Penetrating the American Craft Beer Market: A Market

Entry Study for an Irish Brewery Expansion

Submitted in partial fulfilment of the requirement of the degree of Master

of Business Administration of the University of Strathclyde

THE UNIVERSITY OF STRATHCLYDE

BUSINESS SCHOOL

Pietro Busa
Hemant Chandran
Paul Dimerin

2013 Dorain
Dr. Michael Marck

Statement of Academic Honesty

We declare that this dissertation is entirely our own original work. We declare that, except
where fully referenced direct quotations have been included, no aspect of this dissertation has
been copied from any other source.

We declare that all other works cited in this dissertation have been appropriately referenced.

We understand that any act of Academic Dishonesty such as plagiarism or collusion may result
in the non-award of a Masters degree.

Signed . Dated .

Signed . Dated .

Signed . Dated .

Acknowledgements
The team of researchers would like to thank several people for their advice, input and expertise
in helping us write this dissertation. Dr. Michael Marck, our project supervisor, has been
extremely helpful by providing us generous feedback, advice and direction throughout the entire
process. It was a pleasure working with him.
We would like to acknowledge Josh Sauter, Pam Hearne, Kirsteen Rae and Irene AitkenheadTaylor for their advice and support throughout the course of this project.
The team would also like to thank Caseys Brewery who provided us an opportunity to work
with them on this topic.
The team would like to express their gratitude to Sri Divya Peddireddi, who helped the team
with the graphic design in the recommendations chapter.
Last but most certainly not the least, we would like to thank our respective parents and families
for their unequivocal support and motivation during the course of our study.
To all these people and many more, we are extremely grateful and recognise that a mere
expression of thanks would never suffice.

Abstract
The scope of this project was to define a successful market entry strategy for Caseys Brewery,
a start-up craft brewer based from Cork, Ireland, which is keen to export its beer to the United
States.
The main aim of this project was to understand the market entry prospects in the American craft
beer market and scouts, amongst different options, the most appropriate market entry mode.
Further, it intended to explore different possibilities for product distribution and identify a
particular geographic area within the U.S. market. Other objectives of this project were to
identify key aspects of promotion and the most suitable Stock Keeping Unit solution to export
the product overseas. Finally, this study meant to investigate those factors that are likely to push
a customer to switch from a traditional to craft beer.
The analysis clearly revealed a potential for Caseys ambitious plan while suggesting to limit, at
the beginning, the geographical coverage to the Greater Boston Area and to rely on professional
distributors deeply rooted in the American craft beer market. Additionally, this research
recommended a set of promotional activities that are likely to make market penetration
successful and identified bottles as the best S.K.U. for the initial phase of the process.
Ultimately, in addition to the initial research objectives, this piece of work identified a series of
steps that Caseys Brewery should take to make a consumer switch from a traditional beer to
craft beer.

Word Count: 26,466

Table of Contents
Statement of Academic Honesty ...................................................................................... 3
Acknowledgements ........................................................................................................... 4
Abstract ............................................................................................................................. 5
List of Figures .................................................................................................................. 10
List of Tables.................................................................................................................... 11
Chapter 1: Introduction..................................................................................................... 1
1.1.

Entering a New Market ...................................................................................... 1

1.2.

Research Objectives ........................................................................................... 2

1.3.

Report Structure ................................................................................................. 3

Chapter 2: Literature Review ............................................................................................ 4

2.1.

Introduction ........................................................................................................ 4

2.2.

Entering a New Market ...................................................................................... 5

2.2.1.
2.3.

Market Selection ................................................................................................ 6

2.3.1.
2.4.

Pre-entry Knowledge and Experience ......................................................... 5

Factors Influencing the Market Selection ................................................... 7

Market Entry Mode: A Strategic Decision ........................................................ 10

2.4.1.

The Hierarchical Model ............................................................................. 12

2.4.2.

Exporting Versus Foreign Direct Investments Mode ................................ 14

2.4.3.

The Internalization Theory ........................................................................ 15

2.4.4.

The Resource Based Theory ...................................................................... 15

2.4.5.

Normative Decision Theory and Other Approaches ................................. 16

2.5.

Timing of Market Entry: Pioneer versus Followers .......................................... 16

2.5.1.

Defining a Market Strategy Framework .................................................... 17

2.6.

Market Entry Modes in Mature Industries: The U. S. Brewing Industry .......... 18

2.7.

Sequence of Market Entry ................................................................................ 19

2.7.1.

The Waterfall Model ................................................................................. 19

2.7.2.

The Sprinkler Strategy ............................................................................... 20

2.7.3.

The Wave Strategy .................................................................................... 20

2.8.

Industry Overview ............................................................................................ 21

2.8.1.

The Business Environment for the Beer Industry ..................................... 21

2.8.2.

Market Trends and Industry Challenges ................................................... 22

2.8.3.

The Three-Tier System in U.S. ................................................................... 22

2.8.4.

Complex Distribution Systems with Conflicting Interests ......................... 23

2.8.5.

Distribution Channels and Supply Chain ................................................... 24

2.9.

The Legal Framework ....................................................................................... 24

2.10.

Marketing Communications ......................................................................... 25

2.10.1. Marketing Communications Mix ............................................................... 25

2.10.2. Advertising ................................................................................................ 26
2.10.3. Sales Promotion ........................................................................................ 27
2.10.4. Public Relations ......................................................................................... 28
2.11.

Building Brand Community ........................................................................... 29

2.12.

Outline of the American Beer Market .......................................................... 30

2.12.1. History of Beer in America ........................................................................ 30

2.12.2. Beer Production in America ...................................................................... 31
2.12.3. Beer Consumption in America .................................................................. 32
2.12.4. Economic Impact of Beer .......................................................................... 33
2.12.5. Future Trends ............................................................................................ 34
2.13.

Craft Beer Industry........................................................................................ 34

2.13.1. History of Craft Brewing in America ......................................................... 35

2.13.2. Craft Beer Production ............................................................................... 36
2.13.3. Craft Beer Consumption............................................................................ 37
2.13.4. Craft Beer Demographic............................................................................ 38
2.13.5. Craft Beer Future Trends ........................................................................ 39
2.14.

Irish Diaspora in America .............................................................................. 40

2.15.

Case Company............................................................................................... 42

2.15.1. About Caseys ............................................................................................ 42

2.15.2. Competitive Advantage............................................................................. 43
2.16.

Chapter Summary ......................................................................................... 43

Chapter 3: Research Methodology ................................................................................. 44

3.1.

Introduction ...................................................................................................... 44

3.2.

Research Objectives ......................................................................................... 44

3.3.

Research Process .............................................................................................. 44

3.4.

Research Design ............................................................................................... 45

3.4.1.

Deductive and Inductive Reasoning .......................................................... 45

3.4.2.

Exploratory and Explanatory Studies ........................................................ 46

3.5.

Research Strategy ............................................................................................. 47

3.5.1.
3.6.

Case Study Selection ................................................................................. 47

Data Collection Methods and Procedures ....................................................... 47

3.6.1.

Secondary Research .................................................................................. 48

3.6.2.

Primary Research ...................................................................................... 49

3.7.

Research Conduct and Ethics ........................................................................... 53

3.8.

Conceptual Framework .................................................................................... 54

3.9.

Local Analysis .................................................................................................... 54

3.10.

Methodology Limitations.............................................................................. 55

3.11.

Chapter Summary ......................................................................................... 56

Chapter 4: Findings & Analysis ........................................................................................ 57

4.1.

Introduction ...................................................................................................... 57

4.2.

Table of Significant Findings ............................................................................. 57

4.3.

Market Entry Prospects .................................................................................... 60

4.3.1.

Trends in the U.S. Market ......................................................................... 60

4.3.2.

Geographical Coverage ............................................................................. 62

4.3.3.

Operational Aspects .................................................................................. 63

4.4.

Distribution Channels ....................................................................................... 64

4.4.1.

On-Line Sales ............................................................................................. 64

4.4.2.

Direct Relationship with Retailers ............................................................. 64

4.4.3.

Brokers ...................................................................................................... 65

4.4.4.

Distributors................................................................................................ 66

4.5.

Ideal Geographic Area for Market Penetration ............................................... 68

4.6.

Promotions ....................................................................................................... 71

4.6.1.

Identifying with the Craft Beer Community .............................................. 71

4.6.2.

Promoting the Brand ................................................................................. 73

4.7.

Ideal Packaging Material for Market Entry ...................................................... 74

4.7.1.

Bottles and Kegs ........................................................................................ 74

4.8.

Precedents of Irish Craft Beer Penetration ...................................................... 76

4.9.

Other Key Findings ........................................................................................... 77

4.9.1.
4.10.

Switch from Traditional to Craft Beer ....................................................... 77

Chapter Summary ......................................................................................... 78

Chapter 5: Recommendations and Conclusion ............................................................... 79

5.1

Introduction ...................................................................................................... 79

5.2

Table and Summary of Recommendations ...................................................... 79

5.3

Recommendation 1: Penetrating the American Market .................................. 82

5.4

Recommendation 2: To Use a Distributor to Penetrate the Market ............... 82

5.5

Recommendation 3: Target Boston, Massachusetts to Launch....................... 83

5.6

Recommendation 4: Promotional Campaigns to Aid the Launch .................... 83

5.7

Recommendation 5: Use Bottles as an Ideal Stock Keeping Unit .................... 85

5.8

Recommendation 6: Consider Precedents Set ................................................ 85

5.9
5.10

Recommendation 7: Target and Hook the Traditional Beer Lover .................. 86

Chapter Summary ......................................................................................... 88

Chapter 6: Group Learning and Reflection ..................................................................... 90

6.1

Introduction ...................................................................................................... 90

6.2

Process of Research .......................................................................................... 90

6.3

Group Dynamics ............................................................................................... 91

6.4

What We Learnt ............................................................................................... 91

6.5

What Would We Do Differently ....................................................................... 92

6.6

Conclusion ........................................................................................................ 92

References....................................................................................................................... 93
Appendix A Snapshot of the Alcoholic Drinks Market in U.S. .................................... 107
Appendix B Craft Beer Industry Annual Dollar Volume for Years 2003 2012 ......... 108
Appendix C Irish Population Estimates, 2011 ............................................................ 109
Appendix D Irish Population in New York .................................................................. 110
Appendix E Irish Population in Massachusetts .......................................................... 111
Appendix F Irish Americans in Eastern Massachusetts .............................................. 112
Appendix G Irish Americans in NYC ............................................................................ 113
Appendix H Power-Interest Stakeholder Analysis ..................................................... 114
Appendix I List of People Contacted .......................................................................... 115
Appendix J Interview Transcript of Association 2 ...................................................... 119
Appendix K Interview Transcript of Broker 2 ............................................................. 120
Appendix L Interview Transcript of Craft Brewer 1.................................................... 122
Appendix M Interview Transcript of Distributor 3 ..................................................... 123
Appendix N Interview Transcript of Craft Beer Enthusiast 3 ..................................... 124
Appendix O Interview Transcript of Retailer 1........................................................... 125
Appendix P - Data Collection Highlights........................................................................ 127
Appendix Q Letter from Caseys Brewery .................................................................. 131

List of Figures
Figure 1: Structure of the Analysis Process...........2
Figure 2: Structure of Literature Review... 4
Figure 3: Pre-entry Knowledge Requirements.. 5
Figure 4: Pre-entry Experience Requirements ..6
Figure 5: Overseas Market Selection Criteria .10
Figure 6: Factors of Influence .12
Figure 7: The Hierarchy of Choice of Market Entry Modes ...13
Figure 8: Strategy Framework .18
Figure 9: Key Players in the Brewing Industry ...21
Figure 10: The Three-Tier System ..22
Figure 11: Roles within the Beer Supply Chain ..23
Figure 12: The Marketing Communications Mix 26
Figure 13: Market Share of the Five Largest Breweries over the Years .31
Figure 14: Production Share of Beer in the Alcoholic Beverages Market...31
Figure 15: Production of Beer over the Years 2006-2011 ..32
Figure 16: Beer Market Volume 2007-2012 ...33
Figure 17: U.S. Beer Market Value 2007-2011 ..33
Figure 18: U.S. Beer Market Volume Forecast 2013-2017 .34
Figure 19: 125-Year Brewery Count in the U.S. .36
Figure 20: U.S. Craft Beer Production 37
Figure 21: Volume Share for Craft Brewers ...37
Figure 22: Consumption of Craft Beer by Age ...38
Figure 23: Consumption of Craft Beer by Income ..39
Figure 24: Percentage of Irish-Americans in the U.S., by County ..41

Figure 25: The Research Onion 45

Figure 26: Types of Secondary Data ...48
Figure 27: Types of Electronic Interviews ..50
Figure 28: Types of Sampling Techniques ..52
Figure 29: Research Process 53
Figure 30: Conceptual Framework ..54
Figure 31: Data Analysis Process 55
Figure 32: U.S. Volume Share for Craft Brewers ...60
Figure 33: American Craft Beer Week Advertisement ...62
Figure 34: Distribution Channels.............................................................................................65
Figure 35: American Craft Beer Industry ....69
Figure 36: Promotional Strategy Diagram ..71
Figure 37: Craft Beer Festivals in Boston ...73
Figure 38: U.S. Beer Consumption by Type ...75
Figure 39: Caseys Brewery Red Ale Mock-Up .87
Figure 40: Caseys Brewery Amber Lager Mock-Up .87
Figure 41: Caseys Brewery Stout Mock-Up ..88

List of Tables
Table 1: Breweries Operating in U.S. in 2013 36
Table 2: Craft Beer Production in 2012 (by volume) ..36
Table 3: Classification of Respondents by Stakeholders, Country and Company 51
Table 4: Summary of Findings ...58-59
Table 5: Summary of Recommendations .79-80

List of Abbreviations
B.M.I.
C.A.G.R.
C.B.P.
D.S.D.
E.U.
F.A.A.
F.D.I.
G.B.A.
H.L.
I.P.A.
I.P.R.
M.B.A.
N.B.A.
N.Y.C.
N.Y.S.E.
P.O.P.
S.K.U.
T.T.B.
U.K.
U.S.
U.S.D.

Business Monitor International

Compound Annual Growth Rate
Customs and Border Protection
Direct Store Delivery
European Union
The Federal Alcohol Administration Act
Foreign Direct Investment
Greater Boston Area
Hectolitres
India Pale Ale
The Institute of Public Relations
Master of Business Administration
National Basketball Association
New York City
New York Stock Exchange
Point of Purchase
Stock Keeping Unit
The Tobacco and Alcohol and Trade Bureau
United Kingdom
United States
United States Dollar

Chapter 1: Introduction
1.1.

Entering a New Market

The purpose of this research was to advise Caseys, a start up craft brewery based from Cork,
Ireland, that is aiming to launch its own craft beer in the American market. In line with this, the
researchers intended to look at a market entry strategy and distribution channel that should be
utilised in order to penetrate the American craft beer market.
The rationale for selecting this topic is that each researcher found the scope of the project very
interesting and engaging since Caseys is likely to face several challenges in its mission of
penetrating an overseas market. Furthermore, playing on each others strengths, the researchers
were confident of producing an interesting and thought provoking project.
Craft beer consumption and production in the United States (U.S.) has seen robust growth over
the past two decades and is expected to continue following such a trend for the years to come.
The number of craft brewers has increased significantly all over the States. The picture arising
from the research portrays America, changing its drinking patterns, shifting from traditional
beer towards more sophisticated flavoured craft beer (Euromonitor 2012).
As suggested by Koch (2001), market entry mode and market selection are two aspects of a
single decision process. This piece of work developed an integrated process of evaluation of the
difficulties that a new entrant might face once it decides to penetrate an unfamiliar and
competitive American craft beer market. This research then presents a market entry strategy,
designed by the researchers through an inclusive spectrum of analysis keeping into account all
the factors, internal and external to the company, which could be relevant to the decision
making process. The following chart represents the framework used to structure the analysis.

Figure 1: Structure of the Analysis Process; Source: Adapted from (Ekeledo & Sivakumar,
2004)

1.2.

Research Objectives

The market entry mode strategy is an area that has gathered significant interest in the academic
world leading to a very substantial body of research identifying and assessing those factors
essential to successful market penetration. The interest toward these issues, studied at different
extents and under many aspects, comes mainly from the theory of international investments and
from the problems related to international production (Hymer, 1960) (Southard, 1931) (Caves,
1971) (Dunning, 2006) (Dunning 1977).
The selection of a market entry mode is considered by Root (1994) as extremely relevant
strategic decisions for international firms. This decision of selecting a market entry mode is
highly critical, as the researchers believe that Caseys needs to optimize every aspect that
market entry entails for the brewery to be successful in the American beer market.
A series of interviews have been conducted with different stakeholders (brokers, distributors,
retailers, craft brewers, associations, enthusiasts) bearing extensive business experience in the
craft brewing and the alcoholic beverage industries. These interviews provided the researchers
with useful insights and a rich array of perspectives allowing in-depth knowledge of the
industry.

More particularly this dissertation aims to respond to the following set of questions:
1) To investigate the market entry prospects of Irish beer into the U.S. craft beer market.
2) To identify distribution channels that should be utilised to enter the U.S. craft beer
market.
3) Explore geographic areas in the U.S. to support the launch of Irish craft beer.
4) Identify promotional campaigns to aid market penetration.
5) To investigate the ideal Stock Keeping Unit (S.K.Us) for market entry.
6) To explore precedents of previous market penetration of Irish craft beer into U.S.

1.3.

Report Structure

The report comprises four sections:

The first section reviews and assesses the most relevant literature in the field of market entry
strategy. The section explores aspects such as pre-entry knowledge and experience for entering
a new market, factors influencing market selection, market entry mode, market entry timing and
sequence of market entry. It also considers the aspects of marketing communication and brand
building strategy for a new entrant to the market. Finally, this part also presents an overview of
the American craft brewing industry, exploring its past and future trends and introduces the firm
as an object of this study.
The second section describes, in detail, the methodology that has been used to carry out the
research. This section gives an insight into the different approaches used while highlighting the
difficulties that the researchers faced during the research process.
The third section presents all the findings and research results related to the mentioned
objectives with highlights of all the interviews carried out during the research.
The fourth and final section explores the most relevant findings and offers recommendations
from these findings. This section critically reflects on factors that are expected to influence the
chances of successful penetration of the American craft beer market.

Chapter 2: Literature Review

2.1.

Introduction

The following chapter will explore the most relevant studies in the area of market entry strategy.
The review will then investigate marketing and promotional literature that will help frame some
promotional aspects of the entry strategy that the brewery should employ. In both cases, the
review explores the entire American market in conjunction with the product offering. The final
section of the literature review explores the American craft beer market itself, the geographic
areas where the brewery can launch its offering, the current state the market is in and the
different and diverse demographic that make-up the market.

Market Entry

Literature
Review

Marketing Communications

Caseys Brewery (Case

Company)

American Beer Market

Figure 2: Structure of Literature Review

2.2.

Entering a New Market

When a company enters a new market, it seeks a specific set of clients to increase its customer
base and diversify its business activity. A successful market penetration strategy relies heavily
on the companys aptitude to meet the requirements of new customers (Grigsby, 2007).
A business trying to penetrate a foreign market will be required to make relevant evaluations
regarding the choice of the entry mode. Normally there are different strategic options for
entering a new market and each of them may involve varying resource levels. The four most
common modes used by firms are exporting, sole venture, joint venture, exporting and licensing
(Agarwal & Ramaswami, 1992). Root (1987) stresses the importance of the right initial choice
and the difficulty of changing it afterwards without considerable loss of time and money.
2.2.1. Pre-entry Knowledge and Experience
Paunescu (2013) emphasizes the importance of pre-knowledge and experience of an
entrepreneur entering a new market; the author claims that there is no one universal recipe for
successful entrepreneurship and market entries. Even if there are many similarities in successful
ventures stories, there are also factors that distinguish one venture from the other. This study
draws on existing research indicating that pre-entry knowledge of the market jointly with
entrepreneurs experience at practical and managerial level will enhance the chance of success
for a company (Dencker et al., 2009) (Agarwal, et al., 2004) (Delamr & Shane, 2003) (Franco &
Filson, 2006)
The study aims to understand the relationship existing between pre-entry knowledge and
experience and success of a new venture. The author suggests that this entry knowledge should
be analysed under three criteria:

Personal profile and characteristics of the entrepreneur

Knowledge about the business and the industry

Resources at entrepreneurs disposal

Figure 3: Pre-entry Knowledge Requirements

Source: Paunescu (2013)

Additionally, the study reflects on the fact that pre-entry experience can contribute to three
categories of entrepreneurial skills:

Functional skills (ability to perform tasks)

Relational skills (capacity to work with external actors)

Resource Management skills (ability to optimize the management of scarce resources)

The study aims to highlight the importance of start-up business planning as a pre-requisite for
successful market entry. Furthermore, the author focuses on the value of social and human
capital and claims that, if the entrepreneurial model is adhered to, the firm will be more
prepared to deal successfully with unexpected changes in the competitive environment.

Figure 4: Pre-entry Experience Requirements

2.3.

Source: Paunescu (2013)

Market Selection

Market selection, for every company, is a crucial and strategic step of any international business
strategy (Root, 1994), (Kobrin, 1976). Contrary to the most prevalent approaches arising from
past literature, considering the selection of the market and the mode of entry as related decisions
but substantially detached, Koch (2001) suggests that looking at these aspects as two
components of a single decision process should be a more appropriate approach. The outcome
of such a structured process, can be affected by an exhaustive list of factors and indicates that an
inclusive analysis would give the possibility to accommodate very diverse business
environments, will help improving the quality of the decision making process and deal with
most relevant practices.

2.3.1.

Factors Influencing the Market Selection

Koch (2001) identifies a series of factors likely to affect the selection of a market for a company
that can be internal to the company, external, or mixed. These factors are of high relevance to
this study because one of its objectives is to assess why a firm should decide to enter a given
market. The author identified a comprehensive list of factors relevant to the market selection
and the research will try to explain the relevance of these factors in the craft brewing industry.
Koch (2001) suggests that an element deeply influencing the strategic orientation that
companies develop is the collective and individual experiences of their workers. At this level it
is possible to use a classification based at least on two strategic orientations. The first reflects a
proactive, reactive and planned orientation (Glaister & Thwaites, 1993); the second one
considers companies as prospectors, analysers and defenders (Miles & Snow, 1984). This
strategic orientation is likely to influence the internationalization process of the same company.

2.3.1.1. Internal Factors

Stage of internationalization:
Referring to the international activity of a company or, more in particular, to its export
activity

Company strategic objectives:

These may assume many forms and depend on company history, business sector, or
personal preferences of decision makers setting these objectives. They may imply
market shares revenues or profits on a global or on a local scale.

Overseas market selection experience:

This implies the assessment of companys experience in an international business
context.

Company international competitiveness:

Capacity to access, certain skills and competences of extreme relevance to perform in a
global business environment

Calculation methods applied:

Based on two alternatives: the first approach compares methods relying on risk
appraisal versus methods based on advantage evaluation; the alternative approach,
compares methods based on costs to methods based on extent of marketing control
(Root, 1994) (Porter, 1980).

2.3.1.2. Mixed (External/Internal) Category

Own/accessible resources:
Firms with higher availability of resources, and through different forms of partnerships
have access to resources of other firms, are favoured, ceteris paribus, in the selection of
their worldwide market.

