A report on US Craft Beer

Industry
By Niranjan Mutkekar
Who is a Craft Brewer? ________________________________________________________ 4
Facts _______________________________________________________________________ 4
Types of Breweries: ___________________________________________________________ 5
Microbrewery:____________________________________________________________________ 5
Nano-brewery:____________________________________________________________________ 5
Brewpub: ________________________________________________________________________ 5
Contract Brewing Company: ________________________________________________________ 6
Regional Craft Brewery: ___________________________________________________________ 6
Large Brewery: ___________________________________________________________________ 6
The Top 10 Craft Breweries in US: _______________________________________________ 7
1. Boston Beer Co. _______________________________________________________________ 7
2. Sierra Nevada Brewing Co. _____________________________________________________ 7
3. New Belgium Brewing Co. ________________________________________________________ 8
4. Spoetzl Brewery ______________________________________________________________ 8
5. Pyramid Breweries Inc. ________________________________________________________ 8
6. Deschutes Brewery ____________________________________________________________ 9
7. Matt Brewing Co. _____________________________________________________________ 9
8. Magic Hat Brewing Co. ________________________________________________________ 9
9. Boulevard Brewing Co. _______________________________________________________ 10
10. Harpoon Brewery __________________________________________________________ 10
Craft Beer Sales Stats – 1st half of year 2010 ______________________________________ 11
First Half 2010 Craft Beer Industry: ________________________________________________ 11
2009 Craft Beer Industry Production Volume: ____________________________________________ 11
How big is the US beer market? ________________________________________________________ 12
Craft-Brewery – A strategic group of Brewers _____________________________________ 13
Product Characteristics:___________________________________________________________ 13
Brewing Operations: ______________________________________________________________ 13
Market Structure and Competition: _________________________________________________ 15
Marketing Focus: ________________________________________________________________ 16
Market Characteristics: ___________________________________________________________ 16
Business Strategy: ________________________________________________________________ 18
Production of superior quality of Craft Beers: ____________________________________________ 18
 Diversified product lines: ______________________________________________________________ 18
Strategic Relationships with Distributors: ________________________________________________ 18
Control of Production: _________________________________________________________________ 19
Targeted Sales and Marketing Efforts: __________________________________________________ 19
Distribution: ____________________________________________________________________ 20
Variety:______________________________________________________________________________ 20
Safe storage and Transportation: _______________________________________________________ 20
Chain of Custody:_____________________________________________________________________ 21
Market Access: _______________________________________________________________________ 21
State Alcohol Control: _________________________________________________________________ 21
Choice and Convenience: _____________________________________________________________ 22
Economic Contribution and Community Support: ________________________________________ 22
Alcoholic Beverages Regulation and Taxation: ________________________________________ 23
Licenses and Permits __________________________________________________________________ 23
Taxation: ____________________________________________________________________________ 24
Environmental Regulations: ____________________________________________________________ 24
Investors for Craft Brewery Start Ups _______________________________________________ 24
Craft Beer in a Tin initiative:_______________________________________________________ 25
Corporate Social Responsibility ____________________________________________________ 26
Economics of Beer: _______________________________________________________________ 28
Building a Craft beer brand: _______________________________________________________ 29
Identify your customers: _______________________________________________________________ 29
Craft a dedicated brand message: ______________________________________________________ 30
Creating Image of the brand: __________________________________________________________ 30
Providing consistent quality: ___________________________________________________________ 30
Brand recognition: ____________________________________________________________________ 31
Consumer Ownership: ________________________________________________________________ 31
Packaging: ___________________________________________________________________________ 31
Contingency Planning_________________________________________________________________ 32
Social Media Marketing & Craft Brewing Industry: ___________________________________ 32
Bibliography ________________________________________________________________ 35
Who is a Craft Brewer?
A craft brewer is traditional, independent and small. Traditional in the sense that it has a
malt flagship or brews full bodied beers which are made from recipe taken from German or
English brewing origins. The malt is high grade, the brewing process is relatively slow and the
production is small scale. The main differentiating factors of craft brewers are their unique styles
of brewing which can lead to enhanced flavor and taste.1

Facts2
· The tradition of craft brewing is attracting crowds as people are looking for specialty
beers to satisfy their taste buds despite the decrease in national beer trends.
· Craft brewers currently provide an estimated 100,000 jobs in the U.S., including serving
staff in brewpubs.
· Growth of the craft brewing industry in the first half of 2010 was 9% by volume and 12%
by retail dollars.
· Overall, U.S. beer sales were down an estimated 2.7% by volume in the first half of 2010.
· Growth of the craft brewing industry in 2009 was 7.2% by volume and 10.3% by dollars
compared to growth in 2008 of 5.9% by volume and 10.1% by dollars.
· Craft brewers sold an estimated 9,115,635 barrels* of beer in 2009, up from 8,501,713 in
2008.
· Overall, US beer sales were down 2.2% in 2009.
· Imported beer sales were down 9.8% in 2009, equating to a loss of 2.8 million barrels.
· The craft brewing sales share in 2009 was 4.3% by volume and 6.9% by dollars.
· Craft brewer retail dollar value in 2009 was an estimated $6.98 billion, up from $6.32
billion in 2008.
· 1,595 breweries operated for some or all of 2009, the highest total since before
Prohibition.
· There are about 1500 Craft breweries which are based in United States and majority of
them are microbreweries.

* 1 barrel = 31 US gallons

1
http://www.craftbeer.com/pages/beerology/small-independent-traditional
2
http://www.brewersassociation.org/pages/business-tools/craft-brewing-statistics/facts
Types of Breweries:3

Microbrewery:

· A Brewery which produces less than 15,000 barrels of beer per year. It has more than
75% of its beer sold outside the brewery. Microbreweries sell to public in three different
methods:

Brewery -------à Wholesaler ----à Retailer---à Consumer

Brewery as Wholesaler -à Retailer ---à Consumer

Brewery (As a Bar/On site Tap sales) ---à Consumer

· Micro-breweries adhere to the Bavarian Purity Laws of 1516. This law specifies that only
high-grade hops, barley malt, yeast and water can be used to brew beer.

Nano-brewery:

· A nano brewery is beer making operation even smaller than the traditional
microbreweries. Nano breweries brew less than 30 BBL. They are not a good choice for
long term setup as the effort/profit ratio is very narrow.

Brewpub:

· A brewpub is a restaurant based brewery where more than 25% of beer is sold on the
same floor. These breweries are maintained by restaurants and beer is dispensed from the
storage tanks. A lot of laws and regulations have to be taken in consideration for these
brewpubs and if allowed by law they can sell to offsite places or offer “beer to go”.
· Majority of the restaurants which operate in the north east region of United States have
brewpubs associated with them. The main reason of this is population demand which
mostly focuses towards locally brewed beers.

