This paper examines the determinants of market structure in the UK brewing industry over 1949–1969. Sutton (Sunk costs and market structure: price competition, advertising, and the evolution of concentration, 1991) points to technology and advertising races as two key drivers of market concentration. This study uses an own-built longitudinal data set of the population of firms and breweries, and reveals the importance of institutional factors in explaining the dynamics of market structure. The practice of tying outlets to brewers and legal restrictions on opening retail outlets, together with a permissive policy towards mergers, made acquisition of medium-sized firms and brewery closure (shortly after acquisition) the main driving mechanism towards industry consolidation. During this period, the number of firms and plants fell sharply (by 74% and 60%, respectively) and production rose (by about 25%), with no firm entry and just one new brewery opening. As a result, concentration increased and the market transformed from a highly fragmented one into a stable oligopoly.
Small Business Economics – Springer Journals
Published: Jul 9, 2010
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