Networking:
Companies should develop initiatives such as taking part in international exhibitions,
trade fairs; set up strategic alliances or joint ventures with other players; use the same
suppliers, buyers and create ad hoc consortia. Companies that focus on developing their
business networks are facilitated in their internationalization process (Johanson &
Mattson, 1988).

Similarity/proximity of overseas market:

Vahlne & Wiedersheim-Paul (1977) found that so-called Psychic distance often
influences overseas market selection. Factors like, company employees' familiarity
with a country, managements experience with a country, strength of cultural and
business links (see the immigrant effects discussed later on) between countries are
factors likely to have a substantial relevance in the market choice.

Market portfolio congruity:

The market portfolio of a firm may change over the life of a business, as it is a
consequence of incremental changes, perhaps responses to decisions for pursuing
established business objectives. Root (1994) suggests that, over the time, the logic of
market selection may change. It is important that a company's market portfolio is
compatible with a companys current competitive environment and future development
strategy. In order to meet its objectives and find a better fit with its external
environment the company might be required to modify its existing portfolio of assets.

Expansion sequence optimisation:

It is important to define the most suitable way to enter international markets and the
related entry sequence. This must be done keeping into account the future anticipated
trends of the international market environment and a firms future resources,
competencies and capabilities. A preliminary stage of this analysis may suggest
clustering countries on the basis of their socio-economic features and choosing the
strategy that allows using resources efficiently and sustaining the growth.

2.3.1.3. External Factors

Country market potential:

Country market potential is one of the most common and relevant criteria used in
market selection (Johanson, 1997) (Root, 1994) (Moyer, 1968). An aspect that should
be kept into account while assessing this factor is the potential risk of political
manipulation of the relevant data regarding the product. Another aspect deserving
careful attention is evaluation of product market specific factors used in estimating the
countrys market potential.

Competitive significance of the market:

A conventional and relevant point of interest regards the significance of lead markets as
an indicator to assess companys current performance and as an input to predict its
future changes (Elliott & Cameron, 1994). These leading markets are usually big,
strong and free from administrative regulation and protective measures with strong
opponents. These markets are of relevant strategic importance in global marketing
(Elliott & Cameron, 1994).

Anticipated overseas market risks:

Assessing market risk in foreign market selection is the aspect that, perhaps, has
received the highest attention in the literature (De la Torre & Neckar, 1990) (Backhaus
& Meyer, 1986). Export credit guarantee institutions like banks and other organisations
concerned with international business have mainly driven this attention.
Czinkota & Ronkainen, (1996) identified three main areas of business risks in an
international context:
Possession risks (expropriation, confiscation and domestication)
Operational risks (exchange risks, over- investment and price controls related
risks)
Transfer risks.

Figure 5: Overseas Market Selection Criteria

2.4.

Source: Koch (2001)

Market Entry Mode: A Strategic Decision

A relevant body of past studies covering fields such as global trade, industrial organisations and
market imperfections have revealed several aspects likely to have an influence in choosing the
target market for a potential entrant.
In this regard Dunning (1977, 1980 and 1988) integrated the perspectives from these areas and
suggested a framework according to which three main factors affect the choice regarding how to
penetrate a new selected market:

10

Ownership advantages of a firm.

Location advantages of a market.

Internalizations advantages of integrating transactions within the firm.

There have been numerous empirical studies, which attempted to justify the choice of entry
mode; however, the literature did not manage to explain in a satisfying way the relationship
existing among the relevant factors that should influence the final entry choice. (Kobrin, 1976)
The criticality of the decision of choosing the best market entry mode for a firm is very high
because this choice might have a relevant effect on a firms global business performances.
(Klein & Roth, 1990) (Anderson & Coughlan, 1987).
According to Agarwal & Ramswami (1992), examining the importance of interrelationships
amongst the considered factors is essential because they can explain those firms behaviours
that cannot be explained relying only on the independent factors.
Another factor that Agarwal and Ramswami (1992) have identified as relevant for the choice of
a market entry strategy is managerial perceptions. If many of the academic works mentioned
have always assumed that advantages directly related to a location or a country are exogenous
advantages and should be constant for all the companies deciding to enter a given market this
might change according to the perceptions managers of a company have about these variables.
In particular, factors that may influence such a perception have been identified in managers past
experience regarding that particular geographical area or market, their professional experience
or professional background. The importance of managerial perceptions in making decision is, as
well, supported in the organisational behaviour literature (Cyert & March, 1963).

11

Figure 6: Factors of Influence

2.4.1.

Source: Agarwal and Ramswami (1992)

The Hierarchical Model

Past literature has mainly been oriented toward traditional classification based on the distinction
between equity based (fully owned operations or joint ventures) and non-equity based market
entry modes (mainly based on contracts).
Some more past studies have highlighted the importance of other factors specifically connected
to firms (Erramilli & Rao, 1993; Kim & Hwang, 1992; Kumar & Subramaniam, 1997; Madhok,
1997), or related to the target country (Anderson & Gatignon, 1986; Kogut & Singh, 1988; Tse
& Al 1997).
In a study made in 2000, Pan and Tse drew upon past literature and argued that the entry mode
that a firm will choose can be analysed under a hierarchical perspective (Kumar and
Subramaniam, 1997). The authors claim that this approach would be structured by managers in
such a way that different market entry modes are ranked into a multilevel hierarchy according to
a set of appraisal criteria for each level. Managers should keep into account a limited number of
factors per level of the defined hierarchy.

12

Figure 7: The Hierarchy of Choice of Market Entry Modes

Source: Pan & Tse (2000)

This approach is centred on evaluating the presence and the level of investment in equity and, in
doing so, classifying in equity modes (wholly owned operations and equity joint ventures) and
non equity based modes (contractual agreement or export). At the first level, there is a
distinction between equity and non-equity entry mode. The following step would be to evaluate
which sub-category, between the equity or non-equity entry modes options to choose to develop
further.
In this study, the hierarchical model is tested empirically on a sample of more than 10,000
foreign firms entering the Chinese market in the period 1979 to 1998.
The findings indicate that there are some factors that influence managers while choosing
between equity versus non-equity option. However the influences tend to be weaker for choices
made in the lower levels of the hierarchy. The results provide empirical evidence in support of
the hierarchical model of market entry modes.

13

2.4.2.

Exporting Versus Foreign Direct Investments Mode

The selection of a market entry mode can be influenced by several factors. Due to the difficulty
to include all these factors in one study, many other studies tried to narrow the focus of the
research.
Chung and Enderwig (2001) proposed a study on the eclectic framework as proposed by
Dunning (1977, 1980 & 1988) and extended by other authors (Hill et al 1990), (Kim and Hwang
1992) which has been widely used to explain the choices between Foreign Direct Investments
(F.D.I.) and other entry modes. (Dunning, 1973).
In this study the authors analyse a sample of 124 firms from New Zealand operating in Taiwan
(the only overseas market considered) with the aim of comparing two entry modes exporting vs.
F.D.I.
The analysis was conducted using a logistic regression analysis and factors examined in the
study were:

The International Experience: Defined as firms experience with Japan.

Immigrant Effect: According to which, immigrants from the host country are likely to
facilitate the market entry process acting as a connection bridge amid the firm and the
host country. Immigrants often have a significant knowledge of the country and of its
culture (Gould, 1994; Lever- Tracy et al., 1991).

Market Size: Indicated as a relevant effect from many past studies (Agarwal and
Ramaswami, 1992; Kwon and Konopa, 1993; Root, 1994; Terpstra and Yu, 1988).

Service Requirements: The service requirements of a product, according to several

studies, can also have an influence in the choice of market entry mode. When high level
of services, pre or after sales, are required by a manufacturing product companies tend
to produce directly in the host market to offer an adequate level of performance
(Anderson & Coughlan, 1987; Ramaseshan & Patton, 1994).

The study found that three variables were significant. They are product type (service vs. other),
the immigrant effect and firms international experience (experience with Japan). Perhaps the
most relevant finding of the study is the impact of the immigrant effect, according to which
firms established by immigrants native of the host country tend to opt for F.D.I. to enter a new
market.

14

2.4.3.

The Internalization Theory

This theory aims to explain the reasons according to which a organisation should decide to set
up a direct facility in a host country instead of setting up partnerships agreement with other
players. Rugman (1980) argues that the majority of these studies are part of the subset of the
general theory of internalization.
Other authors offered important contributions in this regard. McManus (1972) developed the
internalization theory, trying to explain the reasons why firms invest directly in manufacturing
facilities abroad (Buckley & Casson, 1976).
Coase (1937) argued that companies might choose F.D.I. when internal transactions are less
expensive than external transactions.
Buckley (1988) indicates that testing the internalisation approach in the modern theory of the
multinational enterprise presents several difficulties. The author claims that because of the
complex structure of the theory, the conclusion drawn is that is not possible to execute a
rigorous testing at the most general theoretical level. However, specific restricting assumptions
are required to proceed to rigorous testing.

2.4.4.

The Resource Based Theory

The resource based theory looks at the organisation as the basis of competitive advantage,
instead of looking at the industry, (Capron & Hulland, 1999). Organisations internal resources
as assets and capabilities are the source of its competitive advantage (Barney, 1991) (Teece, et
al., 1997). Contrary to what Porter (1980) claims, success of firms depends on how the firm
relates to the competitive environment.
The industrial-organisation-based (IO-based) theories view considers the firm as a combiner
of input looking to optimize both production and distribution process (Barney, 1991). Following
a similar path, the resource based theory, recognizes that resources might be both heterogeneous
throughout the firms and not perfectly mobile. But it goes further by indicating that a players
success in the marketplace may also depend on the firms role in shaping the environment in
which it operates and not only on the environment itself (Conner, 1991).
Unlike competing theories, as explained later on, the resource-based theory considers sole
ownership to be the preferred entry mode unless proven otherwise as (Ekeledo & Sivakumar,
2004).

15

2.4.5.

Normative Decision Theory and Other Approaches

Normative decision theory proposes that the choice of entering a given market should be based
on the trade off between risks and returns. According to this approach, the entry mode that
offers the highest return adjusted per the level of risk should be the choice of every firm
(Anderson & Gatignon, 1986).
Evidence, however, indicates that the final choice of entering a new market will be influenced
by factors like the availability of resources intended as the managerial and financial capacity of
a firm to operate in a given market and the need for control as the need for a firm to influence
operations, systems, decisions in that foreign market (Cespedes, 1988), (Stopford & Wells,
1972; Koch, 2001; Koch, 2001).

Control is desirable to improve and manage a firms

competitive position. However, a stronger degree of control implies higher ownership of the
venture. In this case, risks are likely to be higher due to a higher commitment of resources and
the risk connected with the responsibility of decision-making. The choice of an entry mode ends
up a being what managers or entrepreneurs perceive to be the right balance among all these
factors (Kalyanaram & Gurumurthy, 1998).

2.5.

Timing of Market Entry: Pioneer versus Followers

A market pioneer is defined as the foremost actor to enter into a new market and he is also
defined a first mover (Schmalensee, 1982; Bond & Lean, 1977; Bond & Lean, 1979).
Schmalensee (1982) presents a market model in which rational buyer behaviour, in the case of
imperfect information regarding the quality of products, can give advantages to pioneering
brands.
This work has some implications because the relevance of the aforementioned advantage
changes across markets with different basic conditions. The study draws its motivation from
two sorts of evidence from the past research.
First, Bain (1956) in an empirical study of conditions of entry concludes that buyer preferences
for product of sellers already in the markets versus those of potential entrant products are, on
average, larger and represent the most frequent barrier to entry. Many past studies treated
advertising as a proxy for product differentiation and to explain a relationship with profits. Bain
concluded that advertising was not the only factor at work.
The second aspect is the traditional wisdom in marketing supported by empirical research on the
fact that there are relevant advantages in being the first entrant in some markets.

16

Normally, marketers predict little chance of success for the so called me too brands, those
selling at a lower price but pretending to be identical to established brands.
Bond and Lean (1977, 1979) find that pioneering brands get long-lived and important
advantages in the prescription drugs market. Later entrants manage to gain a foothold only if
they offer distinct therapeutic effects; oftentimes, lower prices are not sufficient.
Moreover, developing new products could require important investment of time and money.
The issues regarding product innovation and new product development have interested
economists since authors such as Schumpeter emphasized their importance in his description of
dynamic capitalism. (Fethke & Birch, 1982).
Factors to be taken into account by the firm, in this regard, are the increasing costs connected to
the development period, the potential reduction of profit caused by the prolongation of the
development period and the possibility that competitors can innovate and imitate, which affect
the eventual reward available to the firm (Fethke & Birch, 1982).

2.5.1.

Defining a Market Strategy Framework

Kaliyanaram and Gurumurthy (1998) suggest that the first entrant in a market will have a
significant market share advantage over later entrants. However, later entrants can still be
successful while entering a new market by adopting distinctive positioning and market
strategies.

This study suggests that even if pioneers become powerful they may become

complacent or not be in a position to satisfy the growing demand of the place. Therefore there
might be a chance for a new player to take advantage of this gap and find innovative ways to
match customers requirements.
The authors define a market entry strategy framework that helps to define strategies for growth,
penetration and shares retention axed on three main areas.
Having analysed the various strategies that successful pioneers and late entrants adopted, a
framework has been developed that can be used to formulate strategies for growth, penetration
or share retention.
The first component in this framework involves understanding and developing market
dynamics. The critical areas to be analysed are:
1) Drivers of technology that may generate a relevant shift in the market.
2) Changes in governance: shift in regulations with a major effect on the industry
organisation.
3) The growth and size of the prospective market.
4) The competitive profile.

17

The second component of the framework implies the conduction of an internal appraisal of the
companys abilities and product offerings.
After the completion of external and internal appraisal, there is the third constituent of the
framework where a company needs to define the development of the product strategy. Strategic
elements included segmentation, positioning and decisions on marketing instruments.

Figure 8: Strategy Framework

2.6.

Source: Booz Allen & Hamilton (1998)

Market Entry Modes in Mature Industries: The U. S. Brewing

Industry

Swaminathan (1998) evaluates two processes, niche formation and resource partitioning that,
independently, might be of relevance whenever a company is aiming to penetrate new market
segments of mature industries.
Environmental changes likely to facilitate the entry of a new firm represent the focus of the
argument of niche formation whilst the research-partitioning argument is based on the
differentiation internal to a mature industry, which implies the division into subgroups
composed of generalists and specialist.
Both the discussed arguments, niche formation and account partitioning, stress forces that are
endogenous and exogenous to the industry, respectively. The author in order to resolve this
theoretical dispute models the effects of niche formation and resource-partitioning together on

18

the founding of two segments of the U.S. brewing industry: brewpub and microbrewery
segments.
The findings indicate that niche formation argument explains in a better way founding for both
microbrewery and brewpub. A second important result is that limited evidence has been found
regarding the fact that resource-partitioning process is being practiced again in the
microbrewery segment of U.S. brewing industry.

2.7.

Sequence of Market Entry

Sequencing market entry theory relates to the decision a company makes regarding how to enter
a market or segment of a market, whether doing it simultaneously or initiating a gradual entry
(Douglas & Craig, 1992).
The past decades have seen a substantial growth in the internationalisation of businesses. With
the number of firms operating in multinational markets constantly increasing, the focus of
attention has shifted to decisions concerning the standardisation vs. adaptation of the marketing
mix across countries from initial entry decisions. More recently, attention has moved to the
formulation of global marketing strategy.
These changes indicate a need for greater concern with understanding marketings role in the
development of global competitive strategy. (Kalisha, et al., 1992).

2.7.1.

The Waterfall Model

The waterfall model is based on the work of Ayal and Zif (1979). This model is a marketing
strategy that suggests entering the target markets one after another, commencing from the one
with the highest level of technology and moving towards markets that are technologically less
advanced.
Economic factors (fixed costs of introduction), Diffusion dynamics (the lead effect), and
competitive forces influence the choice of either a waterfall or sprinkler strategy. However,
Kalisha et al (1992) demonstrated that a multinational business is not systematically forced by
global competition to introduce a new product simultaneously in all its markets
A positive aspect of this approach is that it allows a firm, which is entering a new market, to
learn from its mistakes and have a deeper control on the product launch, as it will not be
exposed to several markets at the same time.

19

2.7.2.

The Sprinkler Strategy

Contrary to the waterfall strategy, the sprinkler strategy promoted by Ohmae (1985, 1987)
represents a marketing strategy consisting of a company choosing to introduce a product
simultaneously in several markets. The sprinkler strategy is particularly suitable for a company
aiming to be a first mover that wants to anticipate moves by competitors. One of the main
problems that may arise with this approach is that it requires very substantial resources that
senior management may be reluctant to provide. In addition, a further risk is that companies
could miss the opportunity to gain a sound understanding of the market, neglecting to take the
right path to success.
Adopting a sprinkler strategy may lead to a series of advantages such as the opportunity to build
entry barriers quickly, considering the simultaneous activity on several markets and the
possibility of enjoying higher streams of cash flow.

2.7.3.

The Wave Strategy

The wave strategy, introduced by Lymbersky (2008) is focused on cultural differences and
ranks countries and markets in different groups (waves) according to the similarity to the home
market of a company. Hence, the first wave to be targeted is made up of markets that are
comparable to the home market with slight variations. The wave strategy contains elements of
both the sprinkler strategy, and the waterfall strategy. Lymbersky (2008) suggests that in real
market situations, companies are giving increasing relevance to mixed timing strategy to enter
foreign markets.
According to Hofstede (2001) and Hall (1990) countries that present similar cultural
characteristics such as Austria, Switzerland and Germany should be grouped in one set.
The logic underlying this process is that in the first wave (group), the concept of the home
market can be replicated in an easy way and eventual differences can be analysed. The
experience and the knowledge gained thanks to these market entries should be used in the
planning process of the following wave. The second wave should be launched only after that
the first wave generates a solid stream of cash flows.
However, the waterfall strategy seems to be favoured by academics and businesses. Ayal and
Zif (1979) argue that the waterfall strategy should be the preferred over sequence strategy in
time of fast growth, low competitive pressure and growing sales.

20

2.8.

Industry Overview
2.8.1.

The Business Environment for the Beer Industry

According to a report produced by SAP and Deloitte (2005) to understand todays beer industry,
it is necessary to look at the beverage industry in total.
The beverage industry has been dealing with many new prospects to capitalize on in the recent
years. Shifts in consumer demands and change in preferences require a constant effort to
maintain current customers and attract new ones.
Beverage companies need to offer superior quality products, resourcefully distribute them and
offer low prices to survive in an environment shaped by increasing competition. Additionally,
firms need to ensure safety and be dynamic to capture new markets trends by updating their
offering with new products (SAP & Deloitte 2005).
According to this study, private labels are greatly influencing the environment. The sector has
seen the birth of a few global giants that produce many brands and are often active in both the
categories of the market: alcoholic and non-alcoholic beverages.
According to Euromonitor (2013), beer consumption in the U.S. in 2012 has grown after three
years of decline. Regarding craft beer, according to U.S. Brewer Associations (2013), the
industry has registered a growth in 2012 of 15% by volume and 17% by dollars compared to the
performance in 2011 of 13% by volume and 15% by dollars.

Figure 9: Key Players in the Brewing Industry

Source: SAP, Deloitte (2005)

21

Furthermore, the report identifies four key areas in which beer producers should concentrate
their efforts for lasting growth:
1) Revenue Protection: Focusing on factors such as improving the availability of products,
better management of customer relationship and of the distribution phase.
2)

Cost Reduction/Margin Improvement: Improving working effectiveness.

3)

Improved Asset Utilization: Reducing inventory levels.

4)

Regulatory/Assurance: Participating in retailer assurance schemes and achieving full

compliance with legislation.
2.8.2.

Market Trends and Industry Challenges

Sankrusme (2008) indicates that to identify the changing patterns of global competition in the
beverage industry, a continuous analysis of competing forces is required. The aforementioned
study highlights the importance of tracking market trends for brewers and lists six elementary
themes:
1) Distribution systems complexity with conflicting interests
2) Changes in lifestyle and demographics
3) Increasing bargaining power of retailers
4) Competition intensity
5) Issues related to product safety

6) Consolidation and globalization

2.8.3.

The Three-Tier System in U.S.

At the end of the prohibition in the U.S., member states received the power to control
production, importation, distribution, sale and consumption of alcohol within their limits
(Sarasin, 1998). The brewers willingly offered to operate under a new system of distribution
selling to independent distributors. Brewers were no longer allowed to control or own retailers.
Cash sales between the tiers were meant to avoid control by brewers. This legal framework has
paved way for the current formation of the beer industry (Sarasin, 1998).

Figure 10: The Three-Tier System

Source: SAP, Deloitte (2005)

22

This was the birth of the three-tier system. The primary purpose were to create a system that
facilitated state and local control, discouraged aggressive marketing and encouraged moderate
consumption.
Beer distributors have a complex role inside the three-tier system. Distributors purchase beer
from the manufacturers, reduce the brewer's capital requirements and assume, directly, the risk
of retailers not executing the final payment. The wholesalers then store the beer at their facilities
until the retailers request it.
2.8.4.

Complex Distribution Systems with Conflicting Interests

Often brewers, distributors and merchandisers sell their products. This practice is most
prevalent in the U.S. As illustrated in the chart below, each unit performs different roles within
an intricate supply chain (SAP and Deloitte 2005).

Figure 11: Roles within the Beer Supply Chain

Source: (SAP & Deloitte 2005)

The aforementioned study suggests that this arrangement is likely to create conflicts of interests
between beer manufacturers and distributors:
For Beer Manufacturers: Registered increased sales and return on investments at the expense of
distributors margins; keep developing new product and packages increasing the complexity of
distributors work.
Beer Distributors: Historically have lower profits and higher capital requirements for
distribution networks; they push consumers toward brands offering the highest margins,
consolidate their activity and spread their fixed costs on greater volume to obtain cost reduction,
invest in warehousing and distribution equipment and try to acquire new customers.
On the other hand, it has to be noted that the retailers bargaining power is constantly
increasing, pushing beer makers to improve the agility of their supply chain, with cost
efficiency as a primary target.
The growth of private beer makers, craft brewers in particular, shows how the introduction of a
new product could be an important source of differentiation and competitive advantage.

23

Retailers use their influence to set superior standards for better service quality and operational
excellence. Thanks to their direct relationships with clients, retailers have deeper knowledge of
consumer behaviour. The study suggests, as beer distribution process improves, many producers
attempt to get closer to the consumer by using direct-to-consumer marketing approaches. For
example: active monitoring of in-store activity and direct store delivery (D.S.D.).
2.8.5.

Distribution Channels and Supply Chain

In a competitive business environment that features fierce competition, shifting consumer trends
and conflicting interests between manufacturers and distributors, the supply chain faces
systematically considerable pressure. Retailers regularly ask for better quality and shorter
delivery times and these requests put pressure on manufacturers to achieve higher efficiency in
managing their supply chain.
Retailers identified the following as steps to improve a supply chain:
Ensure on-shelf product availability
Increase flexibility
Accurately forecast demand
Implement a fully integrated returnable containers (empties) management process
Lower costs by controlling high-value empties assets
Increase control by managing empties at customer locations
Tracking empties to reduce manufacturing problems.

2.9.

The Legal Framework

The legal requirements in the U.S. alcoholic beverage sector are quite complex and industry
players are required to comply with regulation at a federal and a state level.
The Tobacco and Alcohol and Trade Bureau (T.T.B.) states that a business willing to import
alcoholic beverages in the U.S.:

Needs to have a permit as requested by The Federal Alcohol Administration Act

(F.A.A.) from T.T.B.

