A report on US Craft Beer Industry By Niranjan Mutkekar

Who is a Craft Brewer? ________________________________________________________ 4 Facts _______________________________________________________________________ 4 Types of Breweries: __________________________________________________________ _ 5 Microbrewery:___________________________________________________________________ _ 5 Nano-brewery:_______________________________________________________________ _____ 5 Brewpub: _______________________________________________________________ _________ 5 Contract Brewing Company: __________________________________________ ______________ 6 Regional Craft Brewery: _______________________________________ ____________________ 6 Large Brewery: __________________________________________ _________________________ 6 The Top 10 Craft Breweries in US: ______________________________________________ _ 7 1. 2. Boston Beer Co. __________________________________________________________ _____ 7 Sierra Nevada Brewing Co. ______________________________________________ _______ 7 3. New Belgium Brewing Co. _____________________________________________________ ___ 8 4. 5. 6. 7. 8. 9. 10. Spoetzl Brewery ____________________________________ __________________________ 8 Pyramid Breweries Inc. ____________________________ ____________________________ 8 Deschutes Brewery _______________________________ _____________________________ 9 Matt Brewing Co. _______________________________ ______________________________ 9 Magic Hat Brewing Co. _________________________ _______________________________ 9 Boulevard Brewing Co. ________________________ _______________________________ 10 Harpoon Brewery _____________________________ _____________________________ 10 Craft Beer Sales Stats 1st half of year 2010 ______________________________________ 11 First Half 2010 Craft Beer Industry: ___________________________________________ _____ 11 2009 Craft Beer Industry Production Volume: ____________________________________ ________ 11 How big is the US beer market? _____________________________________ ___________________ 12 Craft-Brewery A strategic group of Brewers _____________________________________ 13 Product Characteristics:________________________________________________________ ___ 13 Brewing Operations: _____________________________________________________ _________ 13 Market Structure and Competition: _________________________________ ________________ 15 Marketing Focus: ___________________________________________ _____________________ 16 Market Characteristics: _______________________________ ____________________________ 16 Business Strategy: _____________________________ ___________________________________ 18 Production of superior quality of Craft Beers: _________________________________ ___________ 18

Diversified product lines: _____________________________________________________ _________ Strategic Relationships with Distributors: ___________________________ _____________________ Control of Production: ___________________________________ ______________________________ Targeted Sales and Marketing Efforts: ___________ _______________________________________ Variety:________________________________ ______________________________________________ Safe storage and Transportation: _______________________________________________________ Chain of Custody:_______ ______________________________________________________________ Market Access: __ _____________________________________________________________________ State Alco hol Control: _________________________________________________________________ C hoice and Convenience: _________________________________________________________ ____ Economic Contribution and Community Support: ______________________________ __________ 18 18 19 19 20 20 21 21 21 22 22 Distribution: __________________________________________________________________ __ 20 Alcoholic Beverages Regulation and Taxation: ___________________________________ _____ 23 Licenses and Permits ___________________________________________________________ _______ 23 Taxation: ___________________________________________________________ _________________ 24 Environmental Regulations: ________________________________ ____________________________ 24 Investors for Craft Brewery Start Ups __________________________________________ _____ 24 Craft Beer in a Tin initiative:________________________________________ _______________ 25 Corporate Social Responsibility _____________________________ _______________________ 26 Economics of Beer: __________________________________ _____________________________ 28 Building a Craft beer brand: __________________ _____________________________________ 29 Identify your customers: _______________________________________________________ ________ Craft a dedicated brand message: ______________________________________ ________________ Creating Image of the brand: __________________________________ ________________________ Providing consistent quality: _________________________ __________________________________ Brand recognition: __________________________ __________________________________________ Consumer Ownership: _________________ _______________________________________________ Packaging: _____________________ ______________________________________________________ Contingency Planning_____ ____________________________________________________________ 29 30 30 30 31 31 3 1 32 Social Media Marketing & Craft Brewing Industry: _______________________________ ____ 32 Bibliography ________________________________________________________________ 35

Who is a Craft Brewer? A craft brewer is traditional, independent and small. Traditional in the sense t hat it has a malt flagship or brews full bodied beers which are made from recipe taken from German or English brewing origins. The malt is high grade, the brewi ng process is relatively slow and the production is small scale. The main differ entiating factors of craft brewers are their unique styles of brewing which can lead to enhanced flavor and taste.1

Facts2 The tradition of craft brewing is attracting crowds as people are loo ecialty beers to satisfy their taste buds despite the decrease in national beer trends. Craft brewers currently provide an estimated 100,000 jobs in the U.S., i ncluding serving staff in brewpubs. Growth of the craft brewing industry in the first half of 2010 was 9% by volume and 12% by retail dollars. Overall, U.S. bee r sales were down an estimated 2.7% by volume in the first half of 2010. Growth of the craft brewing industry in 2009 was 7.2% by volume and 10.3% by dollars co mpared to growth in 2008 of 5.9% by volume and 10.1% by dollars. Craft brewers s old an estimated 9,115,635 barrels* of beer in 2009, up from 8,501,713 in 2008. Overall, US beer sales were down 2.2% in 2009. Imported beer sales were down 9.8 % in 2009, equating to a loss of 2.8 million barrels. The craft brewing sales sh are in 2009 was 4.3% by volume and 6.9% by dollars. Craft brewer retail dollar v alue in 2009 was an estimated $6.98 billion, up from $6.32 billion in 2008. 1,59 5 breweries operated for some or all of 2009, the highest total since before Pro hibition. There are about 1500 Craft breweries which are based in United States and majority of them are microbreweries. * 1 barrel = 31 US gallons 1 2 http://www.craftbeer.com/pages/beerology/small-independent-traditional http://ww w.brewersassociation.org/pages/business-tools/craft-brewing-statistics/facts

