Penetrating the American Craft Beer Market - A Market Entry Study for an Irish Brewery Expansion

Penetrating the American Craft Beer Market: A Market Entry Study for an Irish Brewery Expansion

Submitted in partial fulfilment of the requirement of the degree of Master of Business Administration of the University of Strathclyde

THE UNIVERSITY OF STRATHCLYDE BUSINESS SCHOOL

Pietro Busa Hemant Chandran Paul Dimerin

2013 Dorain Dr. Michael Marck

Statement of Academic Honesty We declare that this dissertation is entirely our own original work. We declare that, except where fully referenced direct quotations have been included, no aspect of this dissertation has been copied from any other source.

We declare that all other works cited in this dissertation have been appropriately referenced.

We understand that any act of Academic Dishonesty such as plagiarism or collusion may result in the non-award of a Masters degree.

Signed …………………….……… Dated …….……………………

Signed …………………….……… Dated …….……………………

Signed …………………….……… Dated …….……………………

Acknowledgements The team of researchers would like to thank several people for their advice, input and expertise in helping us write this dissertation. Dr. Michael Marck, our project supervisor, has been extremely helpful by providing us generous feedback, advice and direction throughout the entire process. It was a pleasure working with him. We would like to acknowledge Josh Sauter, Pam Hearne, Kirsteen Rae and Irene AitkenheadTaylor for their advice and support throughout the course of this project. The team would also like to thank Casey’s Brewery who provided us an opportunity to work with them on this topic. The team would like to express their gratitude to Sri Divya Peddireddi, who helped the team with the graphic design in the recommendations chapter. Last but most certainly not the least, we would like to thank our respective parents and families for their unequivocal support and motivation during the course of our study. To all these people and many more, we are extremely grateful and recognise that a mere expression of thanks would never suffice.

Abstract The scope of this project was to define a successful market entry strategy for Casey’s Brewery, a start-up craft brewer based from Cork, Ireland, which is keen to export its beer to the United States. The main aim of this project was to understand the market entry prospects in the American craft beer market and scouts, amongst different options, the most appropriate market entry mode. Further, it intended to explore different possibilities for product distribution and identify a particular geographic area within the U.S. market. Other objectives of this project were to identify key aspects of promotion and the most suitable Stock Keeping Unit solution to export the product overseas. Finally, this study meant to investigate those factors that are likely to push a customer to switch from a traditional to craft beer. The analysis clearly revealed a potential for Casey’s ambitious plan while suggesting to limit, at the beginning, the geographical coverage to the Greater Boston Area and to rely on professional distributors deeply rooted in the American craft beer market. Additionally, this research recommended a set of promotional activities that are likely to make market penetration successful and identified bottles as the best S.K.U. for the initial phase of the process. Ultimately, in addition to the initial research objectives, this piece of work identified a series of steps that Casey’s Brewery should take to make a consumer switch from a traditional beer to craft beer.

Word Count: 26,466

Table of Contents Statement of Academic Honesty ...................................................................................... 3 Acknowledgements ........................................................................................................... 4 Abstract ............................................................................................................................. 5 List of Figures .................................................................................................................. 10 List of Tables.................................................................................................................... 11 Chapter 1: Introduction..................................................................................................... 1 1.1.

Entering a New Market ...................................................................................... 1

1.2.

Research Objectives ........................................................................................... 2

1.3.

Report Structure ................................................................................................. 3

Chapter 2: Literature Review ............................................................................................ 4 2.1.

Introduction ........................................................................................................ 4

2.2.

Entering a New Market ...................................................................................... 5

2.2.1. 2.3.

Market Selection ................................................................................................ 6

2.3.1. 2.4.

Pre-entry Knowledge and Experience ......................................................... 5 Factors Influencing the Market Selection ................................................... 7

Market Entry Mode: A Strategic Decision ........................................................ 10

2.4.1.

The Hierarchical Model ............................................................................. 12

2.4.2.

Exporting Versus Foreign Direct Investments Mode ................................ 14

2.4.3.

The Internalization Theory ........................................................................ 15

2.4.4.

The Resource Based Theory ...................................................................... 15

2.4.5.

Normative Decision Theory and Other Approaches ................................. 16

2.5.

Timing of Market Entry: Pioneer versus Followers .......................................... 16

2.5.1.

Defining a Market Strategy Framework .................................................... 17

2.6.

Market Entry Modes in Mature Industries: The U. S. Brewing Industry .......... 18

2.7.

Sequence of Market Entry ................................................................................ 19

2.7.1.

The Waterfall Model ................................................................................. 19

2.7.2.

The Sprinkler Strategy ............................................................................... 20

2.7.3.

The Wave Strategy .................................................................................... 20

2.8.

Industry Overview ............................................................................................ 21

2.8.1.

The Business Environment for the Beer Industry ..................................... 21

2.8.2.

Market Trends and Industry Challenges ................................................... 22

2.8.3.

The Three-Tier System in U.S. ................................................................... 22

2.8.4.

Complex Distribution Systems with Conflicting Interests ......................... 23

2.8.5.

Distribution Channels and Supply Chain ................................................... 24

2.9.

The Legal Framework ....................................................................................... 24

2.10.

Marketing Communications ......................................................................... 25

2.10.1. Marketing Communications Mix ............................................................... 25 2.10.2. Advertising ................................................................................................ 26 2.10.3. Sales Promotion ........................................................................................ 27 2.10.4. Public Relations ......................................................................................... 28 2.11.

Building Brand Community ........................................................................... 29

2.12.

Outline of the American Beer Market .......................................................... 30

2.12.1. History of Beer in America ........................................................................ 30 2.12.2. Beer Production in America ...................................................................... 31 2.12.3. Beer Consumption in America .................................................................. 32 2.12.4. Economic Impact of Beer .......................................................................... 33 2.12.5. Future Trends ............................................................................................ 34 2.13.

Craft Beer Industry........................................................................................ 34

2.13.1. History of Craft Brewing in America ......................................................... 35 2.13.2. Craft Beer Production ............................................................................... 36 2.13.3. Craft Beer Consumption............................................................................ 37 2.13.4. Craft Beer Demographic............................................................................ 38 2.13.5. Craft Beer – Future Trends ........................................................................ 39 2.14.

Irish Diaspora in America .............................................................................. 40

2.15.

Case Company............................................................................................... 42

2.15.1. About Casey’s ............................................................................................ 42 2.15.2. Competitive Advantage............................................................................. 43 2.16.

Chapter Summary ......................................................................................... 43

Chapter 3: Research Methodology ................................................................................. 44 3.1.

Introduction ...................................................................................................... 44

3.2.

Research Objectives ......................................................................................... 44

3.3.

Research Process .............................................................................................. 44

3.4.

Research Design ............................................................................................... 45

3.4.1.

Deductive and Inductive Reasoning .......................................................... 45

3.4.2.

Exploratory and Explanatory Studies ........................................................ 46

3.5.

Research Strategy ............................................................................................. 47

3.5.1. 3.6.

Case Study Selection ................................................................................. 47

Data Collection Methods and Procedures ....................................................... 47

3.6.1.

Secondary Research .................................................................................. 48

3.6.2.

Primary Research ...................................................................................... 49

3.7.

Research Conduct and Ethics ........................................................................... 53

3.8.

Conceptual Framework .................................................................................... 54

3.9.

Local Analysis .................................................................................................... 54

3.10.

Methodology Limitations.............................................................................. 55

3.11.

Chapter Summary ......................................................................................... 56

Chapter 4: Findings & Analysis ........................................................................................ 57 4.1.

Introduction ...................................................................................................... 57

4.2.

Table of Significant Findings ............................................................................. 57

4.3.

Market Entry Prospects .................................................................................... 60

4.3.1.

Trends in the U.S. Market ......................................................................... 60

4.3.2.

Geographical Coverage ............................................................................. 62

4.3.3.

Operational Aspects .................................................................................. 63

4.4.

Distribution Channels ....................................................................................... 64

4.4.1.

On-Line Sales ............................................................................................. 64

4.4.2.

Direct Relationship with Retailers ............................................................. 64

4.4.3.

Brokers ...................................................................................................... 65

4.4.4.

Distributors................................................................................................ 66

4.5.

Ideal Geographic Area for Market Penetration ............................................... 68

4.6.

Promotions ....................................................................................................... 71

4.6.1.

Identifying with the Craft Beer Community .............................................. 71

4.6.2.

Promoting the Brand ................................................................................. 73

4.7.

Ideal Packaging Material for Market Entry ...................................................... 74

4.7.1.

Bottles and Kegs ........................................................................................ 74

4.8.

Precedents of Irish Craft Beer Penetration ...................................................... 76

4.9.

Other Key Findings ........................................................................................... 77

4.9.1. 4.10.

Switch from Traditional to Craft Beer ....................................................... 77 Chapter Summary ......................................................................................... 78

Chapter 5: Recommendations and Conclusion ............................................................... 79 5.1

Introduction ...................................................................................................... 79

5.2

Table and Summary of Recommendations ...................................................... 79

5.3

Recommendation 1: Penetrating the American Market .................................. 82

5.4

Recommendation 2: To Use a Distributor to Penetrate the Market ............... 82

5.5

Recommendation 3: Target Boston, Massachusetts to Launch....................... 83

5.6

Recommendation 4: Promotional Campaigns to Aid the Launch .................... 83

5.7

Recommendation 5: Use Bottles as an Ideal Stock Keeping Unit .................... 85

5.8

Recommendation 6: Consider Precedents Set ................................................ 85

5.9 5.10

Recommendation 7: Target and Hook the Traditional Beer Lover .................. 86 Chapter Summary ......................................................................................... 88

Chapter 6: Group Learning and Reflection ..................................................................... 90 6.1

Introduction ...................................................................................................... 90

6.2

Process of Research .......................................................................................... 90

6.3

Group Dynamics ............................................................................................... 91

6.4

What We Learnt ............................................................................................... 91

6.5

What Would We Do Differently ....................................................................... 92

6.6

Conclusion ........................................................................................................ 92

References....................................................................................................................... 93 Appendix A – Snapshot of the Alcoholic Drinks Market in U.S. .................................... 107 Appendix B – Craft Beer Industry Annual Dollar Volume for Years 2003 – 2012 ......... 108 Appendix C – Irish Population Estimates, 2011 ............................................................ 109 Appendix D – Irish Population in New York .................................................................. 110 Appendix E – Irish Population in Massachusetts .......................................................... 111 Appendix F – Irish Americans in Eastern Massachusetts .............................................. 112 Appendix G – Irish Americans in NYC ............................................................................ 113 Appendix H – Power-Interest Stakeholder Analysis ..................................................... 114 Appendix I – List of People Contacted .......................................................................... 115 Appendix J – Interview Transcript of Association 2 ...................................................... 119 Appendix K – Interview Transcript of Broker 2 ............................................................. 120 Appendix L – Interview Transcript of Craft Brewer 1.................................................... 122 Appendix M – Interview Transcript of Distributor 3 ..................................................... 123 Appendix N – Interview Transcript of Craft Beer Enthusiast 3 ..................................... 124 Appendix O – Interview Transcript of Retailer 1........................................................... 125 Appendix P - Data Collection Highlights........................................................................ 127 Appendix Q – Letter from Casey’s Brewery .................................................................. 131

List of Figures Figure 1: Structure of the Analysis Process………………………………………………...........2 Figure 2: Structure of Literature Review………………………………………………………... 4 Figure 3: Pre-entry Knowledge Requirements………………………………………………….. 5 Figure 4: Pre-entry Experience Requirements …………………………………………………..6 Figure 5: Overseas Market Selection Criteria ………………………………………………….10 Figure 6: Factors of Influence ………………………………………………………………….12 Figure 7: The Hierarchy of Choice of Market Entry Modes …………………………………...13 Figure 8: Strategy Framework ………………………………………………………………….18 Figure 9: Key Players in the Brewing Industry ………………………………………………...21 Figure 10: The Three-Tier System ……………………………………………………………..22 Figure 11: Roles within the Beer Supply Chain ………………………………………………..23 Figure 12: The Marketing Communications Mix ………………………………………………26 Figure 13: Market Share of the Five Largest Breweries over the Years ……………………….31 Figure 14: Production Share of Beer in the Alcoholic Beverages Market…………………...…31 Figure 15: Production of Beer over the Years 2006-2011 ……………………………………..32 Figure 16: Beer Market Volume 2007-2012 …………………………………………………...33 Figure 17: U.S. Beer Market Value 2007-2011 ………………………………………………..33 Figure 18: U.S. Beer Market Volume Forecast 2013-2017 …………………………………….34 Figure 19: 125-Year Brewery Count in the U.S. ……………………………………………….36 Figure 20: U.S. Craft Beer Production …………………………………………………………37 Figure 21: Volume Share for Craft Brewers …………………………………………………...37 Figure 22: Consumption of Craft Beer by Age ………………………………………………...38 Figure 23: Consumption of Craft Beer by Income ……………………………………………..39 Figure 24: Percentage of Irish-Americans in the U.S., by County ……………………………..41

Figure 25: The Research ‘Onion’ ………………………………………………………………45 Figure 26: Types of Secondary Data …………………………………………………………...48 Figure 27: Types of Electronic Interviews ……………………………………………………..50 Figure 28: Types of Sampling Techniques ……………………………………………………..52 Figure 29: Research Process ……………………………………………………………………53 Figure 30: Conceptual Framework ……………………………………………………………..54 Figure 31: Data Analysis Process ………………………………………………………………55 Figure 32: U.S. Volume Share for Craft Brewers ……………………………………………...60 Figure 33: American Craft Beer Week Advertisement ………………………………………...62 Figure 34: Distribution Channels….............................................................................................65 Figure 35: American Craft Beer Industry …………………………………………...………….69 Figure 36: Promotional Strategy Diagram …………………………………………………..…71 Figure 37: Craft Beer Festivals in Boston …………………………………………………..….73 Figure 38: U.S. Beer Consumption by Type ……………………………………………….…..75 Figure 39: Casey’s Brewery Red Ale Mock-Up …………………………………………….…87 Figure 40: Casey’s Brewery Amber Lager Mock-Up ………………………………………….87 Figure 41: Casey’s Brewery Stout Mock-Up ……………………………………………….….88

List of Tables Table 1: Breweries Operating in U.S. in 2013 …………………………………………………36 Table 2: Craft Beer Production in 2012 (by volume) ………………………………….……….36 Table 3: Classification of Respondents by Stakeholders, Country and Company ……………51 Table 4: Summary of Findings …………………………………………………………..….58-59 Table 5: Summary of Recommendations ………………………………………………….79-80

List of Abbreviations B.M.I. C.A.G.R. C.B.P. D.S.D. E.U. F.A.A. F.D.I. G.B.A. H.L. I.P.A. I.P.R. M.B.A. N.B.A. N.Y.C. N.Y.S.E. P.O.P. S.K.U. T.T.B. U.K. U.S. U.S.D.

Business Monitor International Compound Annual Growth Rate Customs and Border Protection Direct Store Delivery European Union The Federal Alcohol Administration Act Foreign Direct Investment Greater Boston Area Hectolitres India Pale Ale The Institute of Public Relations Master of Business Administration National Basketball Association New York City New York Stock Exchange Point of Purchase Stock Keeping Unit The Tobacco and Alcohol and Trade Bureau United Kingdom United States United States Dollar

Chapter 1: Introduction 1.1.

Entering a New Market

The purpose of this research was to advise Casey’s, a start up craft brewery based from Cork, Ireland, that is aiming to launch its own craft beer in the American market. In line with this, the researchers intended to look at a market entry strategy and distribution channel that should be utilised in order to penetrate the American craft beer market. The rationale for selecting this topic is that each researcher found the scope of the project very interesting and engaging since Casey’s is likely to face several challenges in its mission of penetrating an overseas market. Furthermore, playing on each other’s strengths, the researchers were confident of producing an interesting and thought provoking project. Craft beer consumption and production in the United States (U.S.) has seen robust growth over the past two decades and is expected to continue following such a trend for the years to come. The number of craft brewers has increased significantly all over the States. The picture arising from the research portrays America, changing its drinking patterns, shifting from traditional beer towards more sophisticated flavoured craft beer (Euromonitor 2012). As suggested by Koch (2001), market entry mode and market selection are two aspects of a single decision process. This piece of work developed an integrated process of evaluation of the difficulties that a new entrant might face once it decides to penetrate an unfamiliar and competitive American craft beer market. This research then presents a market entry strategy, designed by the researchers through an inclusive spectrum of analysis keeping into account all the factors, internal and external to the company, which could be relevant to the decision making process. The following chart represents the framework used to structure the analysis.

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Figure 1: Structure of the Analysis Process; Source: Adapted from (Ekeledo & Sivakumar, 2004)

1.2.

Research Objectives

The market entry mode strategy is an area that has gathered significant interest in the academic world leading to a very substantial body of research identifying and assessing those factors essential to successful market penetration. The interest toward these issues, studied at different extents and under many aspects, comes mainly from the theory of international investments and from the problems related to international production (Hymer, 1960) (Southard, 1931) (Caves, 1971) (Dunning, 2006) (Dunning 1977). The selection of a market entry mode is considered by Root (1994) as extremely relevant strategic decisions for international firms. This decision of selecting a market entry mode is highly critical, as the researchers believe that Casey’s needs to optimize every aspect that market entry entails for the brewery to be successful in the American beer market. A series of interviews have been conducted with different stakeholders (brokers, distributors, retailers, craft brewers, associations, enthusiasts) bearing extensive business experience in the craft brewing and the alcoholic beverage industries. These interviews provided the researchers with useful insights and a rich array of perspectives allowing in-depth knowledge of the industry.

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More particularly this dissertation aims to respond to the following set of questions: 1) To investigate the market entry prospects of Irish beer into the U.S. craft beer market. 2) To identify distribution channels that should be utilised to enter the U.S. craft beer market. 3) Explore geographic areas in the U.S. to support the launch of Irish craft beer. 4) Identify promotional campaigns to aid market penetration. 5) To investigate the ideal Stock Keeping Unit (S.K.Us) for market entry. 6) To explore precedents of previous market penetration of Irish craft beer into U.S.

1.3.

Report Structure

The report comprises four sections: The first section reviews and assesses the most relevant literature in the field of market entry strategy. The section explores aspects such as pre-entry knowledge and experience for entering a new market, factors influencing market selection, market entry mode, market entry timing and sequence of market entry. It also considers the aspects of marketing communication and brand building strategy for a new entrant to the market. Finally, this part also presents an overview of the American craft brewing industry, exploring its past and future trends and introduces the firm as an object of this study. The second section describes, in detail, the methodology that has been used to carry out the research. This section gives an insight into the different approaches used while highlighting the difficulties that the researchers faced during the research process. The third section presents all the findings and research results related to the mentioned objectives with highlights of all the interviews carried out during the research. The fourth and final section explores the most relevant findings and offers recommendations from these findings. This section critically reflects on factors that are expected to influence the chances of successful penetration of the American craft beer market.

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Chapter 2: Literature Review 2.1.

Introduction

The following chapter will explore the most relevant studies in the area of market entry strategy. The review will then investigate marketing and promotional literature that will help frame some promotional aspects of the entry strategy that the brewery should employ. In both cases, the review explores the entire American market in conjunction with the product offering. The final section of the literature review explores the American craft beer market itself, the geographic areas where the brewery can launch its offering, the current state the market is in and the different and diverse demographic that make-up the market.

Market Entry

Literature Review

Marketing Communications

Casey’s Brewery (Case Company)

American Beer Market

Figure 2: Structure of Literature Review

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2.2.

Entering a New Market

When a company enters a new market, it seeks a specific set of clients to increase its customer base and diversify its business activity. A successful market penetration strategy relies heavily on the company’s aptitude to meet the requirements of new customers (Grigsby, 2007). A business trying to penetrate a foreign market will be required to make relevant evaluations regarding the choice of the entry mode. Normally there are different strategic options for entering a new market and each of them may involve varying resource levels. The four most common modes used by firms are exporting, sole venture, joint venture, exporting and licensing (Agarwal & Ramaswami, 1992). Root (1987) stresses the importance of the right initial choice and the difficulty of changing it afterwards without considerable loss of time and money. 2.2.1. Pre-entry Knowledge and Experience Paunescu (2013) emphasizes the importance of pre-knowledge and experience of an entrepreneur entering a new market; the author claims that there is no one universal recipe for successful entrepreneurship and market entries. Even if there are many similarities in successful ventures stories, there are also factors that distinguish one venture from the other. This study draws on existing research indicating that pre-entry knowledge of the market jointly with entrepreneur’s experience at practical and managerial level will enhance the chance of success for a company (Dencker et al., 2009) (Agarwal, et al., 2004) (Delamr & Shane, 2003) (Franco & Filson, 2006) The study aims to understand the relationship existing between pre-entry knowledge and experience and success of a new venture. The author suggests that this entry knowledge should be analysed under three criteria: 

Personal profile and characteristics of the entrepreneur



Knowledge about the business and the industry



Resources at entrepreneur’s disposal

Figure 3: Pre-entry Knowledge Requirements

Source: Paunescu (2013)

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Additionally, the study reflects on the fact that pre-entry experience can contribute to three categories of entrepreneurial skills: 

Functional skills (ability to perform tasks)



Relational skills (capacity to work with external actors)



Resource Management skills (ability to optimize the management of scarce resources)

The study aims to highlight the importance of start-up business planning as a pre-requisite for successful market entry. Furthermore, the author focuses on the value of social and human capital and claims that, if the entrepreneurial model is adhered to, the firm will be more prepared to deal successfully with unexpected changes in the competitive environment.

Figure 4: Pre-entry Experience Requirements

2.3.

Source: Paunescu (2013)

Market Selection

Market selection, for every company, is a crucial and strategic step of any international business strategy (Root, 1994), (Kobrin, 1976). Contrary to the most prevalent approaches arising from past literature, considering the selection of the market and the mode of entry as related decisions but substantially detached, Koch (2001) suggests that looking at these aspects as two components of a single decision process should be a more appropriate approach. The outcome of such a structured process, can be affected by an exhaustive list of factors and indicates that an inclusive analysis would give the possibility to accommodate very diverse business environments, will help improving the quality of the decision making process and deal with most relevant practices.

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2.3.1.

Factors Influencing the Market Selection

Koch (2001) identifies a series of factors likely to affect the selection of a market for a company that can be internal to the company, external, or mixed. These factors are of high relevance to this study because one of its objectives is to assess why a firm should decide to enter a given market. The author identified a comprehensive list of factors relevant to the market selection and the research will try to explain the relevance of these factors in the craft brewing industry. Koch (2001) suggests that an element deeply influencing the strategic orientation that companies develop is the collective and individual experiences of their workers. At this level it is possible to use a classification based at least on two strategic orientations. The first reflects a proactive, reactive and planned orientation (Glaister & Thwaites, 1993); the second one considers companies as prospectors, analysers and defenders (Miles & Snow, 1984). This strategic orientation is likely to influence the internationalization process of the same company.

