* Competitor Analysis. According to what usually happen in some countries (from Europe and South America), the craft brewing segment is vocalizes -focused- to the region where companies are placed and their influence area; the map of influence looks very “sectored”, so, for the studied case a craft brewer company placed in Seattle, for example, would have a high presence in Seattle and its region, and it would have very few / almost no consumers, for example, in California, or in the East Coast. Each region would consume its own regional products, mainly.
As soon as a craft brewer company wants to expand its boundaries nationwide for example or decides to go public, conflicts and competition with other regional companies would appear. The market is trending to be more competitive because of this reason. In the studied example, top-tier and second-tier should not be considered as competition of Redbook. Instead, craft brewer companies are the Redbook competitors: Boston Beer is the main competitor of Redbook. Also are competitors: * Sierra Nevada Brewing Co * Anchor Brewing Co. * Pet’s Wicked * Pyramid Ales / Hart Brewing Co * and so on.
Top-tier and Second-tier brewers could be considered as competitors as soon as those brewer companies start invading craft beer segment with some products. * Environmental Analysis. Demography: In general, beer is massively spread (considered the most popular alcoholic drink in U. S. ) and it is a relative low-price drink, compared to wine and spirits. Craft beers are more expensive than massive beers, anyway, consumers of craft beers are conscious and predisposed to pay this difference: “Drinking craft beer said something about the consumer.
It said: “l support local business,” and “l care about laity,” and, ultimately, “l am unique too” Consumption is not dependent to age and gender; however it is more frequent in men than women. One Important Torture AT Diverge Industry Is Lustrously. Massive Deere can De found / bought almost everywhere, in every city and town, so there are no limitations about availability. Craft beers, on the other hand, are locally focused. They can rarely be found / bought outside the influence region.
Calculators: Even when consumption is not dependent to age, it is not allowed to ages minor 21 (l am not sure, if this is the age in U. S.? ). The market for top-tier beer companies shows a greater concentration and increased consolidation in the industry. Massive beers can be found / bought almost everywhere, in every city and town, so there are no limitations about availability. Craft beers, on the other hand, are locally focused. They can rarely be found / bought outside the influence region. Their products have more quality and are more “exclusive”.
Technology: Top-tier brewery facilities should be very advanced, investing a high percentage of their budgets in leading technology (machinery, fixed assets) and R&D for new reduces and flavors. Craft beer facilities should be more conservative about investments in technology and the production recipes (formulas) should stay unchanged across the time. Products from craft beer companies have more quality (raw materials, ingredients) than massive beers. Macro-economy: The global financial crisis and U. S. Recession are negative conditions for any company.
Top-tier beer companies should deal also, with stable demand across several years. Second-line products were probably released (limiting quality of raw materials, packaging and so on) for facing the adverse social situation. Consumers of craft beers are conscious about higher prices to be paid. Anyway, market share of craft beer companies grew up during the studied period, compared to top-tier beer companies. Political / Legal: Even when consumption is not dependent to age, it is not allowed to ages minor 21 .
Some states could have specific regulations and taxes affecting alcoholic beverages. Top-tier companies are equally affected (they sell their products nationwide), but craft beer companies located on those regulated states could be affected. Global Trade: Top-tier beer companies invest in advertising and marketing a big percentage of heir budgets; the competence is fierce. They invest an important percentage in logistic Ana Lustrously, too. Craft beer companies are moderate in advertising and marketing, sometimes with local campaigns or even no campaigns at all (word-to-mouth).
Distribution is fostered by a top-tier-beer company with predefined distribution routes. * Five Forces Analysis. Five Forces Analysis – Craft Beer segment. Intensity of Rivalry: * Lot of craft beer brewers currently in the market. * Profits of craft beer, is higher than profits of mass beer. * There is an increasing demand of craft beer compared to all the other segments (top-tier, second-tier, imported). * Even when competition and rivalry is lower for craft brewers than mass brewers, new entrances in the craft brewing segment would increase competition.
Some rivalry is growing up because some top-tier brewers are getting in the craft beer segment. Bargaining power of Suppliers: * Raw materials and ingredients are available. Anyway, prices of specific ingredients in comparison are higher than other goods (food). * Machinery and fixed assets needed to operate a brewery are available, too. Boxes, cans, bottles are pretty standard, with recycling possibilities (respected socially) * Suppliers in general have long term supply agreements and steady business. Even when top-tier brewers can negotiate with suppliers in better conditions, the craft beers can get some agreements with regional and local suppliers in fair conditions. Bargaining power of Buyers: * Craft beer companies sales were mainly to: * main distributors / wholesales / markets. * local bars, pubs or restaurants. * end consumers. * They offer different presentations as for example cans, bottles (different sizes), eggs. * Negotiation among craft beer companies and the first category detailed before, would be the most complicated (for the craft beer companies).
Negotiation with the second and third group, would be propitious for the craft beer companies, because consumers would pay premium prices for differentiation. Threat of new Entries: * Threat of new entries is high, because of lower costs of facilities and machinery (compared to top-tier and second-tier brewing companies) * Those lower costs enable craft beer starters a smooth start-up curve, with lower starting costs. Anyway, influence region is limited at the very beginning compared to top-tier and second-tier brewing companies.
Threat of Substitutes: * Substitutes for craft beers could be: * Other alcoholic drinks (the most similar could be imported beers, but massive beers, wines and spirits should be considered, too) * Non- alcoholic drinks (wide variety, from water, to Juices, energy drinks and soft drinks) * Switching costs are low. Have Forces Analysis – Mass Beer segment. * Considering the paragraph in page 4 “From 1975 to 1995, U. S. Beer consumption per capita varied only slightly, rising from the 17-19 gallons per year range, peaking n the early ass around the 24-gallon mark and then steadily declining, settling in the range of 22-23 gallons per year.
Industry volume has shown essentially zero growth since the early sass a fierce rivalry could be inferred. * Top-tier beer companies spend high amounts in advertising; the market is elastic so any slight price difference could have “negative” consequences. Bargaining power of Suppliers: * Raw materials and ingredients are available. The bargaining power of the suppliers would be lower compared to the mass brewers, which can define the price they are willing to pay or Just switch to another supplier. Anyway, prices of specific ingredients are more expensive, in comparison, than other goods (food). Machinery and fixed assets needed to operate a brewery are available, too. Boxes, cans, bottles are pretty standard, with recycling possibilities (respected socially) * Suppliers in general have more pressure. * Better conditions to negotiate with suppliers. Bargaining power of Buyers: * Top-tier beer companies sales were mainly to: * distributors / wholesales / markets. * end consumers, in lower proportion. * Top-tier beer companies offer different presentations. Consumers of craft beers are probably more brand and taste loyal than top-tier beer consumers.
Negotiation among top-tier beer companies and distributors / wholesales / markets, would be very intense. Threat of new Entries: * Considering high costs of entry (higher sunk costs I. E. Facilities, machinery), the stable demand of mass products, and fierce competition producing low profit margins, the threat of entry is low. Threat of Substitutes: * Substitutes for top-tier beers could be: * Other alcoholic drinks (including second-tier, craft and imported beers, wines ND spirits) * Non- alcoholic drinks (wide variety, from water, to Juices, energy drinks and soft drinks) * Switching costs are low.
Conclusions: After the 5 Forces Analysis for Craft Beers and Top-tier Beers, craft beer segment looks more attractive than top-tier beer, mainly because of intensity of rivalry and demand of products for each case. For both cases, economies of scale are dependent of capacity of utilization; that meaner if it 100% for both cases, Craft Beers and Top- tier Beers would be having the lower average costs possible (no optimization possible).