What follows New Belgium’s Folly? Emmanuel Danmozie Lyn Scott John Towne Texas Woman’s University BUS 5133. 51 April 23, 2011 Dr. Raman Executive Summary New Belgium Brewing’s original marketing strategy focused on relational marketing using a “barstool to barstool” method of marketing and creating “brand stewards” in a grassroots effort to spread the word about New Belgium’s craft beers. As the company’s brand and leadership strategy matured, the marketing became proactive and focused by creating bicycle events, interesting take-away merchandise and a touring taste-testing vehicle.
By forming personal relationships with their customer base, NBB organically gained market share. To remain competitive in the craft brew market and maintain its market share, NBB must explore creative and innovative marketing strategies to outperform its rivals. Background and Case Summary A bicycle tour in Europe combined with an unquenchable passion for Belgian-style home brewing, lead Jeff Lebesch to found the nation’s third largest craft brewery, New Belgium Brewing (NBB). In 1991, the start-up company began commercial operations in the basement of Jeff and his former wife, Kim Jordan’s Ft.
Collins, Colorado home. Within four years, the operation outgrew the tiny basement and moved to its current location at 500 Linden Street in Ft. Collins. In the early years, Jeff served as the original brew master and Kim ably assumed the roles of marketing manager and distribution specialist. As the seventh largest U. S. brewer and Colorado’s second largest brewery behind behemoth Molson Coors Brewing Company (Largest Breweries and Brewpubs, 2010), the company’s thirty beers are currently available in 26 states.
The recession has negatively impacted the alcoholic beverage market causing the overall beer market’s total dollar sales to decrease by 2. 7% during the first half of 2010 (Steverman, 2010). Interestingly, the craft brew market, which makes up 7% of the total beer market, has experienced an increase of 12% during the same period (Schwartz, 2010). This marks the seventh consecutive year that craft brew sales have outpaced the overall beer market in sales (Schwartz, 2010). Another form of industry-specific comparison is volume sold per period, which provides an excellent barometer of a brewery’s success.
Craft brewers saw a growth rate of 9% in the first six months of 2010, compared to a 5% growth rate during the same period in 2009 (Craft brewers boast bigger sales, 2010). Craft brewers sold 4. 6 million barrels during the first half of 2010, an increase of 400,000 barrels over the number sold during the same period in the prior year (Craft brewers boast bigger sales, 2010). NBB’s growth rate is nothing short of explosive with a first year’s production level of 225 barrels (bbl) sold and a 2010 projected figure of 630,000 bbl (Higgins, 2010).
Problem / Decision Statement New Belgium originally employed a relational marketing strategy, using a “barstool to barstool” method of marketing and creating “brand stewards” or Rangers to spread the word about New Belgium’s beers (Ferrell & Hartline, 2011, p. 482). A few years later, the company began engaging consumers with a more “focused and proactive marketing approach” creating merchandise and events like the Tour de Fat, “what’s your folly, postcoasters, and the beerstream trailer” (Ferrell & Hartline, 2011, p. 483).
In 2003, the company produced “Tinkerer” television commercials evoking “faraway outposts” which added a transactional marketing aspect to the company (Ferrell & Hartline, 2011, p. 486). The television commercials provided the vehicle to reach a more dispersed audience, in contrast to the grassroots regional market method provided by the brand stewards. Starting in 2007, the company’s marketing strategy included social media outlets like Facebook and Twitter, and a complementary website www. followyourfolly. com (Ferrell & Hartline, 2011, p. 487).
The following analysis presents several marketing strategy alternatives and a recommended method for the company to maintain their commitment to the environment, their desire to have fun, while increasing market share. Situation Analysis Internal Environment Analysis According to authors Ferrell and Hartline, the first step in reviewing a company’s marketing strategy involves “critical evaluation of the firm’s internal environment with respect to its objectives, performance, allocation of resources, structural characteristics, and political climate” (Ferrell & Hartline, 2011).
In reviewing New Belgium Brewing’s current marketing objectives, strategy and performance it is important to note NBB’s dollar sales increase of 13. 4% over the past five years. The brewery has a very strong market position as the third largest of the 1,625 craft breweries in the U. S. (Craft brewers boast bigger sales, 2010). New Belgium Brewing has five different product lines, with a myriad of beers in each category. The next step in evaluating NBB’s internal environment is to thoroughly review the resources available to dedicate to the marketing strategy.