2.3.1.1. Internal Factors 

Stage of internationalization: Referring to the international activity of a company or, more in particular, to its export activity



Company strategic objectives: These may assume many forms and depend on company history, business sector, or personal preferences of decision makers setting these objectives. They may imply market shares revenues or profits on a global or on a local scale.



Overseas market selection experience: This implies the assessment of company’s experience in an international business context.



Company international competitiveness: Capacity to access, certain skills and competences of extreme relevance to perform in a global business environment



Calculation methods applied: Based on two alternatives: the first approach compares methods relying on risk appraisal versus methods based on advantage evaluation; the alternative approach, compares methods based on costs to methods based on extent of marketing control (Root, 1994) (Porter, 1980).

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2.3.1.2. Mixed (External/Internal) Category 

Own/accessible resources: Firms with higher availability of resources, and through different forms of partnerships have access to resources of other firms, are favoured, ceteris paribus, in the selection of their worldwide market.



Networking: Companies should develop initiatives such as taking part in international exhibitions, trade fairs; set up strategic alliances or joint ventures with other players; use the same suppliers, buyers and create ad hoc consortia. Companies that focus on developing their business networks are facilitated in their internationalization process (Johanson & Mattson, 1988).



Similarity/proximity of overseas market: Vahlne & Wiedersheim-Paul (1977) found that so-called Psychic distance often influences overseas market selection. Factors like, company employees' familiarity with a country, management’s experience with a country, strength of cultural and business links (see the immigrant effects discussed later on) between countries are factors likely to have a substantial relevance in the market choice.



Market portfolio congruity: The market portfolio of a firm may change over the life of a business, as it is a consequence of incremental changes, perhaps responses to decisions for pursuing established business objectives. Root (1994) suggests that, over the time, the logic of market selection may change. It is important that a company's market portfolio is compatible with a company’s current competitive environment and future development strategy. In order to meet its objectives and find a better fit with its external environment the company might be required to modify its existing portfolio of assets.



Expansion sequence optimisation: It is important to define the most suitable way to enter international markets and the related entry sequence. This must be done keeping into account the future anticipated trends of the international market environment and a firm’s future resources, competencies and capabilities. A preliminary stage of this analysis may suggest clustering countries on the basis of their socio-economic features and choosing the strategy that allows using resources efficiently and sustaining the growth.

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2.3.1.3. External Factors 

Country market potential: Country market potential is one of the most common and relevant criteria used in market selection (Johanson, 1997) (Root, 1994) (Moyer, 1968). An aspect that should be kept into account while assessing this factor is the potential risk of political manipulation of the relevant data regarding the product. Another aspect deserving careful attention is evaluation of product market specific factors used in estimating the country’s market potential.



Competitive significance of the market: A conventional and relevant point of interest regards the significance of lead markets as an indicator to assess company’s current performance and as an input to predict its future changes (Elliott & Cameron, 1994). These leading markets are usually big, strong and free from administrative regulation and protective measures with strong opponents. These markets are of relevant strategic importance in global marketing (Elliott & Cameron, 1994).



Anticipated overseas market risks: Assessing market risk in foreign market selection is the aspect that, perhaps, has received the highest attention in the literature (De la Torre & Neckar, 1990) (Backhaus & Meyer, 1986). Export credit guarantee institutions like banks and other organisations concerned with international business have mainly driven this attention. Czinkota & Ronkainen, (1996) identified three main areas of business risks in an international context:  Possession risks (expropriation, confiscation and domestication)  Operational risks (exchange risks, over- investment and price controls related risks)  Transfer risks.

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Figure 5: Overseas Market Selection Criteria

2.4.

Source: Koch (2001)

Market Entry Mode: A Strategic Decision

A relevant body of past studies covering fields such as global trade, industrial organisations and market imperfections have revealed several aspects likely to have an influence in choosing the target market for a potential entrant. In this regard Dunning (1977, 1980 and 1988) integrated the perspectives from these areas and suggested a framework according to which three main factors affect the choice regarding how to penetrate a new selected market:

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

Ownership advantages of a firm.



Location advantages of a market.



Internalizations advantages of integrating transactions within the firm.

There have been numerous empirical studies, which attempted to justify the choice of entry mode; however, the literature did not manage to explain in a satisfying way the relationship existing among the relevant factors that should influence the final entry choice. (Kobrin, 1976) The criticality of the decision of choosing the best market entry mode for a firm is very high because this choice might have a relevant effect on a firm’s global business performances. (Klein & Roth, 1990) (Anderson & Coughlan, 1987). According to Agarwal & Ramswami (1992), examining the importance of interrelationships amongst the considered factors is essential because they can explain those firms’ behaviours that cannot be explained relying only on the independent factors. Another factor that Agarwal and Ramswami (1992) have identified as relevant for the choice of a market entry strategy is managerial perceptions. If many of the academic works mentioned have always assumed that advantages directly related to a location or a country are exogenous advantages and should be constant for all the companies deciding to enter a given market this might change according to the perceptions managers of a company have about these variables. In particular, factors that may influence such a perception have been identified in managers past experience regarding that particular geographical area or market, their professional experience or professional background. The importance of managerial perceptions in making decision is, as well, supported in the organisational behaviour literature (Cyert & March, 1963).

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Figure 6: Factors of Influence

2.4.1.

Source: Agarwal and Ramswami (1992)

The Hierarchical Model

Past literature has mainly been oriented toward traditional classification based on the distinction between equity based (fully owned operations or joint ventures) and non-equity based market entry modes (mainly based on contracts). Some more past studies have highlighted the importance of other factors specifically connected to firms (Erramilli & Rao, 1993; Kim & Hwang, 1992; Kumar & Subramaniam, 1997; Madhok, 1997), or related to the target country (Anderson & Gatignon, 1986; Kogut & Singh, 1988; Tse & Al 1997). In a study made in 2000, Pan and Tse drew upon past literature and argued that the entry mode that a firm will choose can be analysed under a hierarchical perspective (Kumar and Subramaniam, 1997). The authors claim that this approach would be structured by managers in such a way that different market entry modes are ranked into a multilevel hierarchy according to a set of appraisal criteria for each level. Managers should keep into account a limited number of factors per level of the defined hierarchy.

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Figure 7: The Hierarchy of Choice of Market Entry Modes

Source: Pan & Tse (2000)

This approach is centred on evaluating the presence and the level of investment in equity and, in doing so, classifying in equity modes (wholly owned operations and equity joint ventures) and non equity based modes (contractual agreement or export). At the first level, there is a distinction between equity and non-equity entry mode. The following step would be to evaluate which sub-category, between the equity or non-equity entry modes options to choose to develop further. In this study, the hierarchical model is tested empirically on a sample of more than 10,000 foreign firms entering the Chinese market in the period 1979 to 1998. The findings indicate that there are some factors that influence managers while choosing between equity versus non-equity option. However the influences tend to be weaker for choices made in the lower levels of the hierarchy. The results provide empirical evidence in support of the hierarchical model of market entry modes.

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2.4.2.

Exporting Versus Foreign Direct Investments Mode

The selection of a market entry mode can be influenced by several factors. Due to the difficulty to include all these factors in one study, many other studies tried to narrow the focus of the research. Chung and Enderwig (2001) proposed a study on the eclectic framework as proposed by Dunning (1977, 1980 & 1988) and extended by other authors (Hill et al 1990), (Kim and Hwang 1992) which has been widely used to explain the choices between Foreign Direct Investments (F.D.I.) and other entry modes. (Dunning, 1973). In this study the authors analyse a sample of 124 firms from New Zealand operating in Taiwan (the only overseas market considered) with the aim of comparing two entry modes exporting vs. F.D.I. The analysis was conducted using a logistic regression analysis and factors examined in the study were: 

The International Experience: Defined as firm’s experience with Japan.



Immigrant Effect: According to which, immigrants from the host country are likely to facilitate the market entry process acting as a connection bridge amid the firm and the host country. Immigrants often have a significant knowledge of the country and of its culture (Gould, 1994; Lever- Tracy et al., 1991).



Market Size: Indicated as a relevant effect from many past studies (Agarwal and Ramaswami, 1992; Kwon and Konopa, 1993; Root, 1994; Terpstra and Yu, 1988).



Service Requirements: The service requirements of a product, according to several studies, can also have an influence in the choice of market entry mode. When high level of services, pre or after sales, are required by a manufacturing product companies tend to produce directly in the host market to offer an adequate level of performance (Anderson & Coughlan, 1987; Ramaseshan & Patton, 1994).

The study found that three variables were significant. They are product type (service vs. other), the immigrant effect and firm’s international experience (experience with Japan). Perhaps the most relevant finding of the study is the impact of the immigrant effect, according to which firms established by immigrants’ native of the host country tend to opt for F.D.I. to enter a new market.

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2.4.3.

The Internalization Theory

This theory aims to explain the reasons according to which a organisation should decide to set up a direct facility in a host country instead of setting up partnerships agreement with other players. Rugman (1980) argues that the majority of these studies are part of the subset of the general theory of internalization. Other authors offered important contributions in this regard. McManus (1972) developed the internalization theory, trying to explain the reasons why firms invest directly in manufacturing facilities abroad (Buckley & Casson, 1976). Coase (1937) argued that companies might choose F.D.I. when internal transactions are less expensive than external transactions. Buckley (1988) indicates that testing the internalisation approach in the modern theory of the multinational enterprise presents several difficulties. The author claims that because of the complex structure of the theory, the conclusion drawn is that is not possible to execute a rigorous testing at the most general theoretical level. However, specific restricting assumptions are required to proceed to rigorous testing.

2.4.4.

The Resource Based Theory

The resource based theory looks at the organisation as the basis of competitive advantage, instead of looking at the industry, (Capron & Hulland, 1999). Organisation’s internal resources as assets and capabilities are the source of its competitive advantage (Barney, 1991) (Teece, et al., 1997). Contrary to what Porter (1980) claims, success of firms depends on how the firm relates to the competitive environment. The industrial-organisation-based (IO-based) theories’ view considers the firm as a ‘combiner’ of input looking to optimize both production and distribution process (Barney, 1991). Following a similar path, the resource based theory, recognizes that resources might be both heterogeneous throughout the firms and not perfectly mobile. But it goes further by indicating that a player’s success in the marketplace may also depend on the firm’s role in shaping the environment in which it operates and not only on the environment itself (Conner, 1991). Unlike competing theories, as explained later on, the resource-based theory considers sole ownership to be the preferred entry mode unless proven otherwise as (Ekeledo & Sivakumar, 2004).

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2.4.5.

Normative Decision Theory and Other Approaches

Normative decision theory proposes that the choice of entering a given market should be based on the trade off between risks and returns. According to this approach, the entry mode that offers the highest return adjusted per the level of risk should be the choice of every firm (Anderson & Gatignon, 1986). Evidence, however, indicates that the final choice of entering a new market will be influenced by factors like the availability of resources intended as the managerial and financial capacity of a firm to operate in a given market and the need for control as the need for a firm to influence operations, systems, decisions in that foreign market (Cespedes, 1988), (Stopford & Wells, 1972; Koch, 2001; Koch, 2001).

Control is desirable to improve and manage a firm’s

competitive position. However, a stronger degree of control implies higher ownership of the venture. In this case, risks are likely to be higher due to a higher commitment of resources and the risk connected with the responsibility of decision-making. The choice of an entry mode ends up a being what managers or entrepreneurs perceive to be the right balance among all these factors (Kalyanaram & Gurumurthy, 1998).

2.5.

Timing of Market Entry: Pioneer versus Followers

A market pioneer is defined as the foremost actor to enter into a new market and he is also defined a “first mover” (Schmalensee, 1982; Bond & Lean, 1977; Bond & Lean, 1979). Schmalensee (1982) presents a market model in which rational buyer behaviour, in the case of imperfect information regarding the quality of products, can give advantages to pioneering brands. This work has some implications because the relevance of the aforementioned advantage changes across markets with different basic conditions. The study draws its motivation from two sorts of evidence from the past research. First, Bain (1956) in an empirical study of conditions of entry concludes that buyer preferences for product of sellers already in the markets versus those of potential entrant products are, on average, larger and represent the most frequent barrier to entry. Many past studies treated advertising as a proxy for product differentiation and to explain a relationship with profits. Bain concluded that advertising was not the only factor at work. The second aspect is the traditional wisdom in marketing supported by empirical research on the fact that there are relevant advantages in being the first entrant in some markets.

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Normally, marketers predict little chance of success for the so called ‘me too’ brands, those selling at a lower price but pretending to be identical to established brands. Bond and Lean (1977, 1979) find that pioneering brands get long-lived and important advantages in the prescription drugs market. Later entrants manage to gain a foothold only if they offer distinct therapeutic effects; oftentimes, lower prices are not sufficient. Moreover, developing new products could require important investment of time and money. The issues regarding product innovation and new product development have interested economists since authors such as Schumpeter emphasized their importance in his description of dynamic capitalism. (Fethke & Birch, 1982). Factors to be taken into account by the firm, in this regard, are the increasing costs connected to the development period, the potential reduction of profit caused by the prolongation of the development period and the possibility that competitors can innovate and imitate, which affect the eventual reward available to the firm (Fethke & Birch, 1982).

2.5.1.

Defining a Market Strategy Framework

Kaliyanaram and Gurumurthy (1998) suggest that the first entrant in a market will have a significant market share advantage over later entrants. However, later entrants can still be successful while entering a new market by adopting distinctive positioning and market strategies.

This study suggests that even if pioneers become powerful they may become

complacent or not be in a position to satisfy the growing demand of the place. Therefore there might be a chance for a new player to take advantage of this gap and find innovative ways to match customer’s requirements. The authors define a market entry strategy framework that helps to define strategies for growth, penetration and shares retention axed on three main areas. Having analysed the various strategies that successful pioneers and late entrants adopted, a framework has been developed that can be used to formulate strategies for growth, penetration or share retention. The first component in this framework involves understanding and developing market dynamics. The critical areas to be analysed are: 1) Drivers of technology that may generate a relevant shift in the market. 2) Changes in governance: shift in regulations with a major effect on the industry organisation. 3) The growth and size of the prospective market. 4) The competitive profile.

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The second component of the framework implies the conduction of an internal appraisal of the company’s abilities and product offerings. After the completion of external and internal appraisal, there is the third constituent of the framework where a company needs to define the development of the product strategy. Strategic elements included segmentation, positioning and decisions on marketing instruments.

Figure 8: Strategy Framework

2.6.

Source: Booz Allen & Hamilton (1998)

Market Entry Modes in Mature Industries: The U. S. Brewing Industry

Swaminathan (1998) evaluates two processes, niche formation and resource partitioning that, independently, might be of relevance whenever a company is aiming to penetrate new market segments of mature industries. Environmental changes likely to facilitate the entry of a new firm represent the focus of the argument of niche formation whilst the research-partitioning argument is based on the differentiation internal to a mature industry, which implies the division into subgroups composed of generalists and specialist. Both the discussed arguments, niche formation and account partitioning, stress forces that are endogenous and exogenous to the industry, respectively. The author in order to resolve this ‘theoretical’ dispute models the effects of niche formation and resource-partitioning together on

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the founding of two segments of the U.S. brewing industry: brewpub and microbrewery segments. The findings indicate that niche formation argument explains in a better way founding for both microbrewery and brewpub. A second important result is that limited evidence has been found regarding the fact that resource-partitioning process is being practiced again in the microbrewery segment of U.S. brewing industry.

2.7.

Sequence of Market Entry

Sequencing market entry theory relates to the decision a company makes regarding how to enter a market or segment of a market, whether doing it simultaneously or initiating a gradual entry (Douglas & Craig, 1992). The past decades have seen a substantial growth in the internationalisation of businesses. With the number of firms operating in multinational markets constantly increasing, the focus of attention has shifted to decisions concerning the standardisation vs. adaptation of the marketing mix across countries from initial entry decisions. More recently, attention has moved to the formulation of global marketing strategy. These changes indicate a need for greater concern with understanding marketing’s role in the development of global competitive strategy. (Kalisha, et al., 1992).

2.7.1.

The Waterfall Model

The waterfall model is based on the work of Ayal and Zif (1979). This model is a marketing strategy that suggests entering the target markets one after another, commencing from the one with the highest level of technology and moving towards markets that are technologically less advanced. Economic factors (fixed costs of introduction), Diffusion dynamics (the lead effect), and competitive forces influence the choice of either a waterfall or sprinkler strategy. However, Kalisha et al (1992) demonstrated that a multinational business is not systematically forced by global competition to introduce a new product simultaneously in all its markets A positive aspect of this approach is that it allows a firm, which is entering a new market, to learn from its mistakes and have a deeper control on the product launch, as it will not be exposed to several markets at the same time.

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2.7.2.

The Sprinkler Strategy

Contrary to the waterfall strategy, the sprinkler strategy promoted by Ohmae (1985, 1987) represents a marketing strategy consisting of a company choosing to introduce a product simultaneously in several markets. The sprinkler strategy is particularly suitable for a company aiming to be a first mover that wants to anticipate moves by competitors. One of the main problems that may arise with this approach is that it requires very substantial resources that senior management may be reluctant to provide. In addition, a further risk is that companies could miss the opportunity to gain a sound understanding of the market, neglecting to take the right path to success. Adopting a sprinkler strategy may lead to a series of advantages such as the opportunity to build entry barriers quickly, considering the simultaneous activity on several markets and the possibility of enjoying higher streams of cash flow.

2.7.3.

The Wave Strategy

The wave strategy, introduced by Lymbersky (2008) is focused on cultural differences and ranks countries and markets in different groups (waves) according to the similarity to the home market of a company. Hence, the first wave to be targeted is made up of markets that are comparable to the home market with slight variations. The wave strategy contains elements of both the sprinkler strategy, and the waterfall strategy. Lymbersky (2008) suggests that in real market situations, companies are giving increasing relevance to mixed timing strategy to enter foreign markets. According to Hofstede (2001) and Hall (1990) countries that present similar cultural characteristics such as Austria, Switzerland and Germany should be grouped in one set. The logic underlying this process is that in the first wave (group), the concept of the home market can be replicated in an easy way and eventual differences can be analysed. The experience and the knowledge gained thanks to these market entries should be used in the planning process of the following wave. The second wave should be launched only after that the first wave generates a solid stream of cash flows. However, the waterfall strategy seems to be favoured by academics and businesses. Ayal and Zif (1979) argue that the waterfall strategy should be the preferred over sequence strategy in time of fast growth, low competitive pressure and growing sales.

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2.8.

Industry Overview 2.8.1.

The Business Environment for the Beer Industry

According to a report produced by SAP and Deloitte (2005) to understand today’s beer industry, it is necessary to look at the beverage industry in total. The beverage industry has been dealing with many new prospects to capitalize on in the recent years. Shifts in consumer demands and change in preferences require a constant effort to maintain current customers and attract new ones. Beverage companies need to offer superior quality products, resourcefully distribute them and offer low prices to survive in an environment shaped by increasing competition. Additionally, firms need to ensure safety and be dynamic to capture new markets trends by updating their offering with new products (SAP & Deloitte 2005). According to this study, private labels are greatly influencing the environment. The sector has seen the birth of a few global ‘giants’ that produce many brands and are often active in both the categories of the market: alcoholic and non-alcoholic beverages. According to Euromonitor (2013), beer consumption in the U.S. in 2012 has grown after three years of decline. Regarding craft beer, according to U.S. Brewer Associations (2013), the industry has registered a growth in 2012 of 15% by volume and 17% by dollars compared to the performance in 2011 of 13% by volume and 15% by dollars.

Figure 9: Key Players in the Brewing Industry

Source: SAP, Deloitte (2005)

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Furthermore, the report identifies four key areas in which beer producers should concentrate their efforts for lasting growth: 1) Revenue Protection: Focusing on factors such as improving the availability of products, better management of customer relationship and of the distribution phase. 2)

Cost Reduction/Margin Improvement: Improving working effectiveness.

3)

Improved Asset Utilization: Reducing inventory levels.

4)

Regulatory/Assurance: Participating in retailer assurance schemes and achieving full compliance with legislation. 2.8.2.

Market Trends and Industry Challenges

Sankrusme (2008) indicates that to identify the changing patterns of global competition in the beverage industry, a continuous analysis of competing forces is required. The aforementioned study highlights the importance of tracking market trends for brewers and lists six elementary themes: 1) Distribution systems complexity with conflicting interests 2) Changes in lifestyle and demographics 3) Increasing bargaining power of retailers 4) Competition intensity 5) Issues related to product safety

6) Consolidation and globalization 2.8.3.

The Three-Tier System in U.S.

At the end of the prohibition in the U.S., member states received the power to control production, importation, distribution, sale and consumption of alcohol within their limits (Sarasin, 1998). The brewers willingly offered to operate under a new system of distribution selling to independent distributors. Brewers were no longer allowed to control or own retailers. Cash sales between the tiers were meant to avoid control by brewers. This legal framework has paved way for the current formation of the beer industry (Sarasin, 1998).

Figure 10: The Three-Tier System

Source: SAP, Deloitte (2005)

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This was the birth of the three-tier system. The primary purpose were to create a system that facilitated state and local control, discouraged aggressive marketing and encouraged moderate consumption. Beer distributors have a complex role inside the three-tier system. Distributors purchase beer from the manufacturers, reduce the brewer's capital requirements and assume, directly, the risk of retailers not executing the final payment. The wholesalers then store the beer at their facilities until the retailers request it. 2.8.4.

Complex Distribution Systems with Conflicting Interests

Often brewers’, distributors and merchandisers sell their products. This practice is most prevalent in the U.S. As illustrated in the chart below, each unit performs different roles within an intricate supply chain (SAP and Deloitte 2005).

Figure 11: Roles within the Beer Supply Chain

Source: (SAP & Deloitte 2005)

The aforementioned study suggests that this arrangement is likely to create conflicts of interests between beer manufacturers and distributors: For Beer Manufacturers: Registered increased sales and return on investments at the expense of distributors’ margins; keep developing new product and packages increasing the complexity of distributors work. Beer Distributors: Historically have lower profits and higher capital requirements for distribution networks; they push consumers toward brands offering the highest margins, consolidate their activity and spread their fixed costs on greater volume to obtain cost reduction, invest in warehousing and distribution equipment and try to acquire new customers. On the other hand, it has to be noted that the retailers’ bargaining power is constantly increasing, pushing beer makers to improve the agility of their supply chain, with cost efficiency as a primary target. The growth of private beer makers, craft brewers in particular, shows how the introduction of a new product could be an important source of differentiation and competitive advantage.

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Retailers use their influence to set superior standards for better service quality and operational excellence. Thanks to their direct relationships with clients, retailers have deeper knowledge of consumer behaviour. The study suggests, as beer distribution process improves, many producers attempt to get closer to the consumer by using direct-to-consumer marketing approaches. For example: active monitoring of in-store activity and direct store delivery (D.S.D.). 2.8.5.

