MBA 650EV| Beer Wars| A Documentary| | Table of Contents Introduction2 How the Large Got/Stay Large2 Why Light is King3 Craft Beer Facts3 The Craft Beer Way4 Spreading the News5 Large Feeling the Effects5 Political Issues6 Conclusion7 Introduction Beer Wars was a very eye-opening documentary. It was interesting to see how the market share of the largest beer company, Anheiser-Busch, has grown throughout the years. In 1965, Anheiser-Busch had a meager market share of twelve percent. As marketing on television grew in popularity, Anheiser-Busch’s market share grew as well.
By 1985, Anheiser-Busch’s market share had grew to thirty-seven percent. By 2005, Anheiser-Busch’s market share had grown to an enormous forty-nine percent. This was very shocking to me that one company could control almost one-half of the market share of a $97 billion industry. Also, in 1985, the other two largest beer makers, Miller and Coors, made up about twenty-six percent of the market share. Thus, in 2005, major beer companies made up seventy-five percent of the beer sales in the United States. Which tells us that craft breweries only had twenty-five percent of the market share.
How the Large Got/Stay Large In the beginning, all beers were craft beers, until the big three companies wanted to grow, and grow they did. Unfortunately, as the three largest beer companies in the United States grew, the beer-drinking public that was buying their beer were actually the people who were suffering. The reason that I say this is because of the way the large beer manufacturers got to this point. The large beer manufacturers were not very concerned about the quality of their beers as much as they were about the number of sales that were created.
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The way that the large beer companies did this was through their advertising campaigns. The large beer companies were/are millions and millions of dollars during different sporting functions and on every day television. Beer Wars told us that, on average, there is about $1. 5 billion spent on advertising by the large beer companies every single year. That number is astounding to me, considering how popular their beers are. I think if they were to cut back their advertisements by about 50%, they would still maintain a stranglehold on the beer market in the United States.
Another way that large beer companies tend to stay on top of the market is through shelf space at different locations. The large beer companies tend to make many different varieties of beers and thus are afforded more space on the shelves and local markets and liquor stores. This leaves a very small area for craft beers to be displayed, especially when it is very difficult to determine if a beer is a craft beer or made by one of the large beer companies. I will talk more about this later in the discussion. Why Light is King The large beer companies tend to market light lager beers, and for good reason.
About eighty-five percent of the beer consumed in the United States is light lager. So, Miller Lite, Coors Light and Bud-Light are very good money makers for the large beer companies. I would not blame the companies for pushing and selling what the people want, or is this what people want? Craft Beer Facts Well, craft beers haven’t fully caught on in the beer markets. NPR. org tells us that craft beers only make up about five percent of the total beer market. According to NPR. org, there are currently over two thousand breweries in the United States.
Of those two thousand, about 1,950 of those breweries are considered craft beer breweries. That’s another very interesting point. Ninety-five percent of the breweries in the United States are brewing about five percent of the beer that is sold in the United States. That really doesn’t seem right, but NPR. org goes on to tell us that in order to be a craft brewery, the breweries cannot brew more than 6 million barrels of beer every year. According to texaswatchdog. org, Anheiser-Busch alone brewed over one hundred million barrels of beer in 2011. That is an amazingly large amount of beer for one company to sell.
This also tells us that the hope is not nearly lost for craft brewers. If all of the 1,950 craft brewers produced only ? million barrels of beer each year, they could easily cripple the large beer manufacturers with an influx of 975 million barrels of beer flooding the marketplace. But, the vast majority of craft brewers would never want to do that. The Craft Beer Way The craft brewers in the United States and around the world have a completely different take on what it means to brew beer. Dogfish Head craft beer was said to only have . 0002% of the market share of beer sales in the United States.
According to brewersassociation. org, Dogfish Head craft beer ranked 12th in the nation in 2011, based upon the number of sales for a craft brewery. That is truly amazing, how a company ranked 12th in the whole country in craft beer sales still only has . 0002% of the total market share of the beer industry. However, the owner of the company said that he would never want to grow like the large beer companies have. He is more concerned about each and every bottle of beer being the best beer possible, rather than worrying too much about how many cases he is able to send out the door.
