Beer Industry Strategic Management

Definition

The beer industry comprises of establishments primarily engaged in brewing beer, ale, malt liquors, and non-alcoholic beer (https://classcodes.com/lookup/naics-code-312120/).

Industry Chain

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Summary of the Five Forces 

Buyers Power (Moderate)

• Switching costs for buyers are low
• Many buyers are large in size, thus being able to negotiate favourable prices

• Due to the widely differentiated types of beers and flavours, major buyers have a need to offer a wide range of beers to accommodate consumers’ preferences

Supplier Power (Moderate)

• Quality raw materials to produce beer are of utmost importance to the industry
• Many suppliers have alternate channels of buyers, and do not primarily rely on the beer industry 
• There are numerous suppliers who tend to be small in size limiting their ability to influence the market
• Large breweries with a huge amount of resources usually have their own vertical integration capabilities, weakening suppliers bargaining power.

Threat of Substitutes (Moderate)

• Low costs of switching to other substitutes
• Beer still holds a place due to buyer’s need to stock a variety (e.g many pubs still require beer as a primary drink over spirits / wine) hence beer cannot be replaced completely

New Entrants (Moderate)

• Heavy Investment required in beer production capacity
• Government alcohol regulations may deter new entrants
• Smaller players able to enter the industry as a microbrewery due to the demand for premium and craft beers which can command higher prices
• Low customer switching costs encourages entry

Competitive Rivalry (High)

• Market is dominated by several firms with very strong market share
• Many large beer producers are focusing on brand management strategies to ensure that their brands are well known to public. This is due to buyers having low switching costs stemming from a choice of a wide variety of beers.
• Prices of beer products may be forced down by large retail chains

List of firms