New Belgium Case Analysis

Introduction The New Belgium Brewing Company is one of the top three craft beer breweries in the nation. It has experienced solid growth from its original entry as a niche marketer to a brand that is now distributed across the country. Much of New Belgium’s success is a result of a well-developed positioning strategy that promotes the company’s culture as much as its product. Not coincidentally, New Belgium’s target market chooses brands like Fat Tire because of both the company’s culture and its product.Our evaluation of the two New Belgium cases indicates that the craft beer industry remains an attractive investment for the company, particularly because of its specific capabilities and resources. The cases also suggest that a conservative growth outlook has the greatest probability of maintaining an acceptable level of profitability without sacrificing the company’s mission and core values.Finally, New Belgium’s positioning, particularly as it’s exemplified by the Fat Tire campaign, is a sustainable one for both current and future brands, though deliberate adaptations will be necessary as New Belgium expands into new markets SWOT Analysis Strengths (New Belgium)| Weaknesses (New Belgium)| High-quality beer, award-winning beers| Association with a single line of beer- Fat Tire| 7th Largest brewery in the nation, 3rd largest craft brewery| Increased pressure on maintaining company culture as a result of company growth| Strong growth with est. ales of over $100B and sales of over 700K barrels of beer| Continued reliance on natural gas and fossil fuels- non-renewable resources| $10M advertising budget for Fat Tire campaign| No follow-up of successful Fat-Tire ad campaign| Collaboration with Elysian Brewing Company| Increasing distribution distances| Customer Loyalty| Competition from craft brewers and craft beers from traditional brewers| Effective word-of-mouth advertising| Smaller advertising budget ($10M) than c ompetition (Sam Adams $35M)| Strong product association (Fat Tire Brewery)| One of the founders no longer with NBB| Social media presence: Facebook (300K; $50. M monetization), Twitter (100K), Pandora, Instagram, Beer Stream, YouTube| Customer blow back if environmental and social responsibility not as advertised| TV advertising differentiated from traditional breweries| Incompatibility between social responsibility and promotion of alcohol consumption| Clear market segmentation| Increased expense associated with sustainability efforts| Strong brand positioning| | Distribution in 29 states and DC| |Performance advantage of ethically and socially responsible companies| | Triple Bottom Line: economic, social, and environmental focus drives strategy| | Brand manifesto co-developed by Dr. Holt| | Clear mission, core values, and beliefs| | Long-standing commitment to sustainability| | â€Å"Sustainable Purchasing Guidelines†| | Awards for environmental achievement | | Admission of flaws in sustainability claims| |Dedication to socially responsible initiatives, corporate charity and philanthropy| | Event sponsorship to promote environmental responsibility| | Generous employee benefits that reflect company culture| | Awards for business ethics and work-place environment| | Grant-supported new plant in NC| | Opportunities (Craft Beer Industry)| Threats (Craft Beer Industry)| 16. 4 percent growth in craft beer industry| 2 percent decrease in total beer consumption| Fastest growing segment of US alcoholic beverage market w/>100 percent growth from 1999-2011| Accounts for only 5. percent of US beer market| Differentiation from traditional breweries| Competition from traditional and other craft breweries| Low cost per viewer TV advertising | Social stigma of alcohol consumption| Growth of social media as inexpensive source of advertising| Beer can become a commodity in a poor economy, decreasing demand for craft beers| Customer loyalty| Increased differentiation ef forts required to stand apart from traditional breweries| More immune to an economic downturn than traditional beers| |New Belgium and the Craft Beer Industry New Belgium Brewing Company is relatively small compared to the traditional breweries such as Anheuser Busch and Coors, though they are still the seventh-largest brewery in the nation. New Belgium is, however, the third-largest craft brewery in the nation, with estimated sales of over $100 million, equaling approximately 700,000 barrels of beer per year. An analysis of the craft beer industry as a whole suggests that there is continued growth potential for New Belgium.Exhibit 5. 