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Local and Regional Breweries in America's Brewing Industry, 1865 to 1920

Published online by Cambridge University Press:  13 December 2011

Martin Stack
Martin Stack
Affiliation:
MARTIN STACK is assistant professor of economics atSaint Mary College, Kansas. The author wishes to thank Philip Mirowski, three anonymous referees, and the editors of this journal.
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Abstract

Between the end of the Civil War and the enactment of national Prohibition in 1920, America's brewing industry grew to become one of the nation's leading manufacturing industries. During the first thirty years of this period, the industry's growth was propelled by the emergence of a small group of nationally oriented breweries. These firms pioneered a series of important technological, scientific, and organizational innovations, which allowed them to increase annual sales. Yet, after several decades of spectacular growth, they began to see their relative position in the industry decline. From the mid-1890s until Prohibition, hundreds of regional and local breweries reasserted themselves in the market for beer. These firms often were able to provide less expensive beer and to sell it in saloons that they owned or controlled. Together, these two factors enabled regional and local breweries to present a competitive challenge to national firms in the years leading up to Prohibition.

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Articles
Information
Business History Review , Volume 74 , Issue 3 , Autumn 2000 , pp. 435 - 463
Copyright
Copyright © The President and Fellows of Harvard College 2000

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References

1 Cochran, Thomas, The Pabst Brewing Company (New York, 1948) 84, 183.Google Scholar

2 There is a growing literature that highlights the important roles played by local and regional firms during these years. See for example Ingham, John, Making Iron and Steel: Independent Mills in Pittsburgh, 1820–1920 (Columbus, Oh., 1991)Google Scholar for a discussion of the continued importance of local steel mills. Philip Scranton has also written extensively in this area. See “Manufacturing Diversity: Production Systems, Markets and an American Consumer Society, 1870–1930,” Technology and Culture, 35 (1994): 476–505; “Determinism and Indeterminism in the History of Technology,” Technology and Culture, 36 supp. (1995): S31–52; Endless Novelty: Specialty Production and American Industrialization, 1865–1920 (Princeton, N.J., 1998).

3 See, for example, Baron, Stanley, Brewed In America: A History of Beer and Ale in the United States (Boston, Mass., 1962)Google Scholar and McGahan, Anita, “The Emergence of the National Brewing Oligopoly in the American Market, 1933–58,” Business History Review, 65 (1991): 229–284.CrossRefGoogle Scholar

4 The tax was imposed on production, and breweries paid a monthly tax on each barrel of beer they brewed. United States Brewers Association, 1979 Brewers Almanac (Washington DC, 1979), 94.

5 Ibid., 8.

6 See Appendix for a detailed listing of national and state production figures from 1880 to 1915.

7 In 1895, Pabst sold 955,000 barrels, 129,000 barrels below its 1893 level, while Anheuser-Busch sold approximately 700,000 barrels. Cochran, Pabst Brewing Company, 73–4, 180.

8 Cochran's study of Pabst remains the most detailed examination of an American brewery. He wrote this work with the cooperation of the Pabst brewery, focusing in part on the entrepreneurial ability of Pabst's early managers. This is not surprising, as he intended his study to serve as a model for how to write an academic company history. (See Sass, Steven, Entrepreneurial Historians and History, unpublished Ph.D. dissertation, Johns Hopkins University, 1978.)Google Scholar One of the leading members of Harvard's Center for the Study of Entrepreneurial History, he felt that neoclassical economists had ignored the institutional framework in which firms operated and with which they interacted.

9 Baron, for example, argues that the few national shippers were the vital force propelling the industry forward. See Baron, Brewed In America, Chapters 29–32. In addition, the two most complete business histories are of national shippers: Cochran's study of Pabst, and Plavchan's, Ronald, A History of Anheuser-Busch, 1852–1933 (New York, 1969).Google Scholar

10 See Chandler, Alfred D., Visible Hand: The Managerial Revolution in American Business (Cambridge, Mass., 1977), 301–2.Google Scholar

11 Downard, William, Dictionary of the History of the American Brewing and Distilling Industries (Westport, Conn., 1980), 158.Google Scholar

12 Baron, Brewed in America, 241–6; Plavchan, History of Anheuser-Busch, 71–7.

13 Cochran, Pabst Brewing Company, 126–8.

14 Ibid., 109, 124.

15 Pasteur, Louis, Studies on Fermentation. The Diseases of Beer, Their Causes, and the Means of Preventing Them (London, 1879)Google Scholar.