Distribution Channels and Supply Chain

In a competitive business environment that features fierce competition, shifting consumer trends and conflicting interests between manufacturers and distributors, the supply chain faces systematically considerable pressure. Retailers regularly ask for better quality and shorter delivery times and these requests put pressure on manufacturers to achieve higher efficiency in managing their supply chain. Retailers identified the following as steps to improve a supply chain: • Ensure on-shelf product availability • Increase flexibility • Accurately forecast demand • Implement a fully integrated returnable containers (empties) management process • Lower costs by controlling high-value empties assets • Increase control by managing empties at customer locations • Tracking empties to reduce manufacturing problems.

2.9.

The Legal Framework

The legal requirements in the U.S. alcoholic beverage sector are quite complex and industry players are required to comply with regulation at a federal and a state level. The Tobacco and Alcohol and Trade Bureau (T.T.B.) states that a business willing to import alcoholic beverages in the U.S.: 

Needs to have a permit as requested by The Federal Alcohol Administration Act (F.A.A.) from T.T.B.



Needs to maintain a staff and a business office in the U.S. or, alternatively, must contract an existing licensed importer in the U.S. Making an agreement with an existing commercial importer registered in the U.S. eliminates the needs of an importer permit.



In order to have a permit requested by the F.A.A. must complete a T.T.B. form 5 100.24. Jointly to other qualifying documents for each location where he plans to conduct business. For being a wholesaler as well as an importer of beverage alcohol products it is needed to apply for both permits. A permit as an importer does not

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routinely allow conducting business as a wholesaler. 

Needs to pay the Federal Alcohol Excise Tax on beverage alcohol products when these are removed from U.S. Customs and Border Protection (C.B.P.) port of entry.



Needs to have its product’s label approved or a certificate of exemption from label approval before to introduce products to interstate commerce so to ensure that products meet federal law requirements.



Needs to file pre import application to ensure proper tax classification and that products are manufactured meeting federal law requirements.



Needs to meet state requirement in addition to federal requirements (The Tobacco and Alcohol and Trade Bureau, 2013) .

2.10. Marketing Communications Experts in the field of marketing agree that, no matter the organisation’s size, scope and market, all organisations need to utilize communication in varying degrees (Shrimp, 2010) (Fill, 2009) (Broderick & Pickton, 2005), be it directed to consumers or focused on other businesses. Marketing communications is an integral part of a firms’ overall marketing push and directly the market performance of a product offering or service. Organisations use a multitude of marketing communication tools that helps it engage its target market better (Fill, 2009). The primary forms of marketing communications include traditional/mass media or above the line marketing, sales promotions, point of purchase (P.O.P.) communications, online advertising, public relations campaigns and various other forms of collateral (Shrimp, 2010). 2.10.1. Marketing Communications Mix Marketing communications utilizes three key components: tools, media and messages. Advertising, sales promotions, direct marketing, personal selling and public relations make up the five principal communication tools that firms employ. The messages that firms attempt to convey are either informative or emotional depending on the firm’s product offering and the target audience it is trying to connect with. In order to deliver its key messages using the various communication tools available, firms use two types of media: traditional media, which refers to printed and broadcast media. The other form refers to the increasing use of technology, more particularly the Internet as a means of communication and is gaining popularity among firms due to the nature of the medium, which allows for two-way interaction between firms and its audience (Fill, 2009).

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Figure 12: The Marketing Communications Mix

Source: (Kotler & Armstrong, 2010)

2.10.2. Advertising Consensus suggests that there is no one all-encompassing theory that explains how advertising works as the very nature and goals of advertising is dependent on the aims and objectives of the firms that utilize them (Fahy & Jobber, 2012). Compounding this is the fact that advertising is frequently combined with a multitude of other promotional elements, which lends to the difficulty to come up with one all-encompassing theory and definition (Broderick & Pickton, 2005). Most books on the matter therefore define the term in a broad and general view such as the way Kotler (1999, p.692) defined it: “Any paid form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor.” It is also important to note that the flexibility of this form of communication lends itself well to organisations of different sizes, as firms are able to tailor their advertising effort according to the size and demographic of its intended audience (Fill, 2009); as such, the key role and function of an advertising campaign is to communicate with specific and target audiences. There are several key benefits of advertising such as the ability to reach a mass audience and although mass advertising is viewed as an expensive initiative, the cost trade-off is outweighed by the ability of advertising to reach many million members of a firm’s target audience, indeed, the cost-individual reached ratio is relatively low (Broderick & Pickton, 2005).

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Advertising as a potent tool for increasing awareness and sales, as one would imagine, has strong proponents from industry and the academe such as Jones (2007) who believes that advertising is a key component in influencing an individual to buy a product they have never purchased previously. Additionally, it positively influences the creation and the maintenance of brands, helps differentiate brands from others and ultimately helps increase sales. This train of thought views advertising as a ‘strong force’ (Fill, 2009) (Fahy & Jobber, 2012) (Broderick & Pickton, 2005). An alternative to this view is known as the ‘weak force’ of advertising, which raises doubts about the presumptions made by the strong force proponents. These weak force advocates believe that a consumer’s buying behaviour is driven more by habit than by advertising exposure and that advertising merely works in conjunction with an individual’s thoughts and beliefs on the brand (Bernard, et al., 1998). While advertising is viewed as significant, proponents of the weak force theory such as Ehrenberg et al. (2002) believe that advertising is best viewed as a way to reinforce values, sustain brand value and preserve market share. As with any two opposing sides to an argument, both viewpoints do have merits and do agree on some aspects such as the belief that advertising can be very effective.

2.10.3. Sales Promotion Sales promotions are defined as any activity or incentives to consumers or the trade that will drum up sales and stimulate demand (Fahy & Jobber, 2012). Its objective is to encourage a particular group of people to behave in a specific way. The difference between sales promotions and advertising is that the latter is usually undertaken when a firm wants to build and develop market awareness for a certain product or brand. Furthermore, advertising is viewed as a longterm investment for a firm while sales promotions are geared towards short term, temporary and immediate upward shifts in sales (Shrimp, 2010). Manufacturers utilize sales promotions to entice retailers, wholesalers or end users to buy a product and encourage the manufacturer’s sales force to aggressively push and sell its products. Retailers on the other hand utilise sales promotions to encourage sales through inducing its customers to buy more and is presented as an added value to the basic product that is intended to encourage buyers to act now rather than later (Fill, 2009). There are two elements to sales promotions if looked through a value orientation frame: value increasing and value adding (Peatty & Peatty, 1994). Value increasing indicates that the value created is manifested through changes to the product quality or quantity or by lowering the price. Some examples of value increasing promotions are discount pricing, multi packs, payment terms, guarantees and coupons. Value adding promotions; on the other hand, is defined as offering an augmented offering that serves to add a premium to the product. Samples, product

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trial, in mail trials, club cards or loyalty programs are some examples of value adding promotions (Fill, 2009). As enumerated, there is a wide range of ways to utilise sales promotions and as such, firms use sales promotions for a wide variety of reasons (Peatty & Peatty, 1994). Various studies suggest that sales promotions can be effectively utilized to introduce new products or to rejuvenate sales of a mature one (Shrimp, 2010) (Fill, 2009). Additionally, sales promotions can be employed to reduce distributor risk, reward previous purchase behaviour, add value via sampling initiatives and improve the efficiency by shifting and adjusting demand of slow moving products or vice versa (Fahy & Jobber, 2012). Statistics suggest that sale promotions are a growing element within the marketing communications mix. (Broderick & Pickton, 2005). A reason for this growth is the changing dynamics between retailers and manufacturers and distributors. Over the years, retailers have grown in size and power to a point that it is able to dictate terms to manufacturers and distributors. These retailers have pushed for more and more sales promotions and P.O.P. merchandising as it is a preferred method for retailers (Broderick & Pickton, 2005). Strong sales promotions to the trade have become essential part of manufacturers push strategies (Broderick & Pickton, 2005). Another reason for this marked increase in sales promotions is the fact that the fragmentation of the market has seen a reduced effectiveness of traditional mass media (Broderick & Pickton, 2005). Studies suggest that mass media is losing is effectiveness due to a distrust of advertising messages among the consumers (McCombs & Shaw, 2013). This ineffectiveness of mass media has lead firms to lean on sales promotions more and more.

2.10.4. Public Relations The Institute of Public Relations (I.P.R.) describes public relations as the planned and sustained effort to establish and maintain goodwill and mutual understanding between organisations and the public. The activities that public relations encompasses is varied, from monitoring public opinion, lobbying, publicity, sponsorship, donations, press releases and maintaining goodwill among its target audience (Broderick & Pickton, 2005). Much debate has been waged as to whether P.R. and marketing go hand in hand or not, consensus however indicated that P.R. is fundamentally about enhancing the image of a brand or organisation and is separate from the sales function that is commonly associated with marketing (Broderick & Pickton, 2005) (Fill, 2009) (Kotler, 1999).

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2.11. Building Brand Community Creating and building brand loyalty is a facet of any firm’s marketing plan (Kotler & Armstrong, 2010). As a relationship is fostered between firms and its consumers, brand loyalty is created whereby satisfied customers continue to purchase a favoured brand (Fahy & Jobber, 2012). Buyers, meanwhile, feel a sense of belonging with the brand and other advocates of the brand, therefore creating a brand community. In most cases, small & medium enterprises as well as niche products in the market build up and foster a strong brand community as these small firms and niche players rely on repeat business and word of mouth to survive in the market place (Muniz Jr & O'Guinn, 2001). Part of the success of brands that have created very strong ties to its user base, such as Jeep or Nutella (McAlexander, et al., 2002), is the sense of belonging that these brand communities afford its members. Stronger interpersonal ties and affiliation with the brand is built through the sharing of meaningful experiences with other brand advocates and therefore enhances the mutual appreciation each member of the community has for the product (McAlexander, et al., 2002). Companies can build and further strengthen its relationship with its user base through participating and actively engaging visitors of enthusiast trade shows and meet-ups. Additionally, firms can build a community utilising a variety of different promotional activities, events, social gatherings and by the creation of fan clubs and other programs designed to strengthen customer-firm relationships (Muniz Jr & O'Guinn, 2001). Research suggests that an emerging and important aspect of creating and building a brand community is through the use of the internet and social media (Muniz Jr & O'Guinn, 2001) (McAlexander, et al., 2002). The utilisation of company websites as a means for promotion is on the rise due to the relatively low cost to reach ratio. Company websites are also seen as a hub for a firm’s online advertising and as such, a good website is essential for a successful and integrated online advertising campaign (Shrimp, 2010). The most effective websites as noted by Muniz Jr & O'Guinn (2001) were often quite elaborate and included text, pictures, and sound. The content on these sites were very extensive and were continually updated with new content. Organisations aiming to build a community have also turned to social media. The emergence of social media as a marketing tool has reshaped the way organisations approach building relationships with its target audience (Fahy & Jobber, 2012). There are some perils and pitfalls that organisations should bear in mind when utilising social media however. Organisations should be aware that traversing branding through social media isn’t as straightforward as other forms of marketing communications. An interesting paradox occurs wherein the organisation no longer controls the reach and impact of their promotional messages, the consumers did (Fournier & Avery, 2010). Consumers share their experiences with the brand online, ranked and rated content, offered reviews and reposted the content on other websites for their friends to see.

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As firm generated content can be seen as disingenuous, consumers tend to put more weight on the opinions of fellow buyers of the products. Social media technologies such as blogging, tweeting, social networking and bookmarking have created an arena for the consumers to share and discuss their experiences of brands with others in their online social network. Crafting an image of authenticity, building buzz, encouraging and not interfering with its user base’ opinions and comments are ways to create a good brand image online (Fournier & Avery, 2010).

2.12. Outline of the American Beer Market 2.12.1. History of Beer in America Beer is one of the oldest drinks known to mankind. It is believed that beer has been brewed in the U.S. from the time the pilgrims had arrived to find a place to settle. The mid 1600’s to about 1800 are known as the early days of beer brewing in America, where twenty-six breweries and taverns were indicated in an old map of New Amsterdam (now New York City (N.Y.C.)) (Baron, 2007). During the 1800’s, brewing began to rapidly expand in the U.S. and in the latter part of the 19th century, brewing emerged as a significant business where American brewers began to brew lager style beer which was a stark shift from the traditional British-style ale. The early 20th century brought about the Prohibition era where breweries made heavy losses and had to sell their equipment for substantial losses. After the repealing of the Volstead Act which lifted the ban on alcohol, national and regional brewers dominated the market (Chandler, 1977). World War One posed a grave threat to the brewing industry since the government had rationed the supply of grains to breweries. In the years to come, production persisted to grow at a slower rate than consumption. However, the period after World War Two the brewing industry consolidated a great deal (Elzinga, 2011) with big firms such as Anheuser-Busch, Pabst, Schlitz, and Blatz capturing 75% of the market share by 1981 (please see figure 13 for market share) (Adams & Brock, 2001). Subsequently, by year 2006 this number rose to 83.9% (Elzinga, 2011).

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Five Largest Breweries (%) 90

83.9

80

Five Largest (%)

70

74.3

75.9

1978

1981

87.3

85.2

83.9

2004

2006

64

60 47.6

50 39

40 24.9

30

28.5

19 20 10 0 1947

1954

1958

1964

1968

1974

1984

1994

Figure 13: Market Share of the Five Largest Breweries over the Years, Source: (Adams & Brock, 2001), (Elzinga, 2011) Post 1980, the beer production rose to dizzying heights and international dimensions emerged when American breweries started exporting abroad and imports steadily rose. Today, the American beer market is moving towards global integration (Economic History Services, 2010).

2.12.2. Beer Production in America

Alcoholic Drinks in America 15%

America contributes 15.3% (MarketLine, 2013) of the global beer market value through its 2031 breweries all over the country

(National

Beer

85%

Wholesalers

Association, 2012). Beer comprises 85% of the production in the total beverage market in the U.S. since it is paired-up with food in

Beer

Other Alcoholic Beverages

restaurants. While beer production peaks in summer, a decline in beer production was reported in 2012

Figure 14: Production Share of Beer in the Alcoholic Beverages Market, Source: (Freedonia Focus Reports, 2013)

(Freedonia Focus Reports, 2013). The production of beer in America has been uneven over the years (2006-2011). The years 2006 - 2008 show an increase in production due to good economic conditions. However, in the years after, it appears that the beer industry has taken a severe hit due to the recession. The following graph depicts the production of beer for the time period 2006-2011.

31

Beer Production (in million litres) 23,600.00 23,400.00 23,200.00 23,000.00 22,800.00 22,600.00 22,400.00

22,200.00 22,000.00 2006

2007

2008

2009

2010

2011

Figure 15: Production of Beer over the Years 2006-2011; Source: (Euromonitor International, 2013)

2.12.3. Beer Consumption in America Beer has constantly contributed at least 83% and 85% of off-trade and on-trade alcoholic drinks respectively during the years 2004-2009 (Euromonitor International Ltd, 2011) (Please see Appendix A). However, off-trade beer sales accounted for 75% of the total beer sales by volume in 2012 (Euromonitor International, 2013). The graph for the years 2007-2012 clearly indicates that growth in beer sales has risen by 1% even though the actual sales by volume may not be very encouraging. The volume of beer sales is very much dependent on the 576,000 establishments that sell beer which include restaurants, bars, taverns, concessions and military bars (Beer Institute, 2012). For the first time after 2008, beer sales in 2012 rose by 1% signalling green shoots in the beer sector. However, the beer industry in America fears that it may not be able to retrieve the consumers it lost during the recession of 2008. Most consumers of beer have either shifted to wine or spirits. The volume sales in 2012 reached 23.8 billion litres (Euromonitor International, 2013) (The Freedonia Group, Inc., 2012). Beer was the most imported alcoholic beverage in 2012 with the Netherlands, Belgium, Canada and Mexico being the leading suppliers (Freedonia Focus Reports, 2013).

32

Beer Market - Volume 30

0.015 25.3

25.4

25

24.7

25

24.5

0.01

23.8

0.005 20

0

15

-0.005 -0.01

10

-0.015 5

-0.02

0

-0.025 2007

2008

2009 Billion Litres

Figure 16: Beer Market Volume 2007-2012

2010 % Growth

2011

2012

Source: (Euromonitor International, 2013)

2.12.4. Economic Impact of Beer The American beer industry contributes $49 billion to the federal and state exchequers and the economic impact stands at more than $246.5 billion. With 2,015, 120 jobs provided by the beer sector alone and with 6,579 brewers and beer wholesales the American beer industry is an economy in itself (National Beer Wholesalers Association, 2013). In the year 2011, the beer market had revenues totalling $78,802.5 million representing a Compound Annual Growth Rate (C.A.G.R.) of 0.2% from 2007 to 2011 (MarketLine, 2013). The graph depicts the market value of the beer industry over the years 2007-2011 with their C.A.G.Rs. One can observe that while the market value of the beer industry has not changed very drastically, its growth rates have been quite volatile due to the economic downturn.

US Beer Market Value 90 80

0.01 78.1

78.8

77.6

78.2

78.8 0.005

70 60

0

50 -0.005 40 30

-0.01

20 -0.015 10 0

-0.02 2007

2008

2009 $ Billion

Figure 17: U.S. Beer Market Value 2007-2011

2010 % Growth

2011

Source: (MarketLine, 2013)

33

2.12.5. Future Trends Business Monitor International (B.M.I.)

Beer Market Volume Forecast

forecasts beer demand to remain weak over

24.3

the next five years since the sector is

24.3

weighed down by maturity and a general

24.2

shift towards wine in addition to the

24.1

economic

crisis

(Business

Monitor

International, 2013). However, a 1% increase in beer volumes is expected over the next four years until 2017 with sales exceeding 24.1 billion litres (Euromonitor International, 2013). The increase in beer volumes has been projected keeping in

24.2

24.15

24.1

24

23.9

23.9

23.8 23.7 2013

2014

2015

2016

2017

Litres (in billions)

mind that the industry sales have bottomedout and will begin its slow recovery.

Figure 18: US Beer Market Volume Forecast 2013-2017, Source: (MarketLine, 2013)

2.13. Craft Beer Industry The Brewer’s Association defines a craft brewer as one who is independent, small and traditional with a yearly production of six million barrels of beer or less a year. The trademark of a craft brewer is its innovation while using traditional ingredients. Craft brewers are known to be very involved in the communities they are a part of and have very distinctive ways to connect with the customers. Since most craft brewers are free from substantial interest from a non-craft brewer, they maintain very high ethical standards. Research has indicated that a majority of Americans live 10 miles away from a craft brewer (Brewers Association, 2013). The craft brewing industry is segmented into four discrete markets. They are: 

Brewpubs



Microbreweries



Regional Craft Breweries



Contract Brewing Companies

Brewpubs are restaurants where the brewery sells 25% or more of its beer to its customers onsite. The brewery often dispenses the beer directly from its storage tanks. Microbreweries are breweries that produce less than 15,000 barrels (17,600 h.l.) of beer per year and sells 75% or more off-site. The brewery can adopt various distribution channels to sell the

34

beer to the public. One way is to follow the three-tier system in place; the second is to follow a two-tier system where the brewer is the wholesaler; the final one is directly selling the beer to the customer on-site. A Regional craft brewery is one that produces 15,000 to 6,000,000 barrels per year and represents the region it belongs to. Finally, a Contract Brewing company is a business that sub-contracts the activity of brewing beer. This is usually done when the original company is short of capacity and has many orders pending (Brewers Association, 2013). 2.13.1. History of Craft Brewing in America In 1983, there were only 43 brewing firms. Most brewers (in the past 30 years) that have set up shop have labelled themselves as a microbrewery that offer specialised product offerings and target niche markets (Carroll & Swaminathan, 2000). A major driver for the craft brewing movement in the late 1980’s was the emergence of a white-collar meritocracy that believed in “lifestyle” based consumption (Warner, 2010). However, Porter (1980) and other economic analysts predicted a continued contraction of firms since the brewing industry is high on product differentiation (Clemons, et al., 2006) coupled with economies of scale in production, sales and distribution. These, they believed acted as high barriers to entry (Carroll & Swaminathan, 2000). The number of small brewers in America increased in 1976 when then president Jimmy Carter signed a legislation that allowed home brewing nationally. The legislation gave beer enthusiasts an opportunity to gain a foothold in the beer market and compete against the big boys in the beer industry which were ailing from a slowdown of beer sales. The interest in craft brewing and its perceived higher quality generated a lot of interest so much so that that these craft brewers overcame the vast economies of scale (Nelson, 2005). Counter intuitively, the massive growth in craft brewers got about the consolidation of the big brewers in the industry (Tremblay, et al., 2005). Astonishing is the fact that in 1997, U.S. surpassed Germany (a nation known for its strong brewing tradition) in the number of breweries and per capita consumption worldwide (Carroll & Swaminathan, 2000). The market for craft beer has revolutionised the beer industry so much so that every brewer (microbrewery, regional brewery) traces its antecedents to home brewing (Carroll & Swaminathan, 1992). A strong anecdotal evidence of this is, Budweiser, in its advertisements, remind people that it was once a microbrewery (Murray & O’Neill, 2012).

35

While the emergence of craft breweries has been meteoric, it differs markedly by region. Most regions in the U.S. have seen the growth of craft breweries, except the South, which continues to lag with the lowest number of craft brewers. The reason this might be is due to the limited ability to support the craft brewing industry in the particular states (Baginski & Bell, 2011). The following is a graph that shows the brewery count from year 1887 to 2012. One can observe the ups and downs the beer industry has been through during the prohibition era and the other ebb being the 1980 crisis.

Figure 19: 125-year Breweries Count in the U.S.

2.13.2.

Craft Beer Production

Source: (Brewers Association, 2013) US Breweries Operating as of March 2013

The craft beer industry is the most innovative and has the strongest potential for development

Brewpubs

1,124

Microbreweries

1,139

Regional Craft Breweries

97

in the U.S. The young and ‘cooler’ population of

Total US Craft Breweries

2,360

America is turned off by the taste of the big beer

Large Non-Craft Breweries

23

brands

Other Non-Craft Breweries

33

Total US Breweries

2,416

and

look

for

experimentation

(Euromonitor International, 2013). The craft beer industry is home to around 13,000 beer labels (Beverage

Industry,

2012)

and

Table 1: Breweries Operating in U. S. in 2013 Source: (Brewers Association, 2013)

regularly

celebrates a Craft Beer Week, highlighting

2012 Craft Beer Industry Production Volume

contribution and culture of craft beer throughout the

country

(National

Beer

Wholesalers

Regional craft breweries

10,237,632 bbl

Association , 2013). A total of 2,347 craft

Contract brewing companies

227,702 bbl

brewers operated in 2012 which comprised

Microbreweries

1,905,212 bbl

Brewpubs

870,371 bbl

1,118

microbreweries,

97

regional

craft

Table 2: Craft Beer Production in 2012 (by volume),

36

Source: (Brewers Association, 2013)

breweries and 1,132 brewpubs (Brewers Association, 2013). Table 1 indicates the total number of breweries operating as of March 2013. The craft brewing industry experienced a growth of 15% by volume and 17% by dollars in 2012 (Brewers Association, 2013). Table 2 shows us the production of the craft beer industry (by volume) for the year 2012. Craft beer production has been steadily rising over the years from 7.1 million barrels in 2006 to 13.2 million barrels in 2012. This astonishing growth of craft beer production is shown in the figure 20.

