Previously, you read about the industry analysis of the beer, wine and liquor industry and the five forces that affect a firm’s ability to serve consumers and turn a profit. Next, successful companies must recognize and respond to the major forces affecting our macro environment, for example; stock market decline, increase in unemployment and global warming. Companies must now consider several external environmental forces while running their business, in particular, demographics, economics, social, natural, technological and political. Demographics
Demographics can consist of population size, density, location, age, sex, race and occupation. In this analysis, we will focus on examining population size and age. Based on an estimate from July 2011, there were roughly 313 million people in our population with a growth rate of almost one percent (Central Intelligence Agency). The highest areas of growth tend to be in warmer climates, the southern and western parts of the United States. Our population rate is growing at an explosive rate that could exceed our food supply and ability to service the population.
Samuel Adams needs to take into account the areas of highest growth in our population and market to these regions. Ideally, because the craft brew segment is strong on the west coast, Samuel Adams should distribute more products to the western states. As stated earlier, the Boston Brewery Company’s corporate headquarters and brewery is located in Boston, Massachusetts, which makes them primary players already in the east coast market. A second important demographic to consider when marketing is age. Age is important in the alcoholic beverage industry because of the legal drinking age requirements.
One particular approach marketer’s use is generational marketing; this targets certain age groups as well as different generations. This is important for companies to consider especially since the start of the recession in 2008. Since then birth rates have dropped by seven percent and the average age has risen because of this (Livingston). An older consumer market is attractive for many industries because typically higher age groups make up a significant portion of expenditure. For the beer industry, you need to be a certain age to purchase and consume alcoholic everages and companies are legally obligated to address this when selling their product. Economic Environment Next, we will look at the economic environment; this includes factors that affect consumer purchasing power and spending patterns. These factors include but are not limited to price, employment and wages. Today, real income is on the rise and consumers have a number of resources available to help them make the best purchasing decision. “The U. S. convenience store count increased to a record 148,126 stores as of December 31, 2011, a 1. 2 percent increase from the previous year” (Lowe).
Convenience stores offer consumers fast, convenient service for their purchasing needs, particularly for the food and beverage industry, which represents the majority of consumer dollars. The continual increase in alcohol sales each year shows that in the minds of consumers’ alcohol is rather recession resistant. Price is another component that affects consumer purchasing power and spending. In our economy, the consumer price index or the inflation rate measures the variability amongst prices consumers pay for a good or service. Oil prices and tuition are two examples of inflation.
U. S. consumers spent no more in May than in April after seeing almost no gain in their pay, the lack of growth in consumer spending and wages suggests that a faltering job market is slowing the economy (Crutsinger). Even though inflation is falling consumers are still not spending because of the economy, this could also be due to the decline in borrowing of credit. Somewhat correlated to change in price/inflation is unemployment. Because unemployment is as high as it has ever been in recent years one would assume consumer purchasing power is down as a result.
The perception seems to be that Americans are being more frugal because of the economy and saving more as a precaution. Competition has made the price of beer to a consumer rather negligible; Anheuser-Busch and MillerCoors have the ability to raise the price of beer because of their large followings. Another factor that could affect the price of beer is global warming, which you will read about later. Essential to our economy’s growth is the growth of small businesses such as craft breweries.
The upcoming national election is approaching and the company Paychex has identified five important issues facing small businesses today, taxes, regulatory burden, employment regulations, immigration and retirement security (MarketWatch). Succession is important for small businesses and breweries as they look to expand or distribute to even more states. The Boston Beer company has a Brewing the American Dream program that helps provide loans, coaching and mentoring to small business owners in need of help in sustaining their business. Sociocultural Environment
Our sociocultural environment is the next external environmental force that looks at trends, values, preferences, behaviors and beliefs. Today consumers have the ability for mass customization, choosing among a menu of attributes to find the best price, delivery options and features for a product or service. Specifically for the beer industry, this could be whether to purchase cans or bottles or a variety of different flavors. Another trend today is the health craze; a number of products are coming out with low cal options increasing the attractiveness of light beers and low calorie beers to consumers.