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http://www.brewersassociation.org/pages/business-tools/craft-brewing-statistics/market-segments
Contract Brewing Company:

· It consists of a brewing company which outsources its production to other already

established brewery. The main brewery provides the exact specifications for brewing the
beer. The contract brewing company is responsible for the marketing, distribution and
selling aspects of the business while the brewery provides the space, apparatus and
infrastructure for brewing.
· Such contract brewing companies include Pete’s Brewing Company, Boston beer
company etc. Boston Beer Company is the largest brewery with flagship products of
Samuel Adams (SA) Boston Lager, Boston Ale, SA Octoberfest, SA Wheat, and SA
Winter Lager etc. The Boston Brewing company has “24 hour rule” which requires its
products should arrive in the market within 24 hours of shipping.

Regional Craft Brewery:

· A regional brewery is one which has annual beer production of 15,000 to 2,000,000
barrels.
· A regional brewery which has 50% or more volume production in all malt beers or which
has a malt flagship.
· These breweries can also produce beers which use adjuncts to enhance rather than lighter
the beer flavor.
· These breweries include companies like Sierra Nevada Brewing Company, Red hook Ale
Brewery and Anchor Brewing Company.

Large Brewery:

· A brewery which has production capacity of more than 2,000,000 barrels per year. The
only craft brewery that can come close to become craft is Boston Beer Company with
annual production of 1,841,348 barrels per year.
The Top 10 Craft Breweries in US4:

1. Boston Beer Co.

· Annual sales: 1,841,348 barrels

· Share of segment: 20.20%
· Change in share: -1.21%

The largest craft brewery in the country is the Boston Beer Company, headquartered in
Boston, Massachusetts. Known best for their Samuel Adams brand, the brewery also produces a
wide range and diversity of beer. Boston Beer Company is famous as the largest Contract
Brewing Company. Although the most popular brew is their Boston Lager, the company is also
popular for their seasonal and specialty beers, such as the high priced Utopias, which contains
27% alcohol by volume and is aged over 16 years.

Following the acquisition of Anheuser-Busch by InBev, the Boston Beer Company is the
largest American-owned brewery, producing over 1.8 million barrels annually. The company
was founded by Jim Koch, who based the original recipe on his ancestor's pre-prohibition
formula.

2. Sierra Nevada Brewing Co.

· Annual sales: 723,880 barrels

· Share of segment: 7.94%
· Change in share: +0.06%

Established in 1980 by Ken Grossman and Paul Camusi, Sierra Nevada is the second-largest
craft brewery in America and is located in Chico, California. Producing over 723,000 barrels of
beer annually, the most popular brew is the company’s pale ale, although the company has a
wide range of seasonal brews, porters, stouts and special releases.

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 3. New Belgium Brewing Co.

· Annual sales: 583,160 barrels

· Share of segment: 6.40%
· Change in share: +0.60%

The third largest craft brewery in the country is the New Belgium Brewing Co., located in
Fort Collins, Colorado. Founded in 1991, the brewery began when Jeff Lebesch decided to take
his passion for home brewing to a commercial level. Fat Tire, the company’s flagship beer,
originated from a bicycle trip Lebesch took through Belgium from brewery to brewery, and the
icon of a bicycle is also displayed in company logos and labels. The company’s beers are
distributed in 19 different US states.

4. Spoetzl Brewery

· Annual sales: 409,000 barrels

· Share of segment: 4.49%
· Change in share: -0.14%

Also known as the “little brewery in Shiner”, Spoetzl hails from Shiner, Texas. Founded
back in 1909, Spoetzl is also the oldest brewery in Texas and is distributed in 41 states. Spoetzl’s
flagship beer is the Shiner Bock, which has been brewed since 1913 and contains 4.4% alcohol
by volume.

5. Pyramid Breweries Inc.

· Annual sales: 192,199 barrels

· Share of segment: 2.11%
· Change in share: -0.34%

Headquartered in Seattle, Washington, Pyramid Breweries was acquired by North American

Breweries Inc. in August, along with Magic Hat. With its introduction of Apricot Ale in 1994,
Pyramid has been known as a leader in the fruit beer category. They operate several ale houses
and restaurants in Washington, Oregon and California.
 6. Deschutes Brewery

· Annual sales: 186,783 barrels

· Share of segment: 2.05%
· Change in share: -0.07%

Located in Bend, Oregon, Deschutes Brewery produces a range of beers, including Black
Butte Porter and Mirror Pond Pale Ale as well as a specialty brew called The Abyss, which is an
imperial stout with 11% alcohol by volume. Aged in bourbon barrels, “The Abyss” has won
numerous awards since its 2007 release and is considered to be one of the finest beers in the
country.

7. Matt Brewing Co.

· Annual sales: 171,700 barrels

· Share of segment: 1.88%
· Change in share: -0.02%

The brewers of Saranac Beers, the Matt Brewing Co. are the third largest craft brewery in the
US. Located in Utica, New York, it is a family-owned brewery that also produces soft drinks and
is primarily available on the East Coast.

8. Magic Hat Brewing Co.

· Annual sales: 154,236 barrels

· Share of segment: 1.69%
· Change in share: +0.20%

Located in South Burlington, Vermont, Magic Hat brews four year-round beers and four
seasonal beers, with “#9” as its flagship beverage. In August, Magic Hat was acquired by
Rochester-based North American Breweries Inc, along with several other brewers.
 9. Boulevard Brewing Co.
· Annual sales: 138,954 barrels
· Share of segment: 1.52%
· Change in share: -0.10%

Boulevard is a regional brewery located in Kansas City, Missouri. When Anheuser-Busch

was sold to InBev, Boulevard became the largest independent American brewery in Missouri.
Their beers are primarily available in 20 states across the Midwest and Great Plains.

Boulevard has recently completed an expansion of their brewing facility that gives them the
capacity to produce up to 700,000 barrels per year, and they are actively looking to expand their
market share.

10. Harpoon Brewery

· Annual sales: 130,516 barrels
· Share of segment: 1.43%
· Change in share: +0.05%

Headquartered in Boston, Massachusetts, Harpoon Brewery is known best for its India Pale
Ale, but also has a range of beers, including award-winning Munich Dark, 1636 brew and four
seasonal beers. In 2000, Harpoon also acquired a Catamount Brewery
Craft Beer Sales Stats – 1st half of year 20105

First Half 2010 Craft Beer Industry:

· Growth of the craft brewing industry in the first half of 2010 was 9% by volume and 12%
by retail dollars.
· Overall, U.S. beer sales were down an estimated 2.7% by volume in the first half of 2010.