16 Plavchan, History of Anheuser-Busch, 69.

17 Chandler, Visible Hand, 256.

18 The shippers did not invest in multiple plants prior to Prohibition, so any beer sold in various parts of the country had to be transported from the home city. There was, however, a difference in how bottled beer was handled: sometimes it was bottled at the home brewery, and then shipped in bottles; in other instances, it was shipped in kegs and bottled upon its arrival. See Cochran, Pabst Brewing Company, 175; Plavchan, History of Anheuser-Busch, 91–2.

19 Maxwell, H.James and Sullivan, Bob, Hometown Beer: A History of Kansas City's Breweries (Kansas City, Mo., 1999), 75.Google Scholar

20 Cochran, Pabst Brewing Company, 173.

21 Bottled beer's market share slowly rose over this period, reaching perhaps 10 percent by 1895. Canned beer was a post-Prohibition phenomenon, not appearing until 1935.

22 Cochran, Pabst Brewing Company, 136.

23 Ibid., 175.

24 Ibid., 84, 183.

25 Ibid., 87, 176.

26 Some of these firms did occasionally ship small amounts of their beer, but this was never a primary concern. If they did transport beer, they tended to concentrate on nearby regional markets, having much more modest ambitions than their midwestern brethren.

27 See Appendix for details concerning the dominant roles New York, Pennsylvania, and New Jersey played during these years.

28 Ingham, Making Iron and Steel, ch. 1.

29 For further information on the local ordinances that anti-drink forces implemented, see Kerr, K.Austin, Organized For Prohibition: A New History Of The Anti-Saloon League (New Haven, Conn., 1985), chs. 3–5.Google Scholar

30 Additional examples include Ruppert, Bernheimer & Schmid, F. & M. Schafer, Peter Doelger, and James Everard, all based in New York City, and Berger & Engel and Louis Bergdoll based in Philadelphia.

31 One Hundred Years of Brewing (New York, 1974 reprint), 374–5.

32 Ehret, George, Twenty-Five Years of Brewing (New York, 1891).Google Scholar

33 Some late New York City breweries continued to sell only keg beer up to the early 1940s. In 1939, for example, Ehret produced exclusively kegged beer. Research Company of America, A National Survey of the Brewing Industry (New York, 1941), 106–7.Google Scholar

34 Ehret, Twenty-Five Years, 74.

35 To place this amount in perspective, during the current microbrewery revolution begun in the late 1970s, microbreweries were defined as producing less than 10,000 barrels. Very few of the new breweries started in die last two decades produce over 30,000 barrels.

36 All regional and national shippers brewed the beer in their home plant and then shipped it to the destination cities. This led to a key question: should they ship the beer in kegs, and then bottle it upon arrival, or should they bottle the beer at their plant, and then ship it? Individual breweries answered this question differently, depending in part upon their ability to contract with reliable bottlers in their destination markets.

37 Blum, Peter, Brewed in Detroit: Breweries and Beers since 1830 (Detroit, Mich., 1999), 57–65.Google Scholar

38 One Hundred Years of Brewing, 254-5.

39 Apps, Jerry, Breweries of Wisconsin (Madison, Wisc., 1992), 142–6.Google Scholar

40 Maxwell and Sullivan, Hometown Beer, 93.

41 For a complete list of the breweries operating in these, and all other, cities, see Wieren, Dale Van, American Breweries II (West Point, Pa., 1995).Google Scholar

42 Leisy, Bruce, A History of Leisy Brewing, (Wichita, Kans., 1975), 13–14.Google Scholar

43 Ibid., 12–24.

44 During these years, several breweries, in addition to Anheuser-Busch, sold Budweiser-brand beers, and Leisy sold its Budweiser until the 1900s or 1910s (Leisy, History of Leisy, 17–18). In 1898 Anheuser-Busch brought a trademark suit against a Brooklyn brewery that had changed its name in the 1890s to Budweiser Brewery. The owner prompdy changed the company's name to Nassau Brewing. However, in 1905, the DuBois Brewery Company of DuBois, Pennsylvania, began selling DuBois Budweiser. Despite many lawsuits filed by Anheuser-Busch, it continued to sell this brand until 1970 when the U.S. Supreme Court in Pittsburgh ruled that Anheuser-Busch had the exclusive rights to the name Budweiser. See Anderson, Will, From Beer to Eternity (New York, 1987), 10–13.Google Scholar

45 Leisy, History of Leisy, 46–7.

46 Cocnran, Pabst Brewing Company, 71.

47 Hughes, Jonathan and Cain, Louis, American Economic History (New York, 1994)Google Scholar cite 1860 and 1910 Census of Manufactures data in documenting the changing order of importance of America's industries. The 1910 census shows that breweries ranked eighteenth in number (1,531), sixth in capital, twenty-seventh in average number of wage-earners, seventeenth in amount of wages, seventh in the net amount of the value of products, and eleventh in the gross amount of value of products. Using the criteria of “value added to materials by manufacturing processes,” they show that by 1910 brewing trailed only four other industries: machinery, lumber, printing and publishing, and iron and steel. According to a footnote in the 1910 Census of Manufactures, value added deducts the cost of raw materials and adds the cost of mill supplies to the net value of products. For a useful discussion of value added as a measure, see Philip Scranton, Endless Novelty, Chapter 1.