1 of the New Belgium Brewing (B) case shows that craft beer is the fastest growing segment of the U. S. alcoholic beverage market, with an increase in market share of over 100 percent from 1999-2011. It is also an industry whose customers tend to be extremely loyal, making them less likely to view craft beer as a commodity. Consequently, craft beer has a higher probability of being immune to competition from inferior goods and substitutes.This is particularly applicable to New Belgium’s target market of â€Å"beer connoisseurs† that appreciate the high quality and taste of craft beer and who include â€Å"executives, lawyers, and accountants† with the continued ability to pay higher prices for craft beer, enabling the craft beer industry to achieve gross margins of up to 30 percent (Clark & Rogler, 2013). Four other strengths of New Belgium indicate continued growth in the craft beer industry. First, studies have shown that companies who sincerely promote ethical, social, and environmental responsibility outperform those on the S&P 500.New Belgium has been such a company from the very start. Second, they have exploited social media as an inexpensive advertising platform, with their Facebook presence alone accounting for over $50 million in annual sales. Third, New Belgium has shown that they can succeed in tr aditional television advertising as well with their Fat Tire campaign that produced an extremely successful positioning strategy resulting in significant sales increases. Fourth, New Belgium continues to look for ways to innovate, like their partnership with Elysian Brewing Company that could lead to greater efficiency and support new product development.New Belgium is a company that has received awards for their beer, for their ethics, for their employee care, and for their stewardship of the environment, all the while maintaining strong financial growth and market share. There is nothing to suggest that New Belgium cannot continue to succeed in the craft beer industry. New Belgium’s Growth Outlook New Belgium’s success to date in the industry has been a result of a conservative approach to growing their business- a â€Å"go slow to go fast† strategy. We believe it should continue to be conservative in its outlook on growth.New Belgium Brewing is a growing comp any, best exemplified by plans to open a second brewery in Asheville, North Carolina, in order to reach new markets on the east coast. This expansion, however, is creating pressure on the company’s commitment to sustainability. Even though the new plant will reduce the fuel necessary for east coast distribution, it still will result in an increase in the overall use of fossil fuels and non-renewable resources from current levels, not just with transportation but with production as well. In addition, the increased production will necessarily mean an increase in environmental waste by-products.An aggressive outlook on growth with a mindset of â€Å"grow, grow, grow† would further jeopardize the company’s ability to maintain sustainability efforts, which would not be consistent with New Belgium’s way of operating. New Belgium Brewing embraces a â€Å"triple bottom line† approach to business that factors economic, social, and environmental consideratio ns into its business strategy rather than simply looking at the bottom line. We believe that this has been critical in developing a strong brand preference through customer trust.New Belgium’s own study indicates the â€Å"39 percent of beer consumers will make extra efforts to buy from and support sustainable companies,† while outside studies suggest that a significant number of consumers support businesses that demonstrate sustainable practices. Going â€Å"fast† with an aggressive growth outlook would likely alienate New Belgium’s customer base and would violate every one of New Belgium’s Sustainable Branding Strategy principles, from â€Å"walk before talk† (living up to sustainability claims) to â€Å"make ripples† (convincing the customer that advertisements promote the brand and the culture behind it).In addition, an aggressive growth outlook would be contrary to some of New Belgium’s core values and beliefs, particularl y those that address environmental stewardship and commitment to trust through fulfilling promises. No one should doubt that New Belgium is in the business to â€Å"operate a profitable brewery† as its mission statement makes clear, but not at the expense of the other two bottom lines. For New Belgium Brewing Company, slow and steady leads the way. Fat Tire Positioning As noted above, New Belgium’s positioning of its Fat Tire brand was a success.Clancy (2001) defines positioning as â€Å"the message a company wants to imprint on the minds of customer and prospects about its product†¦and how it differs from and offers something better than competitors† (p. 1). In the case of Fat Tire, its positioning mirrored the company’s culture â€Å"where a highly creative activity†¦is pursued for the intrinsic value of doing it, as well as perfromed in a balanced manner with nature. † The message was about pursuing one’s interests (folly) but n ot in a way that reflect’s self-interest alone.It’s a message about recycling (restoring the bike), about caring for the environment (riding instead of driving), about relationships (the road biker and the tinkerer riding uphill together), and about the simple joy of simple things. It’s about good beer made by a literally â€Å"good† company. Compare this approach with the positioning of the largest craft brewer, Sam Adams, whose ads have â€Å"morphed into television spots that [look] more and more like the position of America’s Big Three brewers. The Fat Tire ad, on the other hand, cleary demonstrates that New Belgium is different than it’s competitors in the culture behind the beer, and that’s what New Belgium is after- the market who not only wants high quality, excellent craft beer