1.

The Total U.S. beer market was estimated to be around $106 billion. The total economic impact of the beer market is estimated to be 2.0 percent of the total US GDP. Barrels produced in the U.S. is relatively constant for the past five years. Globally, growth was expected in developing countries and it seems to be fueled by the introduction of different styles of beer. Exported beer to both developed and developing regions was expected to help drive future growth. The case states that there were over 3000 US-based brewers in 2014 and over 4000 in 2015 U.S.

The global market was segmented by producer and brand, with the larger, global producers owning a portfolio of brands within their operations. Acquisition of smaller, microbreweries was becoming more common as larger global producers looked to maintain market share as smaller craft brands competed against the larger, global brands.

2.

Competition in the craft beer industry could be considered global, due to both the product portfolio of the largest producers and the acquisitions to bring more of the craft brands under these companies. However, there were hundreds of regional local breweries that did not compete internationally, yet faced significant competition from the brands of these global producers.

The one of the strongest competitive force is the bargaining power and leverage of buyers. Due to the regulatory environment, the need to sell to distributors is a significant competitive force faced by craft breweries. Larger producers have potentially better negotiating power with distributors, in compare to the small producers. In my opinion another strong competitive force is the rivalry among competing sellers of craft beer since there were many producers. Competition among major brands centered primarily on brand image and advertising, price, as well as distribution and tap and shelf space. Competitive pressure was also driven by the increasing number of local breweries, each attempting to occupy the local craft brand for the geographic location. Moreover, this competitive force may have the greatest effect on industry attractiveness and the potential profitability of new entrants.

In my opinion the weakest competitive force is the competition from substitutes. There may be many substitutes to craft beer, including any other alcoholic beverage, however, in my opinion consumers of craft beer drink are focused and dedicated ones. I analyze craft beer market as a niche market.

3.

My strategic group map would place local distribution for nano and micro breweries and occupy a better price and quality position. Global producers can have an advantage because of the Global distribution and moderate pricing position. In my opinion, Craft Brewing Alliance and Boston Beer Company will have best positions because they possess a suitable combination of high-quality products and large market share, and MillerCoors and AB InBev will have worst positions because the companies have been experiencing the decrease in their annual profits.

4.

Factors that are necessary for competitive success for a start-up craft brewery are; brand image, use of social media for marketing exposure, distributors access, sufficient sales volume. The craft beer brand image is an imperative for market differentiation among consumers, as well as maintaining the higher price in the market. Consumer who cannot see a difference between brands are not necessarily willing to pay a higher price.

Another important factor is usage of social media. To keep costs low, free or relatively-free marketing through social media is a necessary tactic. Marketing on social media became an important marketing tool in a nowadays technological world.

Start-up or small craft breweries may be at a disadvantage with distributors. Distribution represents the key factor as small and large producers compete for shelf and tap space. Especially at the local level, there is insufficient space to accommodate the current producers, as well as the anticipated entry of future breweries.

Last, but not the least important factor is to maintain the sales volume in order to achieve the scale economies in marketing expenditures successful craft breweries were required to have sufficient sales volume to keep marketing expenses at an acceptable cost per unit basis.

5.

The threat of the new companies and the power of the suppliers seem to be the strategic issue for craft brewers in 2017. The threat of new entering company is can have a severe impact on the willingness to expand the product line in the pressure that the new company will produce the substitute product. The shortage of suppliers has given the power in the negotiation process for the essential items required in the production.

In the beer industry, although there are many types of buyers it is most important to understand the preferences and buying behavior of the beer drinkers. Their purchase decisions are driven by price, taste, convenient access, and marketing. This is the strategic issue that craft breweries are facing in 2017.

The key strategy factor includes a strong network of wholesale distributors – to get the company’s brand stocked and favorably displayed in retail outlets, bars, restaurants, and stadiums, where beer is sold) and clever advertising (to induce beer drinkers to buy the company’s brand and thereby pull beer sales through the established wholesale and retail channels). Because there is a potential for strong buyer power on the part of large distributors and retail chains, competitive success depends on some mechanism to offset that power, of which advertising is one. 

6.

The primary goal in any brewery is to focus on making high-quality beer. Quality beer is a critical factor of success. Focus on consistency. The consumer may find risk associated with your beer if the experience is not the same every time. 

Make sure you plan ahead, keep up with demands and don’t run out of beer. Gaining consumer loyalty can be a long process, but it only takes one bad experience or one missed opportunity to destroy that trust. If your loyal consumers are not able to get their favorite beer, they will accept a substitute which results in your loss and another’s gain. Manage your brewery’s growth effectively. As craft breweries grow it becomes harder to produce consistent, quality, differentiated beer that satisfies demand. Managing growth and the complexities that accompany it can ensure consumer retention and help your brewery remain competitive.