Date post: | 11-Jan-2017 |
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ANALYZING THE CRAFT BEER
INDUSTRYChristopher Fadule
MBA 592
Wilkes University
Craft Beer Industry•Rapid growth in the past decade
•Number of breweries in the U.S. (more than tripled)• 2005 – 1,447 breweries• At 6/30/16 – 4,656 breweries & another 2,200 in planning
•Mergers and acquisitions in recent years
What is “Craft”?
•Defined by Brewers Association
• “Small” – 6 million bbl. or less per year
• “Independent” – less than 25% of brewery owned/controlled non-craft brewer
• “Traditional” – uses traditional/innovative brewing ingredients and fermentation
History•Anchor Brewing Company (1896)
•New Albion Brewery (1976)
• Legalization of homebrewing (1978)
•Sierra Nevada Brewing Company (1979)
•Boston Beer Company (1984)
Breweries by Type•Microbrewery• Less than 15,000 bbl. per year• Sells at least 75% off-site• Most common in U.S. (56% of all breweries)• Ex. – Susquehanna Brewing Company
•Brewpub• Restaurant & brewery• Sells 25% or more on-site• 39% of all U.S. breweries• Ex. – Breaker Brewing Company
Breweries by Type (cont’d)•Contract brewing company• Contracts another brewery to make its beer• Can use hybrid approach to meet demand• Ex. – Lancaster Brewing Company
•Regional craft brewery• 15,000 to 6 million bbl. per year• Ex. – Boston Beer Company
•Non-craft (regional & large breweries)
Geographical Factors and Statistics
Geographical Factors and Statistics (cont’d)
•State highlights
• Most craft breweries in the U.S. – CA (518)
• Highest annual craft beer production – PA (4.06 million bbl.)
• Most breweries per capita – VT (9.4)
• Most gallons of beer produced per 21+ adult – VT (17.4)
Geographical Factors and Statistics (cont’d)
2014 Economic Impact by State
RANK STATE OUTPUT ($)
1 CALIFORNIA 6.9 billion
2 PENNSYLVANIA 4.5 billion
3 TEXAS 3.8 billion
4 NEW YORK 2.9 billion
5 COLORADO 2.7 billion
2014 Output Per Capita by State (21+)
RANK STATE OUTPUT PER CAPITA ($)
1 CALIFORNIA 709.39
2 OREGON 631.35
3 VERMONT 579.52
4 PENNSYLVANIA 476.98
5 ALASKA 469.09
Five Forces Model of the Craft Beer Industry
• 1. Rivalry among sellers – moderate
(+) (-)
Low buyer costs to switch brands Buyer demand growing
High differentiation Finite # of styles
Numerous competitors Vary in size/competitive strength
Five Forces Model of the Craft Beer Industry
• 2. Competition from potential new entrants – moderate to high• Barriers to entry• Small scale – low capital requirements
• 3. Threat of substitute products – high• Non-craft beer, wine, liquor, non-alcoholic beverages
Five Forces Model of the Craft Beer Industry (cont’d)
• 4. Bargaining power of suppliers• Most ingredients – low• Hops – high
• 5. Bargaining power of buyers• Wholesalers – low to moderate• Retailers – low to moderate• Consumers – high
Marketing - Consumers•Millennials
• Lack of brand loyalty – style over brand
• Know what they like, but open to trying new things
• Local pride• 75% of Americans live within 10 miles of brewery
• Female Millennials – over index
•Bottom 60% income households = 40% consumption
Marketing Strategies•Social media• Facebook• Instagram• Twitter
•Beer websites/apps• BeerAdvocate• Brewgene
Supply and Demand
• The Alchemist – Waterbury, VT
•Heady Topper• IPA• #1 on Brewgene Top 100• #5 on BeerAdvocate Top 250
Pennsylvania•Breaker Brewing Company
• Troegs Brewing Company
•D.G. Yuengling & Son
Mergers and Acquisitions
Mergers and Acquisitions (cont’d)•Ballast Point Brewing Company
• Lagunitas Brewing Company
• Founders Brewing Company
Infiltrating the Craft Market•Craft or “crafty”?
• Blue Moon
• Shock Top
Conclusion• Industry cannot sustain current pace of growth
•Consolidation has already begun, but will become more common
•Non-craft infiltration causes threat
•Mergers and acquisitions for survival
References
References (cont’d)