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Sierra Nevada Summer 2014 Marketing Plan

Prepared For: Columbia College Chicago

Size of Market: Global Beer Market:

The global beer market was valued at USD 104,978.3 million in 2010 and is expected to reach USD 137,458.9 million in 2015 with a CAGR of 6.3% from 2010-2015. The market has registered a mature and moderate growth rate in Europe and the US market. However in countries like China, Thailand and Nigeria the growth is just average. The biggest challenge for the market continues to be competing with the consumption of wine, and other alcoholic beverages. The U.S. alcohol market size in 2012 was 9.4B gallons and $197.8B in retail sales dollars. Here, beer controls on a volume share basis at 87% of consumption. Spirits and Wine are much more important on dollar share basis. Over the last five years, spirits and wine consumption has matured considerably while beer drinking has declined. In 2012, spirits grew by 3.6%, wine grew by 1.9% and beer reverted to growth with 0.5% consumption. There are now 434 craft distilleries, 2,075 craft breweries and 7,345 local wineries in the U.S. that are driving consumer curiosity and enthusiasm with their original new brands. In 2012, beer sales volume improved by 0.5% to reach 2.8 billion 2.25-gallon cases after three years of 1-2% declines. Light beer leads at 52% of volume, followed by imports at 13%, premiums at 11%, super-premium/craft at 10%. Craft beer grew by 9.8% with imports up 1.2% and declines in all others.

Domestic: Bud Light dominates with a 21.9% share and is 2 times bigger than #2 Coors Light. The leading growth brand is Yuengling up 11.7%. The top 25 brands account for 83% of category volume, but most are in decline. Category growth is being driven by the smaller craft beer brands. Imported: Corona dominates with a 27.1% share and is 2 times bigger than #2 Heineken. Mexican specialties, Tecate Light, Modelo and Dos Equis as well as Stella Artois are the leading growth brands. The top 25 brands account for 91% of category volume and are driving imported category growth.

Craft Beer: This industry contains microbreweries that produce beer for resale or consumption. According to the American Brewers Association, a microbrewery creates up to 6 million barrels of beer a year. The 2,439 businesses in the industry made revenues of $3.9 billion. Within this, Boston Beer Company was the leader in the market with a 19.3% share. Craft beers revenues improved 10% from 2008 to 2013, because more consumers consumed beer in their homes. People aged 35-44 took up the majority of the market by representing 23.2% of all drinkers. Below is the market share of specific kinds of craft beers. Paleales Lagers

41.00 27.90

Seasonal beers 18.10 Stouts and porters 13.00 In 2009, Sierra Nevada made about $.115,400,000 according to Business Insights. Although Business Insights doesn’t have any year listed after 2009 it is fair to assume that Sierra Nevada has been grown by about 5%. Samuel Adams, Sierra Nevada’s main competitor, has grown from $453,400,000 to $711,850,000 from 2009 to 2012. This along with other craft beer companies’ growth allows for a fair assumption of 5% growth.

Brand Share: In 2012 this was the market share for craft beer according to Business Insights: Boston Beer Co, maker of Samuel Adams, was the first on the list controlling 20.2% of the market. (Notice above that in 2013 Samuel Adams controlled 19.3% of the market, a .9% drop). Second was Sierra Nevada with 7.94% and third was New Belgium with 6.4%. Spoetzl, Pyramid, Deschutes, Matt, and Magic Hat were the other competitors with less control of the market. Sierra Nevada is consumed 4.69 times annually per 100 households or 100 people in households; hence the amount in pints annually per household is 0.0469. 0.44% of adults have tried Sierra Nevada once in the past year, in comparison to the craft beer market, which has been tried by 25% of adults in the past year. Buyers of Sierra Nevada end up buying about ten more pints of the product after their first purchase. Generally purchasers of craft beer buy 85 more pints annually after their

first purchase.

Demographic Trends: Millenials: The Millennial generation is creating a mark in the adult world for the first time. The age range is now eighteen to thirty-one and this age group is relatively uncommitted to organized politics and religion, connected by social media, troubled by debt, distrustful of people, in no hurry to marry— and hopeful about the future. To top it off they are the most diverse generation in American history. In all of these scopes, they differentiate themselves greatly from older generations. Also, they are much different than adults now, when they were the age of the current Millenials. Pew Research Center surveys show that fifty percent of Millenials are independent politically, and about thirty percent claim to not be affiliated with any religion. These are at or close to the highest levels of political and religious disaffiliation recorded for any generation in the quarter-century that the Pew Research Center has been polling on these topics. Millennials stand out for voting heavily Democratic and for liberal views on many political and social issues, ranging from a belief in an activist government to support for same-sex marriage and marijuana legalization.

