Brewing Case
Analyze the competitive structure of the industry using Porter’s five forces model.
The competitive structure of the industry when it comes to the risk of entry by potential competitors is that the barriers to new entries is not that high that many
The threat of substitute products is increasing
What are the implications of the evolving competitive structure in the brewing industry for the profitability and strategy of a smaller mass-market firm in the industry?
Some of the implications of the evolving competitive structure in the brewing industry
Are there different strategic groups in the industry? What are they? Do you think the nature of competition varies between groups?
The U.S. brewing industry has become more concentrated over the last two decades because of several reasons. First is that the consumption of beer has been slowly declining, in order for companies to gain market share, they have to take customers from other companies. This would then lead to some companies to go out of business due to the lack of customers. Second, brand loyalty also increased. Advertisement played a large role. Larger companies were able to spent $0.40 per case of beer sold. Smaller mass-market brewers could not afford to spend near that amount. And last, technological change in canning and distribution lead to the concentration of the brewing industry, as well. The size that a mass-market brewer has to accomplish to acquire all economies of scale has grown. They must produce more beer and achieve more market shares. Not all companies reach minimum efficient scales of production.