Executive Summary
BrewDog is a company that has gone from strength to strength in its short time since establishment. The company has been experiencing rapid growth over the past several years. Through extracting the relevant information from a SWOT analysis on the company, I will look at BrewDog’s strengths and opportunities, leading to analysis of competition, barriers to entry and the threat of substitutes in proposed future markets. Through this I will show what growth methods are not suitable for the company, and conclude with my recommendation that simultaneous expansion of the UK and foreign markets are the most viable growth prospects for the company. I will provide analysis and discussion to show the validity of this.
Introduction
BrewDog is a Scottish craft beer company who have quickly become one of the largest independent brewers in the United Kingdom. They are famed for their high quality product and distinctive style of conducting business and marketing. BrewDog’s entrepreneurs work with the intention of promoting the craft beer industry and to offer it as a better alternative to more commercial beers worldwide. They already sell their product to many markets, but their very recent interest in becoming not only a brewery but a strong force in the bar industry itself is where their dreams of expansion lay presently. Section 1 of this report is my analysis of the strengths and opportunities of BrewDog at present through use of relevant parts of my SWOT analysis of the company. Section 2 looks at the viability of the growth prospects presented in section 1, using appropriate segments of the Porter’s five forces model to analyse competition. Section 3 is my recommendation of how the company’s future growth should be conducted.
1. Analysis
I will begin my analysis of the growth prospects of BrewDog by looking at the current position of the company in terms of its strengths and the opportunities available to them in the craft beer market. I will focus largely on the opportunities available to them, with a view to analysing their growth prospects in section 2.
1.1. Strengths
BrewDog’s strengths lie largely in the unique way in which it chooses to conduct business and marketing, and it is these factors that have contributed largely to their current success. The company uses social media to their advantage, saving on many marketing costs, and allowing prospective consumers an up to date view of the company and its products, with recommendations by their likeminded peers. BrewDog’s craft beer product is considered to be of an extremely high quality and has won multiple awards attributed to this (BrewDog, 2010). Their innovation in design and marketing has proven to have a massive PR effect, with their beers being inventively named and bottle design combining art, humour and practicality (Charles, 2013). Much publicity has been gained by provocative designs, as well as direct and public competition with other beers (Telegraph Online, 2010). BrewDog successfully pioneered a change in government legislation with regards available drinking measures in pubs, which was at heart an extremely well executed campaign for their own product (Faulkner, 2011).
It has increased their reputation for quality and for looking out for the customer’s wishes. BrewDog is a public company now, and the method by which it inspired its shareholders was unique in itself. The “equity for punks” campaign has come to make shareholders feel as if they are a part of the brand, which in turn will make them more responsive to requests for money in the future (Smith. et al, 2010). Their year on year 200% growth has made BrewDog a profitable venture, and has made acquiring debt easier for them, as shown by their recent £5m loan (Wright, 2013). The previously mentioned factors continue to reap rewards for the company, and have contributed to their current strength in having Scotland’s largest independent brewery (Scottish Enterprise, 2010). On top of these things, BrewDog’s fairly niche product overcomes the recent down turn in pub attendance by offering a “better” product, and a different kind of experience in their bars, meaning that people are less inclined to consume alcohol in their homes and will come into the bar instead, specifically for their product.
1.2 Opportunities
The opportunities for BrewDog are vast and include continuing to expand on its recent trend of opening BrewDog pubs and bars across the UK, and taking the business global on a larger scale than it currently is. The company already exports to over 30 countries worldwide (McCulloch, 2013) and although this is of course proving profitable, the intentions of BrewDog in terms of expansion are focussed mainly on opening new establishments. The company currently has eleven open bars in Scotland and England, with a flag ship store in Shoreditch, London. Eleven bars is not a massive amount, particularly looking at the success of the ones they currently have. Although expansion abroad is no doubt a high priority, it cannot be ignored that BrewDog bars are not present in Northern Ireland, although the beers are available there for purchase in other establishments and stores. This is an opportunity for expansion. The matter of global expansion of the pubs is one that BrewDog seem very interested in, and understandably so. As mentioned, BrewDog already exports to around 30 different markets, and as such has a customer base around the world already. An opportunity for growth is to enter the German market, where the craft beer market is large, and which is the home country of Schorschbräu – a beer that BrewDog has had an on-going and public battle with to brew the strongest ale (Telegraph Online, 2010).
