The External Environment Competitors Business Essay

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The competition in the United States beer market is highly concentrated, with the top three players holding approximately 81.5 of the total market volume Beer in US. The competition that Mountain Man Brewery Company faces is divided into four main categories: major and second-tier domestic producers, import beer companies, and specialty brewers (Abelli 3).

Major domestic producers involved with a handful of companies who compete on the basis of economies scale of production and advertisement (Hardvard 3). These large-scale operations have established their brand name nationwide. With the strong financial fund supporting the operations, it allows them to be innovative with their products. However, the impact is that the unit price of the product is generally higher overall beer category (Beer in US). Two companies dominated this highly concentrated segment of the market are: Anheuser Busch and Miller Brewing Company. Together, these two companies accounted for approximately 74% share of the market volume as of 2012 (See Appendix A, Abelli 3).

Second-tier domestic producers comprised of medium-sized competitors, such as Pabst and Genesee who are small and more regional (Hardvard 3). Generally, these companies have limited distribution to areas surrounding their plants, selling their beer to regional distributors and retailers (Abelli 3). Thus, brand awareness is majorly based within regional area. These companies are not strongly financial, but do follow a similar product and marketing strategy as the major producers to defend their brand (Abelli 3). The second-tier domestic producers accounted for 12.5% of the beer market.

Imported beer companies like Heineken, Coronas, and Becks traditionally served the needs of sophisticated beer drinker who desired more flavour, bitter tasting beer products (Abelli 3). These companies have difficulty competing locally due to high import cost, weak distribution networks, an inability to control product freshness, and exchange rate fluctuations (Abelli 3). As a result, with such high costs, prices are typically higher than most standard lagers. These large-scale companies have strong financial fund and strong brand name to support their international exchange and stabilize their stand within the beer market. Imported beers account for 12% of the beer market (Abelli 3).

Craft beer, which are numerous small pub, microbreweries, contract breweries, and regional craft breweries account for 1.5 % of the market share in the beer industry (Abelli 3). Craft brewery usually small and privately owned that brewed beer using traditional ingredients and operated with limited distribution networks. These craft breweries generally have lower brand awareness compare to others; thus, the price are tend to be lower then standard lagers. Currently, this sector does not have a high concentrated competitive environment and it has a potential growth in the future. The craft beer movement has been educating American consumer, encouraging and development of their taste (Beer in US). Therefore, consumers have been moving away from lagers to other beer.

Over the past six years, light beers are dominating in the US beer category, accounting for 53% of total volume beer sales in 2011(Beer in US). In fact, beer brands like Bud Light, Coors Light, and Natural Light kinds of light beers and majority of the domestic light alternative are outselling the regular counterparts (Beer in US). For many Americans, light beer became a default preference when ordering a beer. And with the understanding of current trend regarding how light beer contain fewer calories and carbohydrates, which appeal to health conscious consumers; Mountain Man Brewery Company wanted to launch out a light beer as well. As a result of stepping into the light beer sectors, Mountain Man Brewery must faces some challenges of potential competitors within this sectors.

Besides the competitions that mentioned above, a potential forecast threat to growth in beer is Americans are switching over to wine and spirits (Beer in US).

Economic Trends

Due to the recent recessionary issues, there has been a shift in American's alcohol consumption from beer to wine and spirits (Beer in US). Over the 2006-2011, the overall beer volume declined by 3%, while wine and spirits grew by 9% and 12%, respectively (Beer in US). In 2011, US beer volume sales decline for a third straight year; down by 2% to 23.5 billion litres, although value sales grew by 1% to US$86.2 billion (Beer in US). Even though, there is a decline in sales volume. Beer manufactures have been able to maintain the sales value through sales of premium product and increases in over unit prices (Beer in US).

The major reason of the decline in beer is mainly due to the high unemployment rates. Unemployment and the threat of unemployment have change typical consumption habits, with American shifting away from standard lagers. US unemployment remained high with a 9%, but potential forecast is that it will get better (Beer in US).

Even with the recessionary issue, American's did not stop purchasing beer, as an alternative, consumers were trading down from standard beer to economy beers. Thus, economy lager sales grew at the expense of standard lagers (Beer in US). The consumption of beer does not have a direct correlation from economy; instead, consumption of beer is associated with several activities especially with big sporting league such as National Football League (NFL) and the Super Bowl (Beer in US). Americans followed big sporting event through out the year. Many manufactures use these events as an opportunity to increase the sales volume in beers.

Political Trends

Currently, some of U.S. states are trying to privatize spirits (alcohol)("Alcoholic Drinks in the US"). The trend of privatization for spirit is a critical impact for beer industry. Unlike Canada, United State distributes alcohol through retailers or retail establishments like supermarket, grocery stores, and convient store. If spirits are privatized, consumer will then have another choice to consider when purchasing alcohol within retail stores ("Alcoholic Drinks in the US").

If the privatization established within the US, retailers have the choice to decide whether or not to expand their alcoholic drinks space to accommodate carrying spirits ("Alcoholic Drinks in the US"). If they choose against expansion, beer selection will shrink as shelf space is allocated to spirits. As so, it may cause an even more competitive environment as alcoholic beverages fight for their stand within the retail store through marketing activities.

Since there are not limitation for promoting beer; future impact for beer industry is that there will be increase in marketing activities between beer firms to compete their presence within the retail store or retailing stores might drop small, regional beer firms and big industry players will be the remaining players to compete with other alcoholic beverages.