48 Some states were completely dry, having passed statewide prohibition laws outlawing the production and distribution of alcoholic beverages. Other regions, though, unable to pass statewide legislation, succeeded in implementing local option laws that prohibited production widiin specific cities or counties. See K. Austin Kerr, Organized For Prohibition. For a state-level distribution of the number of people living in dry or local option areas between 1910 and 1919, see United States Brewers Association, 1979 Brewers Almanac (Washington D.C., 1979), 115.Google Scholar

49 For data detailing state-level beer production between 1878 and 1919 see United States Brewers Association, 1908 Year Book (New York, 1908)Google Scholar, Table XI; United States Brewers Association, 1914 Year Book (New York, 1914), 332–3Google Scholar; and United States Brewers Association, 1979 Brewers Almanac (Washington, D.C., 1979), 12–13.Google Scholar

50 Cochran recognized that the shippers did not enjoy the same growth rate in the years from 1895 to 1920; however, he only provided data tables detailing individual brewery production levels in 1877 and 1895. It is possible that subsequent authors have extrapolated from the trends clearly apparent in his 1877 and 1895 data tables and applied them to die period 1895 to 1915 for which fewer industry and firm data have been published. See Cochran, Pabst Brewing Company, 73–4, 180–2.

51 Caution, however, must be exercised in interpreting these data. During the earlier period, when the national shippers were emerging in full force, the percentage increase in industry output (242 percent) was much greater than the percentage increase between 1895 and 1915 (78 percent).

52 This idea needs further study. It does not appear that Pabst was capacity constrained in the years after 1895, and indeed they struggled to retain many of the markets that they had earlier won (Cochran, Pabst Brewing Company, chapters 6 to 9). In addition, Anheuser-Busch, America's largest brewery during these years, had annual production levels that were between 36 to 54 percent of that produced by the leading UK brewery. There do not appear to have been technical limitations that limited American brewery maximum output to be tween 1 and 1.5 million barrels. See Krebs and Orthwein, Making Friends, 242–3 and Gourvish, T. R. and Wilson, Richard, The British Brewing Industry: 1830–1980 (Cambridge, England, 1994), 99.Google Scholar

53 Cochran, Pabst Brewing Company, 204.

54 In 1906, total production reach its pre-Prohibition high, 1,086,140. Cochran, Pabst Brewing Company, 180.

55 Ibid., 84, 183.

56 Ibid., 187.

57 Ibid., 243–1.

58 For example, Ruppert Brewery of New York City sold over 1 million barrels in 1916. Downard, Dictionary, 162.

59 It is curious that the Christian Moerlein Brewery of Cincinnati, often regarded as a national shipper, did not more aggressively attack the Cleveland market. It appears to have looked west and south for much of its export market, establishing branch agencies in Council Bluffs, New Orleans, and Pensacola. For further discussion of the Christian Moerlein Brewery, see Downard, William, The Cincinnati Brewing Industry (Columbus, Ohio., 1973), 53–54.Google Scholar

60 Blum, Brewed in Detroit, 64.

61 Ibid., 62–8.

62 Heileman Brewery Archives, 1902 and 1911 Annual Reports (Heileman Brewery, LaCrosse, Wisc.) and Cochran, Pabst Brewing Company.

63 Heileman Brewery Archives, 1902 and 1911 Annual Reports.

64 Leisy, History of Leisy, 53. On December 11, 1917, President Wilson ordered a 30 percent reduction in the amount of grain that breweries could use, a step intended to free up large amounts of barley, corn, and rice for uses deemed more essential. This followed several earlier steps designed to reduce non-essential consumption of these crops. For further information regarding the conservation measures imposed on breweries during and after World War I, see Plavchan, A History of Anheuser-Busch, 144–8, K. Austin Kerr, Organized For Prohibition, 183, and Cochran, The Pabst Brewing Company, 320–321. For a broader discussion of the politics and economics of food administration policies during the war, see Kennedy, David, Over Here: The First World War and American Society (Oxford, 1980), 117–23.Google Scholar

