Marketing lessons brewing from the craft beer revolution

The brewing industries in many countries are undergoing dramatic changes, with increasing numbers of craft breweries challenging the traditional volume-based business model of major corporations.

In the US for example, more than 400 breweries opened in 2012, an increase of 17% from the year before. Craft beer continues to grow even when beer consumption overall is declining in many markets around the world. This certainly seems to be the trend in countries like the US, Canada, New Zealand and indeed Australia.

In 1990, the centralisation of the Australian beer industry seemed complete; three companies controlled the market and the whole country had just 11 breweries. Yet this seems to have been the turning point rather than the end state: 20 years later the craft beer sector had well and truly made its entrance so that by 2013, Australia’s beer industry consists of over 130 breweries.

The trend suggests craft breweries have found a niche market where the large breweries find it hard to compete. Craft beer is often differentiated by taste, as a food companion and by the raw material used to produce it. Enthusiasts sometimes refer to the common beers in derogatory terms as “fizzy yellow lagers”. Some may reject mainstream beer products based on a perceived lack of flavour; others reject it based on ownership of the label.

Some pub mangers around Melbourne refuse to serve beers that are not produced by small independent companies due to negative attitudes towards large multinational businesses, and a belief that craft beer can only be produced by small and independent businesses. Independent craft breweries have been able to make something positive out of their small size by framing themselves as unique and it is resonating with drinkers and pub owners alike.

While beer consumption in Australia has decreased steadily every year since 1979, consumers increasingly demand quality beers and the consumption of craft beers is increasing. ABC news reported that the consumption of craft beer in Australia is increasing by 6% every year. Nevertheless, the beer industry in Australia is still largely centralised, with multinationals SAB Miller (UK) and Kirin Holding (Japan) controlling about 90% of the market.

Yet it is this very high centralisation of the industry, where the large players can be regarded as “generalists”, that provides the opening for small players to enter the market as “specialists”. For craft breweries, such concentration of power in the industry is actually good news because these breweries serve a different market.

The specialists are often focused on selling more than just beer. They are selling an experience, quite often centred on educating consumers about beer styles and how to match it with food. As such, the craft beer industry is tapping into the monopoly of the wine industry as being the natural beverage to accompany a meal.

Beer appreciation, tasting and food matching is growing in popularity in Australia; it is also becoming an important part of tourist activities. For example, the festival Good Beer Week ran in Melbourne in May for the third year with rapidly growing popularity. The festival attracts beer tourists to Melbourne from around the country and overseas.

Large corporations are not ignoring craft beer, even if they generally serve a different segment of the market. The industry recognise that Australians are drinking different beer for different occasions, and craft breweries are leading the way by developing more styles and products to cater for this growing trend. In response, the large breweries are launching their own “craft” labels and buying out existing craft breweries.

For example, Fosters Group (owned by the world’s second largest brewing company SAB-Miller) has acquired one of Australia’s first craft labels, Matilda Bay. Similarly, Lion Nathan (owned by the Japanese giant Kirin Holding) acquired Little World Beverages, which operates two craft breweries, Little Creatures and White Rabbit.

Meanwhile, Australia’s leading retailers, Woolworths and Coles, have launched their own craft-looking beer ranges, Gage Roads Brewing Company and Steamrail Brewing Company. Time will tell whether these large companies can obtain a specialist position through telling genuine stories consumers will buy into. And yes, when it comes to beer, stories are important.

For specialist craft breweries, one of the assets of “smallness” is that they can afford to be more personal and local in how they brand their products. This personal and local touch adds a new dimension to conventional brand building theory in forming relationships with consumers.

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