Needs to maintain a staff and a business office in the U.S. or, alternatively, must
contract an existing licensed importer in the U.S. Making an agreement with an existing
commercial importer registered in the U.S. eliminates the needs of an importer permit.

In order to have a permit requested by the F.A.A. must complete a T.T.B. form 5
100.24. Jointly to other qualifying documents for each location where he plans to
conduct business. For being a wholesaler as well as an importer of beverage alcohol
products it is needed to apply for both permits. A permit as an importer does not

24

routinely allow conducting business as a wholesaler.

Needs to pay the Federal Alcohol Excise Tax on beverage alcohol products when these
are removed from U.S. Customs and Border Protection (C.B.P.) port of entry.

Needs to have its products label approved or a certificate of exemption from label
approval before to introduce products to interstate commerce so to ensure that products
meet federal law requirements.

Needs to file pre import application to ensure proper tax classification and that products
are manufactured meeting federal law requirements.

Needs to meet state requirement in addition to federal requirements (The Tobacco and
Alcohol and Trade Bureau, 2013) .

2.10. Marketing Communications

Experts in the field of marketing agree that, no matter the organisations size, scope and market,
all organisations need to utilize communication in varying degrees (Shrimp, 2010) (Fill, 2009)
(Broderick & Pickton, 2005), be it directed to consumers or focused on other businesses.
Marketing communications is an integral part of a firms overall marketing push and directly
the market performance of a product offering or service. Organisations use a multitude of
marketing communication tools that helps it engage its target market better (Fill, 2009). The
primary forms of marketing communications include traditional/mass media or above the line
marketing, sales promotions, point of purchase (P.O.P.) communications, online advertising,
public relations campaigns and various other forms of collateral (Shrimp, 2010).
2.10.1. Marketing Communications Mix
Marketing communications utilizes three key components: tools, media and messages.
Advertising, sales promotions, direct marketing, personal selling and public relations make up
the five principal communication tools that firms employ. The messages that firms attempt to
convey are either informative or emotional depending on the firms product offering and the
target audience it is trying to connect with. In order to deliver its key messages using the various
communication tools available, firms use two types of media: traditional media, which refers to
printed and broadcast media. The other form refers to the increasing use of technology, more
particularly the Internet as a means of communication and is gaining popularity among firms
due to the nature of the medium, which allows for two-way interaction between firms and its
audience (Fill, 2009).

25

Figure 12: The Marketing Communications Mix

Source: (Kotler & Armstrong, 2010)

2.10.2. Advertising
Consensus suggests that there is no one all-encompassing theory that explains how advertising
works as the very nature and goals of advertising is dependent on the aims and objectives of the
firms that utilize them (Fahy & Jobber, 2012). Compounding this is the fact that advertising is
frequently combined with a multitude of other promotional elements, which lends to the
difficulty to come up with one all-encompassing theory and definition (Broderick & Pickton,
2005). Most books on the matter therefore define the term in a broad and general view such as
the way Kotler (1999, p.692) defined it:
Any paid form of non-personal presentation and promotion of ideas, goods or services by an
identified sponsor.
It is also important to note that the flexibility of this form of communication lends itself well to
organisations of different sizes, as firms are able to tailor their advertising effort according to
the size and demographic of its intended audience (Fill, 2009); as such, the key role and
function of an advertising campaign is to communicate with specific and target audiences.
There are several key benefits of advertising such as the ability to reach a mass audience and
although mass advertising is viewed as an expensive initiative, the cost trade-off is outweighed
by the ability of advertising to reach many million members of a firms target audience, indeed,
the cost-individual reached ratio is relatively low (Broderick & Pickton, 2005).

26

Advertising as a potent tool for increasing awareness and sales, as one would imagine, has
strong proponents from industry and the academe such as Jones (2007) who believes that
advertising is a key component in influencing an individual to buy a product they have never
purchased previously. Additionally, it positively influences the creation and the maintenance of
brands, helps differentiate brands from others and ultimately helps increase sales. This train of
thought views advertising as a strong force (Fill, 2009) (Fahy & Jobber, 2012) (Broderick &
Pickton, 2005).
An alternative to this view is known as the weak force of advertising, which raises doubts
about the presumptions made by the strong force proponents. These weak force advocates
believe that a consumers buying behaviour is driven more by habit than by advertising
exposure and that advertising merely works in conjunction with an individuals thoughts and
beliefs on the brand (Bernard, et al., 1998). While advertising is viewed as significant,
proponents of the weak force theory such as Ehrenberg et al. (2002) believe that advertising is
best viewed as a way to reinforce values, sustain brand value and preserve market share. As
with any two opposing sides to an argument, both viewpoints do have merits and do agree on
some aspects such as the belief that advertising can be very effective.

2.10.3. Sales Promotion

Sales promotions are defined as any activity or incentives to consumers or the trade that will
drum up sales and stimulate demand (Fahy & Jobber, 2012). Its objective is to encourage a
particular group of people to behave in a specific way. The difference between sales promotions
and advertising is that the latter is usually undertaken when a firm wants to build and develop
market awareness for a certain product or brand. Furthermore, advertising is viewed as a longterm investment for a firm while sales promotions are geared towards short term, temporary and
immediate upward shifts in sales (Shrimp, 2010).
Manufacturers utilize sales promotions to entice retailers, wholesalers or end users to buy a
product and encourage the manufacturers sales force to aggressively push and sell its products.
Retailers on the other hand utilise sales promotions to encourage sales through inducing its
customers to buy more and is presented as an added value to the basic product that is intended
to encourage buyers to act now rather than later (Fill, 2009).
There are two elements to sales promotions if looked through a value orientation frame: value
increasing and value adding (Peatty & Peatty, 1994). Value increasing indicates that the value
created is manifested through changes to the product quality or quantity or by lowering the
price. Some examples of value increasing promotions are discount pricing, multi packs,
payment terms, guarantees and coupons. Value adding promotions; on the other hand, is defined
as offering an augmented offering that serves to add a premium to the product. Samples, product

27

trial, in mail trials, club cards or loyalty programs are some examples of value adding
promotions (Fill, 2009).
As enumerated, there is a wide range of ways to utilise sales promotions and as such, firms use
sales promotions for a wide variety of reasons (Peatty & Peatty, 1994). Various studies suggest
that sales promotions can be effectively utilized to introduce new products or to rejuvenate sales
of a mature one (Shrimp, 2010) (Fill, 2009). Additionally, sales promotions can be employed to
reduce distributor risk, reward previous purchase behaviour, add value via sampling initiatives
and improve the efficiency by shifting and adjusting demand of slow moving products or vice
versa (Fahy & Jobber, 2012).
Statistics suggest that sale promotions are a growing element within the marketing
communications mix. (Broderick & Pickton, 2005). A reason for this growth is the changing
dynamics between retailers and manufacturers and distributors. Over the years, retailers have
grown in size and power to a point that it is able to dictate terms to manufacturers and
distributors. These retailers have pushed for more and more sales promotions and P.O.P.
merchandising as it is a preferred method for retailers (Broderick & Pickton, 2005). Strong sales
promotions to the trade have become essential part of manufacturers push strategies (Broderick
& Pickton, 2005). Another reason for this marked increase in sales promotions is the fact that
the fragmentation of the market has seen a reduced effectiveness of traditional mass media
(Broderick & Pickton, 2005). Studies suggest that mass media is losing is effectiveness due to a
distrust of advertising messages among the consumers (McCombs & Shaw, 2013). This
ineffectiveness of mass media has lead firms to lean on sales promotions more and more.

2.10.4. Public Relations

The Institute of Public Relations (I.P.R.) describes public relations as the planned and sustained
effort to establish and maintain goodwill and mutual understanding between organisations and
the public. The activities that public relations encompasses is varied, from monitoring public
opinion, lobbying, publicity, sponsorship, donations, press releases and maintaining goodwill
among its target audience (Broderick & Pickton, 2005). Much debate has been waged as to
whether P.R. and marketing go hand in hand or not, consensus however indicated that P.R. is
fundamentally about enhancing the image of a brand or organisation and is separate from the
sales function that is commonly associated with marketing (Broderick & Pickton, 2005) (Fill,
2009) (Kotler, 1999).

28

2.11. Building Brand Community

Creating and building brand loyalty is a facet of any firms marketing plan (Kotler &
Armstrong, 2010). As a relationship is fostered between firms and its consumers, brand loyalty
is created whereby satisfied customers continue to purchase a favoured brand (Fahy & Jobber,
2012). Buyers, meanwhile, feel a sense of belonging with the brand and other advocates of the
brand, therefore creating a brand community. In most cases, small & medium enterprises as well
as niche products in the market build up and foster a strong brand community as these small
firms and niche players rely on repeat business and word of mouth to survive in the market
place (Muniz Jr & O'Guinn, 2001). Part of the success of brands that have created very strong
ties to its user base, such as Jeep or Nutella (McAlexander, et al., 2002), is the sense of
belonging that these brand communities afford its members. Stronger interpersonal ties and
affiliation with the brand is built through the sharing of meaningful experiences with other
brand advocates and therefore enhances the mutual appreciation each member of the community
has for the product (McAlexander, et al., 2002).
Companies can build and further strengthen its relationship with its user base through
participating and actively engaging visitors of enthusiast trade shows and meet-ups.
Additionally, firms can build a community utilising a variety of different promotional activities,
events, social gatherings and by the creation of fan clubs and other programs designed to
strengthen customer-firm relationships (Muniz Jr & O'Guinn, 2001).
Research suggests that an emerging and important aspect of creating and building a brand
community is through the use of the internet and social media (Muniz Jr & O'Guinn, 2001)
(McAlexander, et al., 2002). The utilisation of company websites as a means for promotion is
on the rise due to the relatively low cost to reach ratio. Company websites are also seen as a hub
for a firms online advertising and as such, a good website is essential for a successful and
integrated online advertising campaign (Shrimp, 2010). The most effective websites as noted by
Muniz Jr & O'Guinn (2001) were often quite elaborate and included text, pictures, and sound.
The content on these sites were very extensive and were continually updated with new content.
Organisations aiming to build a community have also turned to social media. The emergence of
social media as a marketing tool has reshaped the way organisations approach building
relationships with its target audience (Fahy & Jobber, 2012). There are some perils and pitfalls
that organisations should bear in mind when utilising social media however. Organisations
should be aware that traversing branding through social media isnt as straightforward as other
forms of marketing communications. An interesting paradox occurs wherein the organisation no
longer controls the reach and impact of their promotional messages, the consumers did
(Fournier & Avery, 2010). Consumers share their experiences with the brand online, ranked and
rated content, offered reviews and reposted the content on other websites for their friends to see.

29

As firm generated content can be seen as disingenuous, consumers tend to put more weight on
the opinions of fellow buyers of the products. Social media technologies such as blogging,
tweeting, social networking and bookmarking have created an arena for the consumers to share
and discuss their experiences of brands with others in their online social network. Crafting an
image of authenticity, building buzz, encouraging and not interfering with its user base
opinions and comments are ways to create a good brand image online (Fournier & Avery,
2010).

2.12. Outline of the American Beer Market

2.12.1. History of Beer in America
Beer is one of the oldest drinks known to mankind. It is believed that beer has been brewed in
the U.S. from the time the pilgrims had arrived to find a place to settle. The mid 1600s to about
1800 are known as the early days of beer brewing in America, where twenty-six breweries and
taverns were indicated in an old map of New Amsterdam (now New York City (N.Y.C.))
(Baron, 2007). During the 1800s, brewing began to rapidly expand in the U.S. and in the latter
part of the 19th century, brewing emerged as a significant business where American brewers
began to brew lager style beer which was a stark shift from the traditional British-style ale.
The early 20th century brought about the Prohibition era where breweries made heavy losses
and had to sell their equipment for substantial losses. After the repealing of the Volstead Act
which lifted the ban on alcohol, national and regional brewers dominated the market (Chandler,
1977). World War One posed a grave threat to the brewing industry since the government had
rationed the supply of grains to breweries. In the years to come, production persisted to grow at
a slower rate than consumption.
However, the period after World War Two the brewing industry consolidated a great deal
(Elzinga, 2011) with big firms such as Anheuser-Busch, Pabst, Schlitz, and Blatz capturing 75%
of the market share by 1981 (please see figure 13 for market share) (Adams & Brock, 2001).
Subsequently, by year 2006 this number rose to 83.9% (Elzinga, 2011).

30

Five Largest Breweries (%)

90

83.9

80

Five Largest (%)

70

74.3

75.9

1978

1981

87.3

85.2

83.9

2004

2006

64

60
47.6

50
39

40
24.9

30

28.5

19
20
10
0
1947

1954

1958

1964

1968

1974

1984

1994

Figure 13: Market Share of the Five Largest Breweries over the Years, Source: (Adams &
Brock, 2001), (Elzinga, 2011)
Post 1980, the beer production rose to dizzying heights and international dimensions emerged
when American breweries started exporting abroad and imports steadily rose. Today, the
American beer market is moving towards global integration (Economic History Services, 2010).

2.12.2. Beer Production in America

Alcoholic Drinks in America

15%

America contributes 15.3% (MarketLine,

2013) of the global beer market value
through its 2031 breweries all over the
country

(National

Beer

85%

Wholesalers

Association, 2012). Beer comprises 85% of

the production in the total beverage market
in the U.S. since it is paired-up with food in

Beer

Other Alcoholic Beverages

restaurants. While beer production peaks in

summer, a decline in beer production
was reported in 2012

Figure 14: Production Share of Beer in the Alcoholic

Beverages Market, Source: (Freedonia Focus Reports, 2013)

(Freedonia Focus Reports, 2013).

The production of beer in America has been uneven over the years (2006-2011). The years 2006
- 2008 show an increase in production due to good economic conditions. However, in the years
after, it appears that the beer industry has taken a severe hit due to the recession. The following
graph depicts the production of beer for the time period 2006-2011.

31

Beer Production (in million litres)

23,600.00
23,400.00
23,200.00
23,000.00
22,800.00
22,600.00
22,400.00

22,200.00
22,000.00
2006

2007

2008

2009

2010

2011

Figure 15: Production of Beer over the Years 2006-2011; Source: (Euromonitor International, 2013)

2.12.3. Beer Consumption in America

Beer has constantly contributed at least 83% and 85% of off-trade and on-trade alcoholic drinks
respectively during the years 2004-2009 (Euromonitor International Ltd, 2011) (Please see
Appendix A). However, off-trade beer sales accounted for 75% of the total beer sales by volume
in 2012 (Euromonitor International, 2013). The graph for the years 2007-2012 clearly indicates
that growth in beer sales has risen by 1% even though the actual sales by volume may not be
very encouraging.
The volume of beer sales is very much dependent on the 576,000 establishments that sell beer
which include restaurants, bars, taverns, concessions and military bars (Beer Institute, 2012).
For the first time after 2008, beer sales in 2012 rose by 1% signalling green shoots in the beer
sector. However, the beer industry in America fears that it may not be able to retrieve the
consumers it lost during the recession of 2008. Most consumers of beer have either shifted to
wine or spirits. The volume sales in 2012 reached 23.8 billion litres (Euromonitor International,
2013) (The Freedonia Group, Inc., 2012). Beer was the most imported alcoholic beverage in
2012 with the Netherlands, Belgium, Canada and Mexico being the leading suppliers (Freedonia
Focus Reports, 2013).

32

Beer Market - Volume

30

0.015
25.3

25.4

25

24.7

25

24.5

0.01

23.8

0.005
20

15

-0.005
-0.01

10

-0.015
5

-0.02

-0.025
2007

2008

2009
Billion Litres

Figure 16: Beer Market Volume 2007-2012

2010
% Growth

2011

2012

Source: (Euromonitor International, 2013)

2.12.4. Economic Impact of Beer

The American beer industry contributes $49 billion to the federal and state exchequers and the
economic impact stands at more than $246.5 billion. With 2,015, 120 jobs provided by the beer
sector alone and with 6,579 brewers and beer wholesales the American beer industry is an
economy in itself (National Beer Wholesalers Association, 2013). In the year 2011, the beer
market had revenues totalling $78,802.5 million representing a Compound Annual Growth Rate
(C.A.G.R.) of 0.2% from 2007 to 2011 (MarketLine, 2013).
The graph depicts the market value of the beer industry over the years 2007-2011 with their
C.A.G.Rs. One can observe that while the market value of the beer industry has not changed
very drastically, its growth rates have been quite volatile due to the economic downturn.

US Beer Market Value

90
80

0.01
78.1

78.8

77.6

78.2

78.8
0.005

70
60

50
-0.005
40
30

-0.01

20
-0.015
10
0

-0.02
2007

2008

2009
$ Billion

Figure 17: U.S. Beer Market Value 2007-2011

2010
% Growth

2011

Source: (MarketLine, 2013)

33

2.12.5. Future Trends

Business Monitor International (B.M.I.)

Beer Market Volume Forecast

forecasts beer demand to remain weak over

24.3

the next five years since the sector is

24.3

weighed down by maturity and a general

24.2

shift towards wine in addition to the

24.1

economic

crisis

(Business

Monitor

International, 2013). However, a 1%

increase in beer volumes is expected over
the next four years until 2017 with sales
exceeding 24.1 billion litres (Euromonitor
International, 2013). The increase in beer
volumes has been projected keeping in

24.2

24.15

24.1

24

23.9

23.9

23.8
23.7
2013

2014

2015

2016

2017

Litres (in billions)

mind that the industry sales have bottomedout and will begin its slow recovery.

Figure 18: US Beer Market Volume Forecast 2013-2017,

Source: (MarketLine, 2013)

2.13. Craft Beer Industry

The Brewers Association defines a craft brewer as one who is independent, small and
traditional with a yearly production of six million barrels of beer or less a year. The trademark
of a craft brewer is its innovation while using traditional ingredients. Craft brewers are known
to be very involved in the communities they are a part of and have very distinctive ways to
connect with the customers. Since most craft brewers are free from substantial interest from a
non-craft brewer, they maintain very high ethical standards. Research has indicated that a
majority of Americans live 10 miles away from a craft brewer (Brewers Association, 2013).
The craft brewing industry is segmented into four discrete markets. They are:

Brewpubs

Microbreweries

Regional Craft Breweries

Contract Brewing Companies

Brewpubs are restaurants where the brewery sells 25% or more of its beer to its customers onsite. The brewery often dispenses the beer directly from its storage tanks.
Microbreweries are breweries that produce less than 15,000 barrels (17,600 h.l.) of beer per year
and sells 75% or more off-site. The brewery can adopt various distribution channels to sell the

34

beer to the public. One way is to follow the three-tier system in place; the second is to follow a
two-tier system where the brewer is the wholesaler; the final one is directly selling the beer to
the customer on-site.
A Regional craft brewery is one that produces 15,000 to 6,000,000 barrels per year and
represents the region it belongs to.
Finally, a Contract Brewing company is a business that sub-contracts the activity of brewing
beer. This is usually done when the original company is short of capacity and has many orders
pending (Brewers Association, 2013).
2.13.1. History of Craft Brewing in America
In 1983, there were only 43 brewing firms. Most brewers (in the past 30 years) that have set up
shop have labelled themselves as a microbrewery that offer specialised product offerings and
target niche markets (Carroll & Swaminathan, 2000). A major driver for the craft brewing
movement in the late 1980s was the emergence of a white-collar meritocracy that believed in
lifestyle based consumption (Warner, 2010). However, Porter (1980) and other economic
analysts predicted a continued contraction of firms since the brewing industry is high on product
differentiation (Clemons, et al., 2006) coupled with economies of scale in production, sales and
distribution. These, they believed acted as high barriers to entry (Carroll & Swaminathan,
2000).
The number of small brewers in America increased in 1976 when then president Jimmy Carter
signed a legislation that allowed home brewing nationally. The legislation gave beer enthusiasts
an opportunity to gain a foothold in the beer market and compete against the big boys in the
beer industry which were ailing from a slowdown of beer sales. The interest in craft brewing
and its perceived higher quality generated a lot of interest so much so that that these craft
brewers overcame the vast economies of scale (Nelson, 2005). Counter intuitively, the massive
growth in craft brewers got about the consolidation of the big brewers in the industry
(Tremblay, et al., 2005). Astonishing is the fact that in 1997, U.S. surpassed Germany (a nation
known for its strong brewing tradition) in the number of breweries and per capita consumption
worldwide (Carroll & Swaminathan, 2000). The market for craft beer has revolutionised the
beer industry so much so that every brewer (microbrewery, regional brewery) traces its
antecedents to home brewing (Carroll & Swaminathan, 1992). A strong anecdotal evidence of
this is, Budweiser, in its advertisements, remind people that it was once a microbrewery
(Murray & ONeill, 2012).

35

While the emergence of craft breweries has been meteoric, it differs markedly by region. Most
regions in the U.S. have seen the growth of craft breweries, except the South, which continues
to lag with the lowest number of craft brewers. The reason this might be is due to the limited
ability to support the craft brewing industry in the particular states (Baginski & Bell, 2011). The
following is a graph that shows the brewery count from year 1887 to 2012. One can observe the
ups and downs the beer industry has been through during the prohibition era and the other ebb
being the 1980 crisis.

Figure 19: 125-year Breweries Count in the U.S.

2.13.2.

Craft Beer Production

Source: (Brewers Association, 2013)

US Breweries Operating as of March 2013

The craft beer industry is the most innovative

and has the strongest potential for development

Brewpubs

1,124

Microbreweries

1,139

Regional Craft Breweries

97

in the U.S. The young and cooler population of

Total US Craft Breweries

2,360

America is turned off by the taste of the big beer

Large Non-Craft Breweries

23

brands

Other Non-Craft Breweries

33

Total US Breweries

2,416

and

look

for

experimentation

(Euromonitor International, 2013). The craft

beer industry is home to around 13,000 beer labels
(Beverage

Industry,

2012)

and

Table 1: Breweries Operating in U. S. in 2013 Source:

(Brewers Association, 2013)

regularly

celebrates a Craft Beer Week, highlighting

2012 Craft Beer Industry Production Volume

contribution and culture of craft beer throughout

the

country

(National

Beer

Wholesalers

Regional craft breweries

10,237,632 bbl

Association , 2013). A total of 2,347 craft

Contract brewing companies

227,702 bbl

brewers operated in 2012 which comprised

Microbreweries

1,905,212 bbl

Brewpubs

870,371 bbl

1,118

microbreweries,

97

regional

craft

Table 2: Craft Beer Production in 2012 (by volume),

36

Source: (Brewers Association, 2013)

breweries and 1,132 brewpubs (Brewers Association, 2013). Table 1 indicates the total number
of breweries operating as of March 2013. The craft brewing industry experienced a growth of
15% by volume and 17% by dollars in 2012 (Brewers Association, 2013). Table 2 shows us the
production of the craft beer industry (by volume) for the year 2012.
Craft beer production has been steadily rising over the years from 7.1 million barrels in 2006 to
13.2 million barrels in 2012. This astonishing growth of craft beer production is shown in the
figure 20.

Craft Beer Production

13.2

14

11.5

12

10.1

10
8

9.1

8.5

7.1

6
4
2
0
2006

2007

2008

2009

2010

2011

2012

Barrels (in Million)

Figure 20: US Craft Beer Production

2.13.3.

Source: (Brewers Association, 2013)

Craft Beer Consumption

Volume Share for Craft Brewers

The craft beer industry has posted a

C.A.G.R. of 9% over the past five years.