but who also wants to be associated with a high quality company behind it. The Fat Tire campaign produced increased sales of 37 percent in test marke ts, and New Belgium’s sales force was able to leverage this success by convincing transactional customers to promote New Belgium’s secondary brands, increasing these sales by over 50 percent (Holt & Cameron, 2010).Given the results of the Fat Tire campaign, we recommend a continuation of the current positioning. Through Fat Tire, New Belgium has been able to differentiate itself in the craft beer industry by producing strong products that are well received by their target customers who are, or who see themselves as, smart, creative, athletic, environmentally conscious, and socially engaged. Target Markets The target consumer customer marketing strategy for the Fat Tire campaign focuses on the market concentration approach of selecting a single market segment and then identifying shared segmentation factors.For example, the campaign targets â€Å"high-end† (psychographic, behavioral) male beer drinkers ages 25-44 (demographic) who are mostly white-collar professi onals (demographic) who vacation in Colorado (geographic) for a taste of the mountain lifestyle (psychographic). This market longs for the life of the tinkerer (psychographic) but believe that they are unable to sacrifice their current circumstances in order to obtain it (psychographic). They can, however, make a connection to that life and to others in similar situations (psychographic, association/affinity) by drinking Fat Tire (behavioral).The transactional customer, on the other hand, is likely to be the local liquor store or grocer rather than supermarket or large retail discount center. For one, such distributors are more apt to carry craft beers because of their higher price and lower sales volume. More importantly, it is more probable that they are susceptible to local demands to carry New Belgium beers, the kind that result from the example noted by the case where a local Minnesota liquor store sold 400 cases of Fat Tire with the first hour of opening.Recommendations for th e Future Looking toward the future, the cases note that New Belgium has no plans to undertake another major television ad campaign similar to Fat Tire. We recommend that they reconsider this position, particularly as they move into the east coast market and open their Asheville brewery. Taking a pure aggregation approach by replicating current strategy there will probably not produce the success to which New Belgium has become accustomed.Having recently studied the early failures of Disney in Europe due to a lack of adaptation, we suggest a television ad campaign modeled after a listening tour, perhaps where the tinkerer and his single-speed bike tours the Carolinas, finding compatriots along the way. The tagline could be, â€Å"Beer is our folly. What’s yours? † The television ads would promote contact with New Belgium via social media, and local events would be sponsored to share New Belgium beer and culture with the east coast market, as well as to learn more about their new target market.Based upon what New Belgium learns, we also recommend developing a new craft beer specifically for the east coast market, fulfilling the transformational innovation activities of the Innovation Ambition Matrix (Limacher, 2012). We envision this campaign then developing television spots that show the tinkerer traveling through locations from the Maine coast to the Key West, with quick images of him restoring old junked treasures that represent the follies he previously learned about- a wooden canoe, an Appalachian fiddle, or an antique Penn ocean reel- all the while promoting New Belgium’s new brand.In addition to television ads, New Belgium would continue its established strategy of permission marketing using social media, which they have clearly established as having a strong correlation with annual sales. We project that if New Belgium follows this Sustainable Branding Strategy with an emphasis on adaptations to the new market, it will achieve succes s similar to the results from the Fat Tire campaign. Conclusion New Belgium is poised for significant growth because of the way that it has differentiated the company from other craft brewers.Despite a smaller advertising budget that larger competitors like Sam Adams, New Belgium has leveraged its advertising resources into developing a position that is distinctly different, which has created strong brand appeal among its target market. If New Belgium can maintain its original principles as it grows, we see a high likelihood that profits will follow. New Belgium’s â€Å"single speed† is absolutely the right vehicle to transport the company into the future. References Clancy, K. 2001). Whatever happened to positioning: Recent Copernicus study confirms the dissappearance of positioning. Copernicus. Clark, C. , & Rogler, J. (2013, March 8). Personal Interview. (M. Holcomb, Interviewer) Holt, D. , & Cameron, D. (2010). Cultural Strategy: Using Innovative Ideologies to Buil d Breakthrough Brands. New York: Oxford University Press. Limacher, R. (2012, May 25). Framework of the week – 81 -innovation ambition matrix. Retrieved March 20, 2013, from strategyhub. net: