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Price elasticity in the beer market is unique. Microbrewers generally have low price elasticity. Imports have reverse price elasticity. The premium prices charged by imports help to drive their sales by enhancing the prestige value of those products. These elasticities are incongruous with the beer market overall, however. In the mass market segments, it has been shown that elasticity for beer is -0.3 (Chaloupka, et. al. 2002). This is lower than the elasticity for other alcohol products, but reflects that consumers will decrease consumption as prices increase

This has a significant impact on beer producers in a couple of key ways. One is that beer producers must constantly work to hold the line on costs. Price increases result in a loss of business; yet price increases are often a result of changes to the tax regime. Thus, beer producers have limited ability to increase prices on their own, particularly in years where the beer tax is increased. As a result, beer producers must constantly walk a tight line, especially when factor costs are increasing. Some companies have vertically integrated in order to gain better control over factor costs, Anheuser-Busch in particular......

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