Five Forces Analysis of the Craft Beer and the Beer Industry
Threat of New Entry
Beer market is experiencing emergency and growth of home brewer. These brewers have adopted the spectrum competition by packing their products in lower quantity at lower prices making them affordable to many. They also seem to diversify in terms of flavors and taste. If licensed, home brewers may become great threat to Craft Brew in the future (Qumer & Purkayastha, 2016).
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Beer buyers in the region are presented with variety of brands and brewers such that they have a wide spectrum to choose from. Buyers are also presented with both local and international beer packed in different volumes and at different prices. This gives them a wide spectrum to choose from and hence, increasing their bargaining power. The availability of home brewer who pack their beer into much smaller quantities increases customers bargaining power leaving Craft and other large brewers to depend only on customers that are brewers or brand loyal. Beer may also be associated with styles or seasons. This results to fluctuation of demand especially in seasonal based beer, making it hard to enhance good sales throughout. This may force seasonal production of some brands or reduction of prices of some brands to attract more customers during other seasons.
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Brewing companies depends on grains in brewing which is highly available directly from farmers or wholesalers. However, in a situation where a special grain is required, the brewer will need to search for the product which is considerably scarce. In this case, grain specified production increases suppliers bargaining power in the market. The increase in the number of brewing companies has also increase the demand of the brewing grains which result to increase in suppliers bargaining power. Craft Brew produce high-quality and unique beer meaning it requires specialized grains in its production and hence likely to be affected by the high supplier bargaining power. Brewing also requires some equipment needed in different parts of processing. Scarcity in some of these equipment such as aluminum cans of 16-oz increased the supplier bargaining power (Qumer & Purkayastha, 2016).
Threat from Substitute
Craft Brewer produces high-quality and unique products that are well known in its distribution region. This makes its product well distinguished in the market, reducing substitution threat. Craft is the only local brand that is able to focus on uniqueness in testing and quality. Thus, no local brand can manage to substitute it. Although foreign brands have tried being presented as Craft products, they have still not managed to substitute it. Customers may consider taking similar cheap beers in the market, however the quality produced by Craft is highly unmatched and thus, those loyal to the brewer will remain loyal.
Craft beer is experiencing stiff competition from large foreign companies that include SABMiller and AB InBev among other breweries in the market. Some of these international brands are offered at a lower price compared to Craft products. The competition is so stiff such that the above named companies have tried posing some of their products as Craft brands to earn more market shares from locals who are brand or brewer loyal. Moreover, they are associated with a certain style which makes them preferred by some locals than locally produced products. The company is also experiencing competition from other local products though in a lower magnitude compared to big foreign companies (Qumer & Purkayastha, 2016).Order Unique Answer Now