2009 Craft Beer Industry Production Volume:

Regional craft breweries 7,053,996 bbl

Contract brewing companies 365,132 bbl

Microbreweries 989,644 bbl

Brewpubs 706,863 bbl

Domestic Craft Beer Sales

2009 9,115,635 barrels

2008 8,501,713 barrels

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http://www.brewersassociation.org/pages/business-tools/craft-brewing-statistics/beer-sales
How big is the US beer market?

Overall US Beer Market in 2009: Down 2.2% approximately $101 billion Selling
205,676,000 barrels of beer.

Where: 1 barrel = 31 US gallons

31 US gallons = 2 half-barrels
2 half-barrels (15.5 gallon) kegs = 13.78 cases (of 24 12-ounce bottles).
Craft-Brewery – A strategic group of
Brewers
The craft beer industry is able to march past the normal beer industry segment on both
margins and growth because of their unique product characteristics, organizational structure and
different marketing approach.

Product Characteristics:

The craft brewers form a definitive strategic group as their product the “craft-beer” is
horizontally differentiated and it has very little number of substitutes. The main differentiating
factor between the craft beers and other normal beers is the brewing styles and distinctive
flavors. The Craft beers have their unique taste likeness which comes from the traditional slow
brewing styles and over the years perfected recipes. This is the main reason craft beers
differentiate themselves horizontally based on the taste and quality.

Craft type of beers appeal to the consumers who are seeking ‘taste revolution’. For these
particular consumer group the increase in product features increases there economic benefit thus
gives them more satisfaction. Due to this unique feature the price elasticity of demand for Craft
beers is much lower than the normal beers. Because of the economic benefit provided by craft
beers they can demand higher price thus capture higher margins. The craft brewers are also
geographically differentiated. A particular geographical area boasts a unique type of craft brew.
For example: Boston Beer Company localized in a Massachusetts area. The success of the craft
brew industry and its appeal to mass population is based on two main reasons, the higher
economic benefit consumers get even they pay premium price for the beers and in the consumers
mindset, product is an experience rather than a general goods.6

Brewing Operations:

The primary natural ingredients for making beer are Hops, Yeast, Malted Grain and
Water. Craft breweries use the finest of these grains, mostly barley malt with strains having two
rows of grain in each ear. The hops are chosen according to the need of a specific flavor or taste.

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http://www.stumptown.com/articles/mgmtbeer.html
Some hops impart slight bitterness to the beer while others are used to bring out distinctive
aromas. The most commonly used yeasts for fermentation process are Saccharomyces Cerevisiae
used in production of ale and Saccharomyces Uvarum used to produce lagers. There are
numerous different strains of these yeasts and each craft brewer has to carefully choose the
correction combination of these ingredients.

The brewing process starts with milling specific strains of malts and then mixing them
with warm water. A mash tun is used to stir and hit this mixture, which converts simple
carbohydrates and sugars to fermentable sugars with the help of naturally occurring enzymes.
This mash is then strained and rinsed in the lauter tun to produce residual liquid, called wort.
Wort is very high in fermentable sugars. Wort is boiled and concentrated in a brew kettle. Hops
are added at various intervals to enhance the appropriate bitterness and aroma and to act as
natural preservatives.

Sometimes a mixture of different varieties of hops is used to create a distinct flavor and
taste. After the boil the wort is strained and cooled down before it is moved to the fermentation
cellar, where the internally cultivated specific yeast is added to induce the fermentation. Yeast
metabolizes worts sugars to produce alcohol and CO2. CO2 is partially captured and absorbed by
beer providing a natural source of carbonation. After the fermentation is over, the beer is cooled
for several days during which beer gets clarified and a full-flavor develops. The unwanted yeast
is removed from the beer by filtration which is roughly completed in 14-21 days.

The fermenters and other necessary equipment required for the brewery are easily
available for purchase in the market. Different breweries employ different styles and types of
equipment’s. Once the beer is ready it is generally packed in kegs and bottles. Most of the
microbreweries have manually operated bottling equipment. The bottling operations are done
under maximum CO2 concentrations to ensure that minimal amount O2 gets dissolved in beer
and it gets enhanced shelf life. As the breweries are getting more environmental conscious, they
are trying to utilize less weighted glass bottles, tins or bigger (1/2 liter) size bottles to serve beer.

Quality assurance is key factor in order to maintain the consistency in beer quality and flavor.
QA for small breweries is generally done by tasting beer randomly within different batches.
Large breweries like Boston Beer Co, Redhook Ale maintain a separate quality assurance
department. This QA department can be further broken down into following areas of
concentration:

· Microbiology
· Brewing Chemistry
· Sensory Evaluation
· Packaged Quality and Integrity
Each of these departments is responsible for qualitative and quantitative analysis of the batches
to ensure superior product quality. Each new product is thoroughly tested and retested before its
mass produced and sold in the market. Larger breweries allocate extensive amount of budget to
QA departments.7

Market Structure and Competition:

The craft brewing industry has a different organizational structure. This structure is also
based on the fact that the product is differentiated based on flavor and taste. This makes Craft
brews competition based on differentiation and quality rather than cost. Thus craft brews
organizational structure cannot imitate the large brewers with higher economies of scale and
price competitive environment. They have structure which focuses on scale production,
maintaining the craft brew flavor and quality and to foster their brands name and image.

The competition in the domestic craft beer segment and the other high quality beer
categories is based on product quality, consistency, freshness, and taste, their ability to
differentiate products, promotional methods used, customer satisfaction, costs of distribution,
and price. Beyond this category, craft brewers compete with the regular beer products category,
wines, spirits and flavored alcohol beverages.

The craft beer segment has become highly competitive in recent years due to easy
availability of funds to finance the startup operations which has led to the explosive growth in
the number of craft breweries operational in US market. As many of craft brewers are expanding
their distribution areas, the competition is rising amongst the peers. Competition varies with the
regional markets, depending upon the local market preferences and distribution techniques. The
toughest competition is amongst the microbreweries as their numbers are huge and their market
shares are miniscule. Many of the specialty brewers, National craft brewers have wider zones of
distribution thus they are more financially strong to back up their products with expensive
promotions but microbreweries possess the competitive advantages of being unique flavored and
highly appealing to the local customers.

The Craft brewers also compete with the imported Craft brews especially from Germany,
Dark Ale, Pale Ale, Lagers and other alcoholic segment products. The imported beer segment
has very high percentage of market share in US, and also they are more economically strong than
most of the local Craft brewers. The situation is changing rapidly with growth in craft brew
market. Craft brewers are taking advantage of several factors such as lower transportation costs,
quality and flavor of beers, proximity and familiarity with local consumers, federal and state tax
incentives, higher degree of product freshness and crispness etc.

