June 28, 2011
New Belgium Brewing
Case Study Analysis
New Belgium brewery has increasingly grew throughout the years since their development in 1991. Despite the dominance of the “Big Three” (Budweiser, Miller, and Coors), NBB needs to be aggressive and strive to invest in the attractive beer industry in able to grow more. If positioned correctly, NBB and its main brand, Fat Tire, can continually grow. An evaluation of the industry, the business itself, its brands, and the customers and competitors is needed in order to be continuously successful.
The brewing industry can be characterized by Porter’s Five Forces framework. New entries to brewing have a relative ease in creating home micro-breweries, which is aided by the simplicity of the brewing process. Micro-breweries are measured as producing less than 15,000 barrels of beer per year with 75% or more of the beer sold off-site. However, in order to mass produce beers to competitive market levels, more expensive technologies are needed. This provides some protection to established firms in the industry. In addition, the expert knowledge of the brew-masters in the established firms takes years of hands-on experience to acquire, knowledge which is not readily available to most new entrants.
The bargaining power in the industry belongs to the customers due to the variety of craft beers throughout the country and specialty, regional beers. Substitutes for beer include liquors, wines, sodas, teas, juices, and sports drinks. The wide variety of alternative options for consumers is a general threat to the brewing industry. Supplies are generally bought by brewers, with New Belgium providing an example by getting their raw malt materials from the United States and Canada, hops from the Pacific Northwest, and packaging material from Colorado. Then the rivalries within the industry are pretty intense, with the three major players in the domestic market (Budweiser, Miller, Coors), mid-major players (Sam Adams & New Belgium) and the craft/homemade breweries. At any level, a brewing company will have heated competition for consumers.
The brewing industry remains to be an attractive industry for the owners to invest in because of the worldwide appeal of the product, the longevity of beer’s position as a beverage for humanity, and the United States’ cultural inclusion of beers. New Belgium has found a niche for higher-quality, craft brewing. In addition, the demand for these specially made craft brews have increased despite an overall decline in beer sales in the United States. Growth of the craft brewing industry in 2010 was 11% by volume and 12% by dollars compared to growth in 2009 of 7.2% by volume and 10.3% by dollars. Overall, U.S. beer sales were down an estimated 1.0% by volume in 2010. New Belgium states that they opened distribution in six new states in 2009, and increased production by 15%, despite the declining economic climate. Thus craft brewers, like New Belgium, are a threat to the established powers of the beer industry, the Big Three (Bud, Coors, Miller). Craft Beer Sales Growth BEFORE 2010
New Belgium ought to be more aggressive in their desire for growth. The intense rivalry of specifically craft-breweries, not to mention the beer industry as a whole, demands aggressive growth policies. With the continued growth of craft breweries in the domestic market, New Belgium has the potential to gain market share with their mass-production capabilities already in place, and their niche as a specialty, craft beer. Particularly, they must be more aggressive in their marketing campaign.
Facebook and Twitter are essential to any Internet advertising campaign for a company nowadays. New Belgium has been proficient in gaining attention through Facebook, as the numbers of “likes” for New Belgium Brewery’s Facebook has grown from 63,000 in 2010 to its current number of 179,714 (as of June 27, 2011). The brewery’s Twitter account currently has...