7%
6.50%

In 2012, the beer sales increased by 6% to

6%

touch 978 million litres. The inadequate

5%

5.70%
5.00%

accessibility of such beer makes it

appealing to the customer who is looking

4.40%
4%

to try out new things in the craft beer

3%

segment

2%

(Euromonitor

International,

2013). The craft brewing industry sold

4%

1%

around 13,235,917 barrels of beer in 2012

as compared to 11,467,337 in 2011. Also,
craft beer sales share in the beer industry

0%

2008

2009

2010

2011

2012

Volume Share (in %)

was 6.5% by volume and 10.2% by dollars

in 2012. (Brewers Association, 2013).

Figure 21: Volume Share for Craft Brewers,

Source: (Brewers Association, 2013)

37

The rate at which volume share for craft brewers started in 2008 is a low 4% and it has steadily
been increasing to reach 6.5% by the end of 2012 which can be observed from figure 21.
According to the latest reports of BMI, craft beer sales jumped by 26% in the first quarter of
2013 (Business Monitor International, 2013). Please see Appendix B for the annual dollar
volume of the domestic craft beer industry.

2.13.4.

Craft Beer Demographic

The American male accounts for 70% of the craft beer sales in the country. This is despite the
fact that several attempts have been made to attract females to the craft beer consumer market.
The age group 35-44 represent the largest group of people who love craft beer at 25%.
However, the second largest group that craves for craft beer is 25-34 which represents 24.3% of
the pie. The slightly older demographic 45-54 year olds are at 21.7%. It can be inferred that
craft beer is not very popular with 21-25 year olds since it contributes to only 6% of the sales.
For more mature Americans, age groups 55-64 represent 14.5% and 65 and upwards contribute
just 8.5% which indicates that craft beer is not what they relish.

Consumption of Craft Beer - By Age

55-64
14%

65 & Above
9%

21-25
6%
25-34
24%

45-54
22%
35-44
25%

Figure 22: Consumption of Craft Beer by Age

Source: (Brewers Guardian, 2011)

As far as the income demographic is concerned, people in higher income groups tend to
purchase craft beer. 63.3% of the craft beer sales are made to consumers who earn more than
$75,000 per year. For consumers earning between $45,000 and $ 75,000 this number drops
heavily to 21.5%. Merely 9% of the craft beer sales are made to consumers with earnings of
$25,000 to $45,000 and finally a meagre 6.2% of sales are attributed to households which earn
less than $25,000 a year. Also, a craft beer drinker is most likely to be Caucasian, which
accounts for 90% of the sales. In short, a craft beer connoisseur is most likely to be a white male
who is 25-54 years old with a fair amount of disposable income (Brewers Guardian, 2011).

38

Consumption of Craft Beer - By Income

6.20%

9%

21.50%
63.30%

$75,000 or more

$45,000 - $75,000

$25,000 - $45,000

Figure 23: Consumption of Craft Beer by Income

2.13.5.

Less than $25,000

Source: (Brewers Guardian, 2011)

Craft Beer Future Trends

The year 2012 saw the opening of 409 new breweries, which is the biggest surge since the era of
prohibition ended. This year, the Brewers Association claims that 1,250 new American
breweries are planning to set shop in various regions of the country (Time - Business & Money,
2013).
6,840 people from 35 countries attended the Craft Beer conference that was held in March,
2013. This conference was a testimony to the growth that the industry is witnessing. Brewers
Association Director Paul Gatza stated that the jolt the beer industry is witnessing is solely
because of the rise in craft beer popularity. He also stated that by 2017, craft beer would make
up 10% of all the beer that is sold in the U.S. (Beverage Industry, 2012) (The Hops Press,
2013). At present, craft beer makes up 6.5% of the total beer sales in the U.S. Craft beer is also
capturing market share at an astonishing rate of 59%. (Brewers Guardian, 2011).
Also, reports of other industries (such as the dairy / ice cream industry) supporting local craft
brews, it is imperative that the craft brewing industry is set to soar to new heights in the coming
years (Grand Rapids Business Journal, 2013).
The craft brewing industry enjoys strong influence and enormous prominence in the beer sector
largely due to its close-knit community and willingness to help other craft brewers. The rising
star of America is set to rise astronomically in the years to come (Brewers Guardian, 2011).
However, there are concerns about the sudden explosion of craft brewers all across America
with 48 out of 50 states reporting an increase in craft beer production in 2012. States like
Indianapolis have reported that the craft beer scene is getting over crowded and it is becoming

39

difficult for the newer brewers to get taps at bars and restaurants. But, most craft brewers
confide that the customer is the ultimate winner in this competition since he/she gets the best of
the beer in the market and the only way to stay afloat is to produce the best quality craft beer
(TIME - Business & Money, 2013).

2.14. Irish Diaspora in America

Immigrants and descendants of Irish origin comprise the Irish Diaspora in the U.S. Close to 1.5
million Irish men and women travelled to America to escape the Great Famine between the
years 1845 and 1855 (Gribben, 1999). Large Irish communities have been found in N.Y.C,
Boston, Baltimore, Philadelphia, Pittsburgh and Los Angeles.
U.S. in its latest population estimates (as of 4th July) has 313.9 million residents (United States
Census Bureau, 2013). Further, as per the 2011 American Community Survey, 34.5 million
residents claimed to be of Irish ancestry, which is seven times more than Irelands population
(4.68 million). The median age that was reported for Irish residents was 39.3 with N.Y.C.
having a percentage of 12.9% as Irish residents. One of the other states that have a high
percentage of Irish residents is Massachusetts with 22.7%. With a median income of $57,319
the Irish Diaspora is well above the America median of $50,502. (Please see Appendices C, D
and E for further details) (United States Census Bureau, 2013).
The Boston suburbs and other north-eastern metros are considered to be Irish capitals in the
U.S. With Irish population strongly concentrated in the Northeast, the Boston metro area houses
20% of primary Irish ancestry. Most counties in the U.S. have at least a 5% Irish population and
this percentage jumps to 10 in places such as N.Y.C., New England and eastern Pennsylvania
(Trulia.com, 2013). The following is an image of the concentration of Irish population that is
spread across various states of the country. Also, please see Appendices F and G which depict
the Irish American population by county in Eastern Massachusetts and N.Y.C. respectively.

40

Figure 24: Percentage of Irish-Americans in the US, by county; Source: (Trulia.com, 2013)
During the St. Patricks Day holiday (March), a huge surge of beer imports was witnessed with
trade volumes going from $288,073,597 in February 2012 to $374,076,005 in March 2012
(United States Census Bureau, 2013). This can be observed as a big opportunity for craft
brewers, which might want to export beer to the U.S.
The state of Massachusetts in particular seems to be experiencing an upward surge in the
consumption of craft beer. Out of the 4,169,941 barrels of beer that were sold in the state for the
year 2012, 66,565 barrels were craft beer. This figure is 12% higher than what was reported in
2011. Import offerings in the state saw a 23.37% increase from 2011 numbers, which seem to
suggest that import of craft beer is well received. Another important observation to note about
craft beer sales in Massachusetts is that the percentage of craft beer sales is 15.5% of total beer
sales, a much higher number than the national average of 5.6% in 2012 (Brewbound, 2013).
With the state having 47 craft breweries (Brewers Association, 2013) and retailers such as Craft
Beer Cellar who specialise in craft beers (Drink Insider, 2013), Massachusetts is one of the
destinations that a craft beer exporter should explore.

41

2.15. Case Company

2.15.1. About Caseys
Caseys Brewery is a small-scale microbrewery owned by Dominic Casey and Henry Thornhill
located in Skibbereen (a small town in County Cork, Ireland). It occupies a one-floor, lightindustrial building with two business sections. The brewery, which will occupy 1800 square
feet, will produce up to 3,000 hectolitres (h.l.) of beer per year in its initial design and can ramp
up to 10,000 h.l. per year when needed.
Due to tax advantages available only to microbrewers (microbreweries in the European Union
(E.U.) get a 50% relief on tax on the beer if the microbrewery brews less than 20,000 h.l. per
year), Caseys Brewery plans to start production at 3,000 h.l. and with phased expansion grow
to 10,000 h.l. over a five year period.
Caseys initial plans are to produce a lager and Irish red ale. This beer will be tested at Caseys
of Baltimore Hotel (in Cork), which is owned by Dominic Casey. This gives the brewer an
ability to be a production brewery while enjoying the benefits of being a brewpub where they
can trial beers. In addition to the two beers, Caseys also might brew speciality and seasonal
beers once the business is successful since these beers sell quickly and are usually quite popular.
Caseys intend to employ an American Brewer to capture some of the creativity, which is a
hallmark of craft brewing in America. With this in mind, Caseys Brewery proposes to position
itself as a creative brewery in Ireland which gives its brewer creative freedom to experiment
with the beer. On the other hand, microbreweries across Ireland have leaned more towards a
traditional beer line up of an India Pale Ale (I.P.A.), Red Ale and Stout.
Caseys brewery intends to develop a West Cork Beer Festival in Baltimore next year in
conjunction with Caseys Hotel Baltimore. This, they hope, will give them exposure to potential
customers which will help build its brand and also give them a good margin on the beer that it
will sell. Finally, Caseys brewery hopes to penetrate the east coast of America to cash-in on the
high density of Irish population. However, the brewery is not very sure as to which location
should they target. (Casey & Thornhill, 2013).

42

2.15.2. Competitive Advantage

Caseys Brewery believes that it holds a competitive edge on three fronts. They are:

Quality: Caseys Brewery produces beers of top quality and includes only the premium
of natural ingredients for the production of beer. Particularly selected for its unique
flavour profile, the beers are fermented for a bold and smooth taste. The brewery uses
fine Irish two-row barley malt to give the lager its distinctive taste.

Handcrafted: Caseys beers will be stocked up in small 20 h.l. batches under personal
attention of its brewers. The most recent brewing equipment is combined with
traditional brewing processes to guarantee consistently outstanding taste, whether
packaged in bottles, kegs or cans.

Market Demand: Premium lager continues to account for 73% of the lager category in
Ireland which is why Caseys Brewery will produce a premium Irish Lager, while the
majority of Irish microbreweries do not produce a lager (Casey & Thornhill, 2013).

2.16.

Chapter Summary

This chapter focused on market entry mode theory, market selection criteria, the timing of entry,
and market entry sequence. Further, the chapter went on to explore the marketing
communication mix for the Brewery. Finally, the literature review explores the beer market in
America and the trends it might follow in the years to come.

43

Chapter 3: Research Methodology

3.1.

Introduction

This chapter will outline the qualitative research process that has been followed to meet the
research objectives. Twenty one semi-structured and unstructured interviews from different
stakeholders of the craft beer industry were conducted over the months of June and July 2013.

3.2.

Research Objectives

The dissertation aims at building a market entry strategy for an Irish craft brewer to penetrate
the competitive American craft beer market. The main research questions posed for the market
entry strategy are:
1) To investigate the market entry prospects of Irish beer into the American craft beer
market.
2) To identify distribution channels that should be utilised to enter the U.S. craft beer
market.
3) To explore specific geographic areas in the U.S. to support the launch of Irish craft beer.
4) To identify promotional campaigns to aid market penetration.
5) To explore the ideal S.K.Us for market entry.
6) To explore precedents of previous market penetration of imported Irish craft beer into
the U.S.

3.3.

Research Process

The objective of a research piece is the most important criteria to determine the research
strategy that needs to be employed (Eriksson L & Wiedersheim Paul F., 1997). Similarly, the
type of data that researchers want to collect is crucial to determine the choice of research
methodology. For the purposes of this dissertation, it was found that the research onion of
Saunders, et al., (2009) is apt to identify issues that underlie the choice of research philosophies
and approaches.

44

Figure 25: The Research Onion

3.4.

Source: (Saunders, et al., 2009)

Research Design

A research design is a general map as to how to go about answering research questions. Various
research approaches have been utilised in this dissertation. The following section will clearly
explain the approaches used and the rationale behind using them.
3.4.1. Deductive and Inductive Reasoning

Deductive and inductive reasoning are two critical approaches used in attaining a conclusion
based on certain assumptions. While deductive reasoning works on a top-down approach with
general ideas funnelling down to more specific ones, inductive approach is virtually the
opposite of deductive where specific findings are developed into broader generalisations
(Saunders, et al., 2009) (Trochim & Donnelly, 2006).
Further, deductive reasoning kicks off by developing a hypotheses and theory and then follows
it up with designing a strategy to test the hypothesis. Typically, a deductive approach is used
with quantitative research analysis (Neuman, 1997).
Inductive reasoning, which is a bottom up approach, arrives at general conclusions of theories
by collecting data and developing a theory with the help of the analysis (Saunders, et al., 2009).
Though inductive and deductive processes are distinctively different, it must be noted that
deduction might entail a bit of induction and vice-versa (Bryman, 2001).

45

At first, the researchers employed deductive reasoning by assessing the relevant literature of
market entry strategy by authors Agarwal & Ramaswami (1992), Dunning (1973) and Koch
(2001). However, it was observed that the practicalities of entering the craft beer market would
demand special expertise which would lie in the minds of distributors, craft brewers with export
experience, brokers, beer enthusiasts etc. Therefore, it appeared reasonable for the researchers to
move towards an inductive approach to understand the strategies that had contributed to the
success or failure of firms which had ventured abroad. The actual practice of market entry can
only be provided by experts in the field of craft beer who would be very rich in detail and
credibility. Finally, it can safely be said that the researchers have employed both inductive and
deductive approaches to research which has transformed the findings from theoretical to
practical.

3.4.2. Exploratory and Explanatory Studies

Research purposes can be classified into exploratory, explanatory and descriptive in tune with
the research questions that are posed (Saunders, et al., 2009). The research classifications that
are employed for the purposes of this dissertation are exploratory and explanatory.
3.4.2.1.

Exploratory Studies

Babbie (1989) was of the opinion that exploratory research is carried out when problems still at
the early stages. Further, Saunders et al. (2009) clarified that this classification of research is
conducted to clarify and throw light on the nature of the problem. Finally, Collis & Hussey
(2009) elaborated that an exploratory study is conducted to look for prototypes and ideas rather
than verifying a hypothesis.
Exploratory research takes several forms such as surveys, secondary data analysis, interviewing
subject matter experts and carrying out focus group interviews (Babbie, 1989) (Saunders, et al.,
2009). This research generally is very broad in nature and progressively narrows down as the
research develops (Adam & Schvaneveldt, 1991).
3.4.2.2.

Explanatory Studies

Explanatory studies are an extension of descriptive research since the researcher explains as to
how and why a phenomenon takes place. Explanatory research is generally done where the
research question is clearly understood and existing theories need to be supported by facts
(Babbie, 1989). This might also end up becoming an attempt to extend and elaborate on theories
and models where possible (Collis & Hussey, 2009).
The researchers of this dissertation have mostly felt that the purpose and questions that the
problem poses is a continuum between exploratory and explanatory. However, since existing

46

theories, frameworks and models are extensively used throughout this dissertation it must be
admitted that this piece of research is more exploratory. Further, the use of interviews with
industry experts to gain the rich knowledge is further testament to the fact that this is an
exploratory study.

3.5.

Research Strategy

A clear and concise research strategy is essential to respond to the research questions
comprehensively. Different research strategies such as experiment, survey, case study,
ethnography etc., may be employed to conduct descriptive, explanatory and exploratory studies
(Yin, 2003). Saunders, et al. (2009) state that the research strategy one plans to employ is
heavily dependent on the objectives and research questions, the amount of time, other resources
available, existing knowledge and ones philosophical underpinnings. For the purposes of this
dissertation, a case study strategy is employed.

3.5.1. Case Study Selection

A case study selection requires an empirical investigation of a current phenomenon which uses
various sources of evidence (Robson, 2011). The case study strategy gives the researcher a great
understanding of the context of research and the process that is enacted (Morris & Wood, 1991).
Feagin, et al. (1991), opines that the case study method is an ideal choice when a holistic and indepth investigation is essential.
Several case studies, which have successfully penetrated the American craft beer market and
created a niche for themselves, have been studied and analysed for the purposes of this
dissertation since selecting multiple ones is always preferable. This is done to conclude whether
a phenomenon that is occurring in one case study is continuing in the subsequent cases so that
the findings can be generalised (Saunders, et al., 2009).

3.6.

Data Collection Methods and Procedures

Since this dissertation is more exploratory than explanatory, it is observed that data can be
gathered using two activities. They are:
1) Secondary Research
2) Primary Research
For the purposes of this project, secondary data was utilised to create a foundation to study and
form a basis to conduct interviews.

47

3.6.1. Secondary Research

Data when reanalysed, which was previously assembled for some other purpose, is the most
widely used data collection method (Blumbery, et al., 2008). A number of advantages can
ensue out of using secondary data since most information is easily available and it can help
answer ones research question easily by aligning the focus of primary research. One major
benefit of secondary data is that it saves time and money (Belton, 2005) (Ghauri & Gronhaug,
2010).
One important aspect to be considered while gathering secondary information is the purpose for
which the information was initially collected (Denscombe, 1998). Also, the quality of such
secondary information comes into question when such research has biases due to vested
interests (Bryman & Bell, 2011).
For the purposes of this dissertation, the collection of secondary data can be segregated into
three sections documentary, multiple sources and survey (Saunders, et al., 2009). They can be
pictorially represented as follows:

Figure 26: Types of Secondary Data

Source: Adapted from (Saunders, et al., 2009)

Documentary data, mostly written material, available from the brewery were carefully studied
which included the business plan of the brewery and the existing brewpubs website. Along
with this several non-written materials such as You Tube videos and podcasts were considered
while getting an overview of the craft beer industry in the Republic of Ireland and the world in
general.

48

Beer and alcohol consumption reports in the U.S. were considered as a part of area based
secondary data collection. Further, many beer associations and magazines were referred to in
addition with census reports of the U.S. government to narrow down the concentration of Irish
population in different parts of the country. Numerous journals, articles and books were
consulted and analysed for studying the market entry strategies of various companies in foreign
markets. Finally, social media platforms such as blogs posts, LinkedIn and craft beer discussion
forums were comprehensively covered to gather rich secondary information from industry
practitioners.
3.6.2. Primary Research
Collecting primary research is considered as one of the more intrusive means to collect data.
However, the results that follow the collection of primary data are very rich and help researchers
evaluate their research objectives (Saunders, et al., 2009). While it is widely believed that
gathering primary data is expensive and time consuming, the researcher has increased control
over the data points that need to be gathered (Ghauri & Gronhaug, 2010).
3.6.2.1.

Qualitative Method

Collection of data can be carried out using qualitative or quantitative methods (Curwin & Slater,
2008). The researchers believed that the use of qualitative method is the best possible way to
answer the research questions posed. Also, since qualitative research does not measure and
provides great insight through analysis, it is meaningful to integrate primary and secondary data
through qualitative means (Ruyter & Scholl, 1998). Van Maanen (1979) opined that qualitative
research comprises many methods that build a holistic view of a particular phenomenon in the
social world. As this piece of research aims to find out the best possible way to enter the
American craft beer market in addition to some promotional activity, subject matter expertise is
key to the success of market entry.
The following section deals with further justification of data collection methods for the purpose
of answering the research questions.
3.6.2.2.

Interviews

A number of techniques can be engaged with to collect qualitative research. The most common
ones are observations, focus groups and interviews (Ewings, 2011). Since the researchers had
time constraints, all interviews had to be administered by telephones and electronic email.

49

All interviews that were conducted were semi-structured or unstructured in nature. The
researchers had themes and open ended questions which would provide an opportunity to the
interviewee to discuss the topics in greater detail (Saunders, et al., 2009). The interviewers were
careful enough to build a certain rapport with interviewee so that the participants were
encouraged to divulge as much information as they could. This certainly helped the researchers
since the interviewees opened up their thoughts and minds to give certain ideas that the brewery
or the researchers had not thought of (Cohen & Crabtree, 2006). However, the researchers did
find the interviews to be time-consuming both in terms of preparation and interpretation.
A total of twenty one interviews were conducted with eleven respondents using electronic
means as the preferred way to communicate and the other ten chose telephonic interviews. With
respondents using asynchronous ways to communicate with the researchers it has helped to
mitigate the handicap of geographical dispersion (Saunders, et al., 2009). The following figure
demonstrates the classification of electronic interviews.

Figure 27: Types of Electronic Interviews

Source: (Saunders, et al., 2009)

The telephonic interviews that were conducted by the researchers had to be kept short and to the
point since the interviewees had to take time out of their jobs to answer the queries. Further, the
researchers kept taking notes throughout the interview process by dividing the work amongst
them. While one researcher would ask questions, the other two would transcribe notes.
However, for the electronic mail communication, all respondents were happy to scribe at length,
their experiences and knowledge they had gained by working in the industry. The researchers
must admit that some interviewees took a long time to reply to emails and, as indicated by
Saunders et al, this hampered the process of data collection.
Since the research objectives spanned a broad range of issues such as market penetration,
promotional activity and gauging the difficulties to enter the American craft beer market, the
researchers found it apt to interview different stakeholders in the beer industry from diverse
countries such as the United Kingdom (U.K.), U.S., Republic of Ireland, Italy and Canada.
The following is the list of respondents for the interviews that were conducted in the months of
June and July. The respondents are classified into various stakeholder groups and individual
names have been withheld for confidentiality purposes.

50

Stakeholders
Associations
Brokers

Craft Brewers

Distributors

Enthusiasts

Retailers

Company
Northern Craft Brewers Association
Beer Institute
Independent Broker
Selling Spirit
Edouard McGrath Biere et Cidre
Brew Dog
Fyne Ales
Edrington Group
Snoqualmie Falls Brewery
Thornbridge Brewery
Atlantic Importing
Atlas Distributing
Rapid Distribution Beverage
Massachusetts Beverage Alliance
Beer Connoisseur Magazine
Craft Beer Specialist, Educator & Speaker
Better Beer Revolutionist
IDrinkGoodBeer.com
Craft Beer Cellar
Esselunga
Binny's Beverage Depot

Country Respondent Code

UK
Association 1
US
Association 2
US
Broker 1
Canada
Broker 2
US
Broker 3
US/UK
Craft Brewer 1
UK
Craft Brewer 2
US
Craft Brewer 3
US
Craft Brewer 4
UK
Craft Brewer 5
US
Distributor 1
US
Distributor 2
US
Distributor 3
US
Distributor 4
US
Enthusiast 1
US
Enthusiast 2
US
Enthusiast 3
US
Enthusiast 4
US
Retailer 1
Italy
Retailer 2
US
Retailer 3

Table 3: Classification of Respondents by Stakeholders, Country and Company

3.6.2.3.

Sampling

As soon as the researchers had narrowed in on a research methodology, the target population
was identified and a power-interest matrix was mapped to identify the important stakeholders in
the craft beer industry (please see Appendix H). As a result of this, important stakeholders were
identified and the researchers then set about sampling their data.
Belton (2005), stated that a sample is a snapshot of the population that is about to be targeted for
primary research. Generally, sampling techniques are divided into two types:
a) Representative or probability sampling
b) Judgemental or non-probability sampling.

