Craft Beer Study - BRICK+BOND

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No longer niche, the craft beer market is growing at a remarkable rate. Brands of all sizes can not only coexist, but prosper, by strategically tapping into an influential audience ready to purchase, drink,
and spread the word.

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Craft Beer Study - BRICK+BOND

  1. 1. vs. C r a f t C r a f t Y ©2013 A CASE STUDY BY BRICK+BOND brickandbond.com TAPPING INTO THE THE CRAFT BEER MARKET No longer niche, the craft beer market is growing at a remarkable rate. Brands of all sizes can not only coexist, but prosper, by strategically tapping into an influential audience ready to purchase, drink, and spread the word.
  2. 2. FOR MORE INFORMATION, CONTACT US @ BRICK+BOND 1(646) 347 4340 OR inquiries@brickandbond.com 2 In a crowded market, brands that are more observant of consumer needs and desires can build greater engagement, influence purchasing behavior, and return a positive ROI. Almost every other day, there is a new article or study attempting to cover the ins and outs of this highly lucrative market. Whether this is due to craft beer’s staggering growth rates, its increasing popularity among consumers, or because it is simply an attention-grabbing buzzword, one thing remains certain—craft beer is here to stay. Currently, there is a lot of noise regarding the long-standing dispute between small-scale and large-scale brewers. Regardless of how it is framed—“craft” vs. “crafty”, “real” vs. “fake”, “authentic” vs. “inauthentic”—this paper will bypass the hoopla by redefining what it means to be truly “craft” and explaining how brands of all sizes can harmoniously coexist and successfully reach target consumers effectively—even with limited resources. By focusing on what really matters to consumers and filtering through the clutter, brands can establish a strong foothold in the craft beer market and make their marketing dollars go further, work harder, and amplify a winning strategy. GET YOUR CRAFT BEER HERE, there, and EVERYWHERE!
  3. 3. 3FOR MORE INFORMATION, CONTACT US @ BRICK+BOND 1(646) 347 4340 OR inquiries@brickandbond.com Craft beer as a segment has grown by approximately 110% over the past five years, from $5.7 billion in 2007 to $12 billion in 2012. In addition, craft beer is forecasted for continued growth to become an $18 billion market by 2017, representing 20% of the entire beer market. As with all industries, rapid growth breeds increased market complexity. As such, there is an inherent need to define what craft beer is (and conversely what it isn’t) and segment the market given its sheer size and growth in order for brewers to launch, take action and make their marketing dollars go further. Craft beer is big and getting bigger Craft beer was responsible for almost all category growth in 2012 and now represents 15% of the total beer market. *Source - Mintel, Beer - US - December 2012; Mintel, Craft Beer - US - November 2012 ACTUAL FORECAST TOTAL US SALES CRAFT BEER US SALES 100% 75% 50% 25% 0% 2007 OVERALLCATEGORYVOLUME 2012 2017 20% 15%
  4. 4. 4FOR MORE INFORMATION, CONTACT US @ BRICK+BOND 1(646) 347 4340 OR inquiries@brickandbond.com According to the Brewers Association, an American “craft brewer” is small, independent and traditional. More than 2,000 breweries are responsible for the beer brands made within the US, with an estimated 97% of these breweries fitting the “craft brewer” definition. These numbers seem impressive on the surface, but they are misleading when you begin to dig deeper. The problem with this statistic is that the Brewers Association voted to change the meaning of “small” in its definition of what constitutes a “craft” brewer in December of 2010. Whereas “small” used to be defined as producing no more than 2 million barrels per year, it is now defined as producing up to 6 million barrels per year. Pretty crafty of them, eh? NEW DEFINITION: An independent brewery that produces up to 6 million barrels of traditional beer. OLD DEFINITION: An independent brewery that produces no more than 2 million barrels of traditional beer. WHAT CONSTITUTES A CRAFT BREWER? *Source - Mintel, Beer - US - December 2012; Mintel, Craft Beer - US - November 2012 50% 40% 10% BREWPUBS MICROBREWERIES REGIONAL CRAFT + CONTRACT BREWERS