Since New Belgium Brewing is a privately-held employee-owned company, financial information is not required to be publicly released and this is the policy of the company. There are no indications that the company is under financial stress. In addition to financial assets, a company requires knowledgeable and talented employees or human assets to achieve its strategic goals. New Belgium Brewing’s 372 employees (as of August, 2010) are incredibly diversified in their fields of expertise. Kim Jordan, NBB’s current CEO, has been with the company since inception and has over twenty years experience in the craft brew market.
The cornerstone of NBB’s organizational structure is that the brewery is employee-owned, legally organized as an Employee Stock Ownership Plan (ESOP). The company’s leadership includes a board of directors comprised of NBB’s CEO, CFO and three outside members. There are three other primary leadership groups populated by senior management, departmental managers, and employees at-large. The company has survived the divorce of the founders and retirement of the original brew master, Jeff Lebesch. There is no apparent change in the operations and Kim Jordan has demonstrated superlative skill in leading the company.
According to the company’s website, NBB added six new states to its distribution list in 2009. The company did not add any additional states last year, but expects to continue its expansion plans in 2011 (New Belgium – FAQ). Customer Environment The craft beer designation is essential to New Belgium’s core demographic customer. A craft brewery is defined as any brewery that has a total annual production of less than six million barrels, a non-craft brewer owns less than twenty-five percent, and at least fifty percent of the total production volume must be a malt beer.
New Belgium Brewing Company draws a very specific set of demographics in their customer base. At the highest level, the typical consumer of New Belgium beer is a 30 – 50 year old man who enjoys craft beers, is college educated and in their career years (New Belgium – FAQ, 2011). The company’s demographics also includes fans of Belgian style beers who “admire the Colorado lifestyle”, specifically, cyclists (New Belgium – FAQ, 2011). The brand appeals to the environmentally conscientious, socially responsible individual who accepts open business practices.
New Belgium beer is sold to its customers in bars, restaurants, and through various retail outlets. External Environment The final component of the situation analysis for New Belgium Brewery requires a review of the current and future issues and key trends affecting the external environment of the company. First and foremost, it is imperative to consider the various brand competitors NBB faces in the ever-increasing market. In Colorado alone, there are over 100 microbreweries and other large domestic breweries (Higgins, 2010).
New Belgium Brewery also faces product competitors like wines, wine coolers, and other liquors which pose a threat to NBB’s market share. Additionally, NBB competes with generic competitors including non-alcoholic products like soft drinks and bottled water, rounding out the list of external competition challenges the company must address. The company also depends on the economic stability of the market regions where their products are distributed and sold. Not surprisingly, Colorado’s economic growth has been tymied by the recession with minimal growth in retail and hospitality industries. Political trends can create obstacles or opportunities for organizations. On a positive note for NBB, Colorado’s new governor, John Hickenlooper, a craft beer lover and brewpub pioneer, has a personal passion for the brewing industry. Also, an impending bill in the United States Congress proposes to reduce the excise tax for craft beer and seeks to allow the shipment of alcoholic beverages by the post office.
Finally, according to authors Ferrell and Hartline, sociocultural factors are those social and cultural influences that cause changes in consumer’s attitudes, beliefs, norms, customs and lifestyles (Ferrell & Hartline, 2011). A greater focus on ethics and social responsibility may affect the public image of a company that markets alcoholic products; while more home shopping would also require a shift in the marketing strategy for the company. NBB’s success requires the ability to take advantage of opportunities that provide an advantageous interest, and appropriately address challenges presented by others.
SWOT Analysis Strengths The main strengths of New Belgium Brewing are the strong brand name, the company’s commitment to being socially responsible, and an extensive product portfolio. For instance, when New Belgium sponsors a nonprofit event, they help the organization “green up their event and engage in grassroots advocacy…encouraging people to take steps to lower their carbon footprints” (Higgins, 2010, p. 50) Additional strengths include the company’s sales team, dubbed the “Ranger Team”. Rangers are the field sales arm of New Belgium Brewing tasked with securing new business in the far reaches of their markets.
The Ranger Team is the brand ambassadors for the company. Recently, New Belgium announced a collaborative effort with the Elysian Brewing Company in Seattle to brew each other’s beers in their breweries (Creative Partnerships, 2009, p. 26). Philanthropically, New Belgium donates $1 for every barrel of beer sold in the communities where we do business, totaling more than $2 million since our inception in 1991 (New Belgium – FAQ, 2011). Weaknesses The craft beer market is only 7% of the total U. S. beer market, so the market has a finite size.