The subsequent figure illustrates the various sampling techniques available under the two types
of sampling:

51

Figure 28: Types of Sampling Techniques

Source: (Saunders, et al., 2009)

A two stage process of sampling technique was employed while selecting the respondents. In
the first stage (probability sampling), stratified random sampling was employed since the
researchers had to divide the population in to different strata of stakeholders (attributes)
(Saunders, et al., 2009). Consequently, the researchers applied the random sampling technique
to identify the respondents within the U.S. and U.K. Further, it was identified that a nonprobability based purposive sampling technique might be the best way to liaise with respondents
since they are picked on the basis of their ability to contribute (Belton, 2005).
Over 112 people were identified and emailed and another 73 were telephoned to gather primary
data (please see Appendix I for details). Around 143 of the 185 contacts were identified after
stratified random sampling. Extensive internet searching of all the major stakeholders and
remarkable people was done to make sure no stakeholder was left out in the analysis.
With twenty-one responses, the response rate (Neuman, 2005) the researchers achieved is
13.33%. However, the active response rate (Saunders, et al., 2009) was far better at 25.45%.
The researchers believe that one of the reasons for an unusually low response rate is due to the
lead up to July 4th holiday when most Americans were on an extended break.
In addition to internet searching, social media sites such as Facebook and LinkedIn were
extensively utilised for purposive sampling and remarkable people were identified to be
contacted. Also, in a bid to secure further primary information, the researchers added
themselves to groups of craft brewer enthusiasts to participate in the discussion posts on
LinkedIn. This strategy of purposive sampling was especially useful in the later part of the data
collection which helped validate data points from previous interviews. Please refer Appendices
J, K, L, M, N and O for interview transcripts (one of each stakeholder).

52

3.7.

Research Conduct and Ethics

Respondents were reassured of their confidentiality and anonymity in cases where they insisted
to be unnamed. During initial interactions with organisations, the researchers identified
themselves as students at the University of Strathclyde (external researchers) (Saunders, et al.,
2009), and gained access to respondents who then opted to participate in the research exercise.
Consequently, the consent form was dispatched to the specific respondents and interviews were
carried out at the convenience of the interviewees. After the interview ended, the researchers
then emailed the respondent thanking them for their response and assuring them of their
anonymity if they had insisted on any. This was carried out as a part of netiquette which
Saunders, et al. (2009) had emphasised on.
A series of logical stages have been pursued to complete this research project. The stages
includes reviewing literature, designing research, collecting, analysing and interpreting primary
and secondary data and writing up the findings (Creswell, 2012). The following flow-chart
summarizes the research process the researchers followed.

Figure 29: Research Process

Source: (Wilson, 2006)

53

3.8.

Conceptual Framework

The researchers followed a protocol of events which was kicked-off by gathering secondary
data followed by an interview with Caseys. Subsequently, the interviews from different
respondents gave the researchers certain realistic ideas that would help the brewery enter the
American craft brewing market. The data received from the stakeholders was then analysed and
the researchers came up with a credible and practical market entry strategy for the brewery.
During the complete process of the project, the researchers realised the need for constant backup
(secondary research) to bolster the primary data collected. The following figure demonstrates
the modus operandi of the researchers.

Secondary
Research
Market entry
and
promotion
strategy for
Caseys

Interview
with
Brewery

Analysis of
Interviews

Interviews
with
industry
experts

Interviews
with
stakeholders

Figure 30: Conceptual Framework

3.9.

Local Analysis

Data analysis is a constant process and it does not occur in a vacuum (Erlandson, et al., 1993).
The twenty-one interviews that were conducted were transcribed and the process of qualitative
analysis as suggested by Saunders, et al. (2009) was followed.
Step 1: Categorising Data The researchers developed segments or strata into which the
interviews were bucketed and data was organised. These strata helped the researchers develop
important causal linkages between data and answer the research questions.
Step 2: Unitising Data The researchers while transcribing the data unitised chunks which
belonged to the categories that were created. Some chunks of data were sentences and some
were long paragraphs.

54

Step 3: Recognising Relationships and Developing Categories After unitising data into
relevant categories, the researchers started recognising relationships between themes and
created categories such as market entry strategy, promotion strategy, ideal S.K.U. strategy
etc.
Step 4: Developing Testable Propositions The researchers were able to find convergence of
ideas across various themes and they stress tested the propositions against the secondary data
that was available. This helped the researchers get to practical solutions and recommendations
for the case company.
Apart from local analysis, the researchers also found Seidels (1998) model for qualitative data
analysis useful. The model interlinks three parts: Noticing, Collecting and Thinking. The
process of noticing, collecting and thinking was continuously carried out over the period of
collecting secondary and primary data. The following figure captures Seidels model.

Figure 31: Data Analysis Process

3.10.

Source: (Seidel, 1998)

Methodology Limitations

It is common to discuss the limitations of a project as it is a logical extension of the research

methodology (Saunders, et al., 2009). The researchers believe that time was one of the main
constraints to gather more primary data. The twenty-one interviews that were conducted could
have easily been higher if the researchers had the luxury of time and money. Further, the
unwillingness and unavailability of some remarkable people to participate in interviews
hampered our collection of primary data. Another, big limitation that the researchers feel is the
niche category of Irish craft beer they were dealing with made it difficult for them to get
precedents that could be studied.
The researchers are of the opinion that certain biases might have crept in while collecting
primary data. However, it is believed that these biases are set-off by the validity and experience
of the interviewees themselves. Also, further care was taken by researchers by asking open
ended questions which would allow interviewees to share their rich and diverse experience.

55

3.11. Chapter Summary

A qualitative method was preferred by the researchers since the integration of primary and
secondary data would be meaningful. Twenty one interviews were conducted of which ten were
over telephone while the others were over emails. Stratified random sampling and purposive
sampling techniques were employed to pick the target population. The major limitations of this
study are the paucity of time to conduct more interviews, unavailability and unwillingness of
participants, biases of participants and researchers.

56

Chapter 4: Findings & Analysis

4.1.

Introduction

As discussed in the previous chapter, the team undertook extensive primary and secondary data
gathering. This chapter takes the data gathered, combines this data with the knowledge gained
from the literature review and processes them in response to the objectives set out in the
beginning of this dissertation. The findings therefore demonstrate the potential for merging
theory and practice to suggest practical modes of market entry and promotion for Caseys.

4.2.

Table of Significant Findings

The following table is the essence of the findings that the researchers have elaborated in the
subsequent sections of this chapter.

57

Objectives
Objective 1: To investigate the market
entry prospects of Irish craft beer into the
American craft beer market.

Objective 2: To identify distribution

channels that should be utilised to enter
the American craft beer market.

Objective 3: Explore geographic areas in

the U.S. to support the launch of Irish
craft beer.

Significant Findings
1) Craft beer production and consumption in the U.S. has been growing over the past few years and is expected to continue doing so for the years to come.
2) The majority of people interviewed have confirmed such a trend.
3) The majority of interviewees identify the three-tiered system of distribution as a potential difficulty for craft beer entrants.
4) Marketing investment and promotion are key factors for a new player aiming to move the product within the U.S.
5) The initial penetration should be limited to smaller geographical areas rather than aiming for covering regions.
1) Four options have been considered: On line sales, direct relationship with retailers, brokers, distributors.
2) On line sales: considered not suitable and not allowed in many states (including Massachusetts).
3) Direct relationships with retailers: considered not suitable for regulation aspects and because retailers are looking for well established brands.
4) Brokers: not the best option to go with since they are expensive and would add further the chain to final consumers.
5) Distributors/importers: the best option as they will looks after promotions and are deeply rooted in the market.
1) To optimise the utilisation of financial resources, the initial launch should be limited to a small geographical areas.
2) Most Irish Americans are located in the northeast part of the country, with two states in the east coast having a sizeable Irish-American population: New York and
Massachusetts.
3) Irish Americans are loyal customers and particularly proud of their roots and origins and tend to identify with brands that are labelled authentically Irish'.
4) The most suitable areas to be targeted are small cities in Massachusetts. For example: Cambridge and Greenfield.

Table 4: Summary of Findings

58

1) The promotional aspect of market penetration is viewed by a majority of respondents as an essential part of this venture.
2) Many niche markets gain a following via online communities and forum boards as the Internet has space for every niche market imaginable.
Objective 4: Identify promotional
3) Beer festivals and fairs to showcase its offerings to the community, build a reputation and network with fellow brewers are essential to creating a following among
campaign to aid market penetration.
the beer community.
4) It is important to get people to talk about the product and incentivise consumers to try the product.
5) Partnering with an established brewery was also suggested by a number of respondents as a way of creating buzz for the brand.
1) Containers are essential to preserve the quality of products like craft beer, both bottle and kegs have their own advantages and disadvantages.
2) Good quality stainless steel kegs are quite expensive and need to be shipped back which adds further costs.
Objective 5: To explore ideal Stock
3) Bottles would be more ideal since it could be sold in more areas and can be consumed at any location when compared to kegs.
Keeping Units (SKUs) for market entry.
4) Bottles could be sold at retail both for on-premise consumption as well as at carryout or package liquor stores.
5) Respondents have been quite consistent in saying that shipping beer in bottles instead of kegs will be much more cost effective for the brewery.
1) There is a set of 16 Irish craft brewers dotted across the country of Ireland of which three export craft beer in America.
2) Franciscan Well Brewery, one of the earlier entrants into the Irish microbrewery movement was established in 1998 it supplies its products to 39 states through a
Objective 6. To explore precedents of
large distributor.
previous market penetration of Irish craft
3) Carlow Brewing Company brews a range of traditional Irish beers (stouts and ales). Founded in 1996 by the OHara family in Carlow town.
beer into the U.S.
4) The Porterhouse might be the only microbrewer who has set up a franchise in NYC in a historic tavern called the Frances Tavern.
5) None of the three breweries responded to the researcher's repeated queries since they believed that sharing data would annul their competitive advantage.
1) Not easy to shift a traditional beer drinker to craft beer since it is a discretionary purchase.
Other Key Findings
2) Craft beer has an element of ego purchasing involved.
Table 4: Summary of Findings

59

4.3.

Market Entry Prospects

Objective 1: To investigate the market entry prospects of Irish beer into the U.S. craft beer
market
Investigating the market entry prospects of Irish craft beer in the American market opens the
way to several aspects that need to be analysed carefully. The approach used to structure
findings is through three main drivers: trends in the U.S., geographical coverage and operational
aspects.

4.3.1. Trends in the U.S. Market

Craft beer consumption and production in the U.S. has been rising over the past few years and is
expected to continue doing so for the years to come. The number of craft brewers has grown
throughout the country and the attitude of consumers toward craft beer is more positive
(Euromonitor 2012). Distributor 4 claims that craft beer enthusiasts are willing to spend more
on imported premium products. Another factor supporting American customers interest for
craft beer is the ever-increasing number of beer festivals held all over the country (Brewers
Association 2012). Tuttle (2013) indicates that the U.S. is going through a beer renaissance. In
the late 1970s, there was only one craft brewer in the U.S. whereas now there are about 2,500
including 409 new craft brewers added just in 2012; the biggest increase since the prohibition
period ended.

Figure 32: U.S. Volume Share for Craft Brewers

Source: Brewers Association (2013)

Craft beer seems to be everywhere. It is being incorporated into ice cream flavours and included
in beer cocktails around the country. Forty-eight out of fifty states saw an increase in craft beer
production. As evidence, the New Yorker, a well-known U.S. publication, recently launched an
interactive craft-beer map of the country with very detailed information about the most
dynamics craft breweries throughout the nation (Tuttle, 2013).

60

The majority of people interviewed have confirmed such a trend. Distributor 1 indicates that
there is a potential for new craft beers in the market and more and more mainstream beer
drinkers are considering exploring new beers. However on the other hand, Association 1
claims that the American craft beer market is saturated and a new comer, especially if it is a
foreign beer, must be presented in an innovative and outstanding manner. Association 2 goes on
the same tangent claiming that unless this new beer comes with something unique to offer, the
launch will be a herculean task. The point of being unique and having a strong connection with
Irish tradition has been raised as well by Distributor 3. To further highlight how essential it is to
offer something unique and different, Craft Brewer 4 and Retailer 3 highlight the enormous
amount of competition going on amongst U.S. craft brewers. According to these interviewees
being an import, one would have to have something unique to offer so as to make the brand
stand out. Just another Pale Ale, Porter, etc, is not necessarily a good strategy he claims.
Broker 2 identifies the three-tiered system of distribution as a potential difficulty for new
entrants, since a new beer in the market will have a difficult time liaising and negotiating with
three target audiences. In addition Retailer 3 claims that this system might have negative
consequences on the final price and make the product less competitive.
Similarly, Association 1 claims that Irish products carry a status value and charm for IrishAmericans. However Guinness already has a fair presence so no point going head to head with
them with their marketing resources.
Broker 1 states that pubs and restaurants have many options when it comes to selecting beer
brands so product differentiation will be essential to securing space for keg or bottled beer.
Other interviewees, like Broker 3, have a different opinion and a much more optimistic view.
The respondent claims that despite the fact that home competition in the craft beer market is
sensibly growing, he believes that a new Irish craft beer will be warmly welcomed, saying that
other European craft beers, like Belgian craft beers, are selling very well.
Respondents have also noted that craft beers can be seasonal and to exploit this, brewers have
been constantly launching seasonal beers.
Tuttle (2013) indicates that San Franciscos Anchor Brewing, in July 2013, has released a new
brew called Big Leaf Maple Autumn Red to increase its range of seasonal beers. Big Leaf will
be available from early August until October delivering a taste of maple syrupincluding some
from California big leaf maples, after which the beer is named. Similarly, in the mid of July
2013 the Belgian giant AB Inbev has launched a new craft beer (Shanken News Daily, 2013).

61

4.3.2. Geographical Coverage

The vast majority of the interviewees underlined the difficulty of global coverage of the U.S.
market indicating that this could be done only by big players because, first of all, such a
coverage requires very important production levels which a small start up craft brewers would
not be able to reach and, second, it would be required to invest substantial funds in promoting
the product. Consequently, the most appropriate way to enter the market appears to be to focus
on a niche geographical area that allows exploiting the fullest potential carried by the product.
Craft Brewer 1 and 3, Distributor 3 and 4 suggested targeting the Greater Boston Area (G.B.A.)
since this area represents the highest percentage of Irish Americans in U.S., likely to be
potential consumers.
Furthermore, Craft Brewer 3 suggests using an even more focused approach that should reduce
the cost of market entry. According to the respondent, launching the product in big cities would
require substantial funds, especially for promotion. Therefore, the suggestion was to narrow the
area targeted. Smaller cities around Boston, like Cambridge or Newport, could be an ideal
choice since the initial financial effort will be limited.

Figure 33: American Craft Beer Week Advertisement

Source: (Brewers Association, 2013)

62

4.3.3. Operational Aspects

The primary research has also highlighted a number of operational aspects that appears to be
essential for a successful penetration in the U.S. market.
Distributor 1 outlines how marketing investment is a key aspect for a new player aiming to
move the product within the U.S. He emphasizes the need to create buzz among craft beer
circles. According to this interviewee, consumer awareness activities should also be utilized,
and activities such as advertising in-store, in-store sampling, joining trade shows, joining
contests and win awards will bring prestige to the brand.
Pricing will also dictate what segment of the market is being targeted - premium or mass
pricing.

From a distributors end, the fees that a distributor will charge depends on the

marketing spend of the brewery and how willing the firm is on building up the brand.
Obviously, a more visible brand will be charged a lower margin. Brands with strong marketing
will have lower margin structures.
Volume wise, it depends on the capability of brewers and what volume is most cost effective for
the company to ship to the U.S. There are specialized handling companies that ship perishable
goods.
Similarly, Distributor 4 and Retailer3 identify marketing investments as essential for easier
market penetration, especially for foreign brands that have no following in America. For
financially strapped firms, it is better to promote their products at the grassroots levels, since it
is usually cheaper. It will also build a following that can be carried forward. Brand image
should be built; Retailer 3 in particular emphasizes the importance of getting the product into
mouths.
Craft Brewer 4 points out an area that needs to be considered. Shipping beer overseas would
take a relatively lengthy period of time, presumably on a boat and then there would be
warehousing at a wholesaler before reaching the consumer. The respondent claims that it is
uncommon for U.S. wholesalers to refrigerate packaged beer so shipments would be
unrefrigerated for weeks at a time. Draught beer is normally refrigerated at a wholesaler, but
during the sea voyage it might be subject to temperature extremes depending on time of year.
Refrigerated shipping adds to the cost but is a wise investment.
According to Enthusiast 2 there are two different groups of beer drinkers in the U.S. and a
brewer needs to identify which one to market. The first group is the rabid craft beer lover who
will not drink anything made by large corporate brewing entities such as Anheuser-Busch or
Miller or Coors. The second group is exactly the opposite of the first; they know little to nothing
about craft beer and drink nothing but the homogenous products produced by the big brewers.

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Imported beer can reach either of these two groups, though Irish beer carries very little cache
with the craft beer lovers. Outside of Guinness, most Americans are hard pressed to name
another Irish beer or brewer.
Enthusiast 1 suggests that a new brand should look at various importer/wholesaler portfolios
and find a niche that is not already being serviced and identify markets the brewery could target
and work towards building capacity in those markets first. Furthermore, there is a perception
among consumers and retailers in the U.S. that Irish beers are seasonal and only sell in large
quantities leading up to St. Patricks Day in March.

4.4.

Distribution Channels

Objective 2: To identify distribution channels that should be utilised to enter the U.S. craft
beer market
After thorough investigation and conducting interviews with various respondents familiar with
the American craft beer industry, four options emerged as viable distribution channels for
market entry: on line sales, direct relationship with retailers, brokers, distributors.

4.4.1. On-Line Sales

The consensus arising from interviews is that online selling does not appear to be a very
appealing option since there are many federal and state regulatory requirements to comply with.
Furthermore, legislation differs from state to state and none of the interviewees recommended
this option as the most suitable for a start up brewery. In particular, as indicated by Craft
Brewer 3, this option would not provide the right push for the product and moreover, one of the
most suitable areas for market entry process, Massachusetts, does not allow on line beer sales.

4.4.2. Direct Relationship with Retailers

Having a brewers distribution arm, directly try to get placement with big retailers such as
supermarkets, posts many hurdles as indicated by the respondents. Craft Brewer 4 and Retailer
2 indicated that these big retailers are looking for brands that can offer high margins.
According to these interviewees, these big supermarkets tend to usually accommodate wellestablished brands with high turnovers and do not look after the promotion of the product. For
these reasons, a direct relationship with big box retailers seems very far from being the best
option to go for a start-up craft brewer which does not have the luxury of huge financial
resources and will not be able to ship enough products to cover the overheads of going through
the main distribution system.

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Furthermore, Broker 1 believes that obtaining shelf space (bottles or cans) in the retail setting
will be difficult. Shelf space is limited with much of the space still occupied by large domestic
brewers such as AB InBev and SAB Miller. Although the selection of craft beer has increased,
there is still not enough space in the typical grocery store.
Moreover, Retailer 2 indicates that especially for large retail chains, beer producers are in fierce
competition and are ready to pay exorbitant amounts of money to gain shelf space at the
expense of competitors.
A better option would be to approach the smaller liquor and specialty craft beer stores that
specialize in alcoholic beverages such as Spec's, Gordons Liquor and Craft Beer Cellar, the
latter of whom have branches all over the country.

Craft Brewery

On Line Sales

Brokers

Distributors

Distributors

Retailers/Bar/
Restaurants

Retailers

Retailers/Bar/
Restaurants

Final Consumer

Figure 34: Distribution Channels

Source: Busa, Dimerin & Chandran (2013)

4.4.3. Brokers
The third option for the brewery is to approach beer brokers that normally are in touch with
many distributors and have deep knowledge of the market.
However, respondents have indicated that brokers will be an expensive proposition compared to
going to distributors directly and would add an extra player in the supply chain before reaching

65

final consumers. Broker 2 intimated that the intermediation offered by brokers is the simplest
way to go about distributing the beer, as brokers handle multiple distributors and retailers,
which could speed up market penetration. The respondent goes on to say that this is the fastest
way to spread the beer into the market as brokers spend their entire career networking with
distributors so that they can reach out to them when its needed. Brokers are expensive but they
are the best alternative since they know about labelling, regulatory requirements, the paperwork
and the bonds that may be required for the particular geographical areas the beer might want to
operate in. This theory has found very little support amongst the other interviewees.

4.4.4. Distributors
Consensus arising from the majority of interviewees indicates the use of a distributors network
is the most appropriate market entry option for Caseys for the following reasons:

Distributors are deeply rooted into the market with a huge sales force

Distributors can reach out easily to different clients i.e., supermarkets, bars, pubs,
restaurants etc.

Distributors are easily approachable at craft beer conferences, festivals and related events
held every year throughout U.S.

Speciality distributors, who deal with craft beers, can direct the product toward the areas
with the highest potential of success

Distributors generally take care of the promotional aspect

Distributors assume the financial risk of non payments

Distributors know about regulatory requirements at the state and federal level

Meanwhile, the different interviewees highlight some relevant aspects worth considering in
greater detail to have deeper knowledge of the distribution channel dynamics in the American
market.
Craft brewer 4, for example, recommends that having a dedicated brewery representative in the
market is also essential. Relying solely on distributors might not lead to fast market penetration
as they're bombarded by all the other brands in their book who normally rely on incentive
programs from the brewery.
In addition, Craft Brewer 4 suggests that it is also important to develop an incentive program to
keep the distributor representatives attention on your brand.
Similarly, Broker 1 suggests that having sales representatives in addition to distributors would
help market the beer in supermarkets and special events in pubs and restaurants.

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Broker 3 considers the utilization of a distributor network for a foreign brewer as a natural
consequence of the U.S. three-tiered system. He suggests, as well, that a company should use an
importer or, alternatively, start a U.S. import company selling to distributors/wholesalers who
sell to restaurants/bars and stores.
Similarly, Craft Brewer 4 suggests an appropriate way to start the export activity by using an
importer who might also be the distributor and from there; the distributor sells to the market.
Once again, according to the interviewee, it is essential to have a brewery representative who
knows the local market well to direct and monitor the distributors activities.
Craft Brewer 5 intimated that the brewery goes through a distributor, Bunited, who handles the
American business end, including movement within the U.S. and marketing/pushing of products
once in the country.
A different perspective is offered by Retailer 1, who suggests building a reputation by going to
craft beer conferences and trade shows and trying to gain a following by winning some
awards. With that recognition, firms would be more open to starting a relationship with the
brewery. With that in mind, he suggests going through an importer or a distributor who can also
help the brewery in marketing the beer. A very good example of this is The Franciscan Well
brewery in Ireland which was approached by Molson Coors because of the awards the brewery
had won. Also, Molson Coors arranged an import agreement for the brewery which will soon
export their beer to America (Beoir.com, 2013).
Enthusiast 3 indicates as a priority the selection of an importer, like Shelton Brothers, to bring
the beer into the U.S. The importer already has a large portfolio of imported brands to sell to
local area distributors. The distributors then sell those beers to their customers who own bars,
restaurants, supermarkets and liquor stores. He claims that because of the three-tiered system,
which maintains the separation of brewers, wholesalers or distributors and retailers, going with
a distributor is the most natural choice for a new brewer.
Another aspect raised from Association 1 is the role of legal framework, the number of aspects
that would need to be checked and the legal requirements that need to be fulfilled: For what is
supposedly the land of the free and capitalist entrepreneurship, it is a bureaucratic nightmare.
Get that wrong and the authorities, or some aggrieved party, will be onto their legal friends and
come down on you like a ton of bricks and it is likely to prove an expensive, time consuming
and humbling disaster!
This interview does not appear to be very supportive of a new craft brewer trying to enter the
American market but provides interesting insights like the option of the brewery to brewery
deal with a similar sized U.S. brewery.

