Consider the story of craft beer. Large-scale breweries destroyed their smaller rivals in the twentieth century because they were able mass produce the stuff for cheaper (reaching wholesale prices of about fifty cents a beer or less) and because their fat margins allowed them to pay for things such as television advertising. In the late nineteenth century, there were thousands of breweries in the United States; then, Prohibition came, and, after it ended, a consolidated industry emerged. By 1979, there were just forty-four remaining. The giants had won again.
But the small breweries came back. Their beers were not better advertised and certainly not better priced. Rather, the crafts went after an enormous blind spot for the big breweries—namely, flavor. I don’t entirely mean to be snide; more precisely, craft beer succeeded by opting not to compete directly, instead pursuing what can be called a “true differentiation” strategy. That means they established a product that, in the mind of the consumer, is markedly and undeniably different (as opposed to “false differentiation,” which is more or less the same thing with different packaging). True differentiation, if it works, actually changes consumer preferences. The dedicated craft-beer drinker, once he’s hooked, no longer cares if Coors Light costs three dollars less. Today there are once again thousands of breweries in the United States (more than 3,000, in fact).
Thursday, February 5, 2015
Craft Beer Ascending - True Differentiation
Here is a The New Yorker a story on the rise of small, independent businesses competing with giant corporations, with the craft brewing industry as the star example. This story, backed by facts, helps further prove the misguided point of Anheuser-Busch's anti-craft beer Super Bowl commercial. From the article (my emphasis):