Porter's Five Forces Analysis Of The Brewing Industry

1421 WordsOct 13, 20176 Pages
Since 4300 BC, when Babylonians carved the first beer recipes into clay tablets, beer has been a part of society. Throughout time, beer has had the ability to foretell a country’s standing in the world by its production and consumption, and as such, is a fascinating industry to follow. By analyzing large and medium-sized brewers, we intend to provide an analysis of the current brewing industry, covering the topics of 1) Industry Structure and Attractiveness, 2) Key Success Factors and Influencers, 3) Environment and 4) Porter’s Five Forces. Our focal firm throughout the analysis will be the Boston Brewing Company. Industry Structure and Attractiveness Our definition of the brewing industry includes “alcoholic beverages made from malted…show more content…
These are reflected in the ability of Anheuser-Busch and MillerCoors to remain number one and two in the industry up to this point. The fifth factor, Economies of Scope, the ability to produce a wide variety of products appealing to more customers, explains how craft beer is beginning to increase its market share. This analysis leads to the three Key Influencers for industry profitability: 1) Bargaining power along the value chain: As seen in the figure 1 (to right), which breaks down the cost of a purchased craft beer (31% is the retail margin, 24% is the ingredient cost, 21% is distribution cost and 8% makes up the brewer’s margin), the brewer has the smallest margins. The better a company is at negotiating its contracts with these suppliers, the larger the brewer’s margin becomes. For example, larger companies such as Anheuser-Busch and MillerCoors have higher margins, which allow those companies to retain greater profit (increasing overall company revenue) or compete on price (lowering their cost and profit to gain or retain market share) when necessary. 2) Intensity of competition: As a highly competitive industry there are 4,144+ companies with 32,000+ products brewed in 180+ styles (according to reference.com) competing for customers. To stay competitive, brewers have to differentiate their products either on variety, brand or cost. The

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