Ryan Gallagher
Upon reading "The Five Competitive Forces that Shape Strategy", I couldn't help but think of the changes that we've been seeing in the beer industry; namely how craft beers and alcoholic seltzer beverages have been a new trend in the US. I thought back to last Monday (Memorial Day) which is a holiday that most spend celebrating the men and women who have served our country, but also is synonymous with good weather, cookouts, and an alcoholic beverage or two. Normally, you'll find coolers full of the big beer brands; Bud, Coors, Corona, Miller, etc. however over the past decade or two that has changed. Now, you'll find coolers full of craft beers and the newly trending seltzer beverages which highlights two of the competitive forces that shape strategy; New Entrants, and Substitute Products.
The threat of new entrants and the threat of substitute products or services are only 2 of the 5 that Porter detailed in his article, but as mentioned are having a big impact on the beer industry. Up until 2012, two companies (Anheuser-Busch and MillerCoors) owned 90% of beer production[1]. Craft breweries, on the other hand, are normally characterized as a brewery that produces a small amount of beer but focuses more on the quality and flavor of their beer. As one can imagine, these smaller craft breweries are normally less readily available and normally more expensive than those of the big name producers. For a long time, this was enough for the average consumer to choose one of the big name brands. However, with the advances in brewing technology, distribution and other factors, these smaller brands are now more available and more cost friendly to consumers which is helping them to enter the market. In a study from 2019, it was shown that craft beer alone had almost 14% of the market (the market was broken down into craft, import, and domestic)[2]. In response to the growth of craft beer, the historically dominant companies (like Anheuser-Busch) have had to change their business model. For example, Anheuser-Busch has expanded to own a line of 12+ craft breweries to compete with other craft breweries.
In addition to new entrants to the beer industry, substitute products also serve as a threat which impacts the strategy of beer companies. Very recently, hard seltzers have seemed to become a consumer favorite, especially in the summer months. Although this product is not a type of beer itself, it is considered an alternative to beer which impacts the strategy that beer companies develop. This is most easily seen by the recent strategies of Bud Light (Anheuser-Busch) and Corona. These two companies have recently expanded their product lines to include hard seltzers to compete with the market heavyweight Truly and Whiteclaw. I am positive that 5-10 years ago, when these companies were developing long-term strategy, they did not plan to be making alcoholic seltzers, however they adjusted their strategy in the past few years to adjust to consumer demand.
Even in just a few weeks of this course, one major
takeaway I have is the necessity to adapt.
Although it is extremely important to have a long-term plan and BHAGs,
it is also important that companies can adapt to changing consumer demands, competition
and unforeseen worldly developments.
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