These findings are based on a new Pew Research Center survey conducted Feb. 14-23, 2014 among 1,821 adults nationwide, including 617 Millennial adults, and analysis of other Pew Research Center surveys conducted between 1990 and 2014. According to Business Insider, Technology is really starting to help push more people into becoming entrepreneurs. In the past you couldn’t create your own website or really do you own marketing. Nowadays people have more control because of technology. Websites such as SquareSpace, Wix, and video tutorials have made the process of idea to product to marketing much easier. Business Insider is deeming asking questions as agility. Leaders and workers are becoming less and less afraid to ask more and more questions getting to the root of problems. This might reflect less concern for pride. Asking many questions sometimes can show a lack of knowledge, which shows weakness. Understanding trumping pride is something not found too often for many business owners of an older age. The recession has affected nearly every industry negatively over the past 5 years, especially the home industry. However, in 2014 the price of homes is increasing faster than people’s wages or credit. Homebuyers can no longer borrow as much, so they are moving to places that cost less. In 2013 home prices increased 13% while wages increased 2%.

Economic Trends: Many signs are indicating that the economy will once again, be better than the previous year. The Federation’s stance on policy and the booming stock market will

help out the cause. In general this means that for bigger companies increasing production, hiring, and possibly expanding is safer than in years past. Transitioning from the economy to a more simple need like jobs is quite simple. The growth of the labor force will pick up as more job opportunities open up and the economy continues to stabilize and improve. As a result, the decline in the unemployment rate will slow, meaning this could be a critical year for companies to focus on job retention and mobility enticements in order to recruit and retain skilled talent in their industry. Tech Trends:

Mobile usage is skyrocketing. Although people still use their desktop at home, the majority of time people are looking at their phone, tablet, or laptop for news. Omnicom recently made a deal with Instagram for 2 million dollars. This means advertising is going digital and further backs up the point that mobile usage is more than ever. Real time marketing is something that all companies are now utilizing. With social media platforms such as Facebook and Twitter all companies and businesses are now known to have to compete and stay relevant by posting on current events in real time. Most recently we saw McDonalds counter Taco Bell’s “Ronald McDonald” advertising campaign with a picture and a status on their Facebook page. The text said, “Imitation is the most sincere form of flattery.” This is a great example of free

exposure based on shares and ,staying up to date with what competitors are doing, then responding.

To add to this point, viral video advertising is becoming more and more prevalent. All companies should be trying to capitalize on YouTube and how a viral video can become a better investment than an ad campaign. We saw this with Melissa Coker’s viral video of strangers kissing recently. This video didn’t actually have stangers kissing, but people were fooled, and Coker’s business increased by 14,000%.

Business/Consumer Needs "Beer is one of the world's oldest prepared beverages, possibly dating back to the early Neolithic or 9000 BC," according to wikipedia. Other historians suggest later dates, so we may never know the exact origin of beer. But one thing indisputable is that in many countries today, beer has become more than a popular beverage for adults. It has become a part of mainstream culture and a way of social life. It does not matter whether you are a beer drinker or not. The mere mention of beer evokes in us a communal, convivial social experience -- the pub scenes in the TV show "Cheers," backyard BBQ, football and other sports events...

Strengths: Craft Beer is growing and in 2012, it grew 9.8%. Adding to this, the beer market is still the biggest portion of the alcohol market. This means that Sierra Nevada has a

very low risk of losing a lot of money in the upcoming years considering it continues working in a similar way. Sierra Nevada is competing with beers that have been around for hundreds of years, even outside of the craft beer market. This means that Sierra Nevada’s flavor and branding has worked very well with consumers. The branding and taste will not likely change considering it is working well now, and really only has opportunity for growth and variety. Sierra Nevada uses only whole-cone hops for all of our ales and lagers. Wholecone hops are the flowers of the hop plant in their most natural state, maintaining the precious aromatic oils and resins inside. Whole-cone hops preserve the pure, unique and individual flavors of hops, which creates a clean, bold and pure hop character in the finished beer.

The brewery is very sustainable (named Green Business of the Year in 2010), and sustainability is a very popular trend currently. “In the early days, there was no such thing as small-scale brewing equipment. Everything we used was built or repurposed for the brewery. Back then, “reduce, reuse, recycle” wasn’t a catchphrase, but a business model. This hardscrabble ethos and our roots in Northern California helped solidify our commitment to the environment. We have been recognized locally, statewide, and nationally for our commitment to reducing our environmental impact. Although we have proven to be a leader in environmental sustainability, we are always looking for the next step we can take to be more efficient.”

Also the brewery is very creative when it comes to art. Employees of Sierra Nevada have been tinkering brewing machines and recipes for years, mastering each new beer. These two aspects attract more creative people and people who are environmentally friendly. Both of these are holding their ground, and have enormous opportunity to help grow the brand.

Weaknesses: Corona dominates with a 27.1% share and is 2 times bigger than #2 Heineken. Mexican specialties, Tecate Light, Modelo and Dos Equis as well as Stella Artois are the leading growth brands.

