Brooklyn Brewery is a successful craft brewery with high sales in the US and Europe. The company is one of the top 10 craft beer producers in the US. It has unique advantages, including the distribution network, which made Brooklyn Brewery feel more confident in the market following the three-tier rule. The popularity of craft beer among consumers and a wide range of beer flavors is one of the main competitive advantages, distinguishing Brooklyn Brewery from large and local producers of domestic and craft beer. This paper aims to analyze the industry and company potential and describe some practical strategies to sustain a competitive advantage.
Porter’s Five Forces
Overall, the brewery industry is very attractive for several reasons. First, there is a strong demand for low alcohol drinks in the USA, Europe, and globally, and beer is the leader among other substitutes. Second, the craft beer boom was associated with a shift in consumer habits, given that millennials have consistently favored craft beer over a domestic beer in on-premise spots for over ten years. Third, high, but not overly rigid, competition creates a dynamic marketplace with room for experimentation and new alternatives while adhering to a sustainable strategy. Finally, the industry is highly stable, despite some easing in demand, which in the US declined from 50% to 41% between 1993 and 2015 (Meier & Wang, 2021). Considering the current boom and growing diversification of consumer goods in the food and alcoholic beverages industry, such a decrease in demand can be called satisfactory.
However, in addition to the general positive superficial characterization, a more thorough analysis of the Brooklyn Brewery’s external environment and the latest trends in the industry should be carried out. Porter’s five forces model is a versatile and convenient tool for strategic analysis. It considers the competition in the industry, the potential of new entrants into the industry, the power of suppliers, the power of buyers, and the threat of substitute products (Scott, 2020).
Competition in the industry is fierce but not overly rigid despite market saturation. This state of affairs is due to the high demand for the product and its diversification. On the one hand, the high saturation of the market guarantees the stability of the industry, which is a positive factor. On the other hand, there is a moderate threat from competitors producing domestic beer and investing heavily in advertising and from craft beer producers due to their number and the tendency of buyers to try new flavors and brands.
Then, the potential of new entrants into the industry is low. Brooklyn Brewery had to endure about ten years of turbulent time before it gained a stable position (Meier & Wang, 2021). In other words, entrance to the market is possible for a large number of craft producers. Still, given the complexities created by a three-tier system, it is not easy for new companies to gain significant market share quickly without substantial capital and effective strategy. Therefore, most craft companies contribute to product diversification but do not pose a threat to Brooklyn Brewery.
The power of suppliers is considerably high due to the three-tier system. Manufacturers are overly dependent on distributors and retailers, but Brooklyn Brewery has successfully tackled the distribution problem. The power of buyers is moderate, as craft beer is preferred by customers over domestic. There is also the volatility of tastes and the drive to test new product options. The threat of substitute products is also moderate, given that beer is the leader in preferences among other low-alcohol drinks. What’s more, Brooklyn Brewery addressed this issue by experimenting with flavors and making plans to create cider, although this may be distracting.
Brooklyn Brewery Company gained and sustained competitive advantage in the brewing industry during the last 15 years. However, it is necessary to consider the strengths, weaknesses, opportunities, and threats the company faces to propose strategies for further development. Main strengths include good market knowledge, a strong position, and significant market share. Brand recognition, a reliable distributor, and a well-established retail network also characterize the company’s strong position. The weaknesses include dependence on the distributor and retailers, which can dictate the placement of the product among other similar products, the form of sale, the level of service, and the product price.
The company has and is constantly realizing many opportunities: for example, Brooklyn Brewery is expanding its line of flavors to attract customers. Since the company currently only sells to the US and European markets and given its strong position in these markets, Brooklyn Brewery is poised to enter new markets such as China, Japan, Singapore, Brazil, Mexico, and other Asia-Pacific and Latin America. At the moment, the main threat to the company is the lease expiration for the company’s iconic set in Williamsburg (Meier & Wang, 2021). The need for new investments in traditional TV advertising is another threat, as it requires considerable costs.
Given the information presented above, there are several major strategic issues the company is facing. First, one needs to develop a strategy to enter new markets, including increased production, increased headcount, increased investment, and marketing issues. Secondly, if a company is going to invest heavily in TV advertising, special attention should be paid to its content since conventional, rude, and pushy messages can scare customers away. As part of the first issue, and as a separate solution, it is necessary to choose a new location instead of Williamsburg if the lease will not be renewed. Finally, the company needs to consolidate production to improve management and logistics.
Addressing the Strategic Issues
If I were the company’s CEO, I would address the strategic issues as follows. To begin with, I would solve the problem with a site for a new set on which the existing industries could be consolidated. Next, I would analyze the market and make plans to enter new markets and increase production volumes. To do this, I would need to develop guidelines for recruiting new employees and draw up a marketing plan.
If a company wants to increase sales in the US, it should invest in TV advertising. In this case, the ads must address the target audience and be of outstanding quality (Vargas-Hernández, 2019). To attract new customers and update the brand, the company needs to decide on the retail issue. Preferably, it could be a chain of bars, as beer stores can generate less profit due to significantly lower prices but will require similar costs.
Thus, the industry and potential of Brooklyn Brewery were analyzed, and effective strategies to sustain the competitive advantage were discussed. The company has chosen a favorable industry and has successfully carved out its niche in the market. Over the past 15 years, Brooklyn Brewery has consistently made strategic and informed decisions that have helped the company succeed and become one of the top 10 craft brewers in the United States. The company is likely to successfully resolve existing strategic issues and consolidate its position, maintaining a competitive advantage and expanding production by reaching a greater share of US buyers and entering new markets.
Meier, S., & Wang, D. J. (2021). Brooklyn Brewery: Setting the course for growth. Columbia Case Works, 1(1), 1-40.
Scott, G. (2020). Porter’s five forces. Web.
Vargas-Hernández, J. G., & Solís, C. A. J. (2019). Grupo Modelo: Analysis based on the industry of the giant beer company. In International Academic Multidisciplinary Research Conference in Berlin, pp. 253-262.