The Structure of the Brewing Industry Case Study

Exclusively available on Available only on IvyPanda® Made by Human No AI

The brewing industry is exceptionally attractive due to several factors, some of which are identified through an extensive analysis of Porter’s five forces. They include the intensity of rivalry, the substitute’s availability, the bargaining power of buyers and suppliers, as well as the threat of entry. In regards to the first force, it is crucial to determine the extent to which brewing companies compete with each other for customers’ attention. It is evident that if there is less concentration in the industry, manufacturers benefit from less rivalry. The case study notes that there is a decline in the number of macro brewer companies, which results in a substantial rise in industry concentration (Meier & Wang, 2018). Therefore, although the market is dominated by four primary breweries, the rivalry between businesses in the industry is relatively low and gradually declining.

As for the availability of substitutes, it is apparent that as the years past, people do not start drinking any less alcohol, which means that possible substitutes to beer may include liquor or wine. According to the case study, as of 2013, almost two-thirds of American adults consumed alcoholic beverages (Meier & Wang, 2018). Out of these individuals, 41% preferred beer to any other type of alcohol. However, despite being a favorite choice, beer continues to move further away from being the top one. Meier and Wang (2018) raise alarm as “United States’ beer per capita consumption declined from 25 gallons in 1981 to 20 gallons in 2012” (p. 5). Thus, the availability of substitutes is rather high in the brewing industry, which makes it a little less appealing to prospective manufacturers.

The next force is the bargaining power of suppliers, which is relatively low in the industry. The costs for starting a brewery are rather low as any company can buy used equipment or initiate a contract arrangement for renting another business’ excess capacity. In regards to raw materials needed to make beer, most of them are cheap, although the challenge is to find suppliers who can provide them in large quantities. As for supplier substitutes, it is crucial to note that the very ingredients that go into the manufacturing of beer cannot be replaced, which is why the brewing industry depends upon supplier output. All in all, the bargaining power of suppliers could be considered rather low.

As for the bargaining power of buyers, it is important to acknowledge that the primary customers are distributors, and not necessarily actual consumers. Bargaining power can increase if there is a limited number of distributors in the market or if they are growing faster than manufacturers (Goldman, 2017). Meier and Wang (2018) note that “where once there were 5,000 US beer distributors, in the 1970s, there were only 3,333 by 2013” (p. 7). In addition, due to the established state-approved relationship, distributors can essentially do whatever they want, which is why the markup on the wholesale price has increased over the years. Due to a trend in distributor consolidation, not only did the number of distributors decrease, but bigger distributors started to monopolize the market. They eliminate potential competitors and neglect smaller breweries in favor of those that generate immediate profits because of their brand recognition. Therefore, it is apparent that the bargaining power of distributors is very high in the brewing industry. They have all the connections with consumers and big retailers, which makes them capable of manipulating the prices easily.

Lastly, it is also important to discuss the threat of entry as the fifth force. On the one hand, it can bring innovation, new capacity, and resources. On the other hand, new entrants inevitably fight for the market share and influence pricing, which can harm other breweries’ profitability. The threat of entry is low primarily because of the barriers, which make it harder for new breweries to gain market shares. These barriers include brand loyalty, limited access to distributors, numerous complex legal regulations, economies of scale, as well as substantial capital requirements. Overall, it is evident that the threat of entry is low, which means that the brewing industry is a rather attractive business prospect, even though some challenges with distributors and consumers certainly exist.

Brooklyn Brewery’s strengths include its strong brand identity, customer loyalty, a developed global distribution network, investments in innovative research, and expert knowledge of the market. Brooklyn Brewery’s primary weaknesses are rather high prices and standardized and therefore inflexible business procedures. As for the opportunities, they include the development of green products, global expansion, and overall business diversification through developing its portfolio and eliminating its over-dependence on existing enterprises. South Asian and Asia-Pacific regions have exceptional potential as they house some of the most promising emerging markets ready to be explored and conquered. In addition, Brooklyn Brewery has the opportunity to make profits by acquiring medium-sized breweries and distributors in developing countries, while simultaneously minimizing potential competition. The company’s threats are increased competition with lower price points, independent local developments, as well as an increasing cost of research and development (R&D) initiatives. Thus, it is apparent that Brooklyn Brewery can indeed sustain a competitive advantage and position itself at the top of the market if it manages to overcome some of the challenges it faces.

