Monday, November 22, 2010
Chicagoland / Food Chain / Politics / Food & Drink / Clout City Why Cheap, Shitty Beer is So Cheap and Shitty in Chicago
Posted by Whet Moser on 11.22.10 at 01:04 PM
- Commission on Chicago Landmarks
- Chicago Tribune, composite photo, 1906
Crain's has an excellent look inside the strange business of beer distribution and its effect on what beers are sold where at what prices. But it doesn't really explain why the business is legally mandated to exist. For that, I recommend Nicholas Day's 2006 Reader cover story on a conflict between Bell's and its distributor, which briefly drove the brewer out of the Illinois market:
To understand what happened to Bell's, you have to understand what happened in the 1930s, after Prohibition, when modern alcohol law and the three-tier system were created. The system, which stipulates that all alcohol has to pass through a middleman, was established to ensure that producers couldn't run bars and limit consumer choice by exclusively serving their own drinks, a situation known as a "tied house." The repeal of Prohibition effectively gave states the right to regulate alcohol within their borders, and the resulting patchwork of laws has meant that distributors are usually in-state companies.
If you aren't clear on the concept of a "tied house," you may have noticed all the buildings in the city sporting Schlitz iconography and semi-distinctive architectural styles. A lengthy, excellent history of tied houses (PDF) from the city's Commission on Historic Landmarks explains how the tied house, an English invention, came to be the scourge of Chicago beer drinkers: aggressive temperance laws forced tavern owners to appeal to brewers in order to keep up with expensive, difficult-to-obtain licenses:
A second pillar of “dry” reformers focused on the licensing of drinking establishments, specifically restricting the number of licenses to discourage the establishment of new licenses. Dry’s also advocated a “high license” movement which would increase the annual saloon license fee to raise revenue for police and social programs necessitated by alcohol abuse. The higher fees were also hoped to force small tavern owners out of business. In 1883 the Illinois State legislature passed the Harper High License Act which raised the annual saloon license fee from $103 to $500.Facing bankruptcy, saloon keepers turned to brewers for help in paying the higher license fees. To keep their retailers in business and selling their beer, brewers subsidized saloon owners by paying part or all of the increased license fees. In exchange, brewers compelled the saloon keeper to exclusively sell only their beer. After passage of the Harper legislation, 780 of Chicago’s 3,500 saloons closed, yet in the next year 516 new saloons opened with subsidies from brewing companies.
These efforts by temperance advocates to regulate public drinking establishments had the unintended effect of increasing the role of breweries in the retailing of their product, which led ultimately to brewers taking direct control over saloons in the tied-house system.
The eventual consequence of this was to force brewers to build or subsidize tied houses in order to compete; by tying competition not just to beer brewing but tavern building, the result was to inspire lots and lots of tavern building—note the rather extraordinary stretch of Ashland in the picture above—in other words the opposite of what temperance advocates intended. It also discouraged competition among brewers by giving a competitive advantage to larger brewers, which had the capital to compete in a tied-house market.
So the three-tier system—producer, wholesaler, and retailer—was designed to foster competition by breaking the tied-house system. But as the Crain's and Reader pieces show, distributors have gained considerable control over Chicago taps by mimicking the practices of brewers during the tied-house days, subsidizing various costs of business in exchange for market share. The result is big-brewer-dominated distribution companies that wield power in ways not unlike the tied-house brewers once did:
Mass-market brands don't actually own their distribution networks—that'd be a violation of the three-tier system—but they can effectively control them. Even in a declining market, there's a lot of money to be made in distributing the best-known beer brands, and wholesalers want to keep their biggest clients happy. The identification is so complete that if a distributor handles Miller or Anheuser-Busch, people in the industry almost always refer to the company—even if it carries multiple unaffiliated brands—as the "Miller distributor" or the "A-B distributor."
As Day notes, the number of distributors in America has shrunk considerably in the past three decades, while the number of breweries has soared in the wake of craft beer and brewpub deregulation, though we're still far from the number of breweries that existed in the late 19th century.
This has resulted in something of a bottleneck: more beers and fewer businesses to distribute them, or if you prefer, more competition versus more risk of anticompetitive practices. So the pushback is getting stronger, and not just in the form of lengthy investigative pieces about how you get your beer, but also in—naturally—lawsuits.
