"When helping the small hurts the middle": Beer Excise Duties and Market Concentration
Over the last couple of years the beer industry has experienced an intense consolidation process resulting in an every declining number of globally active brewing companies. At the same time, in some large beer markets the number of micro-breweries steadily increased. While the former is often explained by prevailing economies of scale in this industry the latter is often associated with demand side arguments including love-of-variety preferences. This chapter offers an additional explanation for these tendencies observed in the beer markets. More precisely, we argue that a country's policy concerning the taxation of beer products might have a direct impact on the emerging market structure. More precisely, our main finding supports the view that EU's beer excise tax regulation which couples a minimum amount of beer excise taxes obliged to charge with the possibility of reduced rates for small breweries has direct implications for the market structure in the brewing industry. More precisely, this regulation tends to trigger a polarisation of the market in the sense that one observes a very small number of large and globally active brewing companies while, at the same time, the number of micro-breweries increases. Medium-sized beer producers tend to be forced out of the market by this regulation or choose to adjust their production level to a smaller amount. Some of the (formerly) medium-scale beer producers also have been targets of mergers and acquisitions,which further fosters an increase in market concentration among the global players in beer producing. This overall finding confirms that specific tax rules might directly and indirectly affect market structures and in the medium-run might also have implications for customers. Especially, the very small number of globally active brewing companies might increase the likelihood for collusive behaviour and thus calls for a careful monitoring by competition authorities all over the world.