The most crucial strategic issues facing Brooklyn Brewery include the company’s excessive reliance on its country of origin as the main market, a high risk of competitors imitating Brooklyn Brewery, as well as decades-old business operation procedures standardized to fit all the sectors. The case study also mentions that the company does not have a retail presence. Brooklyn Brewery also has no clear direction as to where it should expand.

If I were the CEO, I would utilize the analyses of the industry and the company presented earlier and develop strategies based on them. Firstly, the business would make it its long-term objective to expand in the Asia Pacific market by gradually moving operations overseas and stabilizing the markets it enters by opening stores and presenting customized products. The focus would be on such emerging markets as China, Brazil, and India, in particular. My approach to market penetration would consist of three main pillars, including geographical expansion, increases retail presence offline, and online retailing. Secondly, I would invest resources in improving the ambiance of the manufacturing process, focusing specifically on augmented aspects and adaptability to new markets. Thirdly, my strategy would include the decision to increase marketing costs to promote to new customers worldwide.

References

Goldman, J. (2017). How Brooklyn Brewery stands out from the pack. Inc. Web.

Meier, S., & Wang, D. (2018). Brooklyn Brewery: Setting the course for growth. Columbia Business School

More related papers Related Essay Examples
Cite This paper
You're welcome to use this sample in your assignment. Be sure to cite it correctly

Reference

IvyPanda. (2022, August 20). The Structure of the Brewing Industry. https://ivypanda.com/essays/the-structure-of-the-brewing-industry/

Work Cited

"The Structure of the Brewing Industry." IvyPanda, 20 Aug. 2022, ivypanda.com/essays/the-structure-of-the-brewing-industry/.

References

IvyPanda. (2022) 'The Structure of the Brewing Industry'. 20 August.

References

IvyPanda. 2022. "The Structure of the Brewing Industry." August 20, 2022. https://ivypanda.com/essays/the-structure-of-the-brewing-industry/.

1. IvyPanda. "The Structure of the Brewing Industry." August 20, 2022. https://ivypanda.com/essays/the-structure-of-the-brewing-industry/.


Bibliography


IvyPanda. "The Structure of the Brewing Industry." August 20, 2022. https://ivypanda.com/essays/the-structure-of-the-brewing-industry/.

If, for any reason, you believe that this content should not be published on our website, please request its removal.
Updated:
This academic paper example has been carefully picked, checked and refined by our editorial team.
No AI was involved: only quilified experts contributed.
You are free to use it for the following purposes:
  • To find inspiration for your paper and overcome writer’s block
  • As a source of information (ensure proper referencing)
  • As a template for you assignment
Privacy Settings

IvyPanda uses cookies and similar technologies to enhance your experience, enabling functionalities such as:

  • Basic site functions
  • Ensuring secure, safe transactions
  • Secure account login
  • Remembering account, browser, and regional preferences
  • Remembering privacy and security settings
  • Analyzing site traffic and usage
  • Personalized search, content, and recommendations
  • Displaying relevant, targeted ads on and off IvyPanda

Please refer to IvyPanda's Cookies Policy and Privacy Policy for detailed information.

Required Cookies & Technologies
Always active

Certain technologies we use are essential for critical functions such as security and site integrity, account authentication, security and privacy preferences, internal site usage and maintenance data, and ensuring the site operates correctly for browsing and transactions.

Site Customization

Cookies and similar technologies are used to enhance your experience by:

  • Remembering general and regional preferences
  • Personalizing content, search, recommendations, and offers

Some functions, such as personalized recommendations, account preferences, or localization, may not work correctly without these technologies. For more details, please refer to IvyPanda's Cookies Policy.

Personalized Advertising

To enable personalized advertising (such as interest-based ads), we may share your data with our marketing and advertising partners using cookies and other technologies. These partners may have their own information collected about you. Turning off the personalized advertising setting won't stop you from seeing IvyPanda ads, but it may make the ads you see less relevant or more repetitive.

Personalized advertising may be considered a "sale" or "sharing" of the information under California and other state privacy laws, and you may have the right to opt out. Turning off personalized advertising allows you to exercise your right to opt out. Learn more in IvyPanda's Cookies Policy and Privacy Policy.

1 / 1