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http://www.redhook.com/Default.aspx?p=21
 Competition for the Craft Beers has also come from wine and spirits. Beer segment has
lost about 1% of their market share to wine & spirits segments every year since 2003. However
this trend is declining since the onset of economic downturn. The Craft Beers segment is
showing growth in this downward market which is a very good sign. Pacific Northwest and
California are said to be the most competitive craft beer markets in US both in terms of number
of breweries and consumer awareness. One positive factor about increasing competition is Craft
brewers need to constantly beat their competitors with high quality and diversified product lines.

Craft brewers market is a healthy competitive market, but marketers’ state that soon this
competition will go down to the pricing of the product. They fear that price competition can lead
to the drastic decline in quality of the products which can harm the whole Craft brew industry. In
order to get bigger slice in this market Craft brewers are focusing more on consumer awareness,
redesign of their brands and better alignment of their product lines.8

Marketing Focus:

The craft brews marketing focus varies from localized to nationalize. The small scale
geographically located brewers try and promote their products in near areas while the large
national brewers such as Samuel Adams, Dog Fish, Sierra Nevada Brewing focuses on national
market. They also compete with big regular brewers on local and national markets. The craft
brews have an advantage because of their differentiation competence. They can compete on
higher price points based which bolsters their image of high product quality and innovation.

Market Characteristics:

The Market concentration for Craft Brew industry is high. There are two sets of
distinctive trends which set the competition in the market. The acceptance of Craft brews by
large number of population has led to the extensive growth in the industry. The number and
diversity of craft brewers has grown while at the same time many of the national brewers are
acquiring or being acquired by other national or foreign brewers in order to gain more market
share in the expanding craft brew market. The bigger players like Boston brewing company,
Pete’s brewing company, Red Hook Ale etc. are looking forward to expansions in the global
markets through aggressive buy outs or setting up foreign subsidiaries.

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http://www.konabrewingco.com/uploads/CBA_Kona_Partner.pdf
 Foreign brewing companies have also entered the merger and acquisition market.
SABMiller and Molson Coors came together in joint-venture, merging their U.S. operations as
Miller-Coors to compete head on with market leader Anhauser-Busch. Miller-Coors was then
momentarily was the world’s largest brewer by volume, until InBev’s acquisition of Anhauser
Busch, in the fourth quarter of 2008. According to the industry stats, Anhauser Busch and Miller-
Coors have accounted for roughly 80% of total beer shipped in the United States, including
imports, since 2008. While in the Craft Brew segment, Boston Beer Company became the largest
brewer of Craft brews. The US beer market is similarly and increasingly concentrated in a small
number of microbrewers, nano brewers and brewpubs.

The largest 4 have established the combined market share estimated at just over 50% of
the world market. Budweiser-brewer AB-InBev had beer volumes of around 350 million
hectoliters in 2009, Miller-brewer SABMiller at just under 250 million, Heineken at just over
200 million, and Carlsberg around 125 million, while Tsingtao trailed at just over 50 million
hectoliters a year. 9

As far as the consumers of craft beer are concerned, the following percentages are found:

The majority of craft beer drinkers are primarily Caucasian (90%), male (70%), urban (65%),
which have household incomes of at least $50k per year (75%), are college educated (65%) and
are between ages 21 to 50 (90%). Craft national market for Craft brewers has an eight firm
concentration ratio of 53.4%. The largest of this share goes to Boston Beer Company which
holds market share of 25.1%. Thus, Craft brewing industry has a large untapped market which is
made up of small to very small brewers.

Most of the larger players are trying to gain market share in this craft brew segment. The
Chicago based Miller-Coors have established a separate division named Tenth and Blake Beer
Co. which will now concentrate on the domestic and imported craft beer segment which contains
beers like Blue Moon, Peroni and Pilsner Urquell. The trend is supporting this move as most of
the consumers of internet age are choosing flavored, innovative, full-bodied and diversified beers
over regular beers if they are in the affordable range. Guinness has also started concentrating on
the craft brew industry with launch of the Guinness Black Lager designed for Guinness drinkers
who are looking for taste revolution.10

9
http://www.sabmiller.com/index.asp?pageid=1878&blogid=45
10
http://articles.chicagotribune.com/2010-09-21/business/ct-biz-0922-craft-beers-new-20100921_1_craft-beer-craft-
segment-craft-brewers
Business Strategy11:

Majority of the Craft Brewers are small microbreweries brewing 1000 bbl to 30,000 bbl
per year. As most of them are start-ups they have different business strategies for growth of
business and capturing larger audiences. The main parts of their business strategies are:

Production of superior quality of Craft Beers:

The main strategy for any Craft Brewer is producing high quality of Craft Beer. The beer
is tested thoroughly with regards to its crispness and freshness. Brewers concentrate on
producing full bodied and favored craft brews. The craft beers are brewed by selecting superior
quality of barley, hops and other ingredients. The equipment used is state of art and as a symbol
of high quality most of the brewers get their products Kosher certified by the orthodox union.
Companies seek to produce their beers in sustainable environment and help reduce the total
carbon footprint by improvising on brewing mechanisms.

Diversified product lines:

The craft brewers have identified the need of diversification and now are aggressively
pushing to offer a variety of beers under the same flagship brand. Most of the craft breweries
actively brew different kinds of beers for different festivities or seasons. This strategy helps
when customers switch beers; they generally choose different beers from the same brewers. This
is a good customer retaining strategy which is highly effective. Through different flavors and
brand awareness created by the company customers are able to seek strong relationship with the
brand. Craft brewers are attentive regarding their customers’ tastes and preferences and they
brew products with distinctive tastes and capacity to meet their requirements.

Strategic Relationships with Distributors:

Maintaining the strategic relationship with distributors is one of the most important
factors for success of craft brews. Most of the craft brews are location based and serve a limited
set of area. They lack the necessity manpower to distribute the beer themselves thus they forge
strategic relationships with the local successful distributors. These distributors are kind of their

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front office for sales. The distribution relationships offer efficiencies in logistics, product
delivery and after sales services.

Control of Production:

Except some of the contract distributing companies like Boston Beer Co. most of the
microbreweries and large breweries control their own production. The control of production is
vital to maintain the production efficiencies, consistency in product quality and taste. The control
of production also allows brewers to optimize employee productivity, check on unnecessary
batch costs and consistently produce superior quality of beers. Craft brewers boast their smaller
production volumes, highly controlled brewing conditions and best tasting beers.

Targeted Sales and Marketing Efforts:

For the Craft Brewers the targeted markets are usually local restaurants, liquor stores,
bars and clubs. Creation of different families of products under the same brand name definitely
helps in marketing efforts. The sales and marketing efforts are channeled to the areas where the
demand is more. In order to boost the marketing efforts and achieve higher sales, most of the
breweries adopt to a variety of advertising programs. Breweries also undertake training and
educating the wholesalers and retailers about brands, flavors and distinguishing factors.
Promotion at various events, local festivals, venues, sponsoring certain activities/sports etc. also
is undertaken by breweries to widen their communication networks.

