1. The U.S. brewing industry has become more concentrated over the last two decades for several reasons.
a. 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.
b. 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.
c. 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 ...view middle of the document...
Demand has also been growing, making them less competitive.
c. Bargaining power of buyers (buyers may be the individual customers who consume it product) this is low for mass market brewers because there is a large number of buyers available for High microbrewers.
d. Bargaining power of suppliers (the organizations that provide input into the industry, such as materials, services and labor) the brewing industry has medium to low bargaining power of suppliers.
e. Threat of substitutes is a threat because there are other alcoholic beverages that can be a direct substitute for beer, such as spirits and wine.
3. Small mass market companies in the brewing industry are looking for high barriers of entry, strong bargaining power from suppliers and strong bargaining power from buyers. To reach economies of scale, they would need a lot of money in production volume, causing a high barrier of entry. Suppliers can charge the new companies higher prices because they are also selling to other mass market companies and do not need or depend on the new companies for orders. Buyers are strong and can drive down prices because they do not need to sell the new firms product. There are other mass market beers that already have strong brand loyalty that their customers are purchasing.
4. There are two different strategic groups in the brewing industry: mass market brewers (Anheuser-Busch, SAB-Miller, and Molson Coors) and premium micro brewers. The rivalry is different in both groups. Mass market brewers are more competitive, and focus on getting as much of the market as possible by brewing a beer liked by many. Microbrewers products are focus towards smaller customer by who like distinctive tasting beers.