Discussion Case #2 - Craft Beer

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Feb 20, 2024

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Joshua Turner GBA 490-332 Discussion Case #2 – Craft Beer 1. Overall, one of the biggest strategically relevant components would be the economy. COVID-19 had an extremely negative impact on the beer industry and the economy. Because of the shutdowns that took place across the nation, many brewers saw a decrease in sales. People didn’t leave their houses, resulting in less business for bars. In 2018, the beer market had around a 2% economic impact of the U.S. GDP. Culture is another relevant component. Many people started to drink lower-calorie beers. Notably, seltzers have become a significant substitute for beer given their lower calorie content. Another relevant component is political. Certain laws are in place that grant access to select groups to be able to produce beer. The government keeps track of the distribution process of beer. The environment can also be a relevant component, given that certain weather conditions can influence which drinks are ordered. For example, lighter beer is consumed in warmer months. 2. The competition within the craft beer industry is extremely competitive given the number of brewers and popular brands. I would say that the competition among rival sellers would be the strongest competitive force. The craft beer market has been increasing over the years and as a result, more products are available to consumers. Some consumers are loyal to certain beer, but many consumers buy multiple types of beer from various brands. This greatly increases the rivalry among the brands due to the lack of differentiation. The weakest competitive force in my opinion would be the competition from new entrants. Establishing a distribution network is difficult for new entrants, especially since most start out with a smaller local brewery. Since the production of beer requires a lot of capital to expand, many small brewers cannot afford to do so with a limited budget. The competitive force with the greatest effect on attractiveness and profitability for new entrants would be customer bargaining power. Many beers taste relatively the same, making them hard to differentiate. When a particular beer is out of stock, it is extremely easy to choose a different brand given the large number of brands available. 3. Due to having such a wide geographical range, I believe that AB inBev is in the best position. With distribution in many countries, the customer base is exceptionally large. They can appeal to all types of people with their wide selection of products. On the other hand, lower geographical reach can result in less demand for the products. Due to this, I believe that Micro breweries are in the worst position. 4. Some key factors that can really help a start-up craft brewery include advertising, a reliable source of wholesale distributors, and various products. By having successful

advertising, this can greatly increase the demand and sales of the products. With wholesale distribution, customers can access the products easily. With a wide range of products available, customers can find a drink that they like from that brewery and may even enjoy multiple drinks, increasing the sales and satisfaction of the customers. 5. I would personally recommend smaller breweries to prioritize production of quality beers and try to find some unique flavors that will make them stand out but also be appealing to drink. This could really differentiate them from other brewers that offer typical, average beer. They could test out the success of these new flavors by letting restaurants and bars serve them and see how the sales perform. 6. In 2020, we can observe a decline in the demand for beer overall, with an exception for craft beer. As a result, many breweries will prioritize producing craft beer. Social distancing due to Covid had a negative impact on the distribution for microbreweries. It is likely that competitiveness will rise with the arrival of new entrants into the limited market.

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