As stated above, the wholesalers are face of the company for the outside world, and
wholesalers carry many beer brands both national and domestic, thus it is most important
function of sales and marketing team to elevate their brands name in the perspective of
wholesalers. The brewers have a tough job to increase the transparency of their products in
distributor’s eyes, generate and maintain their attention on its brews and through distributors
promoting the sales of company’s products. The breweries work personally with each distributor,
detailing them about the products and directly involving them in the promotional activities and
events.

Representatives from the Craft Breweries many a times personally visit the restaurants
and bars, talking to the owners, giving them samples of the products thus creating a pull for their
products in the market. It is always easier to sell the product when customer is already aware of
it than to push it on new customers. The chain of education travels through all the strata for Craft
brewer. The time he/she spends with a distributor creating awareness is rewarded by distributor
giving quality and sales pitch to retailers/restaurants/bars which then spread the word to the end
customers. Every element in this command chain is vital and brewers need to give respect and
quality to earn their trust.

Distribution12:

Distributors are very important personnel in beer industry. They are responsible for
transportation, cold storage requirements and maintenance for perishable beer from the time it
leaves the brewery till the time they arrive for sale at restaurants, bars or retailers.

Variety:

Each distributor is equipped with state of art cold storage facilities. They secure the beer
from a variety of breweries and preserve those products in the controlled environment till their
safe delivery at end points. They are the face of the beer brands to the retailers thus they employ
skilled sales and marketing crew to market the products they carry to different retailers.
Distributors have variety of trucks and they employ number of drivers who deliver customized
inventory to a vast network of small and large retailers which include different retailers,
restaurants, pubs, bars and neighborhood stores. Distributors work with the retailers even after
the product deliver where they monitor the products for freshness of quality and taste.

Safe storage and Transportation:

Distributors are key channels for storage and transportation of the beer. They maintain
state of the art warehouses, fleets of temperature controlled trucks and vans, warehouses,
delivery and merchandizing personnel to ensure efficient and safe delivery of wide range of
products at minimum cost possible. Thus they provide great value in terms of product quality and
consumer choice. They also work with state regulators to ensure rules and regulations are
followed which delivering the products.

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Chain of Custody:

The distributors work with chain of custody method in the sale of beer. This system
makes it very easy to enforce state laws and local ordinances. The same system also regulates the
sales to the retailers ensuring that they hold the correct licenses, do not sell to the underage, pay
the required state and local taxes and comply with the state and local alcohol beverage laws.

The same regulations which check for the accountability in beer sales also allow the
states to effectively collect the taxes on the sales of alcohol products. Distributors monitor the
data of the sales from the point it leaves the brewery till it arrives at the licensed retail outlet,
thus they have all the necessary information to collect taxes. Many states find it much easier to
collect the taxes from a limited number of federally and state licensed beer distributors than from
thousands of individual retail outlets.

Market Access:

Distributors are spread wide in different states across the country. Thus selling the beer
through distributors allow many small and large breweries to get their product to diverse markets
and provides the small scale retailers to offer varieties of beer under one roof. The system
provides the same level of playing field for all the breweries irrespective of their size.
Distributors allow a healthy competition between the breweries.

State Alcohol Control:

The rules and regulations for alcohol are different in various states. The main reason for
this being nature and effect of alcoholic drinks. Alcoholic beverages are unique and can have
negative consequences if consumed by illegally underage teens or abused by adults. Thus to
create a responsible society, it is very important to maintain effective regulation on alcoholic
beverages.

The 21st amendment gives states the total control to design and implement their own rules
and regulations for sell of alcoholic beverages. This regulatory system allows states the
flexibility to deal with the local circumstances.
 Choice and Convenience:

The distributors work with numerous breweries – small and large scale, imported or
domestic thus they are able to provide a wide range of product offerings to the consumers. They
provide equal access to market for all brewers alike.

Beer distributors especially help small scale brewers to gain substantial market reach.
They unlock the access for startup and small beer brands and other innovative beverages.
Distributors provide the necessary infrastructure for small brewers so that their products can
reach wide network of retailers. The consumers of the beers benefit by having wide variety of
choices from famous brands from large domestic or international breweries to specialty craft
microbreweries. Because of the economic efficiencies of the distribution system, retailers can
offer hundreds of choices of beers at a great price.

Economic Contribution and Community Support:

Beer distributors are businesses who are socially responsible. They are most of the times
associated with particular beer brands they carry but at the same time they are small business
owners active in economic development and local business groups.

Distributors also actively support local community events and programs, sporting
contests, philanthropic activities and beer fests. There are more than 1900 beer distributors US
wide who employ more than 92,000 Americans and provide their employees with competitive
work place, health care and quality wages. Every dollar spent on beer distribution adds $1.50
in economic activity – generating 30 cents in taxes for federal government and 18 cents for state
and local in tax revenues.131415

13
http://www.centraldistributors.com/
14
http://www.probrewer.com/resources/distribution/specialty.php
15
http://nbwa.org/industry-tech/craft-beer-distributor-of-the-year-award
Alcoholic Beverages Regulation and Taxation:

All of the Craft breweries are highly regulated at the federal, state and local level. These
levels govern the production and distribution of the beer which includes permitting, licensing,
labeling, marketing, trade practices, distributor agreements, advertising and variety of other
matters. There are different entities at federal, state and local level which collect various taxes,
licensing fees and other similar charges. They also make sure each brewery is adhering to the
laws and regulations.

Licenses and Permits

All the breweries who sell beer commercially are subject to licensing, permitting
approvals by a number of governmental authorities at the federal, state and local level. At the
federal level, the Alcohol and Tobacco Tax and Trade Bureau of the U.S Treasury Department
(“TTB”) are responsible for administration and enforcing of the related federal laws and tax
codes to production and taxation of alcoholic products. A federal brewer’s notice is required by
each brewer in order to brew beer for public consumption and an amended brewer’s notice is to
be filed is there is any change in material process, brewing equipment, brewing or warehousing
locations, brewery ownership or change in management team. Similar types of TTB permits are
required if brewery is entering in a contract brewing agreement or into an alternating
proprietorship agreement. These are very important permits and they can be revoked, cancelled
or suspended in case the brewery doesn’t comply with the correct protocol and standards which
directly affects companies’ production and reputation. Also TTB can inspect or audit any
brewery at any time.