As a whole, craft beer makers try to capture their piece of the market through differentiation of their products and not through advertising like the large beer companies. Craft beer makers still try to do new and interesting things with beer, but they do their best not to lose focus on the most important factor, a good quality brew. Spreading the News Beer Wars told us that one event that allows craft breweries to get their name out to the public is the great American beer festival. This is an event where brewers go to from all over the world for people to sample and try different beers that the craft brewers make.
This is a great way for the small breweries to get their name out to the market. Unfortunately, Beer Wars told us that even the large beer companies are starting to attend this event. Large Feeling the Effects The large beer companies have now started feeling the effects of small craft beers in the marketplace. According to brewerassociation. org, craft brew beer sales have increased from about one percent to about six percent of market share in the past fifteen years. This is the only portion of the beer industry to have any sign growth in that timeframe.
Once again, the large beer companies are using their financial advantage to combat this trend. Anheiser-Busch has gone out and purchased several small beer company names and have been selling them as craft beers, where in fact they are mass produced at one of many Anheiser-Busch’s factories. Another way that large beer companies are flexing their monetary muscles is through lawsuits. Beer Wars described how one craft brewer was being sued by Anheiser-Busch for using a name that the brewer had used for years. The problem with this is that Anheiser-Busch had not been using that name for very long.
Another issue with this is that craft brewers do not have the financial means to be able to hold off many lawsuits from large beer manufacturers. The reason that this is difficult for craft beer makers is the fact that funding for craft breweries is very hard to come by. Usually investors either invest in very large ventures or very small ventures. Most of the time, craft beer makers are somewhere in the middle as far as their funding needs go. Because of this oddity, gaining funds for the production facilities for a craft brewery is very hard to obtain through normal financing. Political Issues
Some of the other challenges for the craft beer manufacturers is found in Washington, D. C. Beer Wars tells us that beer lobbyists are one of the most powerful group of lobbyists in Washington. The main focus of these lobbyists is ensuring that the three-tier system of distribution is held intact. The three-tier distribution system basically splits up the beer manufacturers, the beer distributors and the beer retailers. This rule was put in after prohibition to make sure that beer sales would be fair across all persons involved. Basically, so the large beer makers couldn’t prevent others from getting their product onto store shelves.
Unfortunately, this is exactly what is happening. Distributors tend to lend favor to the large beer companies, because they are paid by how much beer they deliver, and as we saw from Beer Wars, the large beer manufacturers still control that volume of beer sales. So, when the distributors are putting the beer on the shelves of the retailer, they will basically give the large beer companies whatever kind of shelving presence that they desire, basically because they are getting incentivized to do so. I definitely think that the three-tier system needs to be looked at and revamped to meet the needs of today’s marketplace.
Conclusion Overall, this documentary was a very interesting look into the beer manufacturer marketplace. I never realized before how devious the large beer manufacturers are when it comes to protecting their market share. With both the lawsuits over naming rights and the basic control of beer distributors, it’s amazing that any craft beer makers even stand a chance of holding any portion of market share. I believe that the large beer manufacturers are scared of what could happen very quickly if they do not do something to respond to the expanding requirements for quality beer in the marketplace.
This documentary definitely made me change my mind on how I thought about craft beers. I always figured it was just some fad that would eventually fade away. I see now that this is not the case at all. Craft brews are just being produced to give the marketplace a much higher quality, even if they have to pay a little more. I have a much greater respect for craft beer manufacturers. I would hope to someday be able to brew my own beer just to see how fulfilling it can be. I will definitely start drinking more craft beers because of this documentary. References (Other Than Beer Wars) 1. BREWERS ASSOCIATION RELEASES TOP 50 BREWERIES IN 2011. " Brewers Association. Brewers Association, 17 Apr. 2012. Web. 28 Nov. 2012. <http://www. brewersassociation. org/>. 2. Chappell, Bill. "U. S. Craft Beer Brewers Thrive, Despite Small Share Of The Market. " NPR. org. NPR, 18 May 2012. Web. 28 Nov. 2012. <http://www. npr. org/blogs/thesalt/2012/05/17/152958268/u-s-craft-beer-brewers-thrive-despite-small-share-of-the-market>. 3. Lisheron, Mark. "Anheuser-Busch InBev Roars against Craft Breweries Bill in Texas Legislature. " Texas Watchdog | Investigating Government Waste, Fraud
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