Until a recently announced collaboration, New Belgium beers were only produced in Fort Collins, Colorado limiting the effectiveness of distribution to remote locations. A privately held company’s potential for raising capital is only as good as the owner’s ability to input additional capital. Finally, New Belgium beer must be ordered three weeks in advance of delivery due to the company’s batch brewing process. The delay between initial order and delivery limits NBB’s ability to respond to sudden increases in sales orders by retail outlets. Opportunities Several opportunities exist for opportunities for expansion into new markets.
New Belgium is currently sold in 26 states, which means there is an enormous opportunity to grab additional sales in a relatively small, niche market. Collaborative opportunities also exist for New Belgium to partner with other craft brewers or to invest in brewing capacity in another region of the company. Extending the brewing capacity in different regions would ease distribution of the product throughout the company. The company has “plans to expand its beer portfolio and pursue partnerships with regional breweries” with a “slow and steady” approach (Wang, 2009, p. 36). Threats
Threats from new craft brewers remain one of the major threats to NBB’s continued success. In Colorado alone, there are 100 craft brewers and throughout the United States, there are 1,625 craft brewers (Despite Sluggish, 2010). Additional threats come from the larger, corporate brewers who have the financial and production resources to create similar type craft beers to compete against New Belgium Brewing in an attempt to steal some of the craft beer market share. Finally, New Belgium Brewing is committed to projecting an image of sustainability and environmentalism and bases their entire marketing strategy on that premise.
Should New Belgium Brewing ever falter in their social responsibility, it could irreparably damage their reputation. Strategic Alternatives and Recommendations Co-Branding Strategy One marketing alternative for New Belgium Brewing would be the co-branding of their products. Co-branding efforts could include partnering with wind energy producers or bicycle manufacturers like Trek Bikes. New Belgium could leverage the financial strength and marketing budgets of these mature industries in a co-branding effort. Trek Bikes and New Belgium could partner to produce a line of “fat tire” bikes for the general public.
This could include the production road bikes, cruisers, and mountain bikes with both the New Belgium and Trek logos. Included in this marketing approach would be joint events, such as the company’s “Tour de Fat”, which embraces the bicycling life style and providing an extension of the companies brand into the bicycle market. In effect, it would be both a co-branding and product line extension for New Belgium Brewing. New Belgium’s commitment to the environment could be extended to the wind energy markets. In 1998, New Belgium’s employees opted to harness wind energy for a source of power for their production (New Belgium – FAQ, 2011, p. ). Partnering with a wind energy company to create a series of public service announcements about their use of wind energy for production could provide a wider exposure to the general public and encourage the alternative energy users to seek out a brand of beer that satisfies their desire to utilize environmentally friendly products. For their part, New Belgium Brewing could offer incentives in the monthly bills of wind energy users for their products. This could include their beers, logo merchandise, or the co-branded bicycles. Psychographic Segmentation: Affordable Luxury
A second strategic marketing option for NBB is to promote their beer as an affordable luxury item. During the most recent economic downturn, craft beer sales have outpaced the overall beer market (Schwartz, 2010). Many believe the increased market share is a result of consumers indulging in luxuries with lower-price points, like specialty beers. At $8 – $9 a six pack, craft beers are often twice as expensive as the average price of domestic beers. Aficionados of craft beers are drawn to the market because of an emotional connection and desire for the unusual.
As a whole, craft brewers focus on quality and uniqueness over quantity. Demographic Segmentation: Target Women Consumers Although women comprise 50. 3% of the total U. S. population (The World Factbook: United States, 2010), providing an untapped market because they currently comprise an extraordinarily small portion of the current beer market share. According to a July 2010 Gallup poll, only 27% of women adult beverage drinkers choose beer, illuminating the opportunity to reach out to 58 million women who drink alcohol and are not selecting beer (Newport, 2010).
According to Mintel International, a Chicago based market research firm, “overall, the industry has plenty of room to grow; just 13% of current beer drinkers prefer craft beers, while six out of ten say they will try them if they knew more about them” (Culverwell, 2010). Marketing Strategy After careful consideration, the recommended course of action is to combine the second and third alternatives proposed above. New Belgium Brewing should consider a marketing strategy that plays upon the affordable luxury of craft beers.
While the cost of craft beers is approximately twice as much as domestic beer, it allows the consumer to indulge in a high quality, unique, affordable luxury item. This strategy has been referred to as the “lipstick effect,” which purports that consumers will indulge in affordable luxury items, like lipsticks or craft beers, during economic downturns (Schaefer, 2008). Additionally, NBB should use a single segment target marketing approach to reach female consumers. The marketing collateral should focus on the health benefits of moderate alcohol consumption; the company’s sustainability and philanthropic endeavors.