At the local and state level, the level of regulation varies widely. Some of the breweries
distribute their products in areas where a mere notice to the authorities regarding the change in
the operations, management, materials or ownership is suffice but in other areas an advance
notice and approval is required. State and local laws and regulations which govern the sale of the
craft beers within particular state, especially for an out of state brewing company vary from
locale to locale.
Taxation:

The breweries producing less than 60,000 barrels of beer pay taxes of $7 per keg while
large breweries brewing more than 60,000 barrels pay $18 per keg in taxes. The tax is on
production and applies as soon as a keg is removed out as a finished product. The individual
states in which the breweries operate also impose excise taxes on beer and other alcoholic
beverages which vary depending on state.

Environmental Regulations:

The environmental regulations differ being federal and state bound. There are special
environmental permits required by the federal and state authorities. These requirements consider
permissions for air emissions, water discharges from the brewery and handling and proper
disposal of hazardous waste materials. The protocols needed to be strictly followed by the
breweries and violation If occurs can lead to adverse effects on breweries credibility.

Investors for Craft Brewery Start Ups

Many investors are lining up to support the exploding growth in the craft beer industry. But
investors are being very careful in selecting the breweries they want to invest in. Multiple factors
are catching investors’ eyes which are making it tough for them to make investment decisions.
Some of those factors are:

· The competition in the craft brew industry is heating up every day with additions of
number of Micro/Nano breweries.
· A petition is filed against craft brewers with the U.S Treasury Department Bureau of
Alcohol, Tobacco and Firearms by Anheuser – Busch, Red hook Ale and several other
breweries. They are demanding craft brewers add names of who actually brewed the beer
on their bottles.
· The growth of the Craft beer industry is mainly because customers think Craft brews
gives them added advantage. The product is carefully brewed and is richer in favor and
taste then mass produced beers.
· The Contracting out of Craft beers- is not mentioned anywhere but Boston Beer
Company and other major breweries actively engage in contract brewing.
· Investors’ further fear that Craft Brewers are expanding based on hype created by the
larger players and one missed step can hurl the industry in downward direction.
 · There are also worries of strong internal cannibalization and questions such as what if big
brewers make a malt flagship product which is much higher in quality and taste.

Microbreweries on the other hand are looking forward to the lawmakers’ tax cuts for craft
beer industry. Craft brewers have different sets of tax burden even if they fall in the broad
category of Small businesses. For these brewers the tax is levied on the production rather than on
the actual sales. The tax cut bill will reduce this $7 per barrel for first 60,000 barrels of beer to
nearly $3.5 per barrel. And for breweries producing more than 60,000, it will reduce tax from
$18 to $16 per barrel. If the bill is passed, it will bring the small breweries on the same playing
field as the small business owners. Harvard study shows, if the bill is passed, it will create 2,700
new jobs within 18 months and 375 new jobs will be created every year for next four-five years.
Thus as most of the investors are trying to figure out which upcoming breweries to invest in, the
micro-breweries are more hopeful more investors will line up as the craft brew market really
explodes in terms of market share and total beer sales in near future.1617

Craft Beer in a Tin initiative:

In 2002, Oskar Blues brewery in Colorado decided to pack their beers in cans rather than in
bottles. Both bottles and cans are environmentally friendly, but cans being more easily recyclable
provided a bigger push towards environmental awareness. Plus, packing beers in cans is cheaper
and product is more easily distributable. This cheap old style can beer was a nice way for Oskar
Blues to bring craft brews to general population who enjoys beers on occasions such as social
gatherings around campfires and back side barbeques.

Oskar Blues CEO first laughed at the notion of canning the craft brews, but after learning the
number of advantages quickly adopted the mechanism. The initial production was of the Oskar
Blues flagship beer Dale’s Pale Ale. This was only possible because Cask Brewing Systems, the
canning machine company has convinced a local manufacturer to produce 200,000 cans for
Dale’s Pale Ale which was way below industry average of 1 million cans.

The initial reaction was utter shock in the craft beer market community. Tin canned beers are
considered as low quality and no craft brewer wanted his/her flagship brand to considered one.
Oskar Blues decided to distribute the canned beer themselves to the retailers and also participate
in beer fests to demonstrate the freshness of the canned beers. Oskar Blues decided to pursue
critics and retailers to consider canning of craft brews based on strong arguments on behalf of
canning beer:

16
http://www.cnbc.com/id/39232270/Craft_Beer_Business_Is_Booming
17
http://www.inc.com/magazine/20101001/a-craft-beer-stimulus-plan.html
 · UV light is biggest enemy of fresh beer. If too much comes in brew gets bitter. The cans
illuminate this risk.
· Oxidation is also a brew spoiler which can happen with bottled caps, but the cans are
hermetically sealed.
· The saying that canned or kegged beer tastes like aluminum is a myth. Canned beer
remains crisp and fresh in taste.
· Aluminum packaging for craft beers means more product shelf-life, manufacturing &
distribution costs go down as they weigh less than a third of the bottles.
· Aluminum is much more earth friendly than glass. It is 100% recyclable, energy used to
create it is much less than bottles thus fuel costs are lower which means shrinkage of
carbon footprint.

Currently less than 1% of the Craft beers are canned. 52 breweries in US now offer canned beers.
The point of view towards canned beer in craft beer segment is changing especially after larger
craft breweries are shifting to green initiatives. In some years it is estimated that canning of craft
beer will increase multifold as more customers will realize its true advantages. 18

Corporate Social Responsibility

It’s the golden era for Craft Beer industry. The Craft Beer sales are going up even in
these stagnant economic conditions. As Big shot beer producers continue to dominate the world
markets with their expensive advertising campaigns and profits from cheap selling beers, the
craft brewers are seen as revolutionaries, who are more localized, green and adopting socially
responsible business models with focus on quality and diversity over the defamed mass
production. In his book, Fermenting Revolution: How to Drink Beer and Save the World, author
and active beer activist Chris O’Brian states that “American Craft brewers are countries unlikely
revolutionaries, and their adoption of sustainable business practices helps fight globalization and
break the market control of major beer companies”.

Microbreweries are fighting in the smaller markets but with larger players, they are
supporting their communities by using fresh local ingredients for their brews; they understand
their customers and they have ability to develop and respond to the needs of the local markets.
They are building loyal followers, giving back to the society by promoting various events
something that hasn’t been done by the beer giants.

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 From the craft beer biggies like New Belgium, Boston Beer Co, and Red Hook Ale to
small microbreweries and brewpubs, an overwhelming number of craft brewers have embraced
green technology to run their businesses. But maintaining a sustainable modern-day brewery
involves more than just buying local ingredients and following a protocol. Eco-friendly brewers
need to be aware of things like the type of energy used to power their operations, the sources of
raw materials, the equipment used to build the brewery, the packing and distribution materials
used and how to dispose of the waste products.