  5. 5. FOR MORE INFORMATION, CONTACT US @ BRICK+BOND 1(646) 347 4340 OR inquiries@brickandbond.com 5 Change in the designation of a “small” brewery has allowed major craft brewers, such as The Boston Beer Company and Sierra Nevada Brewing Company, to maintain their image and remain categorized as “craft brewers” even after they’ve reached critical mass. If the two largest craft brewers have the power to change the definition of “small” once they reach production limits, is the witnessed uptake in craft a result of real growth, or simply a change in definition? The reality is that the definition of craft beer is already unclear. With rising trends and market growth, large brewers have become “crafty” with their tactics—working their way into the market with the likes of Blue Moon (SABMiller) and Goose Island (Anheuser-Busch InBev), much to the chagrin of small-scale brewers. It is questionable whether the success and appeal of craft beer is due to its real attributes or its “craft” perception. The truth is that craft beer’s current growth and success can be attributed to a host of factors: location, variety, history, story value, quality, timing, taste, preference, perception, counter-culture, marketing (or lack thereof), and even novelty. Despite semantics, one thing remains certain—there is something intrinsically unique about craft beers, and that is what makes them so enticing to consumers. Given the success of the numerous “craft” and “crafty” beers currently available, perhaps “craft” should be defined to include brewers of all sizes that are committed to experiment, innovate and most of all, differentiate. If the past five years have provided any indication of things to come, innovation for the beer industry is stemming almost entirely from craft breweries and craft brewing techniques. On the bright side, there is room for brewers of all sizes to grow and prosper in the craft beer market. IT’s BIGTO BE SEEN AS LITTLE It is questionable whether the success and appeal of craft beer is due to its real attributes or its “craft” perception.
  6. 6. FOR MORE INFORMATION, CONTACT US @ BRICK+BOND 1(646) 347 4340 OR inquiries@brickandbond.com Craft beer has broad appeal, but the main source of growth is seen coming from Millennials, in both the younger (21-24) and older (25-34) age segments. Half of all craft beer drinkers expressed interest in locally made beer, while a quarter of them are interested in purchasing craft beer where it was brewed. Another 39% are influenced to purchase when they can relate to the personality of a brand.1 Why should craft brewers care? Not only are these drinkers exceedingly preferential and trendy, they are also highly influential digital natives. Millennials are largely mobile-driven, spending 14% more time engaged with their mobile devices in an average week than their generational peers.2 As such, the new mobile era of “pull” marketing allows for meaningful dialogue with these primary consumers. In addition, Millennials crave brands with heritage and genuine story value. This segment has an affection for brands and activities that transport them to a time when things were ‘simpler’—regardless of whether or not they lived during that era.3 THE CRAFT BEER DRINKER Craft beer variants have managed to capture public imagination and appeal to young drinkers who are frequently on the lookout for new trends and brands that speak to their individual preferences. 6 Source(s): 1 Mintel, Beer - US - December 2012; Mintel, Craft Beer - US - November 2012; 2 Experian Marketing Services - 2013 Digital Marketer Report - Life is the channel. – 2013; 3 Javelinexperiential.com – Millennials and the Great Nostalgia Trip – March 8, 2012
  7. 7. FOR MORE INFORMATION, CONTACT US @ BRICK+BOND 1(646) 347 4340 OR inquiries@brickandbond.com THE MIGHTY MILLENNIAL MARKET This audience values esoteric knowledge and characteristically rejects traditionally large brands. 7 Many Millennials have come of age during the rise of craft beer and understand the differentiation in style and taste compared to domestic and imported beer. All of these factors combined, paired with high growth and low barriers to entry, make craft beer a prime market of focus for small and large-scale brewers alike. As such, brewers of all sizes are attempting to tap this lucrative market and keep up with growing demand, which in turn offers Millennials the choices and variety they want. This in effect, creates a highly stable ‘feedback loop’ that perpetuates the cycle, thereby stimulating growing demand for “craft” beer. EXPANDING M A RKET AND PALATE EXPERTISE IS BECOMINGMAINSTREAM DEMAND FORTHENEWEVOLVINGDEFINI TION oFQUALITY MORE ACCESS TO INFORMATION Millennials are more aligned with the ‘food movement’ and love organic farms, small batch jams, artisanal cheeses…and are willing to go to great lengths to find them. Thus, power is shifting from mass-market brands to “the little guy” online , at the local green market or at the corner store.*