Craft Beer Production 13.2

14

11.5

12

10.1

10 8

8

9.1

8.5

7.1

6 4 2 0 2006

2007

2008

2009

2010

2011

2012

Barrels (in Million)

Figure 20: US Craft Beer Production

2.13.3.

Source: (Brewers Association, 2013)

Craft Beer Consumption

Volume Share for Craft Brewers

The craft beer industry has posted a C.A.G.R. of 9% over the past five years.

7% 6.50%

In 2012, the beer sales increased by 6% to

6%

touch 978 million litres. The inadequate

5%

5.70% 5.00%

accessibility of such beer makes it appealing to the customer who is looking

4.40% 4%

to try out new things in the craft beer

3%

segment

2%

(Euromonitor

International,

2013). The craft brewing industry sold

4%

1%

around 13,235,917 barrels of beer in 2012 as compared to 11,467,337 in 2011. Also, craft beer sales share in the beer industry

0%

2008

2009

2010

2011

2012

Volume Share (in %)

was 6.5% by volume and 10.2% by dollars in 2012. (Brewers Association, 2013).

Figure 21: Volume Share for Craft Brewers, Source: (Brewers Association, 2013)

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The rate at which volume share for craft brewers started in 2008 is a low 4% and it has steadily been increasing to reach 6.5% by the end of 2012 which can be observed from figure 21. According to the latest reports of BMI, craft beer sales jumped by 26% in the first quarter of 2013 (Business Monitor International, 2013). Please see Appendix B for the annual dollar volume of the domestic craft beer industry.

2.13.4.

Craft Beer Demographic

The American male accounts for 70% of the craft beer sales in the country. This is despite the fact that several attempts have been made to attract females to the craft beer consumer market. The age group 35-44 represent the largest group of people who love craft beer at 25%. However, the second largest group that craves for craft beer is 25-34 which represents 24.3% of the pie. The slightly older demographic 45-54 year olds are at 21.7%. It can be inferred that craft beer is not very popular with 21-25 year olds since it contributes to only 6% of the sales. For more mature Americans, age groups 55-64 represent 14.5% and 65 and upwards contribute just 8.5% which indicates that craft beer is not what they relish.

Consumption of Craft Beer - By Age

55-64 14%

65 & Above 9%

21-25 6% 25-34 24%

45-54 22% 35-44 25%

Figure 22: Consumption of Craft Beer by Age

Source: (Brewers’ Guardian, 2011)

As far as the income demographic is concerned, people in higher income groups tend to purchase craft beer. 63.3% of the craft beer sales are made to consumers who earn more than $75,000 per year. For consumers earning between $45,000 and $ 75,000 this number drops heavily to 21.5%. Merely 9% of the craft beer sales are made to consumers with earnings of $25,000 to $45,000 and finally a meagre 6.2% of sales are attributed to households which earn less than $25,000 a year. Also, a craft beer drinker is most likely to be Caucasian, which accounts for 90% of the sales. In short, a craft beer connoisseur is most likely to be a white male who is 25-54 years old with a fair amount of disposable income (Brewers’ Guardian, 2011).

38

Consumption of Craft Beer - By Income 6.20%

9%

21.50% 63.30%

$75,000 or more

$45,000 - $75,000

$25,000 - $45,000

Figure 23: Consumption of Craft Beer by Income

2.13.5.

Less than $25,000

Source: (Brewers’ Guardian, 2011)

Craft Beer – Future Trends

The year 2012 saw the opening of 409 new breweries, which is the biggest surge since the era of prohibition ended. This year, the Brewers Association claims that 1,250 new American breweries are planning to set shop in various regions of the country (Time - Business & Money, 2013). 6,840 people from 35 countries attended the Craft Beer conference that was held in March, 2013. This conference was a testimony to the growth that the industry is witnessing. Brewer’s Association Director Paul Gatza stated that the jolt the beer industry is witnessing is solely because of the rise in craft beer popularity. He also stated that by 2017, craft beer would make up 10% of all the beer that is sold in the U.S. (Beverage Industry, 2012) (The Hops Press, 2013). At present, craft beer makes up 6.5% of the total beer sales in the U.S. Craft beer is also capturing market share at an astonishing rate of 59%. (Brewers’ Guardian, 2011). Also, reports of other industries (such as the dairy / ice cream industry) supporting local craft brews, it is imperative that the craft brewing industry is set to soar to new heights in the coming years (Grand Rapids Business Journal, 2013). The craft brewing industry enjoys strong influence and enormous prominence in the beer sector largely due to its close-knit community and willingness to help other craft brewers. The rising star of America is set to rise astronomically in the years to come (Brewers’ Guardian, 2011). However, there are concerns about the sudden explosion of craft brewers all across America with 48 out of 50 states reporting an increase in craft beer production in 2012. States like Indianapolis have reported that the craft beer scene is getting over crowded and it is becoming

39

difficult for the newer brewers to get ‘taps’ at bars and restaurants. But, most craft brewers confide that the customer is the ultimate winner in this competition since he/she gets the best of the beer in the market and the only way to stay afloat is to produce the best quality craft beer (TIME - Business & Money, 2013).

2.14. Irish Diaspora in America Immigrants and descendants of Irish origin comprise the Irish Diaspora in the U.S. Close to 1.5 million Irish men and women travelled to America to escape the Great Famine between the years 1845 and 1855 (Gribben, 1999). Large Irish communities have been found in N.Y.C, Boston, Baltimore, Philadelphia, Pittsburgh and Los Angeles. U.S. in its latest population estimates (as of 4th July) has 313.9 million residents (United States Census Bureau, 2013). Further, as per the 2011 American Community Survey, 34.5 million residents claimed to be of Irish ancestry, which is seven times more than Ireland’s population (4.68 million). The median age that was reported for Irish residents was 39.3 with N.Y.C. having a percentage of 12.9% as Irish residents. One of the other states that have a high percentage of Irish residents is Massachusetts with 22.7%. With a median income of $57,319 the Irish Diaspora is well above the America median of $50,502. (Please see Appendices C, D and E for further details) (United States Census Bureau, 2013). The Boston suburbs and other north-eastern metros are considered to be Irish capitals in the U.S. With Irish population strongly concentrated in the Northeast, the Boston metro area houses 20% of primary Irish ancestry. Most counties in the U.S. have at least a 5% Irish population and this percentage jumps to 10 in places such as N.Y.C., New England and eastern Pennsylvania (Trulia.com, 2013). The following is an image of the concentration of Irish population that is spread across various states of the country. Also, please see Appendices F and G which depict the Irish American population by county in Eastern Massachusetts and N.Y.C. respectively.

40

Figure 24: Percentage of Irish-Americans in the US, by county; Source: (Trulia.com, 2013) During the St. Patrick’s Day holiday (March), a huge surge of beer imports was witnessed with trade volumes going from $288,073,597 in February 2012 to $374,076,005 in March 2012 (United States Census Bureau, 2013). This can be observed as a big opportunity for craft brewers, which might want to export beer to the U.S. The state of Massachusetts in particular seems to be experiencing an upward surge in the consumption of craft beer. Out of the 4,169,941 barrels of beer that were sold in the state for the year 2012, 66,565 barrels were craft beer. This figure is 12% higher than what was reported in 2011. Import offerings in the state saw a 23.37% increase from 2011 numbers, which seem to suggest that import of craft beer is well received. Another important observation to note about craft beer sales in Massachusetts is that the percentage of craft beer sales is 15.5% of total beer sales, a much higher number than the national average of 5.6% in 2012 (Brewbound, 2013). With the state having 47 craft breweries (Brewers Association, 2013) and retailers such as Craft Beer Cellar who specialise in craft beers (Drink Insider, 2013), Massachusetts is one of the destinations that a craft beer exporter should explore.

41

2.15. Case Company 2.15.1. About Casey’s Casey’s Brewery is a small-scale microbrewery owned by Dominic Casey and Henry Thornhill located in Skibbereen (a small town in County Cork, Ireland). It occupies a one-floor, lightindustrial building with two business sections. The brewery, which will occupy 1800 square feet, will produce up to 3,000 hectolitres (h.l.) of beer per year in its initial design and can ramp up to 10,000 h.l. per year when needed. Due to tax advantages available only to microbrewers (microbreweries in the European Union (E.U.) get a 50% relief on tax on the beer if the microbrewery brews less than 20,000 h.l. per year), Casey’s Brewery plans to start production at 3,000 h.l. and with phased expansion grow to 10,000 h.l. over a five year period. Casey’s initial plans are to produce a lager and Irish red ale. This beer will be tested at Casey’s of Baltimore Hotel (in Cork), which is owned by Dominic Casey. This gives the brewer an ability to be a production brewery while enjoying the benefits of being a brewpub where they can trial beers. In addition to the two beers, Casey’s also might brew speciality and seasonal beers once the business is successful since these beers sell quickly and are usually quite popular. Casey’s intend to employ an American Brewer to capture some of the creativity, which is a hallmark of craft brewing in America. With this in mind, Casey’s Brewery proposes to position itself as a creative brewery in Ireland which gives its brewer creative freedom to experiment with the beer. On the other hand, microbreweries across Ireland have leaned more towards a traditional beer line up of an India Pale Ale (I.P.A.), Red Ale and Stout. Casey’s brewery intends to develop a West Cork Beer Festival in Baltimore next year in conjunction with Casey’s Hotel Baltimore. This, they hope, will give them exposure to potential customers which will help build its brand and also give them a good margin on the beer that it will sell. Finally, Casey’s brewery hopes to penetrate the east coast of America to cash-in on the high density of Irish population. However, the brewery is not very sure as to which location should they target. (Casey & Thornhill, 2013).

42

2.15.2. Competitive Advantage Casey’s Brewery believes that it holds a competitive edge on three fronts. They are: 

Quality: Casey’s Brewery produces beers of top quality and includes only the premium of natural ingredients for the production of beer. Particularly selected for its unique flavour profile, the beers are fermented for a bold and smooth taste. The brewery uses fine Irish two-row barley malt to give the lager its distinctive taste.



Handcrafted: Casey’s beers will be stocked up in small 20 h.l. batches under personal attention of its brewers. The most recent brewing equipment is combined with traditional brewing processes to guarantee consistently outstanding taste, whether packaged in bottles, kegs or cans.



Market Demand: Premium lager continues to account for 73% of the lager category in Ireland which is why Casey’s Brewery will produce a premium Irish Lager, while the majority of Irish microbreweries do not produce a lager (Casey & Thornhill, 2013).

2.16.

Chapter Summary

This chapter focused on market entry mode theory, market selection criteria, the timing of entry, and market entry sequence. Further, the chapter went on to explore the marketing communication mix for the Brewery. Finally, the literature review explores the beer market in America and the trends it might follow in the years to come.

43

Chapter 3: Research Methodology 3.1.

Introduction

This chapter will outline the qualitative research process that has been followed to meet the research objectives. Twenty one semi-structured and unstructured interviews from different stakeholders of the craft beer industry were conducted over the months of June and July 2013.

3.2.

Research Objectives

The dissertation aims at building a market entry strategy for an Irish craft brewer to penetrate the competitive American craft beer market. The main research questions posed for the market entry strategy are: 1) To investigate the market entry prospects of Irish beer into the American craft beer market. 2) To identify distribution channels that should be utilised to enter the U.S. craft beer market. 3) To explore specific geographic areas in the U.S. to support the launch of Irish craft beer. 4) To identify promotional campaigns to aid market penetration. 5) To explore the ideal S.K.Us for market entry. 6) To explore precedents of previous market penetration of imported Irish craft beer into the U.S.

3.3.

Research Process

The objective of a research piece is the most important criteria to determine the research strategy that needs to be employed (Eriksson L & Wiedersheim Paul F., 1997). Similarly, the type of data that researchers want to collect is crucial to determine the choice of research methodology. For the purposes of this dissertation, it was found that ‘the research onion’ of Saunders, et al., (2009) is apt to identify issues that underlie the choice of research philosophies and approaches.

44

Figure 25: The Research ‘Onion’

3.4.

Source: (Saunders, et al., 2009)

Research Design

A research design is a general map as to how to go about answering research questions. Various research approaches have been utilised in this dissertation. The following section will clearly explain the approaches used and the rationale behind using them. 3.4.1. Deductive and Inductive Reasoning

Deductive and inductive reasoning are two critical approaches used in attaining a conclusion based on certain assumptions. While deductive reasoning works on a ‘top-down’ approach with general ideas funnelling down to more specific ones, inductive approach is virtually the opposite of deductive where specific findings are developed into broader generalisations (Saunders, et al., 2009) (Trochim & Donnelly, 2006). Further, deductive reasoning kicks off by developing a hypotheses and theory and then follows it up with designing a strategy to test the hypothesis. Typically, a deductive approach is used with quantitative research analysis (Neuman, 1997). Inductive reasoning, which is a ‘bottom up’ approach, arrives at general conclusions of theories by collecting data and developing a theory with the help of the analysis (Saunders, et al., 2009). Though inductive and deductive processes are distinctively different, it must be noted that deduction might entail a bit of induction and vice-versa (Bryman, 2001).

45

At first, the researchers employed deductive reasoning by assessing the relevant literature of market entry strategy by authors Agarwal & Ramaswami (1992), Dunning (1973) and Koch (2001). However, it was observed that the practicalities of entering the craft beer market would demand special expertise which would lie in the minds of distributors, craft brewers with export experience, brokers, beer enthusiasts etc. Therefore, it appeared reasonable for the researchers to move towards an inductive approach to understand the strategies that had contributed to the success or failure of firms which had ventured abroad. The actual practice of market entry can only be provided by experts in the field of craft beer who would be very rich in detail and credibility. Finally, it can safely be said that the researchers have employed both inductive and deductive approaches to research which has transformed the findings from theoretical to practical.

3.4.2. Exploratory and Explanatory Studies Research purposes can be classified into exploratory, explanatory and descriptive in tune with the research questions that are posed (Saunders, et al., 2009). The research classifications that are employed for the purposes of this dissertation are exploratory and explanatory. 3.4.2.1.

Exploratory Studies

Babbie (1989) was of the opinion that exploratory research is carried out when problems still at the early stages. Further, Saunders et al. (2009) clarified that this classification of research is conducted to clarify and throw light on the nature of the problem. Finally, Collis & Hussey (2009) elaborated that an exploratory study is conducted to look for prototypes and ideas rather than verifying a hypothesis. Exploratory research takes several forms such as surveys, secondary data analysis, interviewing subject matter experts and carrying out focus group interviews (Babbie, 1989) (Saunders, et al., 2009). This research generally is very broad in nature and progressively narrows down as the research develops (Adam & Schvaneveldt, 1991). 3.4.2.2.

Explanatory Studies

Explanatory studies are an extension of descriptive research since the researcher explains as to how and why a phenomenon takes place. Explanatory research is generally done where the research question is clearly understood and existing theories need to be supported by facts (Babbie, 1989). This might also end up becoming an attempt to extend and elaborate on theories and models where possible (Collis & Hussey, 2009). The researchers of this dissertation have mostly felt that the purpose and questions that the problem poses is a continuum between exploratory and explanatory. However, since existing

46

theories, frameworks and models are extensively used throughout this dissertation it must be admitted that this piece of research is more exploratory. Further, the use of interviews with industry experts to gain the rich knowledge is further testament to the fact that this is an exploratory study.

3.5.

Research Strategy

A clear and concise research strategy is essential to respond to the research questions comprehensively. Different research strategies such as experiment, survey, case study, ethnography etc., may be employed to conduct descriptive, explanatory and exploratory studies (Yin, 2003). Saunders, et al. (2009) state that the research strategy one plans to employ is heavily dependent on the objectives and research questions, the amount of time, other resources available, existing knowledge and one’s philosophical underpinnings. For the purposes of this dissertation, a case study strategy is employed.

3.5.1. Case Study Selection A case study selection requires an empirical investigation of a current phenomenon which uses various sources of evidence (Robson, 2011). The case study strategy gives the researcher a great understanding of the context of research and the process that is enacted (Morris & Wood, 1991). Feagin, et al. (1991), opines that the case study method is an ideal choice when a holistic and indepth investigation is essential. Several case studies, which have successfully penetrated the American craft beer market and created a niche for themselves, have been studied and analysed for the purposes of this dissertation since selecting multiple ones is always preferable. This is done to conclude whether a phenomenon that is occurring in one case study is continuing in the subsequent cases so that the findings can be generalised (Saunders, et al., 2009).

3.6.

Data Collection Methods and Procedures

Since this dissertation is more exploratory than explanatory, it is observed that data can be gathered using two activities. They are: 1) Secondary Research 2) Primary Research For the purposes of this project, secondary data was utilised to create a foundation to study and form a basis to conduct interviews.

47

3.6.1. Secondary Research Data when reanalysed, which was previously assembled for some other purpose, is the most widely used data collection method (Blumbery, et al., 2008). A number of advantages can ensue out of using secondary data since most information is easily available and it can help answer one’s research question easily by aligning the focus of primary research. One major benefit of secondary data is that it saves time and money (Belton, 2005) (Ghauri & Gronhaug, 2010). One important aspect to be considered while gathering secondary information is the purpose for which the information was initially collected (Denscombe, 1998). Also, the quality of such secondary information comes into question when such research has biases due to vested interests (Bryman & Bell, 2011). For the purposes of this dissertation, the collection of secondary data can be segregated into three sections – documentary, multiple sources and survey (Saunders, et al., 2009). They can be pictorially represented as follows:

Figure 26: Types of Secondary Data

Source: Adapted from (Saunders, et al., 2009)

Documentary data, mostly written material, available from the brewery were carefully studied which included the business plan of the brewery and the existing brewpub’s website. Along with this several non-written materials such as You Tube videos and podcasts were considered while getting an overview of the craft beer industry in the Republic of Ireland and the world in general.

48

Beer and alcohol consumption reports in the U.S. were considered as a part of area based secondary data collection. Further, many beer associations and magazines were referred to in addition with census reports of the U.S. government to narrow down the concentration of Irish population in different parts of the country. Numerous journals, articles and books were consulted and analysed for studying the market entry strategies of various companies in foreign markets. Finally, social media platforms such as blogs posts, LinkedIn and craft beer discussion forums were comprehensively covered to gather rich secondary information from industry practitioners. 3.6.2. Primary Research Collecting primary research is considered as one of the more intrusive means to collect data. However, the results that follow the collection of primary data are very rich and help researchers evaluate their research objectives (Saunders, et al., 2009). While it is widely believed that gathering primary data is expensive and time consuming, the researcher has increased control over the data points that need to be gathered (Ghauri & Gronhaug, 2010). 3.6.2.1.

Qualitative Method

Collection of data can be carried out using qualitative or quantitative methods (Curwin & Slater, 2008). The researchers believed that the use of qualitative method is the best possible way to answer the research questions posed. Also, since qualitative research does not measure and provides great insight through analysis, it is meaningful to integrate primary and secondary data through qualitative means (Ruyter & Scholl, 1998). Van Maanen (1979) opined that qualitative research comprises many methods that build a holistic view of a particular phenomenon in the social world. As this piece of research aims to find out the best possible way to enter the American craft beer market in addition to some promotional activity, subject matter expertise is key to the success of market entry. The following section deals with further justification of data collection methods for the purpose of answering the research questions. 3.6.2.2.

Interviews

A number of techniques can be engaged with to collect qualitative research. The most common ones are observations, focus groups and interviews (Ewings, 2011). Since the researchers had time constraints, all interviews had to be administered by telephones and electronic email.

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All interviews that were conducted were semi-structured or unstructured in nature. The researchers had themes and open ended questions which would provide an opportunity to the interviewee to discuss the topics in greater detail (Saunders, et al., 2009). The interviewers were careful enough to build a certain rapport with interviewee so that the participants were encouraged to divulge as much information as they could. This certainly helped the researchers since the interviewees opened up their thoughts and minds to give certain ideas that the brewery or the researchers had not thought of (Cohen & Crabtree, 2006). However, the researchers did find the interviews to be time-consuming both in terms of preparation and interpretation. A total of twenty one interviews were conducted with eleven respondents using electronic means as the preferred way to communicate and the other ten chose telephonic interviews. With respondents using asynchronous ways to communicate with the researchers it has helped to mitigate the handicap of geographical dispersion (Saunders, et al., 2009). The following figure demonstrates the classification of electronic interviews.

Figure 27: Types of Electronic Interviews

Source: (Saunders, et al., 2009)

The telephonic interviews that were conducted by the researchers had to be kept short and to the point since the interviewees had to take time out of their jobs to answer the queries. Further, the researchers kept taking notes throughout the interview process by dividing the work amongst them. While one researcher would ask questions, the other two would transcribe notes. However, for the electronic mail communication, all respondents were happy to scribe at length, their experiences and knowledge they had gained by working in the industry. The researchers must admit that some interviewees took a long time to reply to emails and, as indicated by Saunders et al, this hampered the process of data collection. Since the research objectives spanned a broad range of issues such as market penetration, promotional activity and gauging the difficulties to enter the American craft beer market, the researchers found it apt to interview different stakeholders in the beer industry from diverse countries such as the United Kingdom (U.K.), U.S., Republic of Ireland, Italy and Canada. The following is the list of respondents for the interviews that were conducted in the months of June and July. The respondents are classified into various stakeholder groups and individual names have been withheld for confidentiality purposes.

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Stakeholders Associations Brokers

Craft Brewers

Distributors

Enthusiasts

Retailers

Company Northern Craft Brewers Association Beer Institute Independent Broker Selling Spirit Edouard McGrath Biere et Cidre Brew Dog Fyne Ales Edrington Group Snoqualmie Falls Brewery Thornbridge Brewery Atlantic Importing Atlas Distributing Rapid Distribution Beverage Massachusetts Beverage Alliance Beer Connoisseur Magazine Craft Beer Specialist, Educator & Speaker Better Beer Revolutionist IDrinkGoodBeer.com Craft Beer Cellar Esselunga Binny's Beverage Depot

Country Respondent Code UK Association 1 US Association 2 US Broker 1 Canada Broker 2 US Broker 3 US/UK Craft Brewer 1 UK Craft Brewer 2 US Craft Brewer 3 US Craft Brewer 4 UK Craft Brewer 5 US Distributor 1 US Distributor 2 US Distributor 3 US Distributor 4 US Enthusiast 1 US Enthusiast 2 US Enthusiast 3 US Enthusiast 4 US Retailer 1 Italy Retailer 2 US Retailer 3

Table 3: Classification of Respondents by Stakeholders, Country and Company 3.6.2.3.

