THE brewing industry in many countries, traditionally characterized by local breweries, has undergone significant structural changes in most industrialized nations. This is apparently due to recent increases in economies of scale in production and advertising. The result is increasing concentration and aver- age firm size, coupled with a reduction in the number of brands offered.1 So far, these trends seem to have been less noticeable in West Germany, a fact which raises a number of issues: why has the trend to large plant size been so much slower? Do the recent estimates of larger economies of scale by Cockerill [4] and Scherer et al. [I8] not apply to the traditional West German brewing industry? If their estimates are correct, however, will this trend eventually lead to a similar structure as we observe it elsewhere? If increasing concentration results in a reduction of the number of brands offered, as has been observed by the recent experience in the UK, then scale efficiency may be off-set by a diminishing product and brand choice. What are the dimen- sions of this trade-off, and what implications do they entail for policy m