  8. 8. FOR MORE INFORMATION, CONTACT US @ BRICK+BOND 1(646) 347 4340 OR inquiries@brickandbond.com 8 INFLUENCING THE INFLUENCERS Mintel research found that 45% of craft beer drinkers would try more craft beers if they knew more about them. To capture these interested but cautious beer drinkers, craft brewers need to educate consumers about the qualities of their beers. Tasting events, beer-food pairing menu listings, and on and off-premise beer samplers can empower drinkers to experiment with craft beers.1 The key is to target communities that are primed for craft beer consumption, which directly translates to massive reach and frequency for craft brewers. By pursuing highly influential markets, craft beer brands can capture a significant portion of the craft beer market on small budgets. Brick and Bond has identified nine such targetable areas across the US. These key markets provide an opportunity to gain significant traction among Millennials, and should be the primary focus of any strategy to achieve success in the booming craft beer market. By pursuing highly influential markets, craft beer brands can capture a significant portion of the craft beer market, even with limited resources. Source: Forbes, How ‘Millennials’ Are Changing Food as We Know It, September 4, 2012
  9. 9. Unique in many aspects, our chosen influential target markets have some key important characteristics in common. FOR MORE INFORMATION, CONTACT US @ BRICK+BOND 1(646) 347 4340 OR inquiries@brickandbond.com LOCATING THE MAJOR MILLENNIAL MARKETS Source: Mintel, Beer - US - December 2012; Mintel, Craft Beer - US - November 2012 9 WILLIAMSBURG BROOKLYN, NY H STREET CORRIDOR WASHINGTON, DC SILVER LAKE LOS ANGELES, CA MISSION DISTRICT SAN FRANCISCO, CA PEARL DISTRICT PORTLAND, OR CAPITOL HILL SEATTLE, WA WAREHOUSE DISTRICT NEW ORLEANS, LA WICKER PARK CHICAGO, IL EAST AUSTIN AUSTIN, TX • Undergone or are undergoing gentrification • Dense populations of influential Millennial consumers • Abundance of variety and choice • Value diversity, history and culture • Known for trend-setting, exclusivity and ‘hipness’ • Cultural hubs for food, art, fashion, shopping, music, nightlife and entertainment • Large concentrations of trendy, off-the-beat restaurants and bars • Provide “rabbit holes” for storytelling, exploration and discovery
  10. 10. FOR MORE INFORMATION, CONTACT US @ BRICK+BOND 1(646) 347 4340 OR inquiries@brickandbond.com 10 “For this generation, the definition of ‘expert —a person with the credibility to recommend brands, products, or services —has shifted from someone with professional or academic credentials to potentially anyone with firsthand experience, ideally a peer…” Concentrations of young, creative and sophisticated individuals tend to set cultural trends and radiate tremendous amounts of influence. As such, targeting the nine key areas identified using authentic, small-scale, localized, integrated marketing efforts will cause a permeating ripple effect among Millennials. Carefully invested marketing will allow brewers to achieve and enjoy a national presence with localized budgets. Source: BCG The Boston Consulting Group “The Millennial Consumer - Debunking Stereotypes’ – April, 2012 ACCORDING TO THE ‘EXPERTS’… Concentrations of young, creative and sophisticated individuals have a tendency to set cultural trends and radiate tremendous amounts of influence.
  11. 11. 11 Regardless of whether a beer is defined as “craft” or “crafty,” there is no doubt that a growing demand for craft beer exists and is projected to grow rapidly over the next five years. No matter how the craft beer market evolves over time, the true winners will be those who not only have ambition, but those who can integrate that ambition with smart marketing to utilize their resources wisely, achieve scale, and take advantage of this fantastically fertile market. SO, GRAB YOUR SEAT AT THE BAR We exist to provide unparalleled value to our clients through a rigorous, client-tailored planning process and world class creative. To discuss your challenges and initiatives, give us a call or email us BRICK+BOND 200 Varick Street Suite 802 New York, NY 10014 t +1 646 307 4340 inquiries@brickandbond.com HOW TO REACH US: FOR MORE INFORMATION, CONTACT US @ BRICK+BOND 1(646) 347 4340 OR inquiries@brickandbond.com

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