From the 1960s to 1980s the brewing industry experienced a handful of factors that caused changes in the market control. One such innovation was the development of faster canning machines. From the 1950s to the 2000s, the canning speed capabilities grew in a logistic fashion where the steep section overlapped the 60s through the 80s. This increase in canning capacity allowed for an increase in production. This benefit, however, was only felt by the companies that were already making significant profit margins because these new machines were relatively expensive.
Not only was the machinery expensive, but also the time to install would cause production outputs to decrease. This is another reason why only large breweries could afford the new lines. During the install period, these breweries could switch capacity to other lines and still 
produce enough to make nice margins. If a smaller brewery attempted this, they could be stuck severely reducing production capacity until the new line was up and running.
This trend is seen in the spread of market shares. In the 1960s there were thirteen major beer producers controlling only 53.56% of the US market shares. However, by 1982 there were only eight major companies left standing which held 92% of the shares, of which, the top four held 75.84%. Granted this shift was not only because of the innovations in canning lines, but I am positive that it played a part.
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What was the cost structure of some of the implementation this expensive machinery? Essentially, is there a website where we could find what kind of a revenue hit these companies needed to take due to buying up this equipment and dealing with short term decreases in production capability? We could see what minimum threshold of size and profit margins a brewery would need to have to determine whether these were worth it, which could be interesting.
Clearly technology is a determinant in successful firms and industry consolidation. I’m curious to see if large firms will continue to innovate and set themselves ahead of competition. Or have we hit a plateau in such influential technology advancement?
Over this break I am in St Louis visiting family, but while here my parents and I decided to take a tour of the Anheuser-Busch Brewing factory. From my experience these technologies have increased in large leaps, the bottling machines can fill roughly 1250-1300 bottles per minute which are then capped within a tenth of a second of them being filled. The canning line had a capacity of around 2000 cans per minute.
To get a glimpse of the machinery and speeds with which these factories function, here is a video clip: https://www.youtube.com/watch?v=p9kBmg0IkqU
A neat video, and they highlight the variety of packaging and beer varieties as well. I need to show this next semester, along with similar videos for steel (I spent an hour on YouTube for those, you’ve saved me time for the beer side!)
So that’s 20,000 six-packs an hour. That’s a lot of beer. Alternatively, that’s 1200/60 = 20 bottles a second, what, 6 feet of bottles? You can jog that fast, but you can’t walk that fast.
Now if you only turn out 10,000 six-packs on the same line, your capital costs per beer double. However, while lower costs are nice, that may (or may not) be a big enough component of overall costs to have much impact on the bottom line. After all, $20 million is a drop in the veritable beer barrel for the biggest firms.
The small brewer issue seems to be one not of the bottling line itself, but of available real estate. For an longstanding brewer (Strohs in downtown Detroit) there might not be a lot of empty space to put in a new line. However, Devils Backbone added space for their new line, so didn’t have to shut down or otherwise lose production, they could keep the old line going.
We can ask about this when we visit them … how long did they keep the old line around? at what volume point does shifting to a new line, faster line make sense? what is the cost differential of bottling vs canning vs kegs?
This is a very good point but a company would need both the capital along with the extra room, which would require even more capital due to the potential of having to buy that land from somebody.
As you mentioned with Strohs, this could be a major factor to why they were not to keep pace with AB, Miller, and Coors. As demand increased Strohs might not have been able to keep up with these other larger companies and thus fell to the wayside as the others picked up more market share.
I thought what we learned about at Devil’s Backbone in terms of canning their beer. Obviously the advantages of canning were a big reason that large breweries took control of the industry. However, the investment into packaging technology is not the only factor that prevents craft breweries from switching from bottles to cans. The perception of quality, and I would argue actual quality, has a major impact. Their beers are more expensive and consumers won’t purchase their product for the inescapably higher price if they think it is high quality. It is difficult for them to lower their cost of production because they cannot lower the price of their current product.
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