Melbourne's first supplies of beer were imported from Launceston by J.P. Fawkner, as was much expensive bottled ale in later years. The Port Phillip Gazette considered that John Mills, who was charged with illegal Sunday trading in 1837, made 'every palatable ale' at his Flinders Street brewery. Other early brewers included Thomas Capel at his Britannia Brewery near Queens Wharf, and John Moss behind the Ship Inn in Flinders Lane. By the mid-1840s these early manufacturing establishments were using local barley and hops. The first mayor of Melbourne in 1842, Henry Condell, was a brewer. A fire destroyed his enterprise in Little Bourke Street in 1845.
Early brewers experienced difficulties, however. The greatest demand was in hot weather when it was virtually impossible to make good beer. Efforts were made to brew in the cooler months, and store it, though there was no adequate refrigeration until the late 1880s. Nevertheless, as Melbourne and its suburbs grew, brewing enterprises expanded. Breweries and hotels boasted territorial and cultural associations, and predominated in the inner suburbs, with Collingwood the brewing capital. In the 1860s and 1870s in particular, the trade was a gateway to wealth. Edward Latham, recently arrived from Liverpool, purchased a small brewery in Bouverie Street, Carlton in 1864. By 1883 he had sold out, a rich man.
From the 1870s technological innovation saw the industry triumph over problems of production and bacterial spoilage, and develop and market new and popular styles of beer, in particular light, bright-coloured beers. At his City Brewery Robert McCracken employed a student of bio-chemistry, R.K. Montgomerie, as head brewer. McCracken also discovered that cane sugar could balance the instability of colonial malts. Gradually, bad beer was eliminated. In 1884 the Belgian-born brewer and chemist Auguste de Bavay joined T. & A. Aitken's Victoria Parade brewery (founded 1854) and produced pure yeasts and a distinctive, top-fermented Australian beer. But it was soon to be undermined. Americans W.M. and R.R. Foster from New York started the Foster Brewing Co. in Rokeby Street, Collingwood, in 1888, popularising the modern lager style. Undercapitalised, they turned the business into a public company, sold out within a year and returned home. In 1894, de Bavay was persuaded to join Foster's by a director, Montague Cohen, and by 1895 had increased production and a trade in draught beer over 40 metropolitan outlets.
The new century years saw rising temperance activity. Tax increases raised costs and reduced profits and breweries were forced to close. Liquor licensing authorities aimed to reduce the number of hotels, particularly in the inner city, and six o'clock closing was introduced in 1916. The Society of Melbourne Brewers was formed in 1903 to raise the price of beer and in 1907 Carlton & United Breweries (CUB) was formed. The hotelier-backed Co-operative Brewery at Abbotsford remained independent until 1925 when it joined CUB. With many hotels tied to its products, CUB was a virtual monopoly. In both corporate and production terms Melbourne was the centre of Australian brewing. British-based Courage Breweries aimed to break into this market and in 1966 announced that it would build a brewery at Broadmeadows but failed. By 1978 it had sold to the New South Wales-based Tooth & Co. Fashionable boutique breweries were associated with some hotels from the 1980s, but competition was mainly due to a rise in imported bottled beer and inroads made by the Sydney-based firm of Tooheys under the multinational Lion Nathan banner.
Heritage-listed sites include the former Carlton Brewery in Bouverie Street; the Yorkshire Brewery in Wellington Street, Collingwood, with its 1876 polychrome brick brewing tower still standing; and the former Cambridge Brewery, Queensbridge Street, Castlemaine Brewery's No. 2 brew unit (1888) at Southbank. The Victoria Brewery, East Melbourne (closed 1983) has been developed as the Tribeca apartment complex.