Consumers are spending more on products and services that improve their lives rather than their image. Due to recent corporate scandals and layoffs, companies need to win back consumers. We value a product, service and company that is honest, Samuel Adams beer to some symbolizes patriotism because of the name. Other people have values that come from interest or social groups they belong to. ” The nonprofit organization Mothers Against Drunk Drivers does not try to stop the sale of alcohol but promotes lower legal blood-alcohol levels for driving and limited operating hours for businesses that sell alcohol” (Kotler Keller).
Your values, beliefs and influences may also come from heroes, celebrities or athletes. While our society’s average age is increasing, it is important for companies or role models to attract a teenage audience, as they will be able to keep them as a customer/fan later in life. Underage drinking and abuse is a problem that specifically affects the alcohol industry and companies have to deal with potential legal problems, which you will read about later. Another way companies appeal to the consumer and even our environment is by going green.
Every company needs to consider environmental regulations, which is why you see more dollars invested in hybrid cars, organic foods, biodegradable goods and green office buildings. A significant trend to be aware of is the shortage of raw materials like water and the increasing costs of energy. As oil prices soar, companies will need to search for practical means to harness different alternative energy sources (Kotler Keller). Annually, breweries spend over two hundred million dollars on energy making energy consumption 3-8% of the production costs of beer (Galitsky).
A large part of oil concerns was due to the Gulf of Mexico oil spill. The issue of global warming forces companies to act to prevent pollution. With the coming era of water scarcity, this will force a global industry transformation. The price of beer is likely to rise in coming decades because climate change will hamper the production of a key grain needed for the brew (MSNBC). All companies will have to look at different water management opportunities in their future operations. Technological Environment
Year after year, our economy continues to make technological advances that create new products and market opportunities. In addition, improved efficiency can also be the result of adapting new technologies. By not adapting to new technologies industries can struggle, for example, the ability to download music free online hurt Tower Records. In addition, Amazon’s Kindle has affected the sales of Barnes & Noble and its Nook. For beer there are always new ways a brewery finds to brew that provides a new unique flavor to consumers. Innovations are just as important to a company as minor technical improvements.
A growing portion of company research and development expenditure goes towards copying products or making minor improvements. Year in year out Apple makes minor improvements each year rolling out a new version of its iPhone and iPad. Miller Lite has made advances in their bottle and can design adding the vortex and punch top respectively. Today though, current technologies become quickly outdated by innovation or technological advancements. One new invention you will see more of going forward in the beer industry is the bottoms up beer dispenser.
As opposed to a tap where it pours top down, this new dispenser pours from the bottom up and already exists in several sports stadiums and concert venues. Speed, efficiency and less waste are a few benefits of this new technology in the industry. Samuel Adams actually has new products coming out; they are working with a local whiskey distillery to come out with a whiskey no later than 2015. The brewer intends to release as many as 85 new products this year and does not intend to slow down (Springfield Brew Crew). Koch also mentioned he is working on designing a thicker can for beers.
Political/Legal Environment The last external environmental force is the political environment. This can include laws, regulations and groups that work to limit organizations or consumers. Taxation laws have affects across a range of geographies. Under a proposed tax hike, excise taxes would cause the price of the typical bottle of spirits to increase by 12. 5%, wine by 9. 7% and beer by 8. 5% (American Beverage Licensees). The tax hike would affect lower income groups far more than wealthy Americans and hamper a breweries ability to come up with different beers.
In addition to taxation laws, there are laws that even affect trademarks, competition, safety, liability, packaging and labeling. There are limitations as to what Samuel Adams can and cannot put on their bottle. Car dealers often have safety recalls because of violations; recently Samuel Adams had a recall due to cracked glass found in the inside of their bottles. Also, recently the Boston Beer Company filed a lawsuit against Anchor Steam for poaching a former executive and stealing ideas.
The use of the digital space means that marketers also need to find ethical ways to market products and services online with out invading privacy rights. Advertising is perhaps the most controversial part of marketing because of credibility. Advertising is almost illegal in the fact that it can say sweet nothings about a product. Every brewery advertises they are the best but you provide the credibility. Today information is so widely available that consumers have won the right to know the real cost of a loan, cost of a unit, ingredients, benefit of a product and nutritional qualities of food (Kotler Keller).
