Factor Use and Productivity Change in the Alcoholic Beverage Industries

Technology structure and change in the beer, wine, and spirits industries are examined here in a dual cost framework. Productivity growth in these industries has been strong and uninterrupted for the past four decades, outstripping that in the general food sector. Scale economies continue to be significant in brewing and distilling but are weak to nonexistent in winemaking. Substitution between raw materials and value-adding (labor and capital) inputs is high, implying that any reversal in factor price trends likely will bring substantial changes to production processes. Despite recent rapid increases in relative capital prices, technical change has shifted capital-material expansion paths toward capital, suggesting that new equipment is designed for its ability to save on raw material and packaging cost.