Globalization of Brewing and Economies of Scale

The globalization of the brewing industry after the turn of the century through a large wave of mergers and acquisitions has changed the structure of the world beer markets. The paper tracks the development in industry concentrations from 2002 to 2012 and points to high transportation costs for beers and economies of scale in advertising and sales efforts as the main factors behind the wave of cross-country mergers and acquisitions. Using firm-level data from the largest breweries, the estimations verify significant economies of scale in marketing and distribution costs. Based on information from the Annual Reports of the eight largest breweries in the world, the estimation proved a reduction in these costs of more than ten percent when doubling the size of the brewing group. This finding verifies that the restructuring of the brewing industry creates significant scale benefits to be shared between the merging partners as marketing and distribution costs are very high in this industry.