Sampling

As soon as the researchers had narrowed in on a research methodology, the target population was identified and a power-interest matrix was mapped to identify the important stakeholders in the craft beer industry (please see Appendix H). As a result of this, important stakeholders were identified and the researchers then set about sampling their data. Belton (2005), stated that a sample is a snapshot of the population that is about to be targeted for primary research. Generally, sampling techniques are divided into two types: a) Representative or probability sampling b) Judgemental or non-probability sampling.

The subsequent figure illustrates the various sampling techniques available under the two types of sampling:

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Figure 28: Types of Sampling Techniques

Source: (Saunders, et al., 2009)

A two stage process of sampling technique was employed while selecting the respondents. In the first stage (probability sampling), stratified random sampling was employed since the researchers had to divide the population in to different strata of stakeholders (attributes) (Saunders, et al., 2009). Consequently, the researchers applied the random sampling technique to identify the respondents within the U.S. and U.K. Further, it was identified that a nonprobability based purposive sampling technique might be the best way to liaise with respondents since they are picked on the basis of their ability to contribute (Belton, 2005). Over 112 people were identified and emailed and another 73 were telephoned to gather primary data (please see Appendix I for details). Around 143 of the 185 contacts were identified after stratified random sampling. Extensive internet searching of all the major stakeholders and remarkable people was done to make sure no stakeholder was left out in the analysis. With twenty-one responses, the response rate (Neuman, 2005) the researchers achieved is 13.33%. However, the active response rate (Saunders, et al., 2009) was far better at 25.45%. The researchers believe that one of the reasons for an unusually low response rate is due to the lead up to July 4th holiday when most Americans were on an extended break. In addition to internet searching, social media sites such as Facebook and LinkedIn were extensively utilised for purposive sampling and remarkable people were identified to be contacted. Also, in a bid to secure further primary information, the researchers added themselves to groups of craft brewer enthusiasts to participate in the discussion posts on LinkedIn. This strategy of purposive sampling was especially useful in the later part of the data collection which helped validate data points from previous interviews. Please refer Appendices J, K, L, M, N and O for interview transcripts (one of each stakeholder).

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3.7.

Research Conduct and Ethics

Respondents were reassured of their confidentiality and anonymity in cases where they insisted to be unnamed. During initial interactions with organisations, the researchers identified themselves as students at the University of Strathclyde (external researchers) (Saunders, et al., 2009), and gained access to respondents who then opted to participate in the research exercise. Consequently, the consent form was dispatched to the specific respondents and interviews were carried out at the convenience of the interviewees. After the interview ended, the researchers then emailed the respondent thanking them for their response and assuring them of their anonymity if they had insisted on any. This was carried out as a part of netiquette which Saunders, et al. (2009) had emphasised on. A series of logical stages have been pursued to complete this research project. The stages includes reviewing literature, designing research, collecting, analysing and interpreting primary and secondary data and writing up the findings (Creswell, 2012). The following flow-chart summarizes the research process the researchers followed.

Figure 29: Research Process

Source: (Wilson, 2006)

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3.8.

Conceptual Framework

The researchers followed a protocol of events which was kicked-off by gathering secondary data followed by an interview with Casey’s. Subsequently, the interviews from different respondents gave the researchers certain realistic ideas that would help the brewery enter the American craft brewing market. The data received from the stakeholders was then analysed and the researchers came up with a credible and practical market entry strategy for the brewery. During the complete process of the project, the researchers realised the need for constant backup (secondary research) to bolster the primary data collected. The following figure demonstrates the modus operandi of the researchers.

Secondary Research Market entry and promotion strategy for Casey’s

Interview with Brewery

Analysis of Interviews

Interviews with industry experts

Interviews with stakeholders

Figure 30: Conceptual Framework

3.9.

Local Analysis

Data analysis is a constant process and it does not occur in a vacuum (Erlandson, et al., 1993). The twenty-one interviews that were conducted were transcribed and the process of qualitative analysis as suggested by Saunders, et al. (2009) was followed. Step 1: Categorising Data – The researchers developed segments or strata into which the interviews were bucketed and data was organised. These strata helped the researchers develop important causal linkages between data and answer the research questions. Step 2: Unitising Data – The researchers while transcribing the data unitised ‘chunks’ which belonged to the categories that were created. Some chunks of data were sentences and some were long paragraphs.

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Step 3: Recognising Relationships and Developing Categories – After unitising data into relevant categories, the researchers started recognising relationships between themes and created categories such as ‘market entry strategy’, ‘promotion strategy’, ‘ideal S.K.U. strategy’ etc. Step 4: Developing Testable Propositions – The researchers were able to find convergence of ideas across various themes and they stress tested the propositions against the secondary data that was available. This helped the researchers get to practical solutions and recommendations for the case company. Apart from local analysis, the researchers also found Seidel’s (1998) model for qualitative data analysis useful. The model interlinks three parts: Noticing, Collecting and Thinking. The process of noticing, collecting and thinking was continuously carried out over the period of collecting secondary and primary data. The following figure captures Seidel’s model.

Figure 31: Data Analysis Process

3.10.

Source: (Seidel, 1998)

Methodology Limitations

It is common to discuss the limitations of a project as it is a logical extension of the research methodology (Saunders, et al., 2009). The researchers believe that time was one of the main constraints to gather more primary data. The twenty-one interviews that were conducted could have easily been higher if the researchers had the luxury of time and money. Further, the unwillingness and unavailability of some remarkable people to participate in interviews hampered our collection of primary data. Another, big limitation that the researchers feel is the niche category of Irish craft beer they were dealing with made it difficult for them to get precedents that could be studied. The researchers are of the opinion that certain biases might have crept in while collecting primary data. However, it is believed that these biases are set-off by the validity and experience of the interviewees themselves. Also, further care was taken by researchers by asking open ended questions which would allow interviewees to share their rich and diverse experience.

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3.11. Chapter Summary A qualitative method was preferred by the researchers since the integration of primary and secondary data would be meaningful. Twenty one interviews were conducted of which ten were over telephone while the others were over emails. Stratified random sampling and purposive sampling techniques were employed to pick the target population. The major limitations of this study are the paucity of time to conduct more interviews, unavailability and unwillingness of participants, biases of participants and researchers.

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Chapter 4: Findings & Analysis 4.1.

Introduction

As discussed in the previous chapter, the team undertook extensive primary and secondary data gathering. This chapter takes the data gathered, combines this data with the knowledge gained from the literature review and processes them in response to the objectives set out in the beginning of this dissertation. The findings therefore demonstrate the potential for merging theory and practice to suggest practical modes of market entry and promotion for Casey’s.

4.2.

Table of Significant Findings

The following table is the essence of the findings that the researchers have elaborated in the subsequent sections of this chapter.

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Objectives Objective 1: To investigate the market entry prospects of Irish craft beer into the American craft beer market.

Objective 2: To identify distribution channels that should be utilised to enter the American craft beer market.

Objective 3: Explore geographic areas in the U.S. to support the launch of Irish craft beer.

Significant Findings 1) Craft beer production and consumption in the U.S. has been growing over the past few years and is expected to continue doing so for the years to come. 2) The majority of people interviewed have confirmed such a trend. 3) The majority of interviewees identify the three-tiered system of distribution as a potential difficulty for craft beer entrants. 4) Marketing investment and promotion are key factors for a new player aiming to move the product within the U.S. 5) The initial penetration should be limited to smaller geographical areas rather than aiming for covering regions. 1) Four options have been considered: On line sales, direct relationship with retailers, brokers, distributors. 2) On line sales: considered not suitable and not allowed in many states (including Massachusetts). 3) Direct relationships with retailers: considered not suitable for regulation aspects and because retailers are looking for well established brands. 4) Brokers: not the best option to go with since they are expensive and would add further the chain to final consumers. 5) Distributors/importers: the best option as they will looks after promotions and are deeply rooted in the market. 1) To optimise the utilisation of financial resources, the initial launch should be limited to a small geographical areas. 2) Most Irish Americans are located in the northeast part of the country, with two states in the east coast having a sizeable Irish-American population: New York and Massachusetts. 3) Irish Americans are loyal customers and particularly proud of their roots and origins and tend to identify with brands that are labelled ‘authentically Irish'. 4) The most suitable areas to be targeted are small cities in Massachusetts. For example: Cambridge and Greenfield.

Table 4: Summary of Findings

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1) The promotional aspect of market penetration is viewed by a majority of respondents as an essential part of this venture. 2) Many niche markets gain a following via online communities and forum boards as the Internet has space for every niche market imaginable. Objective 4: Identify promotional 3) Beer festivals and fairs to showcase its offerings to the community, build a reputation and network with fellow brewers are essential to creating a following among campaign to aid market penetration. the beer community. 4) It is important to get people to talk about the product and incentivise consumers to try the product. 5) Partnering with an established brewery was also suggested by a number of respondents as a way of creating buzz for the brand. 1) Containers are essential to preserve the quality of products like craft beer, both bottle and kegs have their own advantages and disadvantages. 2) Good quality stainless steel kegs are quite expensive and need to be shipped back which adds further costs. Objective 5: To explore ideal Stock 3) Bottles would be more ideal since it could be sold in more areas and can be consumed at any location when compared to kegs. Keeping Units (SKUs) for market entry. 4) Bottles could be sold at retail both for on-premise consumption as well as at carryout or package liquor stores. 5) Respondents have been quite consistent in saying that shipping beer in bottles instead of kegs will be much more cost effective for the brewery. 1) There is a set of 16 Irish craft brewers dotted across the country of Ireland of which three export craft beer in America. 2) Franciscan Well Brewery, one of the earlier entrants into the Irish microbrewery movement was established in 1998 it supplies its products to 39 states through a Objective 6. To explore precedents of large distributor. previous market penetration of Irish craft 3) Carlow Brewing Company brews a range of traditional Irish beers (stouts and ales). Founded in 1996 by the O’Hara family in Carlow town. beer into the U.S. 4) The Porterhouse might be the only microbrewer who has set up a franchise in NYC in a historic tavern called the Frances Tavern. 5) None of the three breweries responded to the researcher's repeated queries since they believed that sharing data would annul their competitive advantage. 1) Not easy to shift a traditional beer drinker to craft beer since it is a discretionary purchase. Other Key Findings 2) Craft beer has an element of ego purchasing involved. Table 4: Summary of Findings

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4.3.

Market Entry Prospects

Objective 1: To investigate the market entry prospects of Irish beer into the U.S. craft beer market Investigating the market entry prospects of Irish craft beer in the American market opens the way to several aspects that need to be analysed carefully. The approach used to structure findings is through three main drivers: trends in the U.S., geographical coverage and operational aspects.

4.3.1. Trends in the U.S. Market Craft beer consumption and production in the U.S. has been rising over the past few years and is expected to continue doing so for the years to come. The number of craft brewers has grown throughout the country and the attitude of consumers toward craft beer is more positive (Euromonitor 2012). Distributor 4 claims that craft beer enthusiasts are willing to spend more on imported premium products. Another factor supporting American customers’ interest for craft beer is the ever-increasing number of beer festivals held all over the country (Brewers Association 2012). Tuttle (2013) indicates that the U.S. is going through a beer renaissance. In the late 1970s, there was only one craft brewer in the U.S. whereas now there are about 2,500 — including 409 new craft brewers added just in 2012; the biggest increase since the prohibition period ended.

Figure 32: U.S. Volume Share for Craft Brewers

Source: Brewers Association (2013)

Craft beer seems to be everywhere. It is being incorporated into ice cream flavours and included in beer cocktails around the country. Forty-eight out of fifty states saw an increase in craft beer production. As evidence, the New Yorker, a well-known U.S. publication, recently launched an interactive craft-beer map of the country with very detailed information about the most dynamics craft breweries throughout the nation (Tuttle, 2013).

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The majority of people interviewed have confirmed such a trend. Distributor 1 indicates that there is a potential for new craft beers in the market and more and more mainstream beer drinkers are considering ‘exploring new beers’. However on the other hand, Association 1 claims that the American craft beer market is saturated and a new comer, especially if it is a foreign beer, must be presented in an innovative and outstanding manner. Association 2 goes on the same tangent claiming that unless this new beer comes with something unique to offer, the launch will be a herculean task. The point of being unique and having a strong connection with Irish tradition has been raised as well by Distributor 3. To further highlight how essential it is to offer something unique and different, Craft Brewer 4 and Retailer 3 highlight the enormous amount of competition going on amongst U.S. craft brewers. According to these interviewees being an import, one would have to have something unique to offer so as to make the brand stand out. “Just another Pale Ale, Porter, etc, is not necessarily a good strategy” he claims. Broker 2 identifies the three-tiered system of distribution as a potential difficulty for new entrants, since a new beer in the market will have a difficult time liaising and negotiating with three target audiences. In addition Retailer 3 claims that this system might have negative consequences on the final price and make the product less competitive. Similarly, Association 1 claims that Irish products carry a status value and charm for IrishAmericans. However “Guinness already has a fair presence so no point going head to head with them with their marketing resources.” Broker 1 states that pubs and restaurants have many options when it comes to selecting beer brands so product differentiation will be essential to securing space for keg or bottled beer. Other interviewees, like Broker 3, have a different opinion and a much more optimistic view. The respondent claims that despite the fact that home competition in the craft beer market is sensibly growing, he believes that a new Irish craft beer will be warmly welcomed, saying that other European craft beers, like Belgian craft beers, are selling very well. Respondents have also noted that craft beers can be seasonal and to exploit this, brewers have been constantly launching seasonal beers. Tuttle (2013) indicates that San Francisco’s Anchor Brewing, in July 2013, has released a new brew called Big Leaf Maple Autumn Red to increase its range of seasonal beers. Big Leaf will be available from early August until October delivering a taste of maple syrup—including some from California big leaf maples, after which the beer is named. Similarly, in the mid of July 2013 the Belgian giant AB Inbev has launched a new craft beer (Shanken News Daily, 2013).

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4.3.2. Geographical Coverage The vast majority of the interviewees underlined the difficulty of global coverage of the U.S. market indicating that this could be done only by big players because, first of all, such a coverage requires very important production levels which a small start up craft brewers would not be able to reach and, second, it would be required to invest substantial funds in promoting the product. Consequently, the most appropriate way to enter the market appears to be to focus on a niche geographical area that allows exploiting the fullest potential carried by the product. Craft Brewer 1 and 3, Distributor 3 and 4 suggested targeting the Greater Boston Area (G.B.A.) since this area represents the highest percentage of Irish Americans in U.S., likely to be potential consumers. Furthermore, Craft Brewer 3 suggests using an even more focused approach that should reduce the cost of market entry. According to the respondent, launching the product in big cities would require substantial funds, especially for promotion. Therefore, the suggestion was to narrow the area targeted. Smaller cities around Boston, like Cambridge or Newport, could be an ideal choice since the initial financial effort will be limited.

Figure 33: American Craft Beer Week Advertisement

Source: (Brewers Association, 2013)

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4.3.3. Operational Aspects The primary research has also highlighted a number of operational aspects that appears to be essential for a successful penetration in the U.S. market. Distributor 1 outlines how marketing investment is a key aspect for a new player aiming to move the product within the U.S. He emphasizes the need to create buzz among craft beer circles. According to this interviewee, consumer awareness activities should also be utilized, and activities such as advertising in-store, in-store sampling, joining trade shows, joining contests and win awards will bring prestige to the brand. Pricing will also dictate what segment of the market is being targeted - premium or mass pricing.

From a distributor’s end, the fees that a distributor will charge depends on the

marketing spend of the brewery and how willing the firm is on building up the brand. Obviously, a more visible brand will be charged a lower margin. Brands with strong marketing will have lower margin structures. Volume wise, it depends on the capability of brewers and what volume is most cost effective for the company to ship to the U.S. There are specialized handling companies that ship perishable goods. Similarly, Distributor 4 and Retailer3 identify marketing investments as essential for easier market penetration, especially for foreign brands that have no ‘following’ in America. For financially strapped firms, it is better to promote their products at the grassroots levels, since it is usually cheaper. It will also build a ‘following’ that can be carried forward. Brand image should be built; Retailer 3 in particular emphasizes the importance of “getting the product into mouths”. Craft Brewer 4 points out an area that needs to be considered. Shipping beer overseas would take a relatively lengthy period of time, presumably on a boat and then there would be warehousing at a wholesaler before reaching the consumer. The respondent claims that it is uncommon for U.S. wholesalers to refrigerate packaged beer so shipments would be unrefrigerated for weeks at a time. Draught beer is normally refrigerated at a wholesaler, but during the sea voyage it might be subject to temperature extremes depending on time of year. Refrigerated shipping adds to the cost but is a wise investment. According to Enthusiast 2 there are two different groups of beer drinkers in the U.S. and a brewer needs to identify which one to market. The first group is the rabid craft beer lover who will not drink anything made by large corporate brewing entities such as Anheuser-Busch or Miller or Coors. The second group is exactly the opposite of the first; they know little to nothing about craft beer and drink nothing but the homogenous products produced by the big brewers.

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Imported beer can reach either of these two groups, though ‘Irish’ beer carries very little cache with the craft beer lovers. Outside of Guinness, most Americans are hard pressed to name another Irish beer or brewer. Enthusiast 1 suggests that a new brand should look at various importer/wholesaler portfolios and find a niche that is not already being serviced and identify markets the brewery could target and work towards building capacity in those markets first. Furthermore, there is a perception among consumers and retailers in the U.S. that Irish beers are ‘seasonal’ and only sell in large quantities leading up to St. Patrick’s Day in March.

4.4.

Distribution Channels

Objective 2: To identify distribution channels that should be utilised to enter the U.S. craft beer market After thorough investigation and conducting interviews with various respondents familiar with the American craft beer industry, four options emerged as viable distribution channels for market entry: on line sales, direct relationship with retailers, brokers, distributors.

4.4.1. On-Line Sales The consensus arising from interviews is that online selling does not appear to be a very appealing option since there are many federal and state regulatory requirements to comply with. Furthermore, legislation differs from state to state and none of the interviewees recommended this option as the most suitable for a start up brewery. In particular, as indicated by Craft Brewer 3, this option would not provide the right push for the product and moreover, one of the most suitable areas for market entry process, Massachusetts, does not allow on line beer sales.

4.4.2. Direct Relationship with Retailers Having a brewer’s distribution arm, directly try to get placement with big retailers such as supermarkets, posts many hurdles as indicated by the respondents. Craft Brewer 4 and Retailer 2 indicated that these big retailers are looking for brands that can offer high margins. According to these interviewees, these big supermarkets tend to usually accommodate wellestablished brands with high turnovers and do not look after the promotion of the product. For these reasons, a direct relationship with big box retailers seems very far from being the best option to go for a start-up craft brewer which does not have the luxury of huge financial resources and will not be able to ship enough products to cover the overheads of going through the main distribution system.

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Furthermore, Broker 1 believes that obtaining shelf space (bottles or cans) in the retail setting will be difficult. Shelf space is limited with much of the space still occupied by large domestic brewers such as AB InBev and SAB Miller. Although the selection of craft beer has increased, there is still not enough space in the typical grocery store. Moreover, Retailer 2 indicates that especially for large retail chains, beer producers are in fierce competition and are ready to pay exorbitant amounts of money to gain shelf space at the expense of competitors. A better option would be to approach the smaller liquor and specialty craft beer stores that specialize in alcoholic beverages such as Spec's, Gordon’s Liquor and Craft Beer Cellar, the latter of whom have branches all over the country.

Craft Brewery

On Line Sales

Brokers

Distributors

Distributors

Retailers/Bar/ Restaurants

Retailers

Retailers/Bar/ Restaurants

Final Consumer

Figure 34: Distribution Channels

Source: Busa, Dimerin & Chandran (2013)

4.4.3. Brokers The third option for the brewery is to approach beer brokers that normally are in touch with many distributors and have deep knowledge of the market. However, respondents have indicated that brokers will be an expensive proposition compared to going to distributors directly and would add an extra player in the supply chain before reaching

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final consumers. Broker 2 intimated that the intermediation offered by brokers is the simplest way to go about distributing the beer, as brokers handle multiple distributors and retailers, which could speed up market penetration. The respondent goes on to say that this is the fastest way to spread the beer into the market as brokers spend their entire career networking with distributors so that they can reach out to them when it’s needed. Brokers are expensive but they are the best alternative since they know about labelling, regulatory requirements, the paperwork and the bonds that may be required for the particular geographical areas the beer might want to operate in. This theory has found very little support amongst the other interviewees.

4.4.4. Distributors Consensus arising from the majority of interviewees indicates the use of a distributor’s network is the most appropriate market entry option for Casey’s for the following reasons: 

Distributors are deeply rooted into the market with a huge sales force



Distributors can reach out easily to different clients i.e., supermarkets, bars, pubs, restaurants etc.



Distributors are easily approachable at craft beer conferences, festivals and related events held every year throughout U.S.



Speciality distributors, who deal with craft beers, can direct the product toward the areas with the highest potential of success



Distributors generally take care of the promotional aspect



Distributors assume the financial risk of non payments



Distributors know about regulatory requirements at the state and federal level

Meanwhile, the different interviewees highlight some relevant aspects worth considering in greater detail to have deeper knowledge of the distribution channel dynamics in the American market. Craft brewer 4, for example, recommends that having a dedicated brewery representative in the market is also essential. Relying solely on distributors might not lead to fast market penetration as “they're bombarded by all the other brands in their book” who normally rely on incentive programs from the brewery. In addition, Craft Brewer 4 suggests that it is also important to develop an incentive program to keep the distributor representative’s attention on your brand. Similarly, Broker 1 suggests that having sales representatives in addition to distributors would help market the beer in supermarkets and special events in pubs and restaurants.

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Broker 3 considers the utilization of a distributor network for a foreign brewer as a natural consequence of the U.S. three-tiered system. He suggests, as well, that a company should use an importer or, alternatively, start a U.S. import company selling to distributors/wholesalers who sell to restaurants/bars and stores. Similarly, Craft Brewer 4 suggests an appropriate way to start the export activity by using an importer who might also be the distributor and from there; the distributor sells to the market. Once again, according to the interviewee, it is essential to have a brewery representative who knows the local market well to direct and monitor the distributor’s activities. Craft Brewer 5 intimated that the brewery goes through a distributor, Bunited, who handles the American business end, including movement within the U.S. and marketing/pushing of products once in the country. A different perspective is offered by Retailer 1, who suggests building a reputation by going to craft beer conferences and trade shows and trying to gain a ‘following’ by winning some awards. With that recognition, firms would be more open to starting a relationship with the brewery. With that in mind, he suggests going through an importer or a distributor who can also help the brewery in marketing the beer. A very good example of this is The Franciscan Well brewery in Ireland which was approached by Molson Coors because of the awards the brewery had won. Also, Molson Coors arranged an import agreement for the brewery which will soon export their beer to America (Beoir.com, 2013). Enthusiast 3 indicates as a priority the selection of an importer, like Shelton Brothers, to bring the beer into the U.S. The importer already has a large portfolio of imported brands to sell to local area distributors. The distributors then sell those beers to their customers who own bars, restaurants, supermarkets and liquor stores. He claims that because of the three-tiered system, which maintains the separation of brewers, wholesalers or distributors and retailers, going with a distributor is the most natural choice for a new brewer. Another aspect raised from Association 1 is the role of legal framework, the number of aspects that would need to be checked and the legal requirements that need to be fulfilled: “For what is supposedly the land of the free and capitalist entrepreneurship, it is a bureaucratic nightmare. Get that wrong and the authorities, or some aggrieved party, will be onto their legal friends and come down on you like a ton of bricks and it is likely to prove an expensive, time consuming and humbling disaster!” This interview does not appear to be very supportive of a new craft brewer trying to enter the American market but provides interesting insights like the option of the “brewery to brewery” deal with a similar sized U.S. brewery.