Legal and Regulations Issues

The United State was the largest beer consuming market in the world with over $75 billion in annual sales in 2005 (Abelli 4). Of total beer sales in U.S., 18.3 % took place in the East Central region. Even if imports and craft beer didn't quite have a strong hold in the states as they did in other parts of the country, both categories were beginning to take hold. Some state in the region, had become particular competitive.

Recently, the state had repealed laws that had abruptly limited the promotion of beer in retail establishments. With the strong financial fund that big industry players have. Their numerous marketing activities/ strategies, like the discounting promotion on beers, will affect small, regional breweries big time. As retail stores are selling beer at a great discount. It creates a very competitive environment. Where the end result will be, big industry players are driving small firms out of business.

Discounts only reward existing consumer. It will trigger beer drinkers to buy more in bulk in the short term when it is on promotion ("US sees cheaper beer"). . And as they stock up, they wouldn't purchase as often later on. If discounting continues, consumers will increasingly see beer as a low value commodity product ("US sees cheaper beer"). It will lessen brand loyalty with increasing number of consumers purchasing the brand on promotion rather than brand that are not" ("US sees cheaper beer").

Distributors and retailers are becoming more discriminating about which small brand to carry and dropping brands that don't contribute much. Distributors main attentions are mainly focus on the turnovers and margins. Hence, that is the reason why beer consumption continues to degenerate due to the great pressure that is put onto the smaller, regional breweries like Mountain Man.

Beside the issues above, regulations for drink driving also have a negative effect on the beer industry. Social committees who are against drunk driving are leading government to take action (Tough times ahead for strong beers"). Government tries to take action and encourage alcoholic drinkers to be responsible, thus posing a threat to products such as beer, wine, and spirits. Even if governments do not go to the extreme of banning products, but regulations are a way of restricting sales of strong beer (Tough times ahead for strong beers")

. There's forecast that further regulations might be form to control alcoholic and drinks industry, thus threating beer and alcohol sales in the future(Tough times ahead for strong beers"). Below is information or research of overall national level of different drinking regulations:

On a national level, the legal drinking age of Americans is 21. But, 42 out of the 50 US states have at least one of the eight different exceptions to the legal drinking age:

On private, non- alcohol- selling premises, with parental consents (30 states)

On private, non alcohol -selling premises without parental consent (7 States)

For religious purpose (31 states), for medical purposes (21 states)

For government work-related purpose (4 states)

For educational purposes (13 States)

When reporting medical need due to underage drinking for another minor (3 states)

On alcoholic- Selling Premises with parental approval (10 states)

(Source: "Tough times ahead for strong beers")

Technological Trend

Technologies have been changing marketing practices and modify consumer's behaviour, especially through Internet access. There is certain degree that Internet is significant because web access is now innovatively becoming more wirelessly. Many people are able to access the web in their "palm of your hand". But, technology is not entirely appropriate to beer industry for selling. "Sales of alcoholic beverages on the web remain a relatively underexploited medium, not least because direct sales pose a significant regulatory problem" ("Spirit, Beers, and Wine on-line"). Retailers found that "it is a struggle to find business models that combines conveniences and choice for consumers with sustainable profitability" (Spirit, Beers, and Wine on-line"). The nature of beer product makes interne selling a tough business due to the fact of inability to control the product freshness. Usually, beer products are items that bought for immediate consumption, and offer little in way of profit margin to the retailer, unless they are bought in large volume (Spirit, Beers, and Wine on-line"). Therefore, time and cost that is associated with online buying would be an unappealing option for many consumers (Spirit, Beers, and Wine on-line").

Regardless of the problems mentioned, the Internet or Web still plays a crucial factor in the alcohol trade. Traditional advertising such as grass-root marketing through spreading beers quality message through word of mouth is not as effective as before (Abelli 5). In contrast, national beer brands use lifestyle advertisement to reach young drinkers. Broadcasting information on the Internet and utilizing the use of e-commerce tool by its distributors members (Christman). Beer distributors can use various form of technology to increase productivity levels and lower costs in the area of forecasting, delivery, warehousing and payment. Increasingly, beer distributors are recognizing the key role that technology plays in the future beer industry and the competitive advantage that technology brings into their operation (Chrisman).

Social Trends

According to the latest research, there is an increasing demand for lower calories and carbohydrate beer (aka light beer), which appeal to the health-conscious individuals (Beer in US). The focus of being healthier has become one of the major factors in consumer lifestyles. Due to the changes in beer drinker's preferences, Mountain Man Brewery Company experienced decline in sales for the first time in the company's history (Abelli 1). Launching out Mountain Man Light is an ideal thing to do in order to resolve the current situation. The reason is that it provides opportunities in terms of expanding audiences, which might include more female consumers, as well as, younger demographics that are health conscious.

Over the past six years, light beer sales in the United States had been growing at a compound annual rate of 4%, while traditional premium beer sales had declined yearly by the same percentages (Abelli 1). According to the industry observers, they agreed that the key consumers segment for beer companies was younger drinkers, 21-27 years of age (Abelli 4). This group embodied the "first-time drinker demographic" that had not yet established loyalty to any particular brand of beer. The segment represented approximately 13% of the adult population in 2005, but accounted for more than 27% of total beer consumption and was growing (Abelli 4). In addition, this age group consumed twice as much per capita on alcoholic beverages than consumers over 35 years of age and was predicted to grow by nearly four million by the year 2010 (Abelli 4).

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