67

A sort of twinning arrangement: Maybe you ship a pallet of kegs for them to sell and they send
them back with their beer for you to sell, type of reciprocal arrangement. This would of course
require the brewery here to have an outlet to sell American beer at a premium price and use it as
a unique selling point to attract new customers. So that would be a slightly different business
model than just trying to ship beer for cash.
Another option suggested, is an agreement with a U.S. brewery to brew beer for sale in their
existing outlets or brewpub and an overseas player does likewise with one of their beers. Some
breweries have gone for collaborations, where one brewer visits the other brewery and they
brew jointly or are allowed to brew on the plant a beer by them.
This option could be quite interesting financially if it was to be tied in with a holiday, but again
it can generate free publicity, interest and unique selling points.

4.5.

Ideal Geographic Area for Market Penetration

Objective 3: Explore geographic areas in the U.S. to support the launch of Irish craft beer
Selecting and targeting a geographic area that contains a firms target market is of supreme
importance (Kotler, 1999). Ireland based Caseys brewery has decided to target a specific area
of the U.S. that has a dense Irish-American population. By doing so, the brewery hopes to
leverage the brands authentically Irish roots.
As pointed out in the literature review chapter of this dissertation, huge concentrations of IrishAmericans are located in the northeast part of the country, with two states in the east coast
having a sizeable Irish-American population: New York and Massachusetts (please refer
Appendix D & E). New York State has the biggest Irish concentration among any state with
12.9% while Boston, Massachusetts and its surrounding towns have the biggest Irish
concentration out of any city at 20.4% (Kliff, 2013). The Irish-American population and those
who identify themselves as such are fiercely loyal and proud of their roots and origins and tend
to identify with brands that are labelled authentically Irish (Barrett, 2012). Furthermore,
Barrett (2012) also states that Irish-Americans tend to stay brand loyal to a product that they
identify with.
Irish culture is prevalent throughout the history of the Massachusetts area and that culture can
still be seen and felt by people from that area. The earliest St. Patricks Day parade and
celebration in what was then Colonial America was held in Boston in 1737 and has continued to
this day (McNamara, 2012). The first one held in any other area was in N.Y.C. in 1762, which
continues to this day as well (History.com, 2012). The Boston Celtics of the National Basketball
Association (N.B.A.) were named after the ethno-linguistic group located in and around Ireland.
The founder of the team acknowledged the fact that Boston had a huge Irish population and

68

wanted to pay homage to their ancestry, the team plays in green uniforms and utilise a four leaf
clover, another Irish cultural symbol, as a logo (NBA.com, 2013). Clearly, Irish roots run deep
in these two areas of America.
Craft beer in both areas has a strong following. However, the state of Massachusetts above any
place else, consumes more craft beer than any other state in America. In fact, 15.5% of total
beer sales in the state can be attributed to craft beer, a figure much higher than the national
average of 5.6% (Brewbound, 2013). Sales volume of craft beer in the area grew by 10% in
2012, while the national average declined by 1%. The growth in craft beer sales can be
attributed to the changing in tastes of the American beer drinking public from traditional staple
beers to a more sophisticated and deliberate brew, the American palate is become worldlier and
more discerning (Godard, 2013). The increasing popularity of craft beer has been spearheaded
by Samuel Adams lager, a craft beer based out of Boston, which is ranked number one in the
country in terms of craft beer sales and has a listing on the New York Stock Exchange
(N.Y.S.E.) (Godard, 2013). The firm experienced a 20% jump in sales in the first half of 2013
as the popularity of craft beer continues to rise (Hurley, 2013).

Figure 35: American Craft Beer Industry

Source: (New Yorker, 2013)

Research conducted has shown that the Boston and the area surrounding it boasts over 200 Irish
pubs and bars and most of these pubs carry at least one craft beer (yelp.com, 2013).
The proliferation of craft brewers in the Massachusetts area cannot be ignored as well. Apart
from the aforementioned Samuel Adams craft beer, there are at least 20 other craft brewers in
the Boston area and over 40 in the state of Massachusetts, it is expected that those numbers will
keep growing in the future (Doyle, et al., 2012) (Dzen, 2013). Boston also enjoys a very healthy
population of craft beer lovers and enthusiasts as evidenced by respondent Retailer 1 who said

69

that specialty beer retailers are spoilt for choice when it comes to craft beer. Institutions such as
the Massachusetts Brewers Guild ensures that craft beer in the state gets the proper spotlight and
promotion while at the same time protecting the brewing eco-system of farmers, brewers and
pubs that has developed in the state. The guild promotes craft beer through various different
media, encourages working relationships with stakeholders within the eco-system and organizes
meet-ups and festivals.
Craft beer festivals play a big part in the craft beer culture, as these festivals are where
enthusiasts, brewers, retailers, distributors, suppliers and brokers get together and do business
and enjoy beer from all over. As various respondents intimated (Craft Brewer 2, Retailer 1,
Distributor 1), a healthy festival culture ensures that a sizeable following resides in that area
and a big craft beer community will help ease the difficulty of any start-up brewery.
Boston is home to a number of different festivals, including the biggest in the country, the twoday long American Craft Beer Festival. Beer lovers from all over the world flock to the event to
taste the 600 beers offered from 135 different breweries (Berrong, 2013). Other craft beer
festivals that take place in Boston are the WGBH Craft Beer Festival, the Drink Craft Beer
Springfest, the Bacon and Craft Beer Festival, the Cambridge Brewing Festival, the Beer
Summit Winter Jubilee and the Annual Local Craft Brewfest.
While Boston takes the lion share of craft beer festivals, there are notable ones located in the
New York area such as the N.Y.C. Craft Beer Festival and the TAP New York Craft Beer and
Food Festival. These festivals though, are smaller scale and do not attract the same number of
brewers and enthusiasts as the ones held in Boston.
The sizeable Irish-American population and a big craft beer following and community are the
factors that should be considered by Caseys in choosing a geographic location to launch its
offering. Massachusetts and N.Y.C. were pinpointed as areas that fit the criteria but the bigger
craft beer culture and following in Massachusetts trumps N.Y.C. as a destination for craft beer
enthusiasts and thusly brewers as well.

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4.6.

Promotions

Objective 4: Identify Promotional Campaigns to Aid Market Penetration

Social
Media
Initiative

Identify
with Brand
Community

Join Craft
Beer
Festivals

Promotional Strategy
Figure 36: Promotional Strategy Diagram

4.6.1. Identifying with the Craft Beer Community

The promotional aspect of market penetration is viewed by a majority of respondents as an
essential part of this study. As Distributor 1 emphasized, marketing is key for moving your
product.
As was discussed in the literature review chapter, organisations should aim to build a brand
community with its customers as this will build a lasting relationship and will also ensure a
sense of belonging for them. Aspects of community building were also intimated by a number
of different respondents, who believed that in order for Caseys to be successful in penetrating
the market, they must tap into the strong craft beer community that has grown over the years. A
burgeoning group of artisans, artists, critics and home-brewers have adopted the craft beer
culture for their own and have taken steps to protect the culture from big corporate brewing
firms (Wills, 2012). Craft, local and handmade are attributes that should be highlighted in the
marketing literature, as these are the qualities that craft beer enthusiasts look for.

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4.6.1.1.

Utilising Social Media

A lot of niche markets gain a following via online communities and forum boards, as the
Internet has a space for every niche market imaginable. Therefore, it is only natural for craft
beer and its followers from a certain area or locale to first pick up steam on social media sites.
As discussed during the literature review, utilizing social media is a relatively low cost and
effective way of reaching your target audience. Online craft beer forums such as
greatbrewers.com are an excellent vehicle to introduce a product to a willing audience as the
website offers reviews of new brews while also featuring a comments section where other users
can share their experiences with the beer. As was discussed by several beer enthusiasts
interviewed for this project, using these features on websites lets the manufacturer understand
the market better as first hand experiences are intimately detailed on these forums. Furthermore,
it gives a manufacturer a platform by which to interact with its consumers in order to build
relationships and at the same time improve its offering (Godard, 2013).
Craft Brewer 1 stressed the importance of having a website that is accessible to everyone, has
fresh content throughout and is easy to navigate. The brewery stated that since mass
promotional campaigns require heavy capital investment, a really good website which
showcases the beers uniqueness is essential. Furthermore, the brewery stated that having a
company website will aid in gauging the consumer response based on the number of hits the site
gets. These visitors can be geographically identified and targeted on a niche basis. These
insights confirm the theories and ideas presented in the literature review where it is stated that
websites are seen as a hub for a firms online advertising and as such, a good website is
essential for a successful and integrated online advertising campaign.
Other craft beer forums that have a big user base that can be utilised to encourage and build a
brand community are beeradvocate.com, beerforum.com and drinkcraftbeer.com. These
websites offer support for both vendors and enthusiasts alike and it is a great way to network
with fellow beer enthusiasts and brewers.

4.6.1.2.

Beer Festivals

A majority of craft brewers interviewed for this project were adamant that participating in beer
festivals and fairs to showcase its offering to the community, build a reputation and network
with fellow brewers was essential to creating a following among the beer community.
As narrated by a respondent, Enthusiast 2, there are two types of beer drinkers in the U.S., one
group quite happily consumes mass produced beer brands by one of the two biggest breweries
in the country, Anhauser-Busch, makers of Corona, Stella Artois and Budweiser among others
and SABMiller who brew its namesake Miller Draft, Birra Peroni and Fosters. The other group

72

of beer lovers is the opposite, the rabid craft beer fans who appreciate a more sophisticated
brew. These rabid craft beer lovers are the ones who frequent craft beer festivals; they are
passionate about beer and enjoy being around like-minded individuals who are as passionate as
they are. It is therefore essential that any start up breweries that are looking to effectively enter a
new market have a presence in these festivals. There are also several BBQ festivals that
breweries can also attend.
As discussed by several breweries interviewed for this study, these festivals usually hold several
contests and give out awards for craft beer judged on several different criteria. Craft brewers
stressed the fact that having your beer be seen in good light and carry a good reputation
within the craft beer circles is ideal, and gaining that reputation is helped by winning these
aforementioned awards. Craft Brewer 2, a brewery based in the U.K., has successfully
penetrated the North American market, and one of the reasons they were able to do it with a
level of success was because of the awards and recognition their offering had gathered by
participating in festival contests and awards.

Figure 37: Craft Beer Festivals in Boston; Source: (Esquire, 2013) (CBS Boston, 2013)
(WGBH, 2013)
Creating a reputation through engaging with your target audience, building a rapport with firms
and individuals who are in the industry and can help a start up brewery down the right path and
gaining recognition for your products through various craft beer contests are key components as
to why a brewery should consider participating in these craft beer festivals.

4.6.2. Promoting the Brand

As is the case with most start up organisations, funding for various departments and processes is
not as high as those who are more established players in the industry. There are a variety of
ways to circumvent this however, as discussed by a number of respondents from the interviews
conducted for this study. One method that was repeatedly stressed by respondents as a way to
get people talking about the product is by incentivising consumers to try your product. As
Distributor 3 recounted, its extremely hard to get noticed by the craft beer buying public due to
the number of different options out there now, the key to success is finding a niche that you can

73

target, and grow from there. The respondent goes on to say that offering as much free sampling
and tastings as possible will give the brand the exposure it needs to gain a following. Distributor
2 echoed the sentiments above, adding that a start up brewery needed to participate in as much
activities as possible that would allow the brewery to do sampling, whether it is at festivals,
liquor stores, craft beer conferences etc. The respondent goes on to say that joining craft beer
guilds and associations, which would allow the brewery to make important contacts in the
industry and reach as many people as possible.
Partnering with an established brewery was also suggested by a number of respondents as a way
of entering the market and creating buzz for the brand. An established brewery will have a
greater reputation and allying with those breweries could have a positive effect with a start up,
an effect by association can do wonders. Furthermore, finding and creating meaningful
partnerships with established players in the game is essential to entering the market effectively
according to Distributor 4; as entering a market in a different country that the brewery isnt
accustomed to oftentimes leads to problems for a brewery. A multitude of issues that one can
easily make can be avoided with a partner who knows the lay of the land, so to speak.

4.7.

Ideal Packaging Material for Market Entry

Objective 5: To explore an ideal S.K.U. for market entry

4.7.1. Bottles and Kegs

When exporting beer to another country for distribution, the biggest thing one must consider is
what type of container the beer will be sold in for the initial market entry, bottles or kegs. Both
options have their own advantages and disadvantages over one another.
Respondents have been quite consistent in saying that shipping beer in bottles instead of kegs
will be much more cost effective for the brewery. A good quality stainless steel keg can cost
upwards of 200 U.S.D. each according to Craft Brewer 1, which means that once you ship a keg
abroad, you would have to ship the keg back since so much money is already invested into it.
Another point of interest was brought up by several respondents, stating that bars and pubs that
usually utilise draught beer from kegs would need to be convinced to relinquish an existing tap
line to accommodate the offering from Caseys, there are only so many tap handles in a pub or
bar, and the representative of the brewery must find a way to persuade the bar owner to drop
one brand in favour of another. This is potentially time consuming, as one would need multiple
visits to several pubs and bars to convince the owners to accommodate the beer. Combine these
factors with costly shipping costs due to the mass and weight of each keg, which means a lower
profit margin when compared to bottles, and it is no wonder that most respondents stated that

74

for a start- up without much capital, utilising bottles for initial market penetration is the way to
go.
Bottles would be more ideal since it could be sold in more areas and can be consumed at any
location when compared to kegs as intimated by Enthusiast 2. Bottles could be sold at retail
both for on-premise consumption as well as at carryout or package liquor stores. Brewery 2
echoed the same sentiments stating that bottles would be more flexible as it allows you to
penetrate retail stores and drinking establishments, making it more accessible to more people.
However, several respondents did mention though that restaurants, pubs and bars do prefer kegs
over bottles, one reason being that since stocking bottles take up more physical space in
locations, these establishments prefer serving beer on tap. Another reason for bars and pubs
preference of kegs over bottles was brought up by Broker 1 who said that a bottle of beer is
much more likely to be "light-struck," especially if the bottle utilised by the brewery is not
heavily tinted, brown beer bottles tend to aid in this. Light-struck is a term used in beer circles
that describes what happens to beer exposed to ultraviolet light (sunlight). A light-struck beer
results in a skunky nose and is also more likely to be oxidized which results in the beer having a
stale and cardboard flavour. Conversely, kegged beer is impervious to light and the process of
kegging beer is less likely to introduce oxygen into the beer, a precursor for oxidized beer. The
respondent goes on to state that beer shipped in kegs tend to stay fresher for longer, as there
isnt much oxidation going on when compared to bottled beer.

Figure 38: U.S. Beer Consumption by Type

Source: The Freedonia Group (2010)

Cans are another option but are cost prohibitive in the volumes craft brewers are capable of
producing. Glass and metal beverage cans are the standard packaging materials widely available
in the U.S. As of late, there has been a trend where craft brewers are packaging their beer in
metal beverage cans as they add less weight to shipping. The overhead cost of switching from

75

bottling or kegging to metal beverage cans is huge which most brewers cannot accommodate.
Furthermore, canning firms require a minimum order requirement that needs to be met by the
brewery for the venture to be cost beneficial and these minimum requirements usually exceed
the capacity of small start-up breweries. Boston Beer Company, the founder of Samuel Adams,
is gearing up for releasing their beer in cans for the first time in 29 years. With more craft beer
companies moving to cans, since cans have changed from the time people know them, it was
only a matter of time till Sam Adams followed suit (Forbes.com LLC, 2013).

4.8.

Precedents of Irish Craft Beer Penetration

Objective 6: To explore precedents of previous market penetration of Irish craft beer into U.S.
A lot has changed over the past three decades in the American brewing industry. There are now
an increasing number of microbreweries that are muscling into the beer market, which was
previously dominated by the big players. The niche microbreweries are a set of 16 Irish craft
brewers dotted across the country of Ireland of which three export craft beer to the Irish beer
loyalists in America (Irish Examiner Ltd., 2013).
Franciscan Well Brewery, one of the earlier entrants into the Irish microbrewery movement
was established in 1998 with plans to enter the American market. Today, it supplies its products
to 39 states through a large distributor, which includes cities like San Francisco, New York and
Boston. The brewery has witnessed extraordinary growth in the Irish market over the past four
years and they have had to turn away potential accounts. In December 2012, the brewer was
chosen Europes best dry stout at the annual World Beer Awards in London. Owner, Shane
Long, states that his trips to U.S. had been very fruitful with pubs, restaurants and suppliers
were extremely enthusiastic and bullish about its prospects (The Franciscan Well Brewery &
Brew Pub, 2013). In January, Molson Coors U.K. & Ireland bought over the brand and the
micro-brewery to build a strong share in the fast paced craft beer market. The objective of the
Molson Coors was to expand the market reach of the micro-brewery to U.S. and Canada where
there is a strong interest in Irish beer (Business and Leadership Ltd, 2013).
Carlow Brewing Company brews a range of traditional Irish beers (stouts and ales). Founded
in 1996 by the OHara family in Carlow town, it won two gold medals at the International
Brewing Awards, which helped it grow its customer base abroad and gain international
recognition. With five core range of beers, steady increase in brew production and export to 20
countries, exciting times are ahead of Carlow Brewing Company. (Carlow Craft Brewery
Limited, 2013).

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The Porterhouse might be the only microbrewer who has set up a franchise in N.Y.C. in a
historic tavern called the Fraunces Tavern. In 1989, cousins Liam LaHart and Oliver Hughes,
the godfathers of Irelands modern craft beer movement, launched The Porterhouse. Now, the
brewery employs 350 people and exports 50% of its beer to the U.K., U.S., Scandinavia, Italy
and Spain (The Porterhouse Brewing Company, 2013).
The researchers contacted the three craft brewers for interviews via telephones and emails
repeatedly. However, none of them seemed very keen to respond since the breweries believed
sharing data would annul their competitive advantage. However, with the limited secondary data
that the researchers gathered, the three breweries had won many international awards which
attracted distributors to canvas their product.

4.9.

Other Key Findings

While gathering primary data for entering the craft beer market in America, the researchers
found the following key findings which will play a crucial role in Caseys success.

4.9.1. Switch from Traditional to Craft Beer

In order to find out which factors would influence a beer drinker to switch from a traditional
beer (such as the likes of Budweiser, Fosters etc) to craft beer, the researchers asked several
respondents for their views. The general consensus from the respondents was that it is not easy
to move an average beer consumer from a classic, cheap beer to a craft beer. In the words of
Craft Brewer 4 There has to be flavour, stability, good eye catching graphics on the label, a
story about the brewery/brand that appeals to the consumer, and a reason for them to go beyond
their comfort zone. In support of his comment on switching, Association 1 opined that the craft
beer is an expensive discretionary purchase and with the economy being the way it is in
America, it is difficult to persuade alcoholics who slug mainstream crap.
Broker 2 had a very interesting take on craft beer. She stated that premium segments of people
go in for craft beers since they believe its cooler to drink craft beer than a regular Budweiser.
She further goes on to say that an element of ego purchasing takes over since young people
want to look cooler and hipper from the rest of the crowd. However, the best concluding
statement came from Distributor 3 which said The only people still drinking generic beer are:
too old to try something new or don't have the money.

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4.10. Chapter Summary

This chapter provides an outline of findings the researchers have observed during their
interviews. Coupled with primary data, the researchers have made an earnest endeavour to
answer the research questions laid out in the beginning of the dissertation. Please refer
Appendix P for the data collection highlights that have been recorded from the interviews.

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Chapter 5: Recommendations and Conclusion

5.1

Introduction

This chapter provides Caseys Brewery a list of recommendations that are based on the analysis
that was conducted during the course of this research. Research papers and reports that have
been covered in the literature review, collection and analysis of primary data has aided in
formulating

these

set

of

recommendations.

Caseys

Brewery

must

follow

these

recommendations should it want to be a successful craft brewer which exports to America.

It must be confessed by the researchers that Caseys has already started implementing some of
the recommendations that are set forth in this report for its successful foray into the craft beer
market.

5.2

Table and Summary of Recommendations

The following table is a snapshot of the recommendations that have been discussed in detail in
the subsequent sections of this chapter.

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Objectives

Significant Findings
Recommendations
1) Craft beer production and consumption in the U.S. has been growing over the past
few years and is expected to continue doing so for the years to come.
Penetrate the market at the earliest opportune time to cash-in on craft beer growth by:
2) The majority of people interviewed have confirmed such a trend.
Objective 1: To investigate
- Familiarising oneself with import laws
3) The majority of interviewees identify the three-tiered system of distribution as a
the market entry prospects
- Getting acquainted with the three tiered distribution model
potential difficulty for craft beer entrants.
of Irish craft beer into the
- Concentrating on a specific geographical area
4) Marketing investment and promotion are key factors for a new player aiming to
American craft beer market.
- Having a unique selling point which is paramount
move the product within the U.S.
- Focusing on promotion
5) The initial penetration should be limited to smaller geographical areas rather than
aiming for covering regions.
1) Four options have been considered: On line sales, direct relationship with retailers,
brokers, distributors.
2) On line sales: considered not suitable and not allowed in many states (including Using a distributor is critical for success because:
Objective 2: To identify
Massachusetts).
- Distributors have grass root level reach
distribution channels that
3) Direct relationships with retailers: considered not suitable for regulation aspects and - Distributors have a vast sales force
should be utilised to enter
because retailers are looking for well established brands.
- Of the presence of speciality craft beer distributors
the American craft beer
4) Brokers: not the best option to go with since they are expensive and would add - Distributors take care of promotional aspect
market.
further the chain to final consumers.
- Distributors assume financial risk
5) Distributors/importers: the best option as they will looks after promotions and are
deeply rooted in the market.
1) To optimise the utilisation of financial resources, the initial launch should be limited
to a small geographical areas.
Target the greater Boston area, Massachusetts to launch due to the:
2) Most Irish Americans are located in the northeast part of the country, with two states - Huge concentration of Irish - Americans
Objective 3: Explore
in the east coast having a sizeable Irish-American population: New York and - Annual St. Patricks Day parade
geographic areas in the U.S.
Massachusetts.
- Highest consumption of craft beer
to support the launch of
3) Irish Americans are loyal customers and particularly proud of their roots and origins - Growth of Irish pubs and bars
Irish craft beer.
and tend to identify with brands that are labelled authentically Irish'.
- Multitude of craft beer festivals
4) The most suitable areas to be targeted are small cities in Massachusetts. For - Big craft beer following and community
example: Cambridge and Greenfield.
Table 5: Summary of Recommendations

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Objectives

Objective 4: Identify
promotional campaign to
aid market penetration.

Objective 5: To explore
ideal Stock Keeping Units
(SKUs) for market entry.

Objective 6. To explore
precedents of previous
market penetration of Irish
craft beer into the U.S.

Other Key Findings

Significant Findings
1) The promotional aspect of market penetration is viewed by a majority of respondents
as an essential part of this venture.
2) Many niche markets gain a following via online communities and forum boards as
the Internet has space for every niche market imaginable.
3) Beer festivals and fairs to showcase its offerings to the community, build a
reputation and network with fellow brewers are essential to creating a following among
the beer community.
4) It is important to get people to talk about the product and incentivise consumers to
try the product.
5) Partnering with an established brewery was also suggested by a number of
respondents as a way of creating buzz for the brand.