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A sort of twinning arrangement: “Maybe you ship a pallet of kegs for them to sell and they send them back with their beer for you to sell, type of reciprocal arrangement. This would of course require the brewery here to have an outlet to sell American beer at a premium price and use it as a unique selling point to attract new customers. So that would be a slightly different business model than just trying to ship beer for cash.” Another option suggested, is an agreement with a U.S. brewery to brew beer for sale in their existing outlets or brewpub and an overseas player does likewise with one of their beers. Some breweries have gone for collaborations, where one brewer visits the other brewery and they brew jointly or are allowed to brew on the plant a beer by them. This option could be quite interesting financially “if it was to be tied in with a holiday, but again it can generate free publicity, interest and unique selling points”.

4.5.

Ideal Geographic Area for Market Penetration

Objective 3: Explore geographic areas in the U.S. to support the launch of Irish craft beer Selecting and targeting a geographic area that contains a firms’ target market is of supreme importance (Kotler, 1999). Ireland based Casey’s brewery has decided to target a specific area of the U.S. that has a dense Irish-American population. By doing so, the brewery hopes to leverage the brand’s authentically Irish roots. As pointed out in the literature review chapter of this dissertation, huge concentrations of IrishAmericans are located in the northeast part of the country, with two states in the east coast having a sizeable Irish-American population: New York and Massachusetts (please refer Appendix D & E). New York State has the biggest Irish concentration among any state with 12.9% while Boston, Massachusetts and its surrounding towns have the biggest Irish concentration out of any city at 20.4% (Kliff, 2013). The Irish-American population and those who identify themselves as such are fiercely loyal and proud of their roots and origins and tend to identify with brands that are labelled ‘authentically Irish’ (Barrett, 2012). Furthermore, Barrett (2012) also states that Irish-Americans tend to stay brand loyal to a product that they identify with. Irish culture is prevalent throughout the history of the Massachusetts area and that culture can still be seen and felt by people from that area. The earliest St. Patrick’s Day parade and celebration in what was then Colonial America was held in Boston in 1737 and has continued to this day (McNamara, 2012). The first one held in any other area was in N.Y.C. in 1762, which continues to this day as well (History.com, 2012). The Boston Celtics of the National Basketball Association (N.B.A.) were named after the ethno-linguistic group located in and around Ireland. The founder of the team acknowledged the fact that Boston had a huge Irish population and

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wanted to pay homage to their ancestry, the team plays in green uniforms and utilise a four leaf clover, another Irish cultural symbol, as a logo (NBA.com, 2013). Clearly, Irish roots run deep in these two areas of America. Craft beer in both areas has a strong following. However, the state of Massachusetts above any place else, consumes more craft beer than any other state in America. In fact, 15.5% of total beer sales in the state can be attributed to craft beer, a figure much higher than the national average of 5.6% (Brewbound, 2013). Sales volume of craft beer in the area grew by 10% in 2012, while the national average declined by 1%. The growth in craft beer sales can be attributed to the changing in tastes of the American beer drinking public from traditional staple beers to a more sophisticated and deliberate brew, the American palate is become worldlier and more discerning (Godard, 2013). The increasing popularity of craft beer has been spearheaded by Samuel Adams lager, a craft beer based out of Boston, which is ranked number one in the country in terms of craft beer sales and has a listing on the New York Stock Exchange (N.Y.S.E.) (Godard, 2013). The firm experienced a 20% jump in sales in the first half of 2013 as the popularity of craft beer continues to rise (Hurley, 2013).

Figure 35: American Craft Beer Industry

Source: (New Yorker, 2013)

Research conducted has shown that the Boston and the area surrounding it boasts over 200 Irish pubs and bars and most of these pubs carry at least one craft beer (yelp.com, 2013). The proliferation of craft brewers in the Massachusetts area cannot be ignored as well. Apart from the aforementioned Samuel Adams craft beer, there are at least 20 other craft brewers in the Boston area and over 40 in the state of Massachusetts, it is expected that those numbers will keep growing in the future (Doyle, et al., 2012) (Dzen, 2013). Boston also enjoys a very healthy population of craft beer lovers and enthusiasts as evidenced by respondent Retailer 1 who said

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that specialty beer retailers are spoilt for choice when it comes to craft beer. Institutions such as the Massachusetts Brewers Guild ensures that craft beer in the state gets the proper spotlight and promotion while at the same time protecting the brewing eco-system of farmers, brewers and pubs that has developed in the state. The guild promotes craft beer through various different media, encourages working relationships with stakeholders within the eco-system and organizes meet-ups and festivals. Craft beer festivals play a big part in the craft beer culture, as these festivals are where enthusiasts, brewers, retailers, distributors, suppliers and brokers get together and do business and enjoy beer from all over. As various respondents intimated (Craft Brewer 2, Retailer 1, Distributor 1), a healthy festival culture ensures that a sizeable following resides in that area and a big craft beer community will help ease the difficulty of any start-up brewery. Boston is home to a number of different festivals, including the biggest in the country, the twoday long American Craft Beer Festival. Beer lovers from all over the world flock to the event to taste the 600 beers offered from 135 different breweries (Berrong, 2013). Other craft beer festivals that take place in Boston are the WGBH Craft Beer Festival, the Drink Craft Beer Springfest, the Bacon and Craft Beer Festival, the Cambridge Brewing Festival, the Beer Summit Winter Jubilee and the Annual Local Craft Brewfest. While Boston takes the lion share of craft beer festivals, there are notable ones located in the New York area such as the N.Y.C. Craft Beer Festival and the TAP New York Craft Beer and Food Festival. These festivals though, are smaller scale and do not attract the same number of brewers and enthusiasts as the ones held in Boston. The sizeable Irish-American population and a big craft beer following and community are the factors that should be considered by Casey’s in choosing a geographic location to launch its offering. Massachusetts and N.Y.C. were pinpointed as areas that fit the criteria but the bigger craft beer culture and following in Massachusetts trumps N.Y.C. as a destination for craft beer enthusiasts and thusly brewers as well.

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4.6.

Promotions

Objective 4: Identify Promotional Campaigns to Aid Market Penetration

Social Media Initiative

Identify with Brand Community

Join Craft Beer Festivals

Promotional Strategy Figure 36: Promotional Strategy Diagram

4.6.1. Identifying with the Craft Beer Community The promotional aspect of market penetration is viewed by a majority of respondents as an essential part of this study. As Distributor 1 emphasized, “marketing is key for moving your product”. As was discussed in the literature review chapter, organisations should aim to build a brand community with its customers as this will build a lasting relationship and will also ensure a sense of belonging for them. Aspects of community building were also intimated by a number of different respondents, who believed that in order for Casey’s to be successful in penetrating the market, they must tap into the strong craft beer community that has grown over the years. A burgeoning group of artisans, artists, critics and home-brewers have adopted the craft beer culture for their own and have taken steps to protect the culture from big corporate brewing firms (Wills, 2012). Craft, local and handmade are attributes that should be highlighted in the marketing literature, as these are the qualities that craft beer enthusiasts look for.

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4.6.1.1.

Utilising Social Media

A lot of niche markets gain a following via online communities and forum boards, as the Internet has a space for every niche market imaginable. Therefore, it is only natural for craft beer and its followers from a certain area or locale to first pick up steam on social media sites. As discussed during the literature review, utilizing social media is a relatively low cost and effective way of reaching your target audience. Online craft beer forums such as greatbrewers.com are an excellent vehicle to introduce a product to a willing audience as the website offers reviews of new brews while also featuring a comments section where other users can share their experiences with the beer. As was discussed by several beer enthusiasts interviewed for this project, using these features on websites lets the manufacturer understand the market better as first hand experiences are intimately detailed on these forums. Furthermore, it gives a manufacturer a platform by which to interact with its consumers in order to build relationships and at the same time improve its offering (Godard, 2013). Craft Brewer 1 stressed the importance of having a website that is accessible to everyone, has fresh content throughout and is easy to navigate. The brewery stated that since mass promotional campaigns require heavy capital investment, a really good website which showcases the beer’s uniqueness is essential. Furthermore, the brewery stated that having a company website will aid in gauging the consumer response based on the number of hits the site gets. These visitors can be geographically identified and targeted on a niche basis. These insights confirm the theories and ideas presented in the literature review where it is stated that websites are seen as a hub for a firm’s online advertising and as such, a good website is essential for a successful and integrated online advertising campaign. Other craft beer forums that have a big user base that can be utilised to encourage and build a brand community are beeradvocate.com, beerforum.com and drinkcraftbeer.com. These websites offer support for both vendors and enthusiasts alike and it is a great way to network with fellow beer enthusiasts and brewers.

4.6.1.2.

Beer Festivals

A majority of craft brewers interviewed for this project were adamant that participating in beer festivals and fairs to showcase its offering to the community, build a reputation and network with fellow brewers was essential to creating a following among the beer community. As narrated by a respondent, Enthusiast 2, there are two types of beer drinkers in the U.S., one group quite happily consumes mass produced beer brands by one of the two biggest breweries in the country, Anhauser-Busch, makers of Corona, Stella Artois and Budweiser among others and SABMiller who brew its namesake Miller Draft, Birra Peroni and Foster’s. The other group

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of beer lovers is the opposite, the rabid craft beer fans who appreciate a more sophisticated brew. These rabid craft beer lovers are the ones who frequent craft beer festivals; they are passionate about beer and enjoy being around like-minded individuals who are as passionate as they are. It is therefore essential that any start up breweries that are looking to effectively enter a new market have a presence in these festivals. There are also several BBQ festivals that breweries can also attend. As discussed by several breweries interviewed for this study, these festivals usually hold several contests and give out awards for craft beer judged on several different criteria. Craft brewers stressed the fact that “having your beer be seen in good light” and carry a good reputation within the craft beer circles is ideal, and gaining that reputation is helped by winning these aforementioned awards. Craft Brewer 2, a brewery based in the U.K., has successfully penetrated the North American market, and one of the reasons they were able to do it with a level of success was because of the awards and recognition their offering had gathered by participating in festival contests and awards.

Figure 37: Craft Beer Festivals in Boston; Source: (Esquire, 2013) (CBS Boston, 2013) (WGBH, 2013) Creating a reputation through engaging with your target audience, building a rapport with firms and individuals who are in the industry and can help a start up brewery down the right path and gaining recognition for your products through various craft beer contests are key components as to why a brewery should consider participating in these craft beer festivals.

4.6.2. Promoting the Brand As is the case with most start up organisations, funding for various departments and processes is not as high as those who are more established players in the industry. There are a variety of ways to circumvent this however, as discussed by a number of respondents from the interviews conducted for this study. One method that was repeatedly stressed by respondents as a way to get people talking about the product is by incentivising consumers to try your product. As Distributor 3 recounted, it’s extremely hard to get noticed by the craft beer buying public due to the number of different options out there now, the key to success is finding a niche that you can

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target, and grow from there. The respondent goes on to say that offering as much free sampling and tastings as possible will give the brand the exposure it needs to gain a following. Distributor 2 echoed the sentiments above, adding that a start up brewery needed to participate in as much activities as possible that would allow the brewery to do sampling, whether it is at festivals, liquor stores, craft beer conferences etc. The respondent goes on to say that joining craft beer guilds and associations, which would allow the brewery to make important contacts in the industry and reach as many people as possible. Partnering with an established brewery was also suggested by a number of respondents as a way of entering the market and creating buzz for the brand. An established brewery will have a greater reputation and allying with those breweries could have a positive effect with a start up, an effect by association can do wonders. Furthermore, finding and creating meaningful partnerships with established players in the game is essential to entering the market effectively according to Distributor 4; as entering a market in a different country that the brewery isn’t accustomed to oftentimes leads to problems for a brewery. A multitude of issues that one can easily make can be avoided with a partner who knows the lay of the land, so to speak.

4.7.

Ideal Packaging Material for Market Entry

Objective 5: To explore an ideal S.K.U. for market entry

4.7.1. Bottles and Kegs When exporting beer to another country for distribution, the biggest thing one must consider is what type of container the beer will be sold in for the initial market entry, bottles or kegs. Both options have their own advantages and disadvantages over one another. Respondents have been quite consistent in saying that shipping beer in bottles instead of kegs will be much more cost effective for the brewery. A good quality stainless steel keg can cost upwards of 200 U.S.D. each according to Craft Brewer 1, which means that once you ship a keg abroad, you would have to ship the keg back since so much money is already invested into it. Another point of interest was brought up by several respondents, stating that bars and pubs that usually utilise draught beer from kegs would need to be convinced to relinquish an existing tap line to accommodate the offering from Casey’s, there are only so many tap handles in a pub or bar, and the representative of the brewery must find a way to persuade the bar owner to drop one brand in favour of another. This is potentially time consuming, as one would need multiple visits to several pubs and bars to convince the owners to accommodate the beer. Combine these factors with costly shipping costs due to the mass and weight of each keg, which means a lower profit margin when compared to bottles, and it is no wonder that most respondents stated that

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for a start- up without much capital, utilising bottles for initial market penetration is the way to go. Bottles would be more ideal since it could be sold in more areas and can be consumed at any location when compared to kegs as intimated by Enthusiast 2. Bottles could be sold at retail both for on-premise consumption as well as at carryout or package liquor stores. Brewery 2 echoed the same sentiments stating that bottles would be more flexible as it allows you to penetrate retail stores and drinking establishments, making it more accessible to more people. However, several respondents did mention though that restaurants, pubs and bars do prefer kegs over bottles, one reason being that since stocking bottles take up more physical space in locations, these establishments prefer serving beer on tap. Another reason for bars and pubs’ preference of kegs over bottles was brought up by Broker 1 who said that a bottle of beer is much more likely to be "light-struck," especially if the bottle utilised by the brewery is not heavily tinted, brown beer bottles tend to aid in this. Light-struck is a term used in beer circles that describes what happens to beer exposed to ultraviolet light (sunlight). A light-struck beer results in a skunky nose and is also more likely to be oxidized which results in the beer having a stale and cardboard flavour. Conversely, kegged beer is impervious to light and the process of kegging beer is less likely to introduce oxygen into the beer, a precursor for oxidized beer. The respondent goes on to state that beer shipped in kegs tend to stay fresher for longer, as there isn’t much oxidation going on when compared to bottled beer.

Figure 38: U.S. Beer Consumption by Type

Source: The Freedonia Group (2010)

Cans are another option but are cost prohibitive in the volumes craft brewers are capable of producing. Glass and metal beverage cans are the standard packaging materials widely available in the U.S. As of late, there has been a trend where craft brewers are packaging their beer in metal beverage cans as they add less weight to shipping. The overhead cost of switching from

75

bottling or kegging to metal beverage cans is huge which most brewers cannot accommodate. Furthermore, canning firms require a minimum order requirement that needs to be met by the brewery for the venture to be cost beneficial and these minimum requirements usually exceed the capacity of small start-up breweries. Boston Beer Company, the founder of Samuel Adams, is gearing up for releasing their beer in cans for the first time in 29 years. With more craft beer companies moving to cans, since cans have changed from the time people know them, it was only a matter of time till Sam Adams followed suit (Forbes.com LLC, 2013).

4.8.

Precedents of Irish Craft Beer Penetration

Objective 6: To explore precedents of previous market penetration of Irish craft beer into U.S. A lot has changed over the past three decades in the American brewing industry. There are now an increasing number of microbreweries that are muscling into the beer market, which was previously dominated by the big players. The niche microbreweries are a set of 16 Irish craft brewers dotted across the country of Ireland of which three export craft beer to the Irish beer loyalists in America (Irish Examiner Ltd., 2013). Franciscan Well Brewery, one of the earlier entrants into the Irish microbrewery movement was established in 1998 with plans to enter the American market. Today, it supplies its products to 39 states through a large distributor, which includes cities like San Francisco, New York and Boston. The brewery has witnessed extraordinary growth in the Irish market over the past four years and they have had to turn away potential accounts. In December 2012, the brewer was chosen Europe’s best dry stout at the annual World Beer Awards in London. Owner, Shane Long, states that his trips to U.S. had been very fruitful with pubs, restaurants and suppliers were extremely enthusiastic and bullish about its prospects (The Franciscan Well Brewery & Brew Pub, 2013). In January, Molson Coors U.K. & Ireland bought over the brand and the micro-brewery to build a strong share in the fast paced craft beer market. The objective of the Molson Coors was to expand the market reach of the micro-brewery to U.S. and Canada where there is a strong interest in Irish beer (Business and Leadership Ltd, 2013). Carlow Brewing Company brews a range of traditional Irish beers (stouts and ales). Founded in 1996 by the O’Hara family in Carlow town, it won two gold medals at the International Brewing Awards, which helped it grow its customer base abroad and gain international recognition. With five core range of beers, steady increase in brew production and export to 20 countries, exciting times are ahead of Carlow Brewing Company. (Carlow Craft Brewery Limited, 2013).

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The Porterhouse might be the only microbrewer who has set up a franchise in N.Y.C. in a historic tavern called the Fraunces Tavern. In 1989, cousins Liam LaHart and Oliver Hughes, the godfathers of Ireland’s modern craft beer movement, launched The Porterhouse. Now, the brewery employs 350 people and exports 50% of its beer to the U.K., U.S., Scandinavia, Italy and Spain (The Porterhouse Brewing Company, 2013). The researchers contacted the three craft brewers for interviews via telephones and emails repeatedly. However, none of them seemed very keen to respond since the breweries believed sharing data would annul their competitive advantage. However, with the limited secondary data that the researchers gathered, the three breweries had won many international awards which attracted distributors to canvas their product.

4.9.

Other Key Findings

While gathering primary data for entering the craft beer market in America, the researchers found the following key findings which will play a crucial role in Casey’s success.

4.9.1. Switch from Traditional to Craft Beer In order to find out which factors would influence a beer drinker to switch from a traditional beer (such as the likes of Budweiser, Fosters etc) to craft beer, the researchers asked several respondents for their views. The general consensus from the respondents was that it is not easy to move an average beer consumer from a classic, cheap beer to a craft beer. In the words of Craft Brewer 4 “There has to be flavour, stability, good eye catching graphics on the label, a story about the brewery/brand that appeals to the consumer, and a reason for them to go beyond their comfort zone.” In support of his comment on switching, Association 1 opined that the craft beer is an “expensive discretionary purchase” and with the economy being the way it is in America, it is difficult to persuade “alcoholics who slug mainstream crap”. Broker 2 had a very interesting take on craft beer. She stated that “premium segments of people go in for craft beers since they believe its cooler to drink craft beer than a regular Budweiser”. She further goes on to say that “an element of ego purchasing” takes over since young people want to look cooler and hipper from the rest of the crowd. However, the best concluding statement came from Distributor 3 which said “The only people still drinking generic beer are: too old to try something new or don't have the money”.

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4.10. Chapter Summary This chapter provides an outline of findings the researchers have observed during their interviews. Coupled with primary data, the researchers have made an earnest endeavour to answer the research questions laid out in the beginning of the dissertation. Please refer Appendix P for the data collection highlights that have been recorded from the interviews.

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Chapter 5: Recommendations and Conclusion 5.1

Introduction

This chapter provides Casey’s Brewery a list of recommendations that are based on the analysis that was conducted during the course of this research. Research papers and reports that have been covered in the literature review, collection and analysis of primary data has aided in formulating

these

set

of

recommendations.

Casey’s

Brewery

must

follow

these

recommendations should it want to be a successful craft brewer which exports to America. It must be confessed by the researchers that Casey’s has already started implementing some of the recommendations that are set forth in this report for its successful foray into the craft beer market.

5.2

Table and Summary of Recommendations

The following table is a snapshot of the recommendations that have been discussed in detail in the subsequent sections of this chapter.

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Objectives

Significant Findings Recommendations 1) Craft beer production and consumption in the U.S. has been growing over the past few years and is expected to continue doing so for the years to come. Penetrate the market at the earliest opportune time to cash-in on craft beer growth by: 2) The majority of people interviewed have confirmed such a trend. Objective 1: To investigate - Familiarising oneself with import laws 3) The majority of interviewees identify the three-tiered system of distribution as a the market entry prospects - Getting acquainted with the three tiered distribution model potential difficulty for craft beer entrants. of Irish craft beer into the - Concentrating on a specific geographical area 4) Marketing investment and promotion are key factors for a new player aiming to American craft beer market. - Having a unique selling point which is paramount move the product within the U.S. - Focusing on promotion 5) The initial penetration should be limited to smaller geographical areas rather than aiming for covering regions. 1) Four options have been considered: On line sales, direct relationship with retailers, brokers, distributors. 2) On line sales: considered not suitable and not allowed in many states (including Using a distributor is critical for success because: Objective 2: To identify Massachusetts). - Distributors have grass root level reach distribution channels that 3) Direct relationships with retailers: considered not suitable for regulation aspects and - Distributors have a vast sales force should be utilised to enter because retailers are looking for well established brands. - Of the presence of speciality craft beer distributors the American craft beer 4) Brokers: not the best option to go with since they are expensive and would add - Distributors take care of promotional aspect market. further the chain to final consumers. - Distributors assume financial risk 5) Distributors/importers: the best option as they will looks after promotions and are deeply rooted in the market. 1) To optimise the utilisation of financial resources, the initial launch should be limited to a small geographical areas. Target the greater Boston area, Massachusetts to launch due to the: 2) Most Irish Americans are located in the northeast part of the country, with two states - Huge concentration of Irish - Americans Objective 3: Explore in the east coast having a sizeable Irish-American population: New York and - Annual St. Patrick’s Day parade geographic areas in the U.S. Massachusetts. - Highest consumption of craft beer to support the launch of 3) Irish Americans are loyal customers and particularly proud of their roots and origins - Growth of Irish pubs and bars Irish craft beer. and tend to identify with brands that are labelled ‘authentically Irish'. - Multitude of craft beer festivals 4) The most suitable areas to be targeted are small cities in Massachusetts. For - Big craft beer following and community example: Cambridge and Greenfield. Table 5: Summary of Recommendations

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Objectives

Objective 4: Identify promotional campaign to aid market penetration.

Objective 5: To explore ideal Stock Keeping Units (SKUs) for market entry.

Objective 6. To explore precedents of previous market penetration of Irish craft beer into the U.S.