Vermont has highest breweries per capita in U.S where there is a craft brewery per
32,698 people. Vermont also boasts first ever certified organic breweries in nation, Wolaver’s
brewery. Wolaver’s believe that people are attached to a particular type of Craft beer because
they feel the connection for that brewery. And part of building and nurturing that connection is
through implementing local, sustainable business practices. They have the vision: “local,
organic, collective, green and background”. Every step of their beer making process has been
well defined to be sustainable.

Alaskan Brewing Company in Juneau is the first beer producer who has started recycling
the CO2 naturally created during the fermentation process. Alaskan Brewing Company tries to
tie in their location and environment in their brewing process. They state that if a consumer is
enjoying their product, he/she is not only supporting the environment and helping local
community become sustainable but also supporting a business that is consciously trying to make
a difference.

Sedibeng Breweries are actively involved in a wide range of social responsibility

engagement programs which aim to invest back into the community. Through their social
responsibility program they are trying to assist in improving people’s lives. They contribute to
development in a sustainable way and they support projects that communities need. They study
the community requirements, rather than strictly creating solutions for our communities. This
works because then they can spread their resources wide on various sustainable projects.
However, before company commits to a project, it ensures that skills will be transferred,
communities are involved and the projects will be able to become self-sustaining. Wherever can,
company assists and sometimes may form partnerships so as to increase capacity.

Small brewpubs are also paving the way for environmentally sustainable business in
America. Salt Lake Brewing Company in Utah was awarded the 2006 Environmental Company
of The Year award by the Recycling Coalition of Utah. Kona Brewing Company in Hawaii
employs a full-time sustainability coordinator. The ultimate sustainable brewpub in the country
is the Hopworks Urban Brewery in Portland, Oregon.
Portland is famous for two things: beers and bicycles. And Hopworks, Portland’s first
eco-brewery, does its best to combine both. It was opened by former award-
winning Laurelwood brew master Christian Ettinger, Hopworks considers sustainability its
primary motto. From its brew kettle and the brewery truck are run on biodiesel which is made
from oil used in the deep-fryers’, to the pizza ovens that warm the brewing water.
The Hopworks brewery is cleaned with collected rainwater caught from the roof, and the entire
brewery building is built from reclaimed or recycled materials.
Local, sustainable beer is infusing the American beer market. According to the Organic
Trade Association (OTA), organic craft beer sales increased 40 percent in 2005, tying only with
organic coffee as the fastest-growing organic beverage segment in the country. The big
companies are also starting to notice the glitter produced by the organic beers. Anheuser-Busch
released two Organic Beers to the market named Wild Hop lager and Stone Mill pale ale since
then A-B have dedicated separate sustainable development department to improve the social
corporate responsibility rating. In 2008 the Molson Coors Brewing Company set the rolling
global target to reduce water-use efficiency by four percent. And, according to a 2008 promo
video, Miller claims to now be recycling 99.9% of all packaging waste.
Most of the larger players in beer business have taken up environmental initiatives which
have resulted in reductions of carbon footprints, and in less water and energy usages. But these
sly larger players are going green for better PR, the proof lies in the lobbying of U.S. Department
of Agriculture by Anheuser Busch to drop the hops as the item on list of organic beers
ingredients which doesn’t have to actually be organic. According to the USDA, for a product to
be considered organic, it must be made with at least 95 percent organic ingredients. The
company now claims to be using 100% organic hops in its organic beer.1920

Economics of Beer:

Terms used to explain Economics of Beer:

ATC – Average Total Costs

TC – Total Costs

Q - Total Quantity

FC – Fixed Costs

VC – Variable Costs

Average cost for production of one unit (ATC) = Total Cost (TC) / Total Quantity (Q).

Total Cost (TC) = Fixed costs (FC) + Variable Costs (VC).

For Beer making, fixed costs are costs associated with the cost of brewing equipment,
lease on building etc. These costs don’t change with change in the output (Q). Although if you
have reached your maximum out and need to expand further, the FC changes.

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20
http://www.triplepundit.com/2011/01/green-brewhaha-craft-beer-makers-green/
Variable costs are made up of basic raw materials, energy requirements, and manual labor hours.
Thus VC depends upon the output. The more the output the more working hours and raw
materials etc.

Now, TC = FC + VC; and ATC (Cost for brewing one ounce of beer) = TC/Q
Hence, ATC = FC/Q + VC/Q.

Thus you can understand that, both the FC and VC falls with increase in Q that is
increase in scale of beer production will lower fixed as well as variable costs. As the production
expands the costs for brewing per ounce of beer decrease and profits increase. It is said that
operations can be profitable till output reaches 2.5 million barrels a year after that economies of
scale will exhaust. Still, the basic solution is same, increased scale of production will result in
lesser costs and higher profits. 21

Building a Craft beer brand:

Building successful beer brands is a step by step process which takes into consideration
various factors such as quality of beers, availability in marketplace, competitive pricing,
marketing and promotions etc. The balanced combination of ‘Push’ and ‘Pull’ in the marketplace
creates brand recognition and attracts both new and repeat customers. Creating a valuable craft
beer brand is creating a valuable brand following by offering quality product. Push strategies
utilize the resourcefulness of distributors to put the brands on retailers’ shelves while Pull
strategies create a liking for the brands in minds of consumers which then regularly ask for the
same brands/products.
Creating this pull strategy is highly essential for creation of a successful brand. Pull effect
focuses on consumers, their interests, likings and strategically aligns the brands to meet the
same.
Following are considered the basic steps for building a successful Craft beer brand:

Identify your customers:

Identifying your target market is important. Every Craft brewer should know the
demographics of the market, but at the same time should understand the age groups, income
levels, and other key attributes who are buying your product. Seller should know why a

21
http://www.oregonbusiness.com/guest-blogs/4075-the-economics-of-nanobrewing-
particular age group is buying your product, are there repeat customers, what are other age
groups drinking and reasons behind it etc. The craft brewer should try and reach for a dedicated
niche market based on product quality and pricing. Once a loyal base has been established, Craft
brewer can expand further by creating targeted marketing campaigns.

Craft a dedicated brand message:

Every Craft brewer needs to establish a clear communication channel with the consumer.
The message should be clear, concise and appealing. It should be repeated and it has to be
established as your mantra of your brand. The message has to be communicated throughout the
organization from the brewers to distributors to retailers and consumers. Brands packaging and
accessory materials should carry the message.

For example: Boston Beer Co. – Leading brewer of handcrafted and full-flavored beers.

The brand message should take into consideration the vision and mission for the brand.
The strategy behind building a message is customers will then be able to identify your brands
based on the unique message.

Creating Image of the brand:

Creating an image or reputation is essential. This is usually done through designing

unique logos or images which will make a Craft brew brand stand out from the rest. Reputation
is also dependent on quality of beer and customer service provided. Based on all these factors an
image will be created in consumers mind regarding the brand.