65 Ibid., 38, 53.

66 Though an American managed the Cleveland merger, British investors financed a series of other consolidations. In 1889, a British syndicate offered $16.9 million dollars to buy out Pabst, Schlitz, and Blatz. This offer was rejected, as were similar offers for Anheuser-Busch and Christian Moerlein. With one notable exception, the national shippers preferred to remain independent. Blatz eventually agreed to a separate offer, and in 1891 Valentine Blatz sold his company to Milwaukee and Chicago Breweries, an Anglo-American syndicate. Some of the syndicates reached large annual production levels, and while they often impacted local production and prices, they did not greatly affect the overall market for beer. For further discussion of consolidations and syndicates, see Baron, Brewed in America, chapter 30.

67 Leisy, History of Leisy, 48–52.

68 Maxwell and Sullivan, Hometown Beer, 37-44.

69 K. Austin Kerr. Organized For Prohibition, 76.

70 By 1906, over 600 Wisconsin towns had abolished saloons. Cochran, Pabst Brewing Company, 310.

71 In 1910, nine states were completely dry: Alabama, Georgia, Kansas, Maine, Mississippi, North Carolina, North Dakota, Oklahoma, and Tennessee. United States Brewers Association, 1979 Brewers Almanac (Washington D.C., 1979), 115.Google Scholar

72 Cochran, Pabst Brewing Company, 187.

73 England also had a tied-house system for many years. For a brief historical overview of the development and evolution of this system in Great Britain, see Gutzke, David, Protecting the Pub: Brewers and Publicans Against Temperance (Woodbridge, U.K., 1989), 4–5.Google Scholar

74 Duis, Perry, The Saloon: Public Drinking in Chicago and Boston, 1880–1920 (Urbana, Ill., 1983), 25.Google Scholar

75 There were exceptions to this general pattern however. While breweries took advantage of license laws to gain control of Chicago's saloons, in Boston wholesalers rather than breweries secured control of many of the city's saloons. The basic issue was the same: whoever gained access to the saloons controlled what brands would be made available. See Duis, The Saloon, 26–8, 32.

76 K. Austin Kerr, Organized For Prohibition, 167.

77 See, for example, a pamphlet published by Anheuser-Busch, “Herein is proof that beer and light wines disassociated from hard liquors and spirits produce real temperance” (St. Louis, Mo., 1923).

78 This legislation proved an initial obstacle for the brew-pub movement that began around 1980. Brew-pubs, establishments that produce and sell their own beer, violated this separation. As a result, the first brew-pubs in many states had to lobby to end or modify this restriction.

79 The number of retail liquor establishments during these years is staggering. In 1907 there were over 250,000 retail purveyors of liquor and beer. United States Brewers Association, 1908 Year Book (New York, 1908), 194–5.Google Scholar

80 For example, see McGahan, “Emergence of the National Brewing Oligopoly,” 242–4; Cochran, Pabst Brewing Company; Baron, Brewed In America. Transportation costs certainly were an important factor in the higher retail prices the shippers charged. However, smaller breweries did not have to rely on distance to safeguard their operations, and many small and medium-sized breweries operated alongside the largest shipping firms in the same city. For listings of the breweries that coexisted with the shippers in St. Louis, Milwaukee, and Cincinnati, see Van Wieren, American Breweries II. In addition, the assertion that the shippers made a higher quality beer is open to debate; this issue raises important questions about the relationship between product standardization and product quality. Many of the modifications the shippers made to their beer during these years paralleled similar changes in other American goods. For a discussion of how standardization emerged in American industries and what the implications of this development were for consumers, see Philip Scranton, “Determinism and Indeterminism,” S31–52.

81 In 1905, Missouri production was 3.5 million barrels; Anheuser-Busch produced 1.375 million barrels, and Lemp produced around 500,000 barrels. Wisconsin production in 1905 was 4,078,000 barrels; Pabst produced 875,000 barrels; Schlitz, around 1 million barrels; and Blatz, over 500,000 barrels. See Cochran, Pabst Brewing Company, 180, and Krebs and Orthwein, Making Friends, 242.

82 These data also help clarify which were the most important brewing states. While Missouri and Wisconsin have received a great deal of attention because of the national shippers based in St. Louis and Milwaukee, throughout the pre-Prohibition era New York and Pennsylvania were the dominant brewing states. As late as the 1910s, these two states accounted for approximately one-third of national beer production. See Appendix A. For more information on the Chicago beer market, see Skilnik, Bob, The History of Beer and Brewing in Chicago: 1833–1978 (St. Paul, Minn., 1999).Google Scholar