Other Key Findings

Significant Findings 1) The promotional aspect of market penetration is viewed by a majority of respondents as an essential part of this venture. 2) Many niche markets gain a following via online communities and forum boards as the Internet has space for every niche market imaginable. 3) Beer festivals and fairs to showcase its offerings to the community, build a reputation and network with fellow brewers are essential to creating a following among the beer community. 4) It is important to get people to talk about the product and incentivise consumers to try the product. 5) Partnering with an established brewery was also suggested by a number of respondents as a way of creating buzz for the brand.

Recommendations Promotion is key to the success of Casey's. This should be done by: - Participating in craft beer festivals (e.g. WGBH craft beer festival, the Drink Craft Beer Springfest) - Holding sampling and tasting sessions - Winning awards in competitions and festivals - Participating in Irish-American activities and festivals (e.g. St. Patrick’s Day parade and the IrishAmerican Heritage Month) - Pursuing memberships in craft beer associations and guilds (Beoir in Ireland and Craft Brewers Guild of Boston, Massachusetts brewers guild in America) - Participating in online craft beer forums (e.g. greatbrewers.com, beeradvocate.com, beerforum.com and drinkcraftbeer.com) - Starting a dedicated forum for Irish craft beer

1) Containers are essential to preserve the quality of products like craft beer, both bottle and kegs have their own advantages and disadvantages. 2) Good quality stainless steel kegs are quite expensive and need to be shipped back Bottles as an ideal SKU because it is: which adds further costs. - Ideal from a business standpoint 3) Bottles would be more ideal since it could be sold in more areas and can be - Cheaper to ship consumed at any location when compared to kegs. - Easier to transport, distribute and keep cool 4) Bottles could be sold at retail both for on-premise consumption as well as at - Suitable for penetrating retail stores, liquor and specialty beer stores carryout or package liquor stores. 5) Respondents have been quite consistent in saying that shipping beer in bottles instead of kegs will be much more cost effective for the brewery. 1) There is a set of 16 Irish craft brewers dotted across the country of Ireland of which three export craft beer in America. 2) Franciscan Well Brewery, one of the earlier entrants into the Irish microbrewery Consider precedents set by: movement was established in 1998 it supplies its products to 39 states through a large - Winning international awards distributor. - Targeting specific geographic area 3) Carlow Brewing Company brews a range of traditional Irish beers (stouts and ales). - Selecting a good distributor Founded in 1996 by the O’Hara family in Carlow town. - Holding frequent beer tastings 4) The Porterhouse might be the only microbrewer who has set up a franchise in NYC - Launching new and seasonal beer styles in a historic tavern called the Frances Tavern. 5) None of the three breweries responded to the researcher's repeated queries since they believed that sharing data would annul their competitive advantage. Target and hook the traditional beer lover by: - Producing high quality and flavourful beer 1) Not easy to shift a traditional beer drinker to craft beer since it is a discretionary - Having good eye catching graphics on the label purchase. - Playing to the ego purchase of consumers 2) Craft beer has an element of ego purchasing involved. - Targeting college students - Targeting higher spectrum of income groups - Targeting Irish Americans

Table 5: Summary of Recommendations

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5.3

Recommendation 1: Penetrating the American Market

The craft beer industry is burgeoning in America and the researchers recommend that Casey’s Brewery should indeed penetrate the craft beer market at the earliest opportune time to reap rich rewards. The recent acquisition of an Irish craft brewer is a testament to the fact that big companies in the States are looking to cash in on the craft beer movement. As stated by Koch (2001), in the selection of the market, every company should take into account internal, external and mixed factors. A consensus was reached while interviewing different stakeholders in the craft beer industry that a careful study of law is required to export craft beer to America. The three tiered distribution model should be taken into account while choosing to distribute the product in a particular area. It is recommended that the new craft beer product should have a unique selling point to attract new customers. All respondents were in agreement that there is a scarcity of good Irish craft beer in the U.S. and therefore the taste of the beer should be unique and of very high quality. Further, it is also recommended that the brewery target a smaller market to reduce the amount of money that needs to be spent on launching it. Finally, promotion is believed to be a major factor that drives the sales of craft beer. Therefore, it is recommended that Casey’s Brewery must spend a significant amount of time in promoting its craft beer via cost effective means.

5.4

Recommendation 2: To Use a Distributor to Penetrate the Market

Among the four options considered for Casey’s to penetrate the craft beer market, using a distributor emerges as the best option. An agreement was reached by most of the respondents that using a distributor helps a craft brewer work with the grass roots in the distribution chain of the craft beer market. Distributors have a vast sales force which Casey’s can benefit from since it is a new entrant in the American craft brewing industry. Additionally, distributors are known to assume the financial risk of non-payment by the buyer of the beer. Further, the presence of speciality distributors who exclusively deal with craft beers pushing the product into areas with the highest possible proposition of sales can certainly benefit Casey’s. With distributors taking care of the promotional facet of the market entry, Casey’s can rest assured that the brand of its product will be well recognised and give its promotion the required impetus for it to grow in the fiercely competitive market. Therefore, it is robustly suggested that Casey’s use a distributor to launch its product in America. As a part of this project, the researchers got Casey’s in touch with a few distributors that operate in the state of Massachusetts who were keen to distribute the craft brewer’s product. Please refer Appendix Q for feedback from Casey’s Brewery.

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5.5

Recommendation 3: Target Boston, Massachusetts to Launch

The area Casey’s should enter will be discussed in this section. As discussed in literature review and reiterated in the findings & analysis chapter of this dissertation, there is a huge concentration of Irish-Americans located in the north-east part of the country, particularly in Massachusetts. Massachusetts’ Irish-American culture can still be felt and seen to this day. As an example, The St. Patrick’s Day parade, one of the biggest Irish-American celebrations, was first held in Boston and the tradition continues to this day. To further strengthen the case, Massachusetts consumes craft beer more than any other state in the country and trends point to growth higher than the national average, as stated in the findings & analysis section of this report. Fuelling this growth is the growing number of Irish pubs and bars sprouting up in Boston and its surrounding area, which Casey’s should penetrate in the future. Furthermore, the craft beer festival culture is deeply ingrained in Massachusetts, with Boston hosting a multitude of craft beer festivals all through the year, which Casey’s can utilise in its marketing and promotional aspects. As demonstrated in the findings and analysis chapter of this report, Massachusetts is a destination for any craft brewer who wants to enter the market. Due to the sizeable IrishAmerican population, big craft beer following and community and the number of craft beer festivals hosted in the state each year, it is recommended that Casey’s penetrate the state of Massachusetts. The G.B.A. should be number one priority due to the concentration of people located in the district and it is where most of the pubs and festivals are located.

5.6

Recommendation 4: Promotional Campaigns to Aid the Launch

As emphasized by a majority of the respondents interviewed for this study, marketing and promotions are an important aspect for successful market penetration. As mentioned earlier in this chapter, it is recommended that Casey’s penetrate the G.B.A. as it densely populated by its target demographic, Irish-Americans and the city is home to a multitude of craft beer festivals. Identifying with the craft beer community is an area that Casey’s should exhaust a lot of its promotional effort on. It is therefore recommended that Casey’s participate in all the craft beer festivals that are being held in the G.B.A. such as the WGBH craft beer festival, the Drink Craft Beer Springfest and the American Craft Beer Festival. It is also recommended that the brewery hold sampling and tasting sessions while at these craft beer festivals as this will attract a lot of needed attention for the brand from the craft beer community, and furthermore, it will get these enthusiasts to sample the beer who wouldn’t otherwise had they had to pay for it.

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Craft beer festivals usually give out awards for the best tasting beer in a multitude of categories. It is recommended that Casey’s participate in these contests as the awards the brewery could win will help them in building recognition, legitimacy and a fan base as well. As mentioned by one respondent, winning awards from craft beer festivals resulted in a big spike in sales for the brewery the respondent worked for. Creating and building that reputation should be a number one priority for Casey’s and there is no better way to build a reputation than by winning awards handed out their peers in the industry. As was mentioned in the findings and analysis chapter, with the number of different craft beers in the American market nowadays, it is extremely hard to get noticed by the craft beer buying public. The key to success is finding a niche that Casey’s can target and participate in as many activities as possible that would allow the brewery to reach that niche, in this case, the IrishAmerican market. It is therefore recommended that Casey’s participate and have a presence in all Irish-American activities and festivals that happen throughout the course of the year such as the St. Patrick’s Day parade and the Irish-American Heritage Month festivities. It is recommended to do as much sampling as the brewery can, whether it is at these festivals, liquor stores, craft beer conferences etc. It is also recommended that Casey’s pursue memberships in craft beer associations and guilds (such as Beoir in Ireland and Craft Brewers Guild of Boston, Massachusetts Brewers Guild in America) which would allow the brewery to make important contacts in the industry and reach as many people as possible. Reaching niche markets, as discussed, is essential for Casey’s, as the overcrowded craft beer market will not accommodate another market entrant without an identity. The most cost effective way to reach these niche markets is through online media. It is therefore recommended that

Casey’s

participate in online

craft

beer forums

such as

greatbrewers.com,

beeradvocate.com, beerforum.com and drinkcraftbeer.com to further spread the word about the brewery’s offerings. Having a presence in online craft beer forums also helps in networking and getting to know people and organisations that can help Casey’s in market penetration. Through research, it was uncovered that there is no online forum dedicated to the IrishAmerican population and more so, a forum dedicated to Irish craft beer. It is therefore recommended that Casey’s partner with an online web developer to create its own website so that people will be able to find information on the company and its products and at the same time, the brewery can offer a forum where people can talk about their products.

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5.7

Recommendation 5: Use Bottles as an Ideal Stock Keeping Unit

When exporting to another country for distribution, one must consider what S.K.U. would be ideal from a business and a financial standpoint. As was pointed out by numerous respondents, shipping bottles is the most ideal way to enter the market initially. Bottles are cheaper to ship and can be placed in any retail setting, which the keg does not afford the brewery. In line with the promotional strategy recommended for Casey’s, bottles would be ideal if the brewery is to participate in craft beer festivals since they are easier to transport, distribute and keep cool. Bottles also allow for penetrating retail, liquor and specialty beer stores, which kegs cannot penetrate. Kegs do have a place in market penetration as well. As mentioned in the findings & analysis chapter, pubs and bars prefer kegs than bottles albeit a more expensive proposition as taps are limited in number and a brewery will have to negotiate with each bar and pub for placement. Kegs also retain the beer’s freshness better than bottles, as kegs do not allow any oxidation to occur. With these facts in mind, it is recommended that, for the purposes of entering the market, Casey’s should utilise bottles as a container for its beer. As popularity, following and financial stability increases, Casey’s should also utilise kegs to ‘tap’ into the pub and bar market.

5.8

Recommendation 6: Consider Precedents Set

With sixteen Irish craft brewers in Ireland, only three have successfully penetrated the American craft beer market. This is evidence to the fact that these brewers have set themselves apart from the rest by adopting creative market entry strategies. All three breweries that have successfully penetrated the American craft beer market have won several international awards (for example The International Brewing Award won by The Carlow Brewing Company in 2000) to gain international attention. Further, the successful breweries have targeted a specific geographic area to launch their beer and test it in the market. These moves have helped them in reducing costs and obtain decisive feedback which they could incorporate in their expansion plans. Further, a judicious selection of a good distributor, who would have a strong grass root influence as well as a nationwide reach, has helped the breweries target small areas in their initial stage and expand rapidly when their product is successful. Finally, frequent beer tastings and seasonal launch of new beer styles keeps the successful Irish craft brewers in the minds and taste buds of beer aficionados. Thus, it is recommended that Casey’s brewery consistently study and consider the precedents set by its competitors from Ireland.

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5.9

Recommendation 7: Target and Hook the Traditional Beer Lover

According to respondents during the interviews, converting the traditional beer lover to a craft beer drinker is one of the most difficult tasks the brewery has set to achieve. However, there are certain measures that Casey’s can undertake to attempt luring traditional beer drinkers. As most craft beers are perceived as an ego purchase by consumers, it is recommended that Casey’s target college students and people from the higher spectrum of income groups to lure consumers who want to look ‘cool’/’sophisticated’. Also, targeting Irish-Americans by playing the traditional Irish beer card is recommended since it can be very useful in driving the sales of the craft beer. It is believed that Irish-Americans are very true and loyal to Irish brands and once consumers get enthusiastic about Casey’s beer, it will be easier for the Brewery to gain a loyal following. It is recommended that Casey’s brewery produce a high quality and flavourful beer, which is unlike large manufacturers. Further, it is also recommended that the packaging contains good eye catching graphics and a story about the brewery/brand that appeals to the consumer. This would entice the consumer to go beyond their comfort zone. Below are mock-ups of bottles and labels created that take into account the researchers’ findings and recommendations. The label is simple yet eye-catching, utilising a muted colour palette, mostly earth tones, which gives the label a traditional and non-gimmicky feel. The label also tells a story of where the beer comes from, as it incorporates the coat of arms of the city of Cork, Ireland. The tag line “Only God can make it better” was thought up as a way to embody the traditional Catholic Irish values.

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Figure 39: Casey’s Brewery Red Ale Mock-Up

Figure 40: Casey’s Brewery Amber Lager Mock-Up

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Figure 41: Casey’s Brewery Stout Mock-Up

5.10 Chapter Summary This chapter reflects on the findings by the researchers and provides a set of recommendations for Casey’s Brewery to penetrate the American craft beer market. Casey’s Brewery must enter the America immediately using a distributor in the G.B.A. with bottles as its S.K.U. and focus on promoting its brand and converting traditional beer lovers to Casey’s craft beer lovers. The purpose of the project was to advise Casey’s Brewery on market entry, distribution and promotional strategies that should be implemented in order to penetrate the American craft beer market. The value of the project was to integrate our past career experiences/expertise and learning’s from the MBA program. This project has resulted in providing the client, Casey’s Brewery, with significant recommendations that must be implemented to ensure their continued success. Please see Table 5 for a detailed set of recommendations. The research was conducted using academically approved research techniques whereby all the project objectives have been fully answered.

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This project provides the following advancement and contribution of knowledge: a) For the Client: We provided an export channel and got the clients in touch with several distributors. b) For the Industry: Recognise that Massachusetts is a good and viable market to enter for a start-up craft brewer. The industry has been introduced to a new market which is thriving due to a strong craft beer movement from all the stakeholders. c) For the Academics: The researchers contributed to existing market entry strategy studies by linking theory to practice. As an example, the market entry theory of portfolio congruity heavily influenced our findings and recommendations. A letter from the client, Casey’s Brewery, is a testimonial to the value and success of this project. Please see Appendix Q for the letter from Casey’s Brewery.

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Chapter 6: Group Learning and Reflection 6.1 Introduction This chapter deals with the experiences of the researchers during the course of writing this dissertation. The team believe that this project has provided them with insights and knowledge which has helped them in researching into more specific areas of study.

6.2 Process of Research During the course of this project, we had to collaborate with each other to gain new insights and experiences from the process itself. Our expectation when we started with the project was to learn as much as possible from the past literature bodies that were published in the ambit of market entry. Our mental state of mind was more on information and content, rather than the process. As suggested by Kolb (1984), learning is a procedure whereby knowledge is formed through the transformation of experience and thanks to these experiences of many contributors to the research. The analysis paints a picture of a niche market, which is dynamically increasing throughout the U.S. while managing to keep the products tied to a regional dimension. There was a huge contrast from writing assignments during the different modules of the M.B.A. to executing a dissertation project. The most obvious of differences were that there were no lectures or classes. We had to motivate each other to follow a process so that we would not fall prey to frustration and failure half way through the course of this project. Slowly, but steadily we designed a well-aligned work plan and task distribution scheme. Finding an interesting topic that would satiate our appetite for knowledge was not very easy. With two group members from the financial services industry, it was difficult to convince them to work on a marketing based project. In retrospect, we believe that it was an excellent decision we made to work on a project that we learned from immensely. From reading literature on market entry and promotion to studying the craft beer industry in America, we covered the most theoretical aspects to the most practical ones. Soon we realised that organising this information would be a herculean task. However, we soon came to grips with this and changed the way we worked. Reflecting on the experiences we have had, it is obvious that nothing could have saved us from making mistakes. Eventually, these mistakes helped us in making our project better.

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6.3 Group Dynamics As was the case with a majority of the courses throughout this M.B.A., group dynamics and how well each member gelled into a cohesive unit played a huge role during this project. We learned throughout the year that, to maximise the potential of any group, playing to each team member’s strengths was key. That being said, however, the project did not go smoothly, as we ran into some inter-personal difficulties. We found we had contrasting views on almost every chapter we wrote. These contrasting views helped us flesh out the project further and cover all the bases; something each of us wouldn’t have considered had we worked on the final project individually. Most of the conflicts arose from timelines, when and how fast things should be finished. We realised that these conflicts stemmed from personal preference more than any other factor, some believed that a strict deadline had to be followed no matter how unpolished the section was, while some preferred to work on sections to perfection even if it took more time. Reflecting on this, we realised that these conflicts and contrasting views helped the project more than hinder it, as fleshing out issues in an open manner enabled the team to consider all opinions before moving forward with a direction and also helped avoid any resentment towards one another. Our key take-away from this is that each member has strong opinions and not taking into account these opinions will cause the team to be ineffective. Although, at times, personal clashes arise, it is paramount that these conflicts are addressed in a timely manner so that a team can continue to play to each member’s strengths.

6.4 What We Learnt One of the most challenging aspects to this dissertation is the selection of the topic and what would be most beneficial to each team member. As each team member came from different professional and cultural backgrounds, it was paramount that we chose a topic that interested all of us and at the same time challenged us. As suggested by Honey and Mumford (1982) pushing further the ideas developed by Kolb (1984), different individuals might have different learning styles and knowing that every group member had his own way of learning has been a factor facilitating the collective process of learning. We quickly learned that choosing a project that will be a challenge to each of us rather than choosing something a bit easier would be ideal as we were not keen on taking an easy route towards project completion. Despite the fact that we come from different backgrounds, it quickly became apparent that the project we ended up choosing was the best fit for us.

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Another learning point came when we started contacting people to interview; it became apparent that getting people to agree to talk to us for the purposes of this project would not be an easy proposition. There were a multitude of issues, the biggest of which was finding respondents from the U.S., a place none of us come from. Through sheer will and perseverance, we managed to convince twenty-one out of the scores of people we contacted to talk to us. We made a lot of mistakes and missteps along the way; at times we felt that we were taking one step forward and two steps back. But as the great poet and writer Oscar Wilde said, “Experience is simply the name we give our mistakes”. And true to Mr. Wilde’s statement, we feel that throughout this project, we have grown and learned from the mistakes we made and this endeavour has moulded us into better professionals, researchers, students and human beings.

6.5 What Would We Do Differently While thinking about things that the team could have done differently, we do not believe that our approach would need structural changes. However, we do believe that in some circumstances, more clarity in the coordination of work would have been beneficial. For example, at the beginning, we conducted some pieces of research separately and then, when it came time to combine different sections, additional work was required. We realise now, that with better coordination we could have utilised our time better. Exchanging and comparing our different ideas systematically improved our output exponentially. Another aspect that could have been improved upon was the time dedicated to collect interviews from different respondents. We underestimated the timeframe in which respondents needed to get back to us. Perhaps, if we had approached them earlier, despite the fact that we were very busy with other course work until the end of June, it would have given us more time to consider their insights. These additional insights would have helped us ponder over new aspects and ideas which could have incentivised us to rethink on work already developed. Similarly, we believe joining Facebook or LinkedIn groups at an earlier stage could have been beneficial in developing a sound knowledge of the industry and better prioritise the most relevant aspects.

6.6 Conclusion To summarise, the dissertation served as a crash course for applying the knowledge we had gained over the past year before we go back into our professional lives. We are convinced that this endeavour of ours has enriched us professionally as well as personally.

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Appendix A – Snapshot of the Alcoholic Drinks Market in U.S.