Providing consistent quality:

Quality can be conveyed in many ways, but for a Craft brewer the most important factor is
products consistency. The freshness and crispness of the beer should be same in every batch,
every bottle should bear the same logo and brand message and every product packaging should
be identical. Every brewery regardless of its size should have a basic level of quality control
department. High level QC programs are very costly but each brewery should have at least the
following:

· A program which in some way allows measuring the quality of the beer before it sets out
for sale.
 · A well calculated and defined shelf life for each type of beer and a technique to identify
age of the product at retail outlets (best before date stamp).
· A consistent way to randomly sample the products to enforce consistency in products.
· Sufficient budget to remove the “expired” products from the shelves and returned to the
brewery.

Brand recognition:

Making your brand recognizable is most important. Breweries that are dominating in the
market have recognized the need of establishing brand recognition and based on that they get
larger share of shelf space for their products. The more people who see brand’s logo-message,
the more comfortable they get with it and more likely that they will consider buying that brand.
This can be achieved by simple steps such as hanging a sign outside the door, creating
accessories such as pouches for Beer bottles, T-shirts, Pens, Mouse pads etc. These are excellent
means to spread the brand name. Every craft brewer should every move to display name of their
brand at all the places possible esp. at point of sale.

Consumer Ownership:

Why do people choose to buy one types of brands over and over? The main reason
behind this has been attributed to the feeling of ownership/attachment with the brand. Most of
the brands try to create an aura around then which makes them attractive for targeted customers.
For Craft brews, it can be the taste revolution which most of the customers are seeking now days
which can instantly attach a peculiar taste with a brand, or a visit to the brewery which has gone
really well and consumers then feel a kind of attachment towards the brewery and its brands. The
good saying “Give respect to Gain respect” goes very well in this scenario. Craft brewers should
give proper attention to each and every consumer that comes in their sphere of influence. These
people then act as brand ambassadors, spreading the name of your product like wildfire.
Customer centric approach is vital and it successfully established connection between brand and
consumers.

Packaging:

Packaging is conveys how your brand is perceived by the consumer. The best example is
Coca-Cola bottle; the new shape of the bottle is easy to handle which have catapulted the sales of
coke over other sodas. Same goes for Craft beers, if consumers are going to pay special price to
buy a Craft brew, it should be packages well. This appreciable packing instantly creates a
positive effect on consumers’ mindset. Good packaging should Stand out but fit in, it should be
compelling, interesting and comfortable. Most of the breweries re-evaluate their packaging every
time they make changes in their package designs, logo changes etc. They allow their packaging
to evolve as the brand matures. The subtle changes in brand packaging can be easily understood
if famous brands such as Sierra-Nevada, Boston Beer Co. packaging from last 15 years are
studied.22

Contingency Planning

Contingency planning is essential to build a craft beers portfolio. Craft breweries need to
watch individual brands sales records very carefully. If one or other brands is not doing so well,
they can be an economical risk for the company. In such scenarios, brewery must take tough
decisions to stop production of one or more of its beers. There can be several other reasons why
this might happen including sudden drop of demand, lower production volumes, difficulties in
accessing the raw materials etc. On the other hand through contingency planning, craft brewery
can focus on its main products in the scenario of rise in competition in other segments. Craft
Beer industry is currently a niche market and limited by the people who are following the taste
revolution. But as its growing exponentially every year large beer companies like Miller-Coors,
A-H etc. are trying to gain market access in the craft beer market, also every year many new
microbreweries are staring up. Thus in face of rapidly changing scenarios in the craft beer
industry contingency planning is highly important. 23

Social Media Marketing & Craft Brewing Industry:

Social Media has changed the way people used to interact with their brands. The one way flow of
communication from brands to customers is changing and on a larger part the change driver is
Social Media. With the help of social media networking, through the websites such as Facebook,
Twitter now companies can show their presence on the same playing field as their customers,
allowing them to have a one-one kind of interaction with them. In the world of social media,
everyone is connected with each other on same levels and can freely communicate, express or
spread messages. Companies being able to closely monitor their followers and brand messengers
can easily measure the sphere of their influence, the reaction for their products and administer
response measurement for new products. Social Media is allowing companies and corporations

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23
http://www.bplans.com/brewery_business_plan/controls_fc.cfm#ixzz10BxMSyeU
alike to craft specific messages, advertising campaigns and promotions for their products directly
based on consumers’ needs and wants.

Craft brewers have picked up on the scent of this new marketing platform. They are using Social
Media to send and receive instantaneous feedbacks about their existing and upcoming products.
In the world of beer makers, it has always been the case that company with more financial
resources to spare had an upper hand because of their behemoth marketing expenditure. But the
situation is changing. Social Media has brought Microbreweries, Nano-breweries and Large
Breweries to a common battlefield and the one who will strategically utilize these networking
resources will prevail in this battle.

The giants of the Social Media stream are Facebook, Twitter and YouTube. Every
company/brand or product is marking its presence on these social media websites. On Facebook
they create a Fan page, On twitter they create official twitter account which allows its followers
to follow the brand and On YouTube they have company dedicated Channels through which they
share their videos about brand, best practices etc.

There are some common strategies which are used by Craft brewers. Most of the Craft brewers
create a Facebook Fan page and make users aware about it. Some even give out free beer
samples or pints once customers users check on become a Fan. This is a strategy to increase the
sphere of influence on Facebook. The more followers the brand will have the more chances that
a new user will consider checking the brand out once he/she stumbles onto the page.

Second strategy is creating an official account on twitter. Twitter allows users to follow the
brands and celebrities they like. The sphere of influence on twitter is roughly calculated by how
many followers a brand will have plus how far a message posted by brand/company travels.

Third most commonly used strategy is by creating a dedicated video stream on YouTube. The
videos included by Craft Brewers will focus on their best practices, Fun to make beer videos etc.

After marking the presence of the brands and companies on various social media platforms,
companies then need to pay attention to what customers are saying about them, how are their
competitors are interacting with the customers and how effective is their influence on social
media.

Nano and Microbreweries can easily gather information about their current customers and spread
the word to their potential customers through use of very low marketing budget. Social Media
network is a boon for small breweries who can’t dedicate much of their finances to specialize
and costly marketing practices.

After the generation of followers, there are specialized online tools which are available for the
companies through which they determine the level of influence the company has, how many new
followers company/brand have gathered, how effective was their social media strategy etc. The
ROI of a Social Media Marketing plan for a Craft brewer is increase in its sphere of influence
which can be directly translated to more effective pull for his/her products’ from the market.2425

24
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25
http://craftbeer.us/2010/02/14/film-it-and-they-will-watch/
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