2. Viability of Growth Prospects
Use of Porter’s Five forces model for analysis of BrewDog’s growth prospects in different markets has been used to produce the following, based on extraction of relevant material based upon the concepts of competition, barriers to entry and the threat of substitutes (Porter, 2008). The following growth options could only of course be implicated by a company that was solid, well established and well managed, as BrewDog is. To take Flamholtz’s model of organizational success as a method of showing its position as a strong company (Flamholtz, 2000), BrewDog has worked its way up the pyramid of success in a very short time: finding its market niche in craft beer; managing and gaining resources effectively; putting in place incredibly successful alternative marketing systems; establishing its management techniques and ultimately instilling the “punks” culture in both its employees and investors.
The further expansion of the BrewDog brand into the UK market, such as setting up establishments in Northern Ireland, is an option that should be explored further. At first glance, it appears that expansion into a culture such as NI that is similar to the rest of the UK does not have as much risk as a move abroad. Having the pubs available projects further the image of welcoming new craft beer drinkers. Whilst this is true, there are in fact other market forces at work. Upon analysis, it is not the direct craft beer competition, but that provided by major brands like Guinness – which is responsible for a huge percentage of all beer sales in NI – that makes BrewDog pubs in NI less likely to succeed. With a massive percentage of the Northern Irish market drinking Guinness and other major brands because they are used to it, and because it is brewed “at home”, the fact that BrewDog pubs will not sell it will make customers less likely to want to visit. In terms of microbreweries and craft beer, there are only a few companies brewing Irish craft beer, and they have not undergone any significant growth in the past several years. Although I think that BrewDog’s unique brand would be able to compete with its direct competitors in the craft beer industry, and surpass them through their unique advertising and current popularity. The trends of the past seem to indicate that craft beer companies survive rather than flourish in the Northern Irish market. And If this strategy does not work, they have the opportunity to consolidate their existing UK customer base by creating more bars: perhaps with the objective of having one in every major city in the UK, including an expansion into Wales, where they have not currently ventured. Another growth prospect for BrewDog that I have proposed is the continued global expansion of the company. The company plans to open its twelfth bar this year in Stockholm, which will be the company’s first premises in a country outside of the UK.
The success of this establishment might well be an indicator as to where the company will take their product in the future. Sweden is one of BrewDog’s strongest markets currently in terms of its exports, and it makes sense to expand further into a market where their brand has been welcomed and is successful thus far. Brazil and Japan fall into a similar category and as such, are opportunities for expansion in the future. The growing interest in craft beer overall in the past few years is something that makes BrewDog’s expansion to other areas more likely to succeed. BrewDog’s current reputation and charisma will be heightened as the market grows due to increased popularity of the product overall. A profitable market could also be found in Germany. As I have said previously, Schorschbräu has famously been in competition with BrewDog with regards their brewing styles and beer strength. This company would serve as the main competition in this market. However, with their comparable brewing style, BrewDog edges them out by being far more unique and oriented towards their stockholders. Again, their strong marketing campaigns and the general culture of the company could contribute to them gaining an edge on the competition in Germany. Gaining a strong presence in Germany would be characteristic of BrewDog’s no-fear attitude towards PR, marketing and taking on the “big dogs”. It will put them in line with this company that it has been competing with over the past several years in a bold move into the German market. This is a tactic that would be indicative of BrewDog’s belief that they brew the best beer in the world.
3. Recommendations
In summary, my recommendations for the future growth of BrewDog as a company revolve largely around the expansion of their brand of pub and bar into foreign markets. Sales figures for exported beer sales show that there is definitely a market for BrewDog in countries like Sweden and Brazil. Taking the brand to Germany could prove to be highly profitable due to the existing niche market for craft beer, and because of the publicity that will be gained and will continue on account of BrewDog’s rivalries in that country. Whilst expansion into Northern Irish territory would not bear much fruit due to the lack of a market for the product, BrewDog should continue to develop new bars in their home country of Scotland, as well as the rest of the UK as a means of consolidating and solidifying their existing customer base. It is my recommendation that BrewDog do this whilst simultaneously expanding abroad to increase their market share and availability on both a local and global scale.
References
Brew Dog. (2010). Hardcore IPA wins Gold at the 2010 World Beer Cup. Available: http://www.brewdog.com/blog-article/286. Last accessed 15th April 2010. Butler, S. (2013). BrewDog to open bars outside the UK. Available: http://www.guardian.co.uk/business/2013/feb/21/brewdog-bars-outside-uk?INTCMP=SRCH. Last accessed 15th April 2010. Charles, G. (2013). BrewDog founder on