Comments (13)
Showing 1-13 of 13
"The fight between Bud and Miller helps consumers by keeping beer prices in Chicago lower than the national average."
I'll drink to that!
-- MrJM
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I'd prefer an eminently drinkable Bud to some over-hopped, high-gravity ale that I've got to force down my gullet any day of the week. As far as strong-arm tactics go, it's hard to top those of the Manhattan Brewing Company of Chicago which brewed the inferior Canadian Ace beer still touted by many ghost signs around town.
http://en.wikipedia.org/wiki/Manhattan_Bre…
For a more contemporary look at this sort of thing, the Reader had an excellent article on one Fritzy Konstantelos of Miller Beer fame back in 2000.
http://www.chicagoreader.com/chicago/fritz…
"I'd prefer an eminently drinkable Bud to some over-hopped, high-gravity ale that I've got to force down my gullet any day of the week."
There's no accounting for taste, especially a complete lack of it.
"There's no accounting for taste, especially a complete lack of it."
Go fuck yourself.
FGFM makes a very key point regarding Ace Beer, as you can't even pretend to tell the story of beer in Chicago without referencing the organized crime syndicates who ran the beer market. Organized crime was brewing near-beer and quickly turning it into needle-beer throughout prohibition, they took over the local breweries here and when prohibition was repealed all the institutional knowledge had disappeared, and the real brewers had largely left for safer pastures and the ability to brew beer that wasn't total slop.
Bob Skilnik's book "A History of Beer and Brewing in Chicago" is a must-read if you want to know why St. Louis and Milwaukee ended up with the big beer distributors, and we ended up with tied-houses.
http://www.amazon.com/History-Beer-Brewing…
In short (I haven't read it in a few years), it's not the tied-houses that were the scourge, it was hordes of Al Capone's goons forcing bars to serve their lousy product. Breweries figured that by maintaining total control of the tavern they could better ensure their beer was served. The public spoke, and there you go.
"I'd prefer an eminently drinkable Bud to some over-hopped, high-gravity ale that I've got to force down my gullet any day of the week."
Heh. This reminds me of my recent experience with Chang, which I had never had before. It's pretty unique as cheap beer goes: it actually tastes like dirt. And not metaphorically.
The worst beers used to be some of those Wisconsin labels that you could buy for $4/case in returnable bottles like Edelweiss and Breunig's. Edelweiss in particular tasted like wood pulp.
Big whup. You can't get every beer in every bar. You also can't get spaghetti in Taco Bell. If the big bars don't carry what you want, go elsewhere.
And...if the little microbrews didn't have the Big Three to ban together against, they'd just be fighting with each other.
I think that the Big Three are actually the Big Two given that Pabst contracts its brewing out to MillerCoors. Boston Brewing of Sam Adams fame is a distant fourth.
There's an excellent documentary on this very subject, titled "Beer Wars." It discusses distribution, competition for shelf space, boutiques and industry consolidation in an entertaining and informative way.
BTW: Millers, Coors and AB are owned wholly or partially by foreign conglomerates. In addition to the popular brands brewed in various cities around the U.S., most of the well-known foreign brands also are owned by or licensed to the Big 3, and they're brewed in the U.S.
The concept, "imported beer," is applicable only a small precentage of times, while any list of foreign beers now could include Michelob.
This explains why it's possible to find certain once-obscure imported brands now stocked almost as prominently on same shelf as Bud and Miller. It also explains why the boutiques still have to fight for every inch of space on shelves and in refrigerators, even as popularity of boutiques grows. They're not only fighting Bud and Michelob for space, but also AB's Beck's, Kirin and Bass (among others), and AB's own line of "boutique" brands, including Red Bridge,Hop Hound and Michelob Honey Wheat.
Löwenbräu is a good example of a brand that was ruined in the US by mishandling the transition to domestic brewing. It was the #2 import after Heineken back in the 70's. Miller bought the rights, started brewing it in Milwaukee with corn, and was roundly rejected by drinkers unwilling to pay double for mediocrity. The label slipped into obscurity, but since 2002 you've been able to buy the real thing when you can find it.
Related Stories
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Bye-Bye Bell's
How Illinois beer distribution laws, fiercely protected by a powerful industry, drove away one of Chicago's favorite small brewers.
- Dec 14, 2006
