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Craft BeerCatering to a Whole New Customer

Author- Tanmeet Gujral
BUS130- Spring13

Craft Beer- Catering to a Whole New Customer

Americans have been enjoying their beers since their arrival on the Mayflower. Small home breweries have been operating in the U.S. ever since. Although a major share of the market for beer is owned by the big beer companies like Modelo, Heineken, and Anheuser-Busch with their famous Budweiser brand of beer, recent years have found many microbreweries and craft breweries coming up all over the U.S. According to the Brewers Association, craft brewers can be defined as small, independent and traditional, whose focus is on producing traditional beer with innovative new styles and ingredients (Brewers Association). As more and more customers move towards experimenting with locally produced brews, the craft beer industry is seeing an increase in their popularity and growth (IBIS industry report, 2012). Shifts in Demographics and Cultural Values One of the most important shifts in demographics in the U.S. has been the changing age structure of the population. While the Baby Boomers (born between 1946 and 1964) and the Generation X (born between 1965 and 1976) form a large chunk of the beer consumers, the craft beer industry cannot ignore the much younger, Generation Y or the Millennials. The Generation Y, born between 1977 and 2000, will within the next ten years or so, make up over 40% of Americans that are of or over the legal drinking age of 21 years. Given this, the Millennials will eventually form a large portion of the beer (and other alcoholic beverages) drinking population, and make up a large and attractive market, both now and in the future. The Millennials are a generation that has grown up in a technologically savvy world that is very culturally and ethnically diverse. They are fiercely independent, highly educated, ambitious, and place a greater emphasis on their quality of life and experiences. This generation loves stimulation and experimentation, and continuously seeks to define itself through its consumption

3 choices. Being internet proficient, the Millennials prefer seeking out their own product preferences and expect a two-way communication from brands of their choice through a media of their choice. The Millennials are also a generation of changing cultural values. They are very aware of who they are or want to be as an individual, and use products and services as a means of selfexpression. They value social interaction and prefer getting their brand recommendations from peers and social networking websites rather than from advertisements. The Millennials are also a very environmentally conscious segment that values the natural world. They are increasingly moving towards a more green society, and some have increasing preferences for local and organic products. They are also calling upon businesses to be more environmentally aware and socially responsible. Opportunities and Threats Associated with the Identified Shifts Shifting demographics and changing cultural values have major implications for businesses in any industry, creating opportunities and threats for both existing and new products. But for the craft beer industry, these changes have opened up a stream of loyal consumers bringing in sustained revenues. While beer industry as a whole has suffered declining sales, the craft beer has managed an annual growth rate of 8.4% between 2007 and 2012 (IBIS industry report, 2012), and shows almost a 46% growth from new drinkers (Clarke, 2012). The Millennials, affluent and highly educated, demand better beer experiences and appreciate quality over price. This has led to an emergence of craft brewers and resulted in what can be called the Craft Beer Renaissance (Goldammer, 2008). The opportunity for the craft beer industry lies in the untapped niche between the more upscale wine drinkers and the more blue-collar beer drinkers. With unique product development and a more wine-like experience,

4 with beer-tasting rooms and brewpubs, the craft beer industry has attracted a lot of wine drinkers (Warner, 2010). The craft beer drinkers expect the small, often home-based, breweries to offer customized experiences and choices, and not just one iconic variety. They prefer variety and a full flavored beer, rather than the often bland tastes of the mainstream beers. They want the craft beer to offer them exotic tastes that are authentic, unique, and rustic. Another opportunity for the craft brewing industry lies with the women consumers who prefer a fuller flavor, aroma, and texture in their beer, and are offended by the low-calorie, fruityflavored, often patronizing tone of the mainstream beer houses (Clarke, 2012). However, the price of the craft beers poses a big obstacle in the industrys revenue stream. According to Mintel Groups (2010) research, 41% of beer drinkers only buy craft beers on special occasions due to their high prices, and deem it a luxury item. Also, due to recession and higher operating costs, many home-breweries and microbreweries close or are sold to larger national brew houses (Goldammer, 2008). A lot of them often close even before they start business as they are unable to get the brew right or face other obstacles in regulations. Conclusion As more and more young peoples imagination is captured by these craft brews, the small but significant industry is finding new ways to cash in on the changing demographics of age, income, and education. As marketers, we need to be continuously aware of changes in the demographics and culture within those demographics, to be able to fully capture the intended markets. More than anything, the Millennials love to up their cool factor and that is what the craft beers need to target for their own growth and survival.

5 References Warner, A. G. (2010). The Evolution Of The American Brewing Industry. Journal of Business Case Studies (JBCS), 6(6). Goldammer, Ted. "U.S. Beer Industry." The Brewers Handbook. 2nd ed. N.p.: n.p., 2008. N. pag. U.S. Beer Demographics. Apex Publishers. Web. 15 Feb. 2013. <http://www.beerbrewing.com/beer-brewing/US_beer_industry/beer_demographics.htm>. IBIS world.com."Craft Beer Production in the US: Market Research Report." Craft Beer Production in the US Market Research. N.p., June 2012. Web. 15 Feb. 2013. <http://www.ibisworld.com/industry/craft-beer-production.html>. Brewers Association."Craft Brewing Statistics." Brewers Association. N.p., n.d. Web. 15 Feb. 2013. <http://www.brewersassociation.org/pages/business-tools/craft-brewingstatistics/facts>. Satran, Joe. "Craft Beer Growth Pushes Number Of Breweries In U.S. Higher Than Ever Before." The Huffington Post. TheHuffingtonPost.com, 13 Dec. 2012. Web. 15 Feb. 2013. <http://www.huffingtonpost.com/2012/12/13/craft-beerbreweries_n_2287906.html>. Clarke, Jim. "Who Is The New Beer Consumer?" Beverage Media Group. N.p., 1 May 2012. Web. 15 Feb. 2013. <http://www.beveragemedia.com/index.php/2012/05/who-is-thenew-beer-consumer-brewers-ready-to-say-ihola-and-more-to-expand-reach/>. "Craft Beers Bubble over in Popularity." Mintel. Mintel Oxygen Reports, 2010. Web. 15 Feb. 2013. <http://www.mintel.com/press-centre/press-releases/641/craft-beers-bubble-overin-popularity>.