Opportunities: According to EuroMonitor, one of the top ten consumer trends of 2014 is visual appeal. Sierra Nevada is competing mainly with Corona, Dos Equis, Harp, and Fosters all who have little visual appeal through design. This automatically gives Sierra Nevada power, considering it wouldn’t make much sense for all of these brands to change their branding at this point in time. Internally, Sierra Nevada has the power to capitalize not only on visual appeal, but also the increase in mobile usage by creating beautifully displayed campaigns and viral videos for social media sites and YouTube. On top of this they can promote their visually appealing designs more with knowledge of the interest in visual appeal. The brand can also capitalize on their third most successful area of sales, which is struggling urban cores. This can be done through free beer per a certain amount of

purchases. Adding to the promotion Sierra Nevada could make a cheaper beer with a more appealing design for these areas. Sierra Nevada’s main consumers come from older bustling families at 17.3% of their sales. It would be interesting to promote the idea of older bustling parents passing the tradition of Sierra Nevada down to their children once they are of age. The second and third most popular consumers are established couples and empty nest couples. The idea of passing the tradition down could work for these two groups as well.

Threats: In 2012, spirits grew by 3.6%, wine grew by 1.9% and beer reverted to growth with 0.5% consumption. Although the craft beer market is growing at a more rapid speed than other forms of beer, the overall category isn’t growing as fast. Cosmopolitan centers are a very crowded area filled with Sierra Nevada as well as many of Sierra Nevada’s competitors. If Sierra Nevada tries to capitalize on other areas that aren’t selling as well this may hurt the cosmopolitan centers quite a bit. It should be imperative to focus on maintaining the amount of products being sold in cosmopolitan centers. New Belgium Brewing Co. is closing in on becoming second in the craft beer market with only a 1.24% difference. Corona, Sam Adams, and Dos Equis, three of Sierra Nevada’s main competitors, have much more funding. The road to the top of the market can be sped up, but it will take time.

Competitors: Dos Equis: Dos Equis is known mainly for it’s lager which actually came after Dos Equis Amber. It is currently doing very well and growing in the beer market for multiple reasons. However, the main reason credited to Dos Equis’ current success is the advertising campaign, “The Most Interesting Man in the World”. Cosmopolitan Centers are the most popular place in which Dos Equis, a Heineken Brand, is being bought. In these cosmopolitan centers empty nest couples, and older bustling families are the most common buyers. Empty nest couples are 170% more likely to buy than the average consumer, while older bustling families are 108% more likely to buy than an average consumer. Fosters: Foster’s is bought 61% more than average in affluent suburbs. Within this, established couples bought it 349% more than average. It is also interesting to note that established couples in modest working towns bought Fosters 307% more than average. HARP: Harp lager is a Vienna style Irish lager created in 1960 by Guiness. It is very popular in Ireland, Africa, Australia, Canada and the United States. Distribution for the

brand is handled by Carlton and United Breweries, while it is brewed in Dundalk and sent to Dublin to be kegged. Harp is most commonly purchased in Cosmopolitan Centers. Here people buy it 76% more than the average consumer. Empty nest couples are the most prominent purchasers, purchasing Harp 431% more than the average buyer. Corona Extra: In 1925 Corona, Modelo’s flagship brand, was born. By the 1940s it was the most popular beer in Mexico, and by 1976 it was very well received the United States. In 1985 Corona’s name rights were sold to Modelo and exports to the US continued. Today Corona Extra is the most popular imported beer in America and is sold in 180 countries. This beer is purchased mainly in affluent suburbs. Here it is purchased 48% more than average. Within affluent suburbs as well as cosmopolitan centers, established couples are the buyers. New Belgium Brewing Co: Younger bustling families are the main consumers of New Belgium Brewing Co. This segment purchases the beer 36% more than any other group. The area that has the most purchases is cosmopolitan centers which accounts for 50% more than average. New Belgium has many different kinds of drinks from wheat, pale ales and

lagers, imperial ales, seasonal drinks, Belgian ale, flavored beers, etc. They capture almost every flavor you can think of. “Fat Tire “ amber ale, is one of their best sellers, especially amongst the younger crowd.

Keys to Success The main keys to success for Sierra Nevada are to maintain great consumer interest within the cosmopolitan centers, and affluent spreads, while targeting struggling urban cores a little bit more. (Promotion will be key for struggling urban cores) Focusing on tradition through older bustling families and their children could be a huge way to have a positive impact on younger generations, especially millenials. In order to maintain market space from New Belgium Brewing Co. and gain space on Sam Adams, Sierra Nevada should be capitalizing on their creativity in art. Packaging, branding, and taste are pristine, and this should be utilized in response to the growth in mobile usage. General social media advertising, viral video campaigns, and brilliant banner design will be key to success.

Bibliography (2012) Sierra Nevada Brewing, Business Insights Essential u=uiuc_columbia Mercedes M. Cardona (2013). Top 11 Marketing Trends for 2014 (2014) Millenials in Adulthood

Sierra Nevada Situational Analysis Ellis Peters  
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