resolves the economic question of markets. Doing a bit of digging, I find <a href="http://oregonecon.blogspot.com/2008/07/econ-101-anti-trust-and-whole-foodswild.html" rel="nofollow">this analysis</a> on the Wild Oats/Whole Foods merger.<br /><br /><i>The usual course is to look at the cross-price elasticity of demand. This measure, for example, the change in demand for Whole Foods goods when Safeway changes their prices. As you can imagine trying to isolate this effect in the world of supermarkets where prices are always and constantly in flux is almost impossible. Another thing that matters is the 'contestability' of the market - how easy would it be for a new competitor to enter the market. This limits firms' ability to exploit concentration by raising prices because it would encourage the entry of new competitors.</i><br /><br />My my lights, these are two different markets, though we probably will need numbers to resolve them. I don't think there's any cross-price elasticity of demand between the two. And given the record of the past 50 years, there seems to be zero contestability. (A situation strengthened by the control the bigs have over distribution networks.)<br /><br />We'd need some numbers to back my hunches, though. Otherwise it's just two guys yammering on a blog.Jeff Alworthhttps://www.blogger.com/profile/02930119177544342495noreply@blogger.comtag:blogger.com,1999:blog-3471471289744825428.post-7361100412462058152009-08-28T16:49:58.653-07:002009-08-28T16:49:58.653-07:00Well, that was kind of my point - that the market ...Well, that was kind of my point - that the market for macro beer (or just about any product) is not well defined. Are other 'malt beverages' and micro brews close substitutes for macro beer? Clearly they are substitutes, but how close? We really need estimates of cross-price elasticities to better understand the market.<br /><br />By the way the answer to "are they the same market?" is "yes and no." You are welcome. <br /><br />Ralph,I haven't done an "Econ 101" post in ages, so this is a good idea. I'll try and work on it. But now it is Friday afternoon and blogging shall cease until Monday.Patrick Emersonhttps://www.blogger.com/profile/17242234148546323374noreply@blogger.comtag:blogger.com,1999:blog-3471471289744825428.post-82089671698554385302009-08-28T15:57:40.456-07:002009-08-28T15:57:40.456-07:00Patrick, can you please do a post on "Perfect...Patrick, can you please do a post on "Perfect Competition". Thanks.Ralphhttps://www.blogger.com/profile/15935553689879498648noreply@blogger.comtag:blogger.com,1999:blog-3471471289744825428.post-54975445165343753802009-08-28T15:38:36.134-07:002009-08-28T15:38:36.134-07:00I'm sure we could place the word "market&...I'm sure we could place the word "market" at the center of the rope and tug all day at it.<br /><br />You have done nothing more than suggest because BMC, three (ok, 2.5) separate companies, sell an overwhelming majority of the beer they are engaged in some form of anti-competition. The existing companies were approved by our government.<br /><br />Prices go up. I'm not really wanting to debate the expansion of the money supply, but let's just agree that it exists. Or, as Patrick has suggested, it could simply be price elasticity. I can't tell you for sure as I do not have access to what they were thinking, nor should I as it is a private matter for the individual companies. I don't believe we should get to crack open companies private dealings unless there is evidence of collusion, which I have yet to read. The NY Times piece was nothing more than a supposition (which seems to pass for journalism these days).<br /><br />As to Full Sail, I don't have enough knowledge on what their production quantities are for their given brands. But it as you suggest 20 to 25% of their brewing capacity goes to a beer that isn't listed as one of their "core brews" I'd say they are going pretty good with that. If they even have a fraction of a percent of that market for light lagers, I'd suggest they market it heavier and try to increase that share. <br /><br />I'm for real competition, not one in which competition comes at the hand of government intervention. <br /><br />My point was simple there are several light lagers to choose from at the package store. Nothing is limiting the customer choice to BMC products.Ralphhttps://www.blogger.com/profile/15935553689879498648noreply@blogger.comtag:blogger.com,1999:blog-3471471289744825428.post-75957977288512555852009-08-28T12:31:10.947-07:002009-08-28T12:31:10.947-07:00I would actually like to prevail on Patrick to def...I would actually like to prevail on Patrick to define and describe "market" for our purposes. Ralph, you cite Full Sail Session as a new competitor to the macros. I think this tends to support my argument, though.<br /><br />A substantial percentage of those consumers only drink micros. Full Sail only sells 90k barrels overall; let's say 10-20k barrels of Session are penetrating the macro market. That's way, way less than 1% of the market. The reason FS can enter the market at all is because for them, it's a niche market. Given that, wouldn't this suggest that it is a separate, distinct market?<br /><br />Professor, care to bring a little light to our darkness?Jeff Alworthhttps://www.blogger.com/profile/02930119177544342495noreply@blogger.comtag:blogger.com,1999:blog-3471471289744825428.post-54330684464192880632009-08-28T09:58:14.204-07:002009-08-28T09:58:14.204-07:00Macros are a different market.
That is where your...<i>Macros are a different market.</i><br /><br />That is where your argument fails. A rose is a rose is a rose.<br /><br />Joe Sixpack has choices when he goes to the package store.<br /><br />Ask Full Sail how their Session brand is doing.<br /><br />Most of the beverage cans are made of aluminum these days, not tin.Ralphhttps://www.blogger.com/profile/15935553689879498648noreply@blogger.comtag:blogger.com,1999:blog-3471471289744825428.post-4723839630970350222009-08-27T16:16:42.570-07:002009-08-27T16:16:42.570-07:00I've no doubt that the macros would make a spi...I've no doubt that the macros would make a spirited defense of their case, but I think their argument is weak on the facts (if not the politics).<br /><br />Macros are a different market. They have totally different consumers--when Deschutes' prices go up (as they have in the past two years) Bud's sales ... are unaffected. In fact, even though prices have gone up among micros, they continue to sell more beer. Despite flat prices among macros, they're seeing sales plummet. <br /><br />The real question isn't how easily a micro can enter the market. It's how easy another company hoping to enter the tin-can beer market. And in this regard, the record is terrible. Regional beer companies have been systematically run out of business by the big companies in the era of consolidation. During that period, not a single company has made inroads into the macro market. <br /><br />If smaller companies can't stay in the market or enter one, it's hard to call it competitive.Jeff Alworthhttps://www.blogger.com/profile/02930119177544342495noreply@blogger.comtag:blogger.com,1999:blog-3471471289744825428.post-59760677005719480092009-08-27T11:27:05.615-07:002009-08-27T11:27:05.615-07:00An excellent post. Thank you for a explanation tha...An excellent post. Thank you for a explanation that shows you've thought through the different angles.Ralphhttps://www.blogger.com/profile/15935553689879498648noreply@blogger.com