Source: (Euromonitor International Ltd, 2011)

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Appendix B – Craft Beer Industry Annual Dollar Volume for Years 2003 – 2012

Source: (Business Insider, 2013)

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Appendix C – Irish Population Estimates, 2011

Source: (United States Census Bureau, 2013)

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Appendix D – Irish Population in New York

Source: (United States Census Bureau, 2013)

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Appendix E – Irish Population in Massachusetts

Source: (United States Census Bureau, 2013)

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Appendix F – Irish Americans in Eastern Massachusetts

Source: (Trulia.com, 2013)

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Appendix G – Irish Americans in NYC

Source: (Trulia.com, 2013)

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High

Appendix H – Power-Interest Stakeholder Analysis

Keep Satisfied

Manage Closely Distributors

Beer Associations (US)

Brokers

Power

Craft Beer Enthusiasts

Retailers

Monitor (Minimum effort)

Keep Informed

Other Craft Brewers

US Government

Low

Media

Low

Interest

High

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Appendix I – List of People Contacted

BREWERS Name Inveralmond Brewery BrewDog WEST Brewery Tennents Arran Brewery Grain Brewery Midlands Craft Brewers Coniston Brewing Company Meantime Brewing Company UK Lovibonds Brewery Beaver Town Harbour Brewing Strangford Lough Brewing Company Ltd Thornbridge Brewery St. Peter’s Brewery Co. Ltd., Titanic Brewery Fyne Ales Purple Moose Brewery Ltd Edringtoon Group US Snoqualmie Falls Brewing Company

Status / Comments Sent an email with questions but response not very helpful Had a telephonic interview with the Operations Director Called and emailed. No response Visited and emailed; Unfavourable response Emailed and received a negative response. Emailed with no response from the other end Interviewed over email Called and emailed. No response Called and emailed. No response Called and emailed. No response Called and emailed. No response Called and emailed. No response Called and left message on the answering machine; no reply; emailed with no reply Called and sent emails. Interviewed through email Sent an email to the managing director; awaiting response Sent an email; did not receive response Interviewed but could not get much information Sent an email; did not receive response Had a Skype interview with the brand manager in New York Contacted via CBA, Interview through email

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RETAILERS Name Gaetano di gregoerio Craft Beer Cellar The Drinkery Shop Julius Liquor US Marty's Fine Wines BRITISH BEER COMPANY Grapes and Grains Binnys Beverage Depot Top Shelf Brews UK James Clay

Status / Comments Interviewed over email Interviewed over email Sent an email; no response Sent an email; no response Called but received no response Called and emailed; no response Called and emailed; no response Interviewed over email Called and emailed; no response Called and left a message on its website; no response

DISTRIBUTORS Name Five Star Distributing Atlantic Importing Company Atlas Distributing Horizon Beverage Massachusetts beverage alliance US Burke Distributing Co. Quality Beverage Inc Colonial Wholesale Beverage Commercial Distributing Co Merrimack Valley Distributing

Status / Comments Called but these guys could not help Interviewed over phone Interviewed over phone Called and left message on the answering machine; no reply; sent and email as well Interviewed over phone Called and left message on the answering machine; no reply; sent and email as well Called and left message on the answering machine; no reply Called and left message on the answering machine; no reply; sent and email as well Called and left message on the answering machine; no reply; sent and email as well Called and left message on the answering machine; no reply; sent and email as well

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ASSOCIATIONS Name

Status / Comments

Perfect Pint The Beer Club HQ London Amateur Brewers UK Craft Brewing Associations Any Given Beer The Northern Craft Brewers SIBA

Called and Emailed. Helpful person, good information, no interview Called and left message on the answering machine; no reply Sent an email with no response Sent an email with no response Sent an email with no response Interviewed and was very helpful, got us an interview with American craft brewer Sent an email with no response

American Home Brewers Association Brewers Association BeerAdvocate Beaoir Americas Executive Beverage Consultancy US Craft Brewers Guild of Boston Beer Institute Irish Beer Finder Massachusetts brewers guild Craft Brewers Guild of Boston National Beer Wholesalers Association

Called and Emailed, received negative response asking us to contact distributors Called and Emailed, received negative response; left a message on the website as well Sent an email; no response Sent an email; no response Sent an email; no response Called and Emailed, received negative response Interviewed over telephone Called and left message on the answering machine; no reply; left a message on the website Called and left message on the answering machine; no reply; emailed with no reply Called and left message on the answering machine; no reply Called and left message on the answering machine; no reply

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BROKERS Name Dean Palmer Bill Evenson Richard Allen US Ed McGrath Aaron Brodniak Cheryl (Lester) Woodhouse

Status / Comments Sent an email; no response Sent an email; no response Contacted, but no response Interviewed over email Interviewed over email Interview over telephone

IRISH BEER ENTHUSIASTS Name Reuben Gray Mark Sobelman Shawn Patrick Connelly US Joshua S. Elizabeth Lyons Marty Nachel

Status / Comments Emailed with negative response Interviewed over email Interviewed over email Emailed with no response Interviewed over email Interviewed over email

IRISH BREWERIES Name FRANCISCAN WELL BREWERY CARLOW BREWING COMPANY IR Galway Hooker The Porterhouse Group

Status / Comments Called but did not answer; sent an email Called and sent an email Mobile numbers in Ireland, could not call Called with bad line connection; sent an email

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Appendix J – Interview Transcript of Association 2 What difficulties do you foresee in penetrating the American market, should an Irish Craft brewer decide to launch? I believe that the market for craft beer in the US is already saturated to the extent that it can take no more craft beers unless the beer has something unique to offer. It will be a herculean task to launch an Irish craft beer without any unique selling proposition to it. How would you go about distributing Irish craft beer in America? What channel of distribution would you use to export the beer? Licensee, agent, broker, distributor, supermarkets etc.? I would believe that a distributor is the best way to go about entering the market since most distributors have a huge sales force that can reach out to the different stakeholders who sell the product. How would you sell Irish beer? In kegs or in bottles? For starters, the company should consider the option of exporting beer in bottles since acquiring tap lines in bars is an expensive proposition. Further, when the brand of the beer is well known, then exporting kegs makes sense since the company would be able to justify the amount it pays to the bars for including their beer on the tap lines. What factor in your opinion would push a consumer to switch from a "normal" beer to Irish craft beer? People consume beer for the cool quotient. The marketing of the beer needs to be such that, people who want to buy such products are portrayed in a cool way. Marketing to the youngsters can be a good idea. What kind of promotional strategy for Irish craft beer would you recommend? Since you have to compete with the likes of Guinness, the promotional strategy should be the cheapness of the beer. The beer has to be cheap if it needs to beat the market of the big players. Would you recommend selling beer over the internet? I believe there are federal as well as state laws for this? I would not recommend selling beer of the Internet since there are instances in the past where companies have tried doing that and have failed. In addition, there are far too many regulatory issues around selling beer over the Internet. In many cases, different states have different laws.

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Appendix K – Interview Transcript of Broker 2 What difficulties do you foresee in penetrating the American market, should an Irish Craft brewer decide to launch? I can foresee many difficulties in entering the craft beer market. However, I have to highlight 2 key barriers to entry. The first is that the eastern side of the US has a three or a four tiered market. So the company would have 3 different target audiences for their messages. They are Importer/distributor, whom you will have to educate about the product, then you have the restaurant, bars and the super markets that are primary points of contacts and primary points of sale for the product and finally you have the consumers. There are a lot of privately owned distributors in the eastern coast. The company should ideally divide the marketing dollar by the third. 1/3rd to each of the tiers should ensure good market penetration. How would you go about distributing Irish craft beer in America? What channel of distribution would you use to export the beer? Licensee, agent, broker, distributor, supermarkets etc.? The simplest way to go about distributing the beer is to go with the broker. This is the fastest way to spread your beer into the market that you wish. The brokers spend their entire career networking with distributors so that they can reach out to them when time comes. Brokers are expensive but they are the best alternative since they know about labelling, regulatory requirements, the paperwork and the bonds that may be required for the particular geographical area the beer might want to operate in. How would you sell Irish beer? In kegs or in bottles? The answer for this question would depend on the market segment you are targeting. Initially, the bottle will be a better bet since the consumer will be able to go and purchase it in the retail market. A lot of east coast micro breweries serve their beer in their own restaurants and then when the beer becomes popular, they go ahead with bottling them. What factor in your opinion would push a consumer to switch from a "normal" beer to Irish craft beer? This is an interesting dynamic in America where the premium segments of people go in for craft beers since they believe its cooler to drink craft beer than a regular Budweiser. There is an element of ego purchasing here since the premium segment wants to look superior to a person who drinks regular beer.

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What kind of promotional strategy for Irish craft beer would you recommend? For a positioning statement, I would recommend the beer to come across as a modern Irish innovation against the traditional Irish beer (that is Guinness). This product can be branded as a more innovative and modern take on the traditional Irish beer that people are familiar with. This would capture the traditional Irish beer market and the craft beer market as well. Would you recommend selling beer over the internet? I believe there are federal as well as state laws for this? In the eastern side of the US, beer companies do have access to internet selling. There are 33 states that allow alcohol shipments into them. There are certain states which do not allow shipping out from their state even though they allow shipments into theirs. So finding the right one would be tough. Rather than going through a traditional, e commerce website, I would recommend going through the one of the month club, which sends out a craft beer every month. Again, joining schemes like sending out craft beer of the month would be helpful. This would be helpful in building consumer exposure as well.

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Appendix L – Interview Transcript of Craft Brewer 1 How does one go about exporting beer to the US, especially if it’s an Irish craft brewer? The first step to export Irish beer is to find the maximum amount of Irish concentration in the US. This can be done by going to the website doingbusiness.org. Which distributors do you use in the U.S.? Brew Dog operates in about 30 countries worldwide and in the US we had a long standing relationship with a distributor in California who used to supply beer throughout the country. However, we have now shifted to another distributor by name Anchor Brewing Company. In your opinion, what is the best way for our brand to enter the market – licensee, agent, broker etc.? It may not be a good strategy for craft brewers to scout for distributors since they would like to know the amount of money the craft brewers are willing to spend on promotional campaigns. It basically boils down to the negotiation capacity of the brewer since distributors might promote the beer themselves for a start and then ask the brewer to capitalise on the promotional campaign and pitch in. However, since promotional campaigns require heavy capital investment, which craft brewers are not able to bear, it might be a good idea to set up a website which showcases the beer’s uniqueness. One can make the website interactive and gauge the response based on the number of visitors. These visitors can be geographically identified and targeted on a niche basis. Would you consider it a good strategy to approach super markets for the sale of beer? It might not be a good idea for a craft brewer to approach a super market since most of them use a pull strategy. Further, supermarkets look for established beer brands which make the most profit for the retailer.

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Appendix M – Interview Transcript of Distributor 3 Have you had any experience with Irish craft beer imports? If yes, what would be the price point of entry? Is it bottles or in kegs? Most popular form? Only the Porter House is importing its own beer from Ireland. How do you go about selecting Craft Beer? Seasonals have some play. Then based on what sells. IPA's always popular. Brand recognition or is someone willing to do tastings. According to our research, Boston and NYC are the cities with highest Irish-American population. In connection with this, we are targeting Boston, MA initially, as the product would leverage the fact that it’s an “authentic Irish beer”. Any comments on the matter? Not a bad idea. Again: price & flavour need to be there What would you suggest to make the product "unique”? Either be a Brew Dog or make a better Guinness In your opinion, what is the best way for our brand to enter the market – licensee, agent, broker etc.? Importer as they have a distributor network and reps on the street. Any suggestions as to how others have done it in the past? See #5 they have relied on importers What’s the competition like for Irish ale? Do you think there is a growing potential for this product? Killian's killed the market. Again: price & flavour What kind of promotional strategy for craft beer would you recommend? Tastings, as many as you can handle. Do collaboration beers with a good American brewery...give you street credentials. Craft beer consumption in US is growing substantially, what factor in your opinion would push a consumer to switch from a "normal" beer to craft beer The only people still drinking generic beer are: too old to try something new or don't have the money (that said have seen many a consumer buy a 6 pack of Craft then a suitcase of Bud).

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Appendix N – Interview Transcript of Craft Beer Enthusiast 3 Here in the States beer sales are governed by what's called the "Three Tier System", which maintains the separation of brewers, wholesalers or distributors and retailers. In a nutshell none of those entities can have a vested interest in any one of the others. So a brewery may not own a distributor or a restaurant or pub, if they wish to sell their beers in those outlets. Some markets allow small brewpubs to "self distribute" their beer, but there is a limit as to how much beer they can produce annually.

So first off you will need an importer to bring your beer into U.S., a company like Shelton Brothers. A company like that already has a large portfolio imported brands which they bring over and then sell to local area distributors. The distributors then sell those beers to their customers who own bars, restaurants, supermarkets and liquor stores.

Whether you ship in kegs or bottles is up to you. But remember, although shipping in kegs may cost more and require more rapid delivery to assure quality and freshness, keg beer is more profitable to American bars and restaurants. In addition you will likely be targeting Irish pubs and just like over there they do way more business in draught than bottle.

Your biggest hurdle will be competing with Guinness, Smithwick's & Harp which are the established Irish beers here in America. Guinness even tried to get Kilkenny into the market but consumers rejected it. With the wide variety of beers currently available, and throw in craft brands, Irish Ales and Stouts only capture a small share of the overall beer market.

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Appendix O – Interview Transcript of Retailer 1 Have you had any experience with Irish craft beer imports? If yes, what is the price point of entry? Is it bottles or in kegs? Most popular form? Any tax/importation issues we should consider? Yes, we do carry a couple of Irish brews. I cannot divulge pricing over the internet but I can say that their pricing is comparable to other imported craft beer of the same make. We only carry bottled beer at this point as carrying kegs take up too much real estate in our stores. As for taxes, it would be best answered by the brewers themselves as we only worry about local value added tax imposed by the states we operate in.

How do you go about selecting the beer Craft Beer Cellar sells in the stores? We typically meet craft brewers at conferences such as the craft brewers conference & expo where we get to sample their product. A certain level of interest from the beer aficionados must also be achieved by the beer for us to consider them as taking on an unknown brand without any marketing will be a risk for us. Having said that, the brewer must be able to guarantee a certain level of following for us to take them on. If they are from outside the U.S., they would have to get licensed or they would have to go through a licensed importer or distributor.

According to our research, Boston and NYC are the cities with highest Irish-American population. In connection with this, we are targeting Boston, MA initially, as the product would leverage the fact that it’s an “authentic Irish beer”. Any comments on the matter? Most of the sales of our Irish beers come from states with a big Irish-American population, yes. That would be a wise strategy.

Is online sale of beer permitted in the states? In the state of Massachusetts? The sale of beer over the internet is illegal in the US unless you are licensed to sell beer. In your opinion, what is the best way for our brand to enter the market – licensee, agent, broker etc.? I would say build a reputation first by going to craft beer conferences and trade shows, try to gain a following or win some awards. With that recognition, firms would be more open to starting a relationship with the brewery. With that in mind, I would suggest going through an importer or a distributor who can also help you with marketing your beer.

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Any suggestions as to how others have done it in the past? I would say the same as question 5 What kind of promotional strategy for craft beer would you recommend? Join craft beer associations and conferences; get your name out there! Try and join beer competitions, win some awards and gain notoriety. Make the public want your beer. Build relationships

with

craft

beer aficionados

through

online

media.

What will be the impact of duties/tax on the final price? We only get a final wholesale price from distributors so I have no idea what the tax breakdowns are. Can’t help you with that one.

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Appendix P - Data Collection Highlights Respondent Code Country Distributor 1

USA

Distributor 2

USA

Distributor 3

USA

Distributor 4

USA

Data Collection Highlights Significant Findings Emphasized marketing as a key area to consider. Creating buzz among those in craft beer circles is key. Consumer awareness activities should be at the forefront, activities such as advertising in-store, in-store sampling, joining trade shows, joining contests and win awards will bring your brand prestige. Marketing investment will dictate how high or low the distributor will charge. A more visible brand will mean a lower margin will be charged by distributors. Brands with strong marketing will have lower margin structures. Choosing demographics to target will impact the kind of marketing push a firm will do. Irish-Americans are very loyal and once you capture their interest, you have a loyal customer in them. Create interaction with craft beer lovers through online beer lovers community, beer festivals, guilds and associations. There has been a marked increase in the consumption of craft beer, partly because people are tired of the staple beers that have no flavour, another reason is because craft brews are getting more and more accessible to a lot of people and they are starting to discover a whole new world of beer out there. India Pale Ale's are very popular right now in the US. Do as many tastings as possible to entice people to buy the beer. Importers are a good way to enter the market as they usually have a network of distributors and representatives on the street. Marketing investment allows for easier penetration, especially for foreign brands that have no following in America. For financially strapped firms, it’s better to promote in the grassroots level as it’s usually cheaper. It will also build a following that the brewery can carry forward. Offering something unique is the name of the game, the beer market is oversaturated at the moment, any way to stand out is good. A brewery entering the market will need a good support team on the ground to ease market entry. A team who knows the lay of the land so to speak.

Enthusiast 1

USA

Look at various importer/wholesaler portfolios and find a niche that is not already being serviced. Identify the markets the brewery should target and work toward building capacity in those markets first. From a consumer and retailer perspective, too, wrongly or not there is a perception of Irish beers as "seasonal" and only "hot" leading up to the holiday in March. Finding a solid importer with a good track record and relationship with the distribution channel can be extremely beneficial. There is still some "brand loyalty" in the light lager-drinking segment (Bud, Miller, Coors), but even these consumers are opting more and more for a variety of beers over a single brand. There are many "beer of the month" type clubs that are enjoying good success. Looking into having a new brand included in one of these might be worthwhile.

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Enthusiast 2

USA

Enthusiast 3

USA

There are two main groups of beer drinkers. The first group is the rabid craft beer lovers who won't drink anything made by a large, national corporate brewing entity such as Anheuser-Busch or Miller or Coors. The second group is exactly the opposite of the first; they no little to nothing about craft beer and drink nothing but the homogenous products produced by the big brewers. Selling by bottles is ideal as they could be sold at retail both for on-premise consumption as well as at liquor stores. The States beer sales are governed by what's called the "Three Tier System", which maintains the separation of brewers, wholesalers or distributors and retailers. Although shipping in kegs may cost more and require more rapid delivery to assure quality and freshness, keg beer is more profitable to American bars and restaurants. In addition you will likely be targeting Irish pubs and just like over there they do way more business in draught than bottle. Says that Marketing is the biggest thing and without a good social networking presence in the market the product stuff will lose interest and sit on shelves.

Enthusiast 4

USA

Retailer 1

USA

Retailer 2

Italy

Retailer 3

USA

Suggests to use importers/distributors and indicates the firm Shelton Brothers as this firm deals a lot with international brands from all over Europe. Normal beer (macro beer) would not be your competition here, American Craft Beer and other craft beers from Europe. That said your beer has to be flavourful and balanced and be right there with some of the top beers here in America. I personally would want something that has me say "DAMN" this beer is amazing. Retailers typically meet craft brewers at conferences and expos where they get to sample products. A certain level of interest from craft beer aficionados must be achieved by the brewery for retailers to consider stocking the beer. The brewery must be able to guarantee a certain level of following for most retailers to take it on. Build a reputation first by going to craft beer conferences and trade shows, try to gain a following or win some awards. The space allocated to a brand depends mainly on its turnover. So for big brands two aspects are very relevant: turnover and margin on the brands. There is a fierce competition where players are ready to pay a lot of money to gain visibility at the expenses of competitors. Firms without a lot of monetary resources should find a way to stay ahead. The space dedicated to craft beer within stores is much smaller compared to the one dedicated to famous brands, because turn over is much lower, except for the limited period in which there are promotions dedicated to these products. Price can be a big issue, the added expense of getting beer over here in a timely manner can add a layer of cost that makes it much harder to compete at established price points. Most American "big brewery" consumers are commercial driven sheep who buy on price and are hesitant to shift. There is a developing layer where the big breweries are pushing "safe" craft choices to get their dedicated drinkers to at least try something that is marginally more profitable (SAB/Miller Coors with Blue Moon, Leinenkugel, Batch 19, Redd's Apple Ale; AB Inbev with Shock Top, Stella Artois Cider, etc.). Focus on product quality, and in the correct areas the "Irish-ness" of the beer, Chicago, Boston and New York have large expat Irish populations that identify closely with all things Irish. There is a tangled web of laws around all interstate shipping of alcohol, because the Federal government considers most commercial alcohol issues "state rule" you have 50 different sets of laws.

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Association 1

UK

Association 2

USA

Broker 1

USA

Broker 2

Canada

Broker 3

USA

Craft Brewer 1

UK

Craft Brewer 2

UK

Indicates that craft beer could be considered a discretionary if not luxury purchase. Moving people to better and more expensive discretionary purchases is going to be tough with high employment and many of the same austerity pressures being experienced. Suggests that going for the main distributor channel (approaching retailers directly) would not be a wise choice for a start up brewery. Says that Casey's should carefully decide how much to spend in marketing and think out of the box for example fostering partnerships with US Breweries. Mentioned that US craft beer market is saturated to the extent that it can't take more craft beers unless the beer has something unique to offer. Indicates that the best option to enter the market is to go via distributors since most distributors have a huge sales force that can reach out to the different stakeholders who sell the product. Indicated that the best SKU to enter the American market initially would be bottles since acquiring tap lines in bars is an expensive proposition. Further, when the brand is well known, exporting kegs makes sense since the company would be able to justify the amount it pays to the bars for including their beer on the tap lines. Believes obtaining shelf space (bottles or cans) in the retail setting or convincing a pub or restaurant to put an Irish Craft brewer on tap will be difficult. Suggests to establish a relationship with a distributor in addition to having sales representatives to help market the beer in supermarkets and special events in pubs and restaurants. Indicates that bottled beer tends to have a higher profit margin and makes beer more accessible to the consumer. Most importantly, is the quality of the beer and its accompanying story. The palate of the craft beer patron in the U.S. demands high quality and is in search of unique flavours. Foresees many difficulties in entering the craft beer market. In particular that the eastern side of the US has a three or a four tiered market and a company would have 3 different target audiences for their messages. Considers going with brokers the simplest way to go about distributing the beer. This is the fastest way to spread the beer into the market. Stated that brokers spend their entire career networking with distributors so that they can reach out to them when time comes. Bottled beer would be a better since the consumer will be able to go and purchase it in the retail market. Suggests that product should be branded as a more innovative and modern take on the traditional Irish beer that people are familiar with. Believes that an Irish craft beer would be very well received. Stated that although there is a growing interest in beers from other parts of the world, the biggest problem facing foreign beer is the growing interest in competitors local craft beers. Points out that in the American west coast, the beer drinker is very sophisticated. Suggests to work very closely with distributors. In the US, craft beer marketing is a grass root effort. Indicates that the first step to export Irish beer is to find the maximum amount of Irish concentration in the US. Claims that It might not be a good idea for a craft brewer to approach a super market since most of them use a pull strategy. Further, supermarkets look for established beer brands which make the most profit for the retailer. Thinks that it might be a good idea to set up a website which showcases the beer’s uniqueness. The website should be interactive and gauge the response based on the number of visitors. These visitors can be geographically identified and targeted on a niche basis. Advises to try to go to the Craft Beer conference that is held every year in the Washington. That’s where all the distributors are and breweries makes good contacts there. The best idea is to get awards and recognition for the beer as this would raise there beer’s profile.

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Craft Brewer 3

USA

Craft Brewer 4

USA

Craft Brewer 5

UK

Underlines the difficulty of making the product meaningfully unique. The company will have to try gaining market share by targeting a new audience or an existing craft brewer audience. Suggests that launching a niche product like Casey's beer in big cities is not a wise idea since it requires an enormous amount of money. Test products in a smaller market such as sub sections of Boston like Cambridge, New Port, Rhode Island should be more appropriate for a craft beer since there are universities and students located in this area. Considers going through Distributors as the best way to penetrate the market since they act as a broker and they haves multiple sales people who work for them. These sales people focus on grocery stores, bars and packaged goods stores. If The brewery wants the product to hit the shelves very quickly, the company will have to run an incentive program by bringing the sales force to the brewery and provide free trips. Indicates bottles as the way to go since beer tastes better in bottles. For kegs, he claim, the company would need a tap line in the bar. The bar would have to be convinced to relinquish one existing tap line to fit in the new one. And tap lines are very expensive too Says that uniqueness of the beer is one very important factor. Many beers in America such as Boston beer and Samuel Adams have been able to do that. On the other hand, the beer should be really cheap for people to switch. This may not be possible since the company would be shipping beer overseas. Emphasizes the enormous amount of competition with the US craft brewers. Being an import, one would have to have something unique to offer so as to make your brand stand out. Just another Pale Ale, Porter, etc, is not necessarily a good strategy. Draws the attention on the issue of stability. The shipment would take a length of time presumably on a boat, and then there would be warehousing at a wholesaler before reaching the consumer. It's uncommon for US wholesalers to refrigerate packaged beer so bottles and cans would be unrefrigerated for weeks at a time. Perhaps months. Says that having a dedicated brewery representative in the market is also essential. Relying solely on distributor representatives might not be enough as they're bombarded by all the other brands in their book who normally rely on incentive programs from the brewery. the brewery will also have to develop an incentive program to keep the distributor reps' attention on your brand. Suggests to start with an importer who might also be the distributor. From there the distributor sells to the market. He considers essential to have a brewery representative in the market to oversee and direct the distributor representatives. Believes that the American market is quite tough because of the three tier system. His company goes through a distributor, Bunited, who handle all of the American business end for us including movement within the USA and marketing/pushing of our products once in the country. Distributors take care of all of the promotional aspects. Says that the USA has been undergoing a huge craft beer rise for a while now which has seen thousands of new people take to it, and has influenced the market worldwide. Getting people to switch from normal to craft beer often starts with a gateway craft beer that is relatively accessible.

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Appendix Q – Letter from Casey’s Brewery

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