Customer Analysis We just analyzed the external environment forces that not only affect the Boston Brewery Company but all companies across the United States. Known for specializing in its craft beers, Samuel Adams holds a small percentage of the industry’s market share but its sales are quickly growing. Diving deeper into the craft beer segment, specifically Samuel Adams, let us analyze the five w’s regarding the Samuel Adams customer, who, what, where, when and why. Current and Potential Customers
Currently, the Boston Brewery Company is a strong national competitor in the beer industry holding one percent of the market share and is one of the top craft beers. Because they are located on the east coast, it is fair to assume that their fan base is stronger in the Eastern part of the United States but they do distribute nationally. After doing research, reports indicated the millennial generation makes up 21% of the adult population and 29% of craft beer volume (Beer Marketer’s Insights). While the industry is male dominated in terms of sales, many women drink craft beer as opposed to mainstream beers because of its uniqueness.
In an effort to bring in additional customers, Samuel Adams also came out with a light beer because this market was too lucrative to ignore. Looking at the future Samuel Adams customer, as the craft beer market continues to grow; Samuel Adams needs to focus more on reaching the craft customer as opposed to joining the mainstream light beer market. Recently launching their cider offering, this should appeal to health conscious consumers as well as millennials. Samuel Adams national presence should allow them to reach a variety of audiences as they continue to grow and expand their product line.
What Customers do with Samuel Adams Tom Burkemper, a senior director of trade marketing for Anheuser-Busch, indicated there are five beer consumer profiles; loyalists, experimenters, aspirers, trend seekers and sippers (MonkeyDish). This begs the question, what each profile does with beer. Loyalists tend to stick with a brand and socialize while drinking, experimenters look for unique tastes, aspirers tend to drink imported beers, trend seekers are all about creating memorable events around beer and sippers are spurring the growth of sweeter fruitier beers.
While many consumers drink certain beers because they are inexpensive, craft beers are trending because customers want to try the different unique flavors they offer rather than pound several light beers. To characterize millennials, they identify themselves as individuals and are well educated; craft beers offer a breakaway from the mainstream brands like Miller Lite and Bud Light. Where and When Customers Purchase Samuel Adams Where and when do consumers purchase Samuel Adams products?
You can find Samuel Adams in not only the United States but also parts of Europe, Canada, Mexico, Israel and the Caribbean; a number of wholesalers distribute their product. The down economy has had little impact on alcohol purchases in stores. More than 80% of consumers say they are spending the same amount or more on beer, wine and spirits compared with a year ago (Nielsen). To no surprise, the majority of beer sales come from your traditional grocery and convenience stores followed by bars/clubs. If you have ever visited a bar you might find that Samuel Adams Boston Lager is not often found on tap.
A great place to discover and buy many craft beers is now festivals. Customers decide to purchase beer based on a number of reasons such as special occasions like sporting events, parties or out of need. Besides beer, Samuel Adams offers a variety of apparel and accessories that you can purchase on their e-store. Advertising can also have a significant impact on aiding are awareness of a brand and increasing our propensity to purchase a product. Their ads aim to educate and even point out that even though they are small they are growing up.
They also have shown that you should pair a good beer with a good meal and have even come out with their own Boston Lager cut. Samuel Adams has a whole line of seasonal beers giving consumers a different beer to drink based on the time of year. Why and How Customers Select Samuel Adams Why do consumers select Samuel Adams? One reason might be that it has won the most awards of any beer. Consumers receive the impression they are purchasing a beer with the finest quality ingredients with a unique flavor. In addition, they offer over thirty different kinds of beer to satisfy a variety of taste buds.
Their push to help other local businesses reach the American Dream is very inspiring and has a positive impact on our perception of their beer. Social media has a big impact in how customers choose their beer. Samuel Adams launched its Craft Crowd Project that lets you choose the color, clarity, body, hops and character of the malt to create the perfect Facebook beer as determined by consumer consensus. This will give them the exact attributes Facebook fans are looking for in a beer and the Boston Beer Company can deliver just that.