Wednesday, April 30, 2003

Pseudo-variety in the beer market One technique retail oligopolies use is flood the shelves with a pseudo variety of similar products made in almost exactly the same way, so that minor vendors that offer real variety can be elbowed out. The beer industry is a great example of this trend. There is a great episode of the Simpsons where Homer Simpson takes a tour of the “Duff” brewery. What we see (and Homer doesn’t) is one master pipe which divides in three to supply three enormous vats, one labeled Duff Regular, a second Duff Light, and a third Duff Dry. The point: these three varieties (and we might add Duff Ice and Old Duff) are essentially exactly the same. They represent not variety, but the illusion of variety, what we call “pseudo-variety.” But while no supermarket or other retailer is likely to fill more than a few yards of its shelf space with regular Budweiser, it is more than happy to include Bud Light, Bud Dry, Bud Ice, Bud Ice Light, Michelob, Michelob Light, Michelob Dry, Michelob Ultra, Busch, Busch Light, Busch Ice, Natural Light, and Natural Ice, all from the same company, Anheuser-Busch, which owns 46% of the US beer market. These seemingly distinct beers fill up many yards of shelf space. We’d contend that any European beer drinker (and plenty of Americans) would find little difference in taste between any of these brands. These are all products from the same Anheuser-Busch vats,  and they are all in same style, American lager. If this shelf coverage isn’t enough, look at the brands of the other oligopoly competitors: Miller (over 29% of the domestic beer market) sells Miller High Life, Miller High Life Lite, Miller High Life Ice, Miller Lite, Miller Lite Ice, Miller Genuine Draft, Miller Genuine Draft Light, Miller Ice House, Milwaukee Best, Milwaukee Best Light, and Milwaukee Best Ice. Coors (10% of the market), in the same way offers Coors Light, Original Coors, Coors Artic Ice, Coors Artic Ice Light, Coors Extra Gold, and Coors Dry. The fourth major American beer manufacturer, Pabst (which has taken over Stroh’s recently) offers similar beers: Pabst Blue Ribbon, Stroh’s, Stroh’s Light, Schlitz, Old Milwaukee, Old Milwaukee Ice, Old Milwaukee Light, Schmidt's, Schaffer, Schaeffer Light. These all represent two basic categories of the all the beers available – namely American-style lager and American-style light beer, a watered-down version of the same. While there are variations in taste, they are small. In contrast, The Great American Beer Festival, an annual contest, offers 56 categories of beer, among which are varieties of porter, stout, wheat beers, bitter, brown ale, pale ale, bock, pilsner, and fruit beers. Granted none of these are popular drinks in the US, but they hardly have a chance, elbowed off the shelves by a mass of close variations on the same theme. Once all these American lagers and lites are on the shelves, they are can complemented with a few real (though mild) variations are Anheuser-Busch brands as well: Michelob Golden Draft, Michelob Golden Draft Light, Michelob Classic Dark, Michelob Black & Tan Lager, Michelob Amber Bock, Michelob Pale Ale, Michelob Honey Lager, and Michelob Hefe-Weizen. The others offer a few similar products.  But the main result is the appearance of enormous diversity and bounty, and the reality is an oligopoly of a few companies with very little variety, except in packaging. The shelf sapce is occupied, and free choice, which seems unlimited, is in fact very restricted.   Principles illustrated: Oligopolies offer pseudo-variety. Oligopolies try to master three basic forces: shelf life, shelf space, and mind space. 9:22:53 PM

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