Recommendations
Promotion is key to the success of Casey's. This should be done by:
- Participating in craft beer festivals (e.g. WGBH craft beer festival, the Drink Craft Beer
Springfest)
- Holding sampling and tasting sessions
- Winning awards in competitions and festivals
- Participating in Irish-American activities and festivals (e.g. St. Patricks Day parade and the IrishAmerican Heritage Month)
- Pursuing memberships in craft beer associations and guilds (Beoir in Ireland and Craft Brewers
Guild of Boston, Massachusetts brewers guild in America)
- Participating in online craft beer forums (e.g. greatbrewers.com, beeradvocate.com,
beerforum.com and drinkcraftbeer.com)
- Starting a dedicated forum for Irish craft beer

1) Containers are essential to preserve the quality of products like craft beer, both
bottle and kegs have their own advantages and disadvantages.
2) Good quality stainless steel kegs are quite expensive and need to be shipped back
Bottles as an ideal SKU because it is:
which adds further costs.
- Ideal from a business standpoint
3) Bottles would be more ideal since it could be sold in more areas and can be
- Cheaper to ship
consumed at any location when compared to kegs.
- Easier to transport, distribute and keep cool
4) Bottles could be sold at retail both for on-premise consumption as well as at
- Suitable for penetrating retail stores, liquor and specialty beer stores
carryout or package liquor stores.
5) Respondents have been quite consistent in saying that shipping beer in bottles instead
of kegs will be much more cost effective for the brewery.
1) There is a set of 16 Irish craft brewers dotted across the country of Ireland of which
three export craft beer in America.
2) Franciscan Well Brewery, one of the earlier entrants into the Irish microbrewery
Consider precedents set by:
movement was established in 1998 it supplies its products to 39 states through a large
- Winning international awards
distributor.
- Targeting specific geographic area
3) Carlow Brewing Company brews a range of traditional Irish beers (stouts and ales).
- Selecting a good distributor
Founded in 1996 by the OHara family in Carlow town.
- Holding frequent beer tastings
4) The Porterhouse might be the only microbrewer who has set up a franchise in NYC
- Launching new and seasonal beer styles
in a historic tavern called the Frances Tavern.
5) None of the three breweries responded to the researcher's repeated queries since they
believed that sharing data would annul their competitive advantage.
Target and hook the traditional beer lover by:
- Producing high quality and flavourful beer
1) Not easy to shift a traditional beer drinker to craft beer since it is a discretionary - Having good eye catching graphics on the label
purchase.
- Playing to the ego purchase of consumers
2) Craft beer has an element of ego purchasing involved.
- Targeting college students
- Targeting higher spectrum of income groups
- Targeting Irish Americans

Table 5: Summary of Recommendations

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5.3

Recommendation 1: Penetrating the American Market

The craft beer industry is burgeoning in America and the researchers recommend that Caseys
Brewery should indeed penetrate the craft beer market at the earliest opportune time to reap rich
rewards. The recent acquisition of an Irish craft brewer is a testament to the fact that big
companies in the States are looking to cash in on the craft beer movement. As stated by Koch
(2001), in the selection of the market, every company should take into account internal, external
and mixed factors.
A consensus was reached while interviewing different stakeholders in the craft beer industry
that a careful study of law is required to export craft beer to America. The three tiered
distribution model should be taken into account while choosing to distribute the product in a
particular area.
It is recommended that the new craft beer product should have a unique selling point to attract
new customers. All respondents were in agreement that there is a scarcity of good Irish craft
beer in the U.S. and therefore the taste of the beer should be unique and of very high quality.
Further, it is also recommended that the brewery target a smaller market to reduce the amount of
money that needs to be spent on launching it. Finally, promotion is believed to be a major factor
that drives the sales of craft beer. Therefore, it is recommended that Caseys Brewery must
spend a significant amount of time in promoting its craft beer via cost effective means.

5.4

Recommendation 2: To Use a Distributor to Penetrate the Market

Among the four options considered for Caseys to penetrate the craft beer market, using a
distributor emerges as the best option. An agreement was reached by most of the respondents
that using a distributor helps a craft brewer work with the grass roots in the distribution chain of
the craft beer market. Distributors have a vast sales force which Caseys can benefit from since
it is a new entrant in the American craft brewing industry. Additionally, distributors are known
to assume the financial risk of non-payment by the buyer of the beer.
Further, the presence of speciality distributors who exclusively deal with craft beers pushing the
product into areas with the highest possible proposition of sales can certainly benefit Caseys.
With distributors taking care of the promotional facet of the market entry, Caseys can rest
assured that the brand of its product will be well recognised and give its promotion the required
impetus for it to grow in the fiercely competitive market. Therefore, it is robustly suggested
that Caseys use a distributor to launch its product in America.
As a part of this project, the researchers got Caseys in touch with a few distributors that operate
in the state of Massachusetts who were keen to distribute the craft brewers product. Please refer
Appendix Q for feedback from Caseys Brewery.

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5.5

Recommendation 3: Target Boston, Massachusetts to Launch

The area Caseys should enter will be discussed in this section. As discussed in literature review
and reiterated in the findings & analysis chapter of this dissertation, there is a huge
concentration of Irish-Americans located in the north-east part of the country, particularly in
Massachusetts.
Massachusetts Irish-American culture can still be felt and seen to this day. As an example, The
St. Patricks Day parade, one of the biggest Irish-American celebrations, was first held in
Boston and the tradition continues to this day.
To further strengthen the case, Massachusetts consumes craft beer more than any other state in
the country and trends point to growth higher than the national average, as stated in the findings
& analysis section of this report. Fuelling this growth is the growing number of Irish pubs and
bars sprouting up in Boston and its surrounding area, which Caseys should penetrate in the
future.
Furthermore, the craft beer festival culture is deeply ingrained in Massachusetts, with Boston
hosting a multitude of craft beer festivals all through the year, which Caseys can utilise in its
marketing and promotional aspects.
As demonstrated in the findings and analysis chapter of this report, Massachusetts is a
destination for any craft brewer who wants to enter the market. Due to the sizeable IrishAmerican population, big craft beer following and community and the number of craft beer
festivals hosted in the state each year, it is recommended that Caseys penetrate the state of
Massachusetts. The G.B.A. should be number one priority due to the concentration of people
located in the district and it is where most of the pubs and festivals are located.

5.6

Recommendation 4: Promotional Campaigns to Aid the Launch

As emphasized by a majority of the respondents interviewed for this study, marketing and
promotions are an important aspect for successful market penetration. As mentioned earlier in
this chapter, it is recommended that Caseys penetrate the G.B.A. as it densely populated by its
target demographic, Irish-Americans and the city is home to a multitude of craft beer festivals.
Identifying with the craft beer community is an area that Caseys should exhaust a lot of its
promotional effort on. It is therefore recommended that Caseys participate in all the craft beer
festivals that are being held in the G.B.A. such as the WGBH craft beer festival, the Drink Craft
Beer Springfest and the American Craft Beer Festival. It is also recommended that the brewery
hold sampling and tasting sessions while at these craft beer festivals as this will attract a lot of
needed attention for the brand from the craft beer community, and furthermore, it will get these
enthusiasts to sample the beer who wouldnt otherwise had they had to pay for it.

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Craft beer festivals usually give out awards for the best tasting beer in a multitude of categories.
It is recommended that Caseys participate in these contests as the awards the brewery could
win will help them in building recognition, legitimacy and a fan base as well. As mentioned by
one respondent, winning awards from craft beer festivals resulted in a big spike in sales for the
brewery the respondent worked for. Creating and building that reputation should be a number
one priority for Caseys and there is no better way to build a reputation than by winning awards
handed out their peers in the industry.
As was mentioned in the findings and analysis chapter, with the number of different craft beers
in the American market nowadays, it is extremely hard to get noticed by the craft beer buying
public. The key to success is finding a niche that Caseys can target and participate in as many
activities as possible that would allow the brewery to reach that niche, in this case, the IrishAmerican market. It is therefore recommended that Caseys participate and have a presence in
all Irish-American activities and festivals that happen throughout the course of the year such as
the St. Patricks Day parade and the Irish-American Heritage Month festivities. It is
recommended to do as much sampling as the brewery can, whether it is at these festivals, liquor
stores, craft beer conferences etc. It is also recommended that Caseys pursue memberships in
craft beer associations and guilds (such as Beoir in Ireland and Craft Brewers Guild of Boston,
Massachusetts Brewers Guild in America) which would allow the brewery to make important
contacts in the industry and reach as many people as possible.
Reaching niche markets, as discussed, is essential for Caseys, as the overcrowded craft beer
market will not accommodate another market entrant without an identity. The most cost
effective way to reach these niche markets is through online media. It is therefore recommended
that

Caseys

participate in online

craft

beer forums

such as

greatbrewers.com,

beeradvocate.com, beerforum.com and drinkcraftbeer.com to further spread the word about the
brewerys offerings. Having a presence in online craft beer forums also helps in networking and
getting to know people and organisations that can help Caseys in market penetration.
Through research, it was uncovered that there is no online forum dedicated to the IrishAmerican population and more so, a forum dedicated to Irish craft beer. It is therefore
recommended that Caseys partner with an online web developer to create its own website so
that people will be able to find information on the company and its products and at the same
time, the brewery can offer a forum where people can talk about their products.

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5.7

Recommendation 5: Use Bottles as an Ideal Stock Keeping Unit

When exporting to another country for distribution, one must consider what S.K.U. would be
ideal from a business and a financial standpoint. As was pointed out by numerous respondents,
shipping bottles is the most ideal way to enter the market initially. Bottles are cheaper to ship
and can be placed in any retail setting, which the keg does not afford the brewery. In line with
the promotional strategy recommended for Caseys, bottles would be ideal if the brewery is to
participate in craft beer festivals since they are easier to transport, distribute and keep cool.
Bottles also allow for penetrating retail, liquor and specialty beer stores, which kegs cannot
penetrate.
Kegs do have a place in market penetration as well. As mentioned in the findings & analysis
chapter, pubs and bars prefer kegs than bottles albeit a more expensive proposition as taps are
limited in number and a brewery will have to negotiate with each bar and pub for placement.
Kegs also retain the beers freshness better than bottles, as kegs do not allow any oxidation to
occur.
With these facts in mind, it is recommended that, for the purposes of entering the market,
Caseys should utilise bottles as a container for its beer. As popularity, following and financial
stability increases, Caseys should also utilise kegs to tap into the pub and bar market.

5.8

Recommendation 6: Consider Precedents Set

With sixteen Irish craft brewers in Ireland, only three have successfully penetrated the American
craft beer market. This is evidence to the fact that these brewers have set themselves apart from
the rest by adopting creative market entry strategies. All three breweries that have successfully
penetrated the American craft beer market have won several international awards (for example
The International Brewing Award won by The Carlow Brewing Company in 2000) to gain
international attention. Further, the successful breweries have targeted a specific geographic
area to launch their beer and test it in the market. These moves have helped them in reducing
costs and obtain decisive feedback which they could incorporate in their expansion plans.
Further, a judicious selection of a good distributor, who would have a strong grass root
influence as well as a nationwide reach, has helped the breweries target small areas in their
initial stage and expand rapidly when their product is successful.
Finally, frequent beer tastings and seasonal launch of new beer styles keeps the successful Irish
craft brewers in the minds and taste buds of beer aficionados. Thus, it is recommended that
Caseys brewery consistently study and consider the precedents set by its competitors from
Ireland.

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5.9

Recommendation 7: Target and Hook the Traditional Beer Lover

According to respondents during the interviews, converting the traditional beer lover to a craft
beer drinker is one of the most difficult tasks the brewery has set to achieve. However, there are
certain measures that Caseys can undertake to attempt luring traditional beer drinkers.
As most craft beers are perceived as an ego purchase by consumers, it is recommended that
Caseys target college students and people from the higher spectrum of income groups to lure
consumers who want to look cool/sophisticated. Also, targeting Irish-Americans by playing
the traditional Irish beer card is recommended since it can be very useful in driving the sales of
the craft beer. It is believed that Irish-Americans are very true and loyal to Irish brands and once
consumers get enthusiastic about Caseys beer, it will be easier for the Brewery to gain a loyal
following.
It is recommended that Caseys brewery produce a high quality and flavourful beer, which is
unlike large manufacturers. Further, it is also recommended that the packaging contains good
eye catching graphics and a story about the brewery/brand that appeals to the consumer. This
would entice the consumer to go beyond their comfort zone.
Below are mock-ups of bottles and labels created that take into account the researchers findings
and recommendations. The label is simple yet eye-catching, utilising a muted colour palette,
mostly earth tones, which gives the label a traditional and non-gimmicky feel. The label also
tells a story of where the beer comes from, as it incorporates the coat of arms of the city of
Cork, Ireland. The tag line Only God can make it better was thought up as a way to embody
the traditional Catholic Irish values.

86

Figure 39: Caseys Brewery Red Ale Mock-Up

Figure 40: Caseys Brewery Amber Lager Mock-Up

87

Figure 41: Caseys Brewery Stout Mock-Up

5.10 Chapter Summary

This chapter reflects on the findings by the researchers and provides a set of recommendations
for Caseys Brewery to penetrate the American craft beer market. Caseys Brewery must enter
the America immediately using a distributor in the G.B.A. with bottles as its S.K.U. and focus
on promoting its brand and converting traditional beer lovers to Caseys craft beer lovers.
The purpose of the project was to advise Caseys Brewery on market entry, distribution and
promotional strategies that should be implemented in order to penetrate the American craft beer
market.
The value of the project was to integrate our past career experiences/expertise and learnings
from the MBA program.
This project has resulted in providing the client, Caseys Brewery, with significant
recommendations that must be implemented to ensure their continued success. Please see Table
5 for a detailed set of recommendations.
The research was conducted using academically approved research techniques whereby all the
project objectives have been fully answered.

88

This project provides the following advancement and contribution of knowledge:

a) For the Client: We provided an export channel and got the clients in touch with several
distributors.
b) For the Industry: Recognise that Massachusetts is a good and viable market to enter for
a start-up craft brewer. The industry has been introduced to a new market which is
thriving due to a strong craft beer movement from all the stakeholders.
c) For the Academics: The researchers contributed to existing market entry strategy
studies by linking theory to practice. As an example, the market entry theory of
portfolio congruity heavily influenced our findings and recommendations.
A letter from the client, Caseys Brewery, is a testimonial to the value and success of this
project. Please see Appendix Q for the letter from Caseys Brewery.

89

Chapter 6: Group Learning and Reflection

6.1 Introduction
This chapter deals with the experiences of the researchers during the course of writing this
dissertation. The team believe that this project has provided them with insights and knowledge
which has helped them in researching into more specific areas of study.

6.2 Process of Research

During the course of this project, we had to collaborate with each other to gain new insights and
experiences from the process itself. Our expectation when we started with the project was to
learn as much as possible from the past literature bodies that were published in the ambit of
market entry. Our mental state of mind was more on information and content, rather than the
process. As suggested by Kolb (1984), learning is a procedure whereby knowledge is formed
through the transformation of experience and thanks to these experiences of many contributors
to the research. The analysis paints a picture of a niche market, which is dynamically increasing
throughout the U.S. while managing to keep the products tied to a regional dimension.
There was a huge contrast from writing assignments during the different modules of the M.B.A.
to executing a dissertation project. The most obvious of differences were that there were no
lectures or classes. We had to motivate each other to follow a process so that we would not fall
prey to frustration and failure half way through the course of this project. Slowly, but steadily
we designed a well-aligned work plan and task distribution scheme.
Finding an interesting topic that would satiate our appetite for knowledge was not very easy.
With two group members from the financial services industry, it was difficult to convince them
to work on a marketing based project. In retrospect, we believe that it was an excellent decision
we made to work on a project that we learned from immensely. From reading literature on
market entry and promotion to studying the craft beer industry in America, we covered the most
theoretical aspects to the most practical ones. Soon we realised that organising this information
would be a herculean task. However, we soon came to grips with this and changed the way we
worked. Reflecting on the experiences we have had, it is obvious that nothing could have saved
us from making mistakes. Eventually, these mistakes helped us in making our project better.

90

6.3 Group Dynamics

As was the case with a majority of the courses throughout this M.B.A., group dynamics and
how well each member gelled into a cohesive unit played a huge role during this project. We
learned throughout the year that, to maximise the potential of any group, playing to each team
members strengths was key.
That being said, however, the project did not go smoothly, as we ran into some inter-personal
difficulties. We found we had contrasting views on almost every chapter we wrote. These
contrasting views helped us flesh out the project further and cover all the bases; something each
of us wouldnt have considered had we worked on the final project individually. Most of the
conflicts arose from timelines, when and how fast things should be finished. We realised that
these conflicts stemmed from personal preference more than any other factor, some believed
that a strict deadline had to be followed no matter how unpolished the section was, while some
preferred to work on sections to perfection even if it took more time. Reflecting on this, we
realised that these conflicts and contrasting views helped the project more than hinder it, as
fleshing out issues in an open manner enabled the team to consider all opinions before moving
forward with a direction and also helped avoid any resentment towards one another.
Our key take-away from this is that each member has strong opinions and not taking into
account these opinions will cause the team to be ineffective. Although, at times, personal
clashes arise, it is paramount that these conflicts are addressed in a timely manner so that a team
can continue to play to each members strengths.

6.4 What We Learnt

One of the most challenging aspects to this dissertation is the selection of the topic and what
would be most beneficial to each team member. As each team member came from different
professional and cultural backgrounds, it was paramount that we chose a topic that interested all
of us and at the same time challenged us. As suggested by Honey and Mumford (1982) pushing
further the ideas developed by Kolb (1984), different individuals might have different learning
styles and knowing that every group member had his own way of learning has been a factor
facilitating the collective process of learning.
We quickly learned that choosing a project that will be a challenge to each of us rather than
choosing something a bit easier would be ideal as we were not keen on taking an easy route
towards project completion. Despite the fact that we come from different backgrounds, it
quickly became apparent that the project we ended up choosing was the best fit for us.

91

Another learning point came when we started contacting people to interview; it became
apparent that getting people to agree to talk to us for the purposes of this project would not be
an easy proposition. There were a multitude of issues, the biggest of which was finding
respondents from the U.S., a place none of us come from. Through sheer will and perseverance,
we managed to convince twenty-one out of the scores of people we contacted to talk to us.
We made a lot of mistakes and missteps along the way; at times we felt that we were taking one
step forward and two steps back. But as the great poet and writer Oscar Wilde said, Experience
is simply the name we give our mistakes. And true to Mr. Wildes statement, we feel that
throughout this project, we have grown and learned from the mistakes we made and this
endeavour has moulded us into better professionals, researchers, students and human beings.

6.5 What Would We Do Differently

While thinking about things that the team could have done differently, we do not believe that
our approach would need structural changes. However, we do believe that in some
circumstances, more clarity in the coordination of work would have been beneficial.
For example, at the beginning, we conducted some pieces of research separately and then, when
it came time to combine different sections, additional work was required. We realise now, that
with better coordination we could have utilised our time better. Exchanging and comparing our
different ideas systematically improved our output exponentially.
Another aspect that could have been improved upon was the time dedicated to collect interviews
from different respondents. We underestimated the timeframe in which respondents needed to
get back to us. Perhaps, if we had approached them earlier, despite the fact that we were very
busy with other course work until the end of June, it would have given us more time to consider
their insights. These additional insights would have helped us ponder over new aspects and
ideas which could have incentivised us to rethink on work already developed.
Similarly, we believe joining Facebook or LinkedIn groups at an earlier stage could have been
beneficial in developing a sound knowledge of the industry and better prioritise the most
relevant aspects.

6.6 Conclusion
To summarise, the dissertation served as a crash course for applying the knowledge we had
gained over the past year before we go back into our professional lives. We are convinced that
this endeavour of ours has enriched us professionally as well as personally.

92

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106

Appendix A Snapshot of the Alcoholic Drinks Market in U.S.

Source: (Euromonitor International Ltd, 2011)

107

Appendix B Craft Beer Industry Annual Dollar Volume for Years

2003 2012

Source: (Business Insider, 2013)

108

Appendix C Irish Population Estimates, 2011

Source: (United States Census Bureau, 2013)

109

Appendix D Irish Population in New York

Source: (United States Census Bureau, 2013)

110

Appendix E Irish Population in Massachusetts

Source: (United States Census Bureau, 2013)

111

Appendix F Irish Americans in Eastern Massachusetts

Source: (Trulia.com, 2013)

112

Appendix G Irish Americans in NYC

Source: (Trulia.com, 2013)

113

High

Appendix H Power-Interest Stakeholder Analysis

Keep Satisfied

Manage Closely
Distributors

Beer Associations (US)

Brokers

Power

Craft Beer Enthusiasts

Retailers

Monitor (Minimum effort)

Keep Informed

Other Craft Brewers

US Government

Low

Media

Low

Interest

High

114

Appendix I List of People Contacted

BREWERS
Name
Inveralmond Brewery
BrewDog
WEST Brewery
Tennents
Arran Brewery
Grain Brewery
Midlands Craft Brewers
Coniston Brewing Company
Meantime Brewing Company
UK
Lovibonds Brewery
Beaver Town
Harbour Brewing
Strangford Lough Brewing Company Ltd
Thornbridge Brewery
St. Peters Brewery Co. Ltd.,
Titanic Brewery
Fyne Ales
Purple Moose Brewery Ltd
Edringtoon Group
US
Snoqualmie Falls Brewing Company

Status / Comments
Sent an email with questions but response not very helpful
Had a telephonic interview with the Operations Director
Called and emailed. No response
Visited and emailed; Unfavourable response
Emailed and received a negative response.
Emailed with no response from the other end
Interviewed over email
Called and emailed. No response
Called and emailed. No response
Called and emailed. No response
Called and emailed. No response
Called and emailed. No response
Called and left message on the answering machine; no reply; emailed with no reply
Called and sent emails. Interviewed through email
Sent an email to the managing director; awaiting response
Sent an email; did not receive response
Interviewed but could not get much information
Sent an email; did not receive response
Had a Skype interview with the brand manager in New York
Contacted via CBA, Interview through email

115

RETAILERS
Name
Gaetano di gregoerio
Craft Beer Cellar
The Drinkery Shop
Julius Liquor
US Marty's Fine Wines
BRITISH BEER COMPANY
Grapes and Grains
Binnys Beverage Depot
Top Shelf Brews
UK James Clay

Status / Comments
Interviewed over email
Interviewed over email
Sent an email; no response
Sent an email; no response
Called but received no response
Called and emailed; no response
Called and emailed; no response
Interviewed over email
Called and emailed; no response
Called and left a message on its website; no response

DISTRIBUTORS
Name
Five Star Distributing
Atlantic Importing Company
Atlas Distributing
Horizon Beverage
Massachusetts beverage alliance
US
Burke Distributing Co.
Quality Beverage Inc
Colonial Wholesale Beverage
Commercial Distributing Co
Merrimack Valley Distributing

Status / Comments
Called but these guys could not help
Interviewed over phone
Interviewed over phone
Called and left message on the answering machine; no reply; sent and email as well
Interviewed over phone
Called and left message on the answering machine; no reply; sent and email as well
Called and left message on the answering machine; no reply
Called and left message on the answering machine; no reply; sent and email as well
Called and left message on the answering machine; no reply; sent and email as well
Called and left message on the answering machine; no reply; sent and email as well