It is further recommended that New Belgium Brewing consider producing bottles and cans with a smaller circumference to fit better in smaller hands. The company’s CEO, Kim Jordan, should be the spokesperson for the new women’s initiative because she can easily relate with female consumers. The combination of these two strategic alternatives will give NBB an enormous pool of consumers and will aid in the advancement of their marketing strategy while increasing their market share. Marketing Implementation and Control
Formal marketing control would be necessary to ensure the successful implementation of the marketing strategy. NBB should adopt the following measures ensuring that the proper tools and resources are in place for a successful campaign. New employee recruitment, current employee advancement, and training will ensure that the right people are selected, and with necessary resources to successfully achieve the proposed campaign’s goals. Adequate funding for research and development would also be necessary to create new packaging that would enhance the new women’s product initiative.
By choosing Kim Jordan, the CEO (a female and co-founder), as the leader of the campaign, management will show a strong commitment to the campaign and provide the right influence for the rest of organization. In addition to having a female as the CEO, NBB also promotes sustainability which further enhances the company’s image. The fact that the company is 41% employee-owned creates a culture of employee empowerment, further ensuring the campaign’s success. The marketing campaign must attempt to draw large numbers of women to future sporting and other promotional events sponsored by the company.
Marketing success can be measured through sales tracking and by a marketing audit for proper output control for better evaluation of the recommended strategy. Methods of audit include measuring current marketing activities. Benchmarking against NBB’s competitors, and identifying other additional marketing activities our targeted segment want, need, or expect. The company can also seek feedback through social media like Facebook, Twitter, and company website. It is further recommended that the company utilize informal control methods such as cultural control.
NBB is employee-owned, allowing for shared values among all employees of the organization. This enables a more efficient marketing implementation process as all employees are guided by the same values, beliefs, and committed to the success of the company. New Belgium Brewing has an added advantage because they have achieved the desired cultural environment. Conclusion New Belgium Brewing’s original marketing strategy focused on relational marketing using a “barstool to barstool” method of marketing and creating “brand stewards” in a grassroots effort to spread the word about New Belgium’s craft beers.
As the company’s brand and leadership strategy matured, the marketing became proactive and focused by creating bicycle events, interesting take-away merchandise and a touring taste-testing vehicle. By forming personal relationships with their customer base, NBB’s market share has grown organically. To remain competitive in the craft brew market and maintain its market share, it is recommended that NBB’s marketing strategy strive to attract more women consumers with product and packaging improvements and market their beers as an affordable luxury item. References Beer feels the squeeze. (2010). Beverage World 101(8) , 37-38.
Retrieved from http://ezproxy. twu. edu:2052/login. aspx? direct=true&db=bth&AN=53270122&site=bsi-live Cioletti, J. (2010). Aligning passions Ideal Media, LLC. Retrieved from http://search. ebscohost. com/login. aspx? direct=true&db=bth&AN=52418532&site=ehost-live Cioletti, J. (2010). Fermentation Fest & Females. Beverage World , 10. Retrieved from http://ezproxy. twu. edu:2052/login. aspx? direct=true&db=bth&AN=54564325&site=bsi-live Craft brewers boast bigger sales. (2010). Beverage Industry 101(9) , 10. Retrieved from EBSCOhost http://search. ebscohost. com/login. spx? direct=true&db=bth&AN=54312026&site=bsi-live Creative partnerships. (2009). Beverage Industry, 100(4), 26-26. Retrieved from http://search. ebscohost. com/login. aspx? direct=true&db=bth&AN=39878476&site=ehost-live Culverwell, W. (2010, December 29). Craft brewers should target new markets. Retrieved February 14, 2011, from Portland Business Journal: http://www. bizjournals. com/portland/blog/2010/12/craft-brews-target-untapped-market. html Despite sluggish economy, craft beer market has got plenty to toast to (2010). Retrieved from http://ezproxy. twu. edu:2068/gtx/infomark. do? amp;contentSet=IAC-Documents&type=retrieve&tabID=T004&prodId=SPN. SP00&docId=CJ236904631&source=gale&srcprod=SP00&userGroupName=txshracd2583&version=1. 0 Ferrell, O. C. , & Hartline, M. D. (2011). Marketing Strategy (Vol. 5e). Mason: South-Western Cengage Learning. Higgins, K. T. (2009). The greening of manufacturing. (cover story). Food Engineering, 81(1), 80-90. Retrieved from http://search. ebscohost. com/login. aspx? direct=true&db=bth&AN=36350853&site=ehost-live Higgins, K. T. (2010). New belgium brewing co. hits the spot. (cover story). Food Engineering, 82(9), 40-52. Retrieved from