Brewing Industry Case Study

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Question 1. Industry Background:
There was no growth in 50$ billion domestic beer market between 1981 and 1994. Beer consumption drooped from 23,1 gallons per person in 1981 to 21,5 gallons in 1994. Stricter enforcement of laws related to age restrictions (from 18 to 21 age), social pressure on drinking and driving, healthy life style, which stagnated the industry.
In this paper we are focusing on the following three general categories of US domestic beer market: major and second-tier domestic producers, craft brewers and import companies.
Major domestic companies left the specialty beer segment for the import companies as it was of a small size of the whole beer market. They tried to re-position the premium beer to the specialty segment, stepped
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While threat of entry is high for the major and second-tier domestic producers, they are substantially lower for the better beer, specifically craft brewers, category. Additionally, suppliers almost don’t have power over prices. Yet, brewery production attractiveness depends on the strategic categories of US beer market a business plans to enter. Investment in equipment, plants, creating recipes, buying ingredients and processes is a significant obstacle to entry into the major and second-tier domestic brewer producers. Where market was dominated by “Big three” companies, which accounted for 77% of domestic beer shipments in …show more content…
Throughout the 1980’s beer consumer preferences changed and craft brewers gained popularly over lighter, mass-produced beers of the larger breweries. In contrast to other general categories of beer, sales of the specialty beer segment grew at compound annual rate of 40%, while occupying only 1,4% of the total US beer industry in 1994.
Contracting brewing companies had several competitive advantages like, manufacturing flexibility, lower capital and overhead costs resulting in higher gross margin. In addition followed by careful selection of brewery based on geographic preferences; reduction of transportation costs, setting high quality standards and option to keep the product fresh. Meanwhile this segment has been mainly imported. This was an opportunity to create a own production and niche by Boston Beer Company, the largest in US craft brewery segment.
Based on these factors, overall industry attractiveness is medium with the better beer segment (specifically craft brewer) having the most attractiveness and the major and second-tier domestic brewer producers segment having the least attractiveness.

Question 2.

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