116

ASSOCIATIONS
Name

Status / Comments

Perfect Pint
The Beer Club HQ
London Amateur Brewers
UK Craft Brewing Associations
Any Given Beer
The Northern Craft Brewers
SIBA

Called and Emailed. Helpful person, good information, no interview

Called and left message on the answering machine; no reply
Sent an email with no response
Sent an email with no response
Sent an email with no response
Interviewed and was very helpful, got us an interview with American craft brewer
Sent an email with no response

American Home Brewers Association

Brewers Association
BeerAdvocate
Beaoir
Americas Executive Beverage Consultancy
US
Craft Brewers Guild of Boston
Beer Institute
Irish Beer Finder
Massachusetts brewers guild
Craft Brewers Guild of Boston
National Beer Wholesalers Association

Called and Emailed, received negative response asking us to contact distributors

Called and Emailed, received negative response; left a message on the website as well
Sent an email; no response
Sent an email; no response
Sent an email; no response
Called and Emailed, received negative response
Interviewed over telephone
Called and left message on the answering machine; no reply; left a message on the website
Called and left message on the answering machine; no reply; emailed with no reply
Called and left message on the answering machine; no reply
Called and left message on the answering machine; no reply

117

BROKERS
Name
Dean Palmer
Bill Evenson
Richard Allen
US
Ed McGrath
Aaron Brodniak
Cheryl (Lester) Woodhouse

Status / Comments
Sent an email; no response
Sent an email; no response
Contacted, but no response
Interviewed over email
Interviewed over email
Interview over telephone

IRISH BEER ENTHUSIASTS

Name
Reuben Gray
Mark Sobelman
Shawn Patrick Connelly
US
Joshua S.
Elizabeth Lyons
Marty Nachel

Status / Comments
Emailed with negative response
Interviewed over email
Interviewed over email
Emailed with no response
Interviewed over email
Interviewed over email

IRISH BREWERIES
Name
FRANCISCAN WELL BREWERY
CARLOW BREWING COMPANY
IR
Galway Hooker
The Porterhouse Group

Status / Comments
Called but did not answer; sent an email
Called and sent an email
Mobile numbers in Ireland, could not call
Called with bad line connection; sent an email

118

Appendix J Interview Transcript of Association 2

What difficulties do you foresee in penetrating the American market, should an Irish
Craft brewer decide to launch?
I believe that the market for craft beer in the US is already saturated to the extent that it can take
no more craft beers unless the beer has something unique to offer. It will be a herculean task to
launch an Irish craft beer without any unique selling proposition to it.
How would you go about distributing Irish craft beer in America? What channel of
distribution would you use to export the beer? Licensee, agent, broker, distributor,
supermarkets etc.?
I would believe that a distributor is the best way to go about entering the market since most
distributors have a huge sales force that can reach out to the different stakeholders who sell the
product.
How would you sell Irish beer? In kegs or in bottles?
For starters, the company should consider the option of exporting beer in bottles since acquiring
tap lines in bars is an expensive proposition. Further, when the brand of the beer is well known,
then exporting kegs makes sense since the company would be able to justify the amount it pays
to the bars for including their beer on the tap lines.
What factor in your opinion would push a consumer to switch from a "normal" beer to
Irish craft beer?
People consume beer for the cool quotient. The marketing of the beer needs to be such that,
people who want to buy such products are portrayed in a cool way. Marketing to the youngsters
can be a good idea.
What kind of promotional strategy for Irish craft beer would you recommend?
Since you have to compete with the likes of Guinness, the promotional strategy should be the
cheapness of the beer. The beer has to be cheap if it needs to beat the market of the big players.
Would you recommend selling beer over the internet? I believe there are federal as well as
state laws for this?
I would not recommend selling beer of the Internet since there are instances in the past where
companies have tried doing that and have failed. In addition, there are far too many regulatory
issues around selling beer over the Internet. In many cases, different states have different laws.

119

Appendix K Interview Transcript of Broker 2

What difficulties do you foresee in penetrating the American market, should an Irish
Craft brewer decide to launch?
I can foresee many difficulties in entering the craft beer market. However, I have to highlight 2
key barriers to entry. The first is that the eastern side of the US has a three or a four tiered
market. So the company would have 3 different target audiences for their messages. They are
Importer/distributor, whom you will have to educate about the product, then you have the
restaurant, bars and the super markets that are primary points of contacts and primary points of
sale for the product and finally you have the consumers. There are a lot of privately owned
distributors in the eastern coast. The company should ideally divide the marketing dollar by the
third. 1/3rd to each of the tiers should ensure good market penetration.
How would you go about distributing Irish craft beer in America? What channel of
distribution would you use to export the beer? Licensee, agent, broker, distributor,
supermarkets etc.?
The simplest way to go about distributing the beer is to go with the broker. This is the fastest
way to spread your beer into the market that you wish. The brokers spend their entire career
networking with distributors so that they can reach out to them when time comes. Brokers are
expensive but they are the best alternative since they know about labelling, regulatory
requirements, the paperwork and the bonds that may be required for the particular geographical
area the beer might want to operate in.
How would you sell Irish beer? In kegs or in bottles?
The answer for this question would depend on the market segment you are targeting. Initially,
the bottle will be a better bet since the consumer will be able to go and purchase it in the retail
market. A lot of east coast micro breweries serve their beer in their own restaurants and then
when the beer becomes popular, they go ahead with bottling them.
What factor in your opinion would push a consumer to switch from a "normal" beer to
Irish craft beer?
This is an interesting dynamic in America where the premium segments of people go in for craft
beers since they believe its cooler to drink craft beer than a regular Budweiser. There is an
element of ego purchasing here since the premium segment wants to look superior to a person
who drinks regular beer.

120

What kind of promotional strategy for Irish craft beer would you recommend?
For a positioning statement, I would recommend the beer to come across as a modern Irish
innovation against the traditional Irish beer (that is Guinness). This product can be branded as a
more innovative and modern take on the traditional Irish beer that people are familiar with. This
would capture the traditional Irish beer market and the craft beer market as well.
Would you recommend selling beer over the internet? I believe there are federal as well as
state laws for this?
In the eastern side of the US, beer companies do have access to internet selling. There are 33
states that allow alcohol shipments into them. There are certain states which do not allow
shipping out from their state even though they allow shipments into theirs. So finding the right
one would be tough. Rather than going through a traditional, e commerce website, I would
recommend going through the one of the month club, which sends out a craft beer every month.
Again, joining schemes like sending out craft beer of the month would be helpful. This would
be helpful in building consumer exposure as well.

121

Appendix L Interview Transcript of Craft Brewer 1

How does one go about exporting beer to the US, especially if its an Irish craft brewer?
The first step to export Irish beer is to find the maximum amount of Irish concentration in the
US. This can be done by going to the website doingbusiness.org.
Which distributors do you use in the U.S.?
Brew Dog operates in about 30 countries worldwide and in the US we had a long standing
relationship with a distributor in California who used to supply beer throughout the country.
However, we have now shifted to another distributor by name Anchor Brewing Company.
In your opinion, what is the best way for our brand to enter the market licensee, agent,
broker etc.?
It may not be a good strategy for craft brewers to scout for distributors since they would like to
know the amount of money the craft brewers are willing to spend on promotional campaigns. It
basically boils down to the negotiation capacity of the brewer since distributors might promote
the beer themselves for a start and then ask the brewer to capitalise on the promotional
campaign and pitch in.
However, since promotional campaigns require heavy capital investment, which craft brewers
are not able to bear, it might be a good idea to set up a website which showcases the beers
uniqueness. One can make the website interactive and gauge the response based on the number
of visitors. These visitors can be geographically identified and targeted on a niche basis.
Would you consider it a good strategy to approach super markets for the sale of beer?
It might not be a good idea for a craft brewer to approach a super market since most of them use
a pull strategy. Further, supermarkets look for established beer brands which make the most
profit for the retailer.

122

Appendix M Interview Transcript of Distributor 3

Have you had any experience with Irish craft beer imports? If yes, what would be the
price point of entry? Is it bottles or in kegs? Most popular form?
Only the Porter House is importing its own beer from Ireland.
How do you go about selecting Craft Beer?
Seasonals have some play. Then based on what sells. IPA's always popular. Brand recognition
or is someone willing to do tastings.
According to our research, Boston and NYC are the cities with highest Irish-American
population. In connection with this, we are targeting Boston, MA initially, as the product
would leverage the fact that its an authentic Irish beer. Any comments on the matter?
Not a bad idea. Again: price & flavour need to be there
What would you suggest to make the product "unique?
Either be a Brew Dog or make a better Guinness
In your opinion, what is the best way for our brand to enter the market licensee, agent,
broker etc.?
Importer as they have a distributor network and reps on the street.
Any suggestions as to how others have done it in the past?
See #5 they have relied on importers
Whats the competition like for Irish ale? Do you think there is a growing potential for
this product?
Killian's killed the market. Again: price & flavour
What kind of promotional strategy for craft beer would you recommend?
Tastings, as many as you can handle. Do collaboration beers with a good American
brewery...give you street credentials.
Craft beer consumption in US is growing substantially, what factor in your opinion would
push a consumer to switch from a "normal" beer to craft beer
The only people still drinking generic beer are: too old to try something new or don't have the
money (that said have seen many a consumer buy a 6 pack of Craft then a suitcase of Bud).

123

Appendix N Interview Transcript of Craft Beer Enthusiast 3

Here in the States beer sales are governed by what's called the "Three Tier System", which
maintains the separation of brewers, wholesalers or distributors and retailers. In a nutshell none
of those entities can have a vested interest in any one of the others. So a brewery may not own a
distributor or a restaurant or pub, if they wish to sell their beers in those outlets. Some markets
allow small brewpubs to "self distribute" their beer, but there is a limit as to how much beer
they can produce annually.

So first off you will need an importer to bring your beer into U.S., a company like Shelton
Brothers. A company like that already has a large portfolio imported brands which they bring
over and then sell to local area distributors. The distributors then sell those beers to their
customers who own bars, restaurants, supermarkets and liquor stores.

Whether you ship in kegs or bottles is up to you. But remember, although shipping in kegs may
cost more and require more rapid delivery to assure quality and freshness, keg beer is more
profitable to American bars and restaurants. In addition you will likely be targeting Irish pubs
and just like over there they do way more business in draught than bottle.

Your biggest hurdle will be competing with Guinness, Smithwick's & Harp which are the
established Irish beers here in America. Guinness even tried to get Kilkenny into the market but
consumers rejected it. With the wide variety of beers currently available, and throw in craft
brands, Irish Ales and Stouts only capture a small share of the overall beer market.

124

Appendix O Interview Transcript of Retailer 1

Have you had any experience with Irish craft beer imports? If yes, what is the price point
of entry? Is it bottles or in kegs? Most popular form? Any tax/importation issues we
should consider?
Yes, we do carry a couple of Irish brews. I cannot divulge pricing over the internet but I can say
that their pricing is comparable to other imported craft beer of the same make. We only carry
bottled beer at this point as carrying kegs take up too much real estate in our stores. As for
taxes, it would be best answered by the brewers themselves as we only worry about local value
added tax imposed by the states we operate in.

How do you go about selecting the beer Craft Beer Cellar sells in the stores?
We typically meet craft brewers at conferences such as the craft brewers conference & expo
where we get to sample their product. A certain level of interest from the beer aficionados must
also be achieved by the beer for us to consider them as taking on an unknown brand without any
marketing will be a risk for us. Having said that, the brewer must be able to guarantee a certain
level of following for us to take them on. If they are from outside the U.S., they would have to
get licensed or they would have to go through a licensed importer or distributor.

According to our research, Boston and NYC are the cities with highest Irish-American
population. In connection with this, we are targeting Boston, MA initially, as the product
would leverage the fact that its an authentic Irish beer. Any comments on the matter?
Most of the sales of our Irish beers come from states with a big Irish-American population, yes.
That would be a wise strategy.

Is online sale of beer permitted in the states? In the state of Massachusetts?

The sale of beer over the internet is illegal in the US unless you are licensed to sell beer.
In your opinion, what is the best way for our brand to enter the market licensee, agent,
broker etc.?
I would say build a reputation first by going to craft beer conferences and trade shows, try to
gain a following or win some awards. With that recognition, firms would be more open to
starting a relationship with the brewery. With that in mind, I would suggest going through an
importer or a distributor who can also help you with marketing your beer.

125

Any suggestions as to how others have done it in the past?

I would say the same as question 5
What kind of promotional strategy for craft beer would you recommend?
Join craft beer associations and conferences; get your name out there! Try and join beer
competitions, win some awards and gain notoriety. Make the public want your beer. Build
relationships

with

craft

beer aficionados

through

online

media.

What will be the impact of duties/tax on the final price?

We only get a final wholesale price from distributors so I have no idea what the tax breakdowns
are. Cant help you with that one.

126

Appendix P - Data Collection Highlights

Respondent Code Country
Distributor 1

USA

Distributor 2

USA

Distributor 3

USA

Distributor 4

USA

Data Collection Highlights

Significant Findings
Emphasized marketing as a key area to consider. Creating buzz among those in craft beer circles is key. Consumer awareness activities should be at
the forefront, activities such as advertising in-store, in-store sampling, joining trade shows, joining contests and win awards will bring your brand
prestige.
Marketing investment will dictate how high or low the distributor will charge. A more visible brand will mean a lower margin will be charged by
distributors. Brands with strong marketing will have lower margin structures.
Choosing demographics to target will impact the kind of marketing push a firm will do.
Irish-Americans are very loyal and once you capture their interest, you have a loyal customer in them.
Create interaction with craft beer lovers through online beer lovers community, beer festivals, guilds and associations.
There has been a marked increase in the consumption of craft beer, partly because people are tired of the staple beers that have no flavour, another
reason is because craft brews are getting more and more accessible to a lot of people and they are starting to discover a whole new world of beer out
there.
India Pale Ale's are very popular right now in the US.
Do as many tastings as possible to entice people to buy the beer.
Importers are a good way to enter the market as they usually have a network of distributors and representatives on the street.
Marketing investment allows for easier penetration, especially for foreign brands that have no following in America.
For financially strapped firms, its better to promote in the grassroots level as its usually cheaper. It will also build a following that the brewery can carry
forward.
Offering something unique is the name of the game, the beer market is oversaturated at the moment, any way to stand out is good.
A brewery entering the market will need a good support team on the ground to ease market entry. A team who knows the lay of the land so to speak.

Enthusiast 1

USA

Look at various importer/wholesaler portfolios and find a niche that is not already being serviced. Identify the markets the brewery should target and
work toward building capacity in those markets first. From a consumer and retailer perspective, too, wrongly or not there is a perception of Irish beers
as "seasonal" and only "hot" leading up to the holiday in March.
Finding a solid importer with a good track record and relationship with the distribution channel can be extremely beneficial.
There is still some "brand loyalty" in the light lager-drinking segment (Bud, Miller, Coors), but even these consumers are opting more and more for a
variety of beers over a single brand.
There are many "beer of the month" type clubs that are enjoying good success. Looking into having a new brand included in one of these might be
worthwhile.

127

Enthusiast 2

USA

Enthusiast 3

USA

There are two main groups of beer drinkers. The first group is the rabid craft beer lovers who won't drink anything made by a large, national corporate
brewing entity such as Anheuser-Busch or Miller or Coors. The second group is exactly the opposite of the first; they no little to nothing about craft beer
and drink nothing but the homogenous products produced by the big brewers.
Selling by bottles is ideal as they could be sold at retail both for on-premise consumption as well as at liquor stores.
The States beer sales are governed by what's called the "Three Tier System", which maintains the separation of brewers, wholesalers or distributors
and retailers.
Although shipping in kegs may cost more and require more rapid delivery to assure quality and freshness, keg beer is more profitable to American
bars and restaurants. In addition you will likely be targeting Irish pubs and just like over there they do way more business in draught than bottle.
Says that Marketing is the biggest thing and without a good social networking presence in the market the product stuff will lose interest and sit on
shelves.

Enthusiast 4

USA

Retailer 1

USA

Retailer 2

Italy

Retailer 3

USA

Suggests to use importers/distributors and indicates the firm Shelton Brothers as this firm deals a lot with international brands from all over Europe.
Normal beer (macro beer) would not be your competition here, American Craft Beer and other craft beers from Europe. That said your beer has to be
flavourful and balanced and be right there with some of the top beers here in America. I personally would want something that has me say "DAMN" this
beer is amazing.
Retailers typically meet craft brewers at conferences and expos where they get to sample products.
A certain level of interest from craft beer aficionados must be achieved by the brewery for retailers to consider stocking the beer. The brewery must be
able to guarantee a certain level of following for most retailers to take it on.
Build a reputation first by going to craft beer conferences and trade shows, try to gain a following or win some awards.
The space allocated to a brand depends mainly on its turnover. So for big brands two aspects are very relevant: turnover and margin on the brands.
There is a fierce competition where players are ready to pay a lot of money to gain visibility at the expenses of competitors. Firms without a lot of
monetary resources should find a way to stay ahead.
The space dedicated to craft beer within stores is much smaller compared to the one dedicated to famous brands, because turn over is much lower,
except for the limited period in which there are promotions dedicated to these products.
Price can be a big issue, the added expense of getting beer over here in a timely manner can add a layer of cost that makes it much harder to
compete at established price points.
Most American "big brewery" consumers are commercial driven sheep who buy on price and are hesitant to shift. There is a developing layer where
the big breweries are pushing "safe" craft choices to get their dedicated drinkers to at least try something that is marginally more profitable
(SAB/Miller Coors with Blue Moon, Leinenkugel, Batch 19, Redd's Apple Ale; AB Inbev with Shock Top, Stella Artois Cider, etc.).
Focus on product quality, and in the correct areas the "Irish-ness" of the beer, Chicago, Boston and New York have large expat Irish populations that
identify closely with all things Irish.
There is a tangled web of laws around all interstate shipping of alcohol, because the Federal government considers most commercial alcohol issues
"state rule" you have 50 different sets of laws.

128

Association 1

UK

Association 2

USA

Broker 1

USA

Broker 2

Canada

Broker 3

USA

Craft Brewer 1

UK

Craft Brewer 2

UK

Indicates that craft beer could be considered a discretionary if not luxury purchase. Moving people to better and more expensive discretionary
purchases is going to be tough with high employment and many of the same austerity pressures being experienced.
Suggests that going for the main distributor channel (approaching retailers directly) would not be a wise choice for a start up brewery.
Says that Casey's should carefully decide how much to spend in marketing and think out of the box for example fostering partnerships with US
Breweries.
Mentioned that US craft beer market is saturated to the extent that it can't take more craft beers unless the beer has something unique to offer.
Indicates that the best option to enter the market is to go via distributors since most distributors have a huge sales force that can reach out to the
different stakeholders who sell the product.
Indicated that the best SKU to enter the American market initially would be bottles since acquiring tap lines in bars is an expensive proposition.
Further, when the brand is well known, exporting kegs makes sense since the company would be able to justify the amount it pays to the bars for
including their beer on the tap lines.
Believes obtaining shelf space (bottles or cans) in the retail setting or convincing a pub or restaurant to put an Irish Craft brewer on tap will be difficult.
Suggests to establish a relationship with a distributor in addition to having sales representatives to help market the beer in supermarkets and special
events in pubs and restaurants.
Indicates that bottled beer tends to have a higher profit margin and makes beer more accessible to the consumer. Most importantly, is the quality of
the beer and its accompanying story. The palate of the craft beer patron in the U.S. demands high quality and is in search of unique flavours.
Foresees many difficulties in entering the craft beer market. In particular that the eastern side of the US has a three or a four tiered market and a
company would have 3 different target audiences for their messages.
Considers going with brokers the simplest way to go about distributing the beer. This is the fastest way to spread the beer into the market. Stated that
brokers spend their entire career networking with distributors so that they can reach out to them when time comes.
Bottled beer would be a better since the consumer will be able to go and purchase it in the retail market.
Suggests that product should be branded as a more innovative and modern take on the traditional Irish beer that people are familiar with.
Believes that an Irish craft beer would be very well received. Stated that although there is a growing interest in beers from other parts of the world, the
biggest problem facing foreign beer is the growing interest in competitors local craft beers.
Points out that in the American west coast, the beer drinker is very sophisticated.
Suggests to work very closely with distributors. In the US, craft beer marketing is a grass root effort.
Indicates that the first step to export Irish beer is to find the maximum amount of Irish concentration in the US.
Claims that It might not be a good idea for a craft brewer to approach a super market since most of them use a pull strategy. Further, supermarkets
look for established beer brands which make the most profit for the retailer.
Thinks that it might be a good idea to set up a website which showcases the beers uniqueness. The website should be interactive and gauge the
response based on the number of visitors. These visitors can be geographically identified and targeted on a niche basis.
Advises to try to go to the Craft Beer conference that is held every year in the Washington. Thats where all the distributors are and breweries makes
good contacts there. The best idea is to get awards and recognition for the beer as this would raise there beers profile.

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Craft Brewer 3

USA

Craft Brewer 4

USA

Craft Brewer 5

UK

Underlines the difficulty of making the product meaningfully unique. The company will have to try gaining market share by targeting a new audience or
an existing craft brewer audience.
Suggests that launching a niche product like Casey's beer in big cities is not a wise idea since it requires an enormous amount of money. Test
products in a smaller market such as sub sections of Boston like Cambridge, New Port, Rhode Island should be more appropriate for a craft beer
since there are universities and students located in this area.
Considers going through Distributors as the best way to penetrate the market since they act as a broker and they haves multiple sales people who
work for them. These sales people focus on grocery stores, bars and packaged goods stores. If The brewery wants the product to hit the shelves very
quickly, the company will have to run an incentive program by bringing the sales force to the brewery and provide free trips.
Indicates bottles as the way to go since beer tastes better in bottles. For kegs, he claim, the company would need a tap line in the bar. The bar would
have to be convinced to relinquish one existing tap line to fit in the new one. And tap lines are very expensive too
Says that uniqueness of the beer is one very important factor. Many beers in America such as Boston beer and Samuel Adams have been able to do
that. On the other hand, the beer should be really cheap for people to switch. This may not be possible since the company would be shipping beer
overseas.
Emphasizes the enormous amount of competition with the US craft brewers. Being an import, one would have to have something unique to offer so as
to make your brand stand out. Just another Pale Ale, Porter, etc, is not necessarily a good strategy.
Draws the attention on the issue of stability. The shipment would take a length of time presumably on a boat, and then there would be warehousing at a
wholesaler before reaching the consumer. It's uncommon for US wholesalers to refrigerate packaged beer so bottles and cans would be
unrefrigerated for weeks at a time. Perhaps months.
Says that having a dedicated brewery representative in the market is also essential. Relying solely on distributor representatives might not be enough
as they're bombarded by all the other brands in their book who normally rely on incentive programs from the brewery. the brewery will also have to
develop an incentive program to keep the distributor reps' attention on your brand.
Suggests to start with an importer who might also be the distributor. From there the distributor sells to the market. He considers essential to have a
brewery representative in the market to oversee and direct the distributor representatives.
Believes that the American market is quite tough because of the three tier system.
His company goes through a distributor, Bunited, who handle all of the American business end for us including movement within the USA and
marketing/pushing of our products once in the country.
Distributors take care of all of the promotional aspects.
Says that the USA has been undergoing a huge craft beer rise for a while now which has seen thousands of new people take to it, and has influenced
the market worldwide.
Getting people to switch from normal to craft beer often starts with a gateway craft beer that is relatively accessible.

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Appendix Q Letter from Caseys Brewery

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