Types of Breweries:3 Microbrewery: A Brewery which produces less than 15,000 barrels of beer per year. It has more than 75% of its beer sold outside the brewery. Microbreweries sell to public in three different methods: Brewery ------- Wholesaler ---- Retailer--- Consumer Brewe ry as Wholesaler - Retailer --- Consumer Brewery (As a Bar/On site Tap sales) --- C onsumer Micro-breweries adhere to the Bavarian Purity Laws of 1516. This law spe cifies that only high-grade hops, barley malt, yeast and water can be used to br ew beer. Nano-brewery: A nano brewery is beer making operation even smaller than the traditional microb reweries. Nano breweries brew less than 30 BBL. They are not a good choice for l ong term setup as the effort/profit ratio is very narrow. Brewpub: A brewpub is a restaurant based brewery where more than 25% of beer is sold on t he same floor. These breweries are maintained by restaurants and beer is dispens ed from the storage tanks. A lot of laws and regulations have to be taken in con sideration for these brewpubs and if allowed by law they can sell to offsite pla ces or offer beer to go . Majority of the restaurants which operate in the north east region of United States have brewpubs associated with them. The main reaso n of this is population demand which mostly focuses towards locally brewed beers . 3 http://www.brewersassociation.org/pages/business-tools/craft-brewing-statistics/ market-segments

Contract Brewing Company: It consists of a brewing company which outsources its production to other alread y established brewery. The main brewery provides the exact specifications for br ewing the beer. The contract brewing company is responsible for the marketing, d istribution and selling aspects of the business while the brewery provides the s pace, apparatus and infrastructure for brewing. Such contract brewing companies include Pete s Brewing Company, Boston beer company etc. Boston Beer Company is the largest brewery with flagship products of Samuel Adams (SA) Boston Lager, Bo ston Ale, SA Octoberfest, SA Wheat, and SA Winter Lager etc. The Boston Brewing company has 24 hour rule which requires its products should arrive in the market within 24 hours of shipping. Regional Craft Brewery: A regional brewery is one which has annual beer production of 15,000 to 2,000,00 0 barrels. A regional brewery which has 50% or more volume production in all mal t beers or which has a malt flagship. These breweries can also produce beers whi ch use adjuncts to enhance rather than lighter the beer flavor. These breweries include companies like Sierra Nevada Brewing Company, Red hook Ale Brewery and A nchor Brewing Company. Large Brewery: A brewery which has production capacity of more than 2,000,000 barrels per year. The only craft brewery that can come close to become craft is Boston Beer Compa ny with annual production of 1,841,348 barrels per year.

The Top 10 Craft Breweries in US4: 1. Boston Beer Co. Annual sales: 1,841,348 barrels Share of segment: 20.20% Change in share: -1.21% The largest craft brewery in the country is the Boston Beer Company, headquarter ed in Boston, Massachusetts. Known best for their Samuel Adams brand, the brewer y also produces a wide range and diversity of beer. Boston Beer Company is famou s as the largest Contract Brewing Company. Although the most popular brew is the ir Boston Lager, the company is also popular for their seasonal and specialty be ers, such as the high priced Utopias, which contains 27% alcohol by volume and i s aged over 16 years. Following the acquisition of Anheuser-Busch by InBev, the Boston Beer Company is the largest American-owned brewery, producing over 1.8 mi llion barrels annually. The company was founded by Jim Koch, who based the origi nal recipe on his ancestor's pre-prohibition formula. 2. Sierra Nevada Brewing Co. Annual sales: 723,880 barrels Share of segment: 7.94% Change in share: +0.06% Established in 1980 by Ken Grossman and Paul Camusi, Sierra Nevada is the second -largest craft brewery in America and is located in Chico, California. Producing over 723,000 barrels of beer annually, the most popular brew is the company s p ale ale, although the company has a wide range of seasonal brews, porters, stout s and special releases. 4 http://www.cnbc.com/id/39233398/The_10_Biggest_US_Craft_Breweries

3. New Belgium Brewing Co. Annual sales: 583,160 barrels Share of segment: 6.40% Change in share: +0.60% The third largest craft brewery in the country is the New Belgium Brewing Co., l ocated in Fort Collins, Colorado. Founded in 1991, the brewery began when Jeff L ebesch decided to take his passion for home brewing to a commercial level. Fat T ire, the company s flagship beer, originated from a bicycle trip Lebesch took th rough Belgium from brewery to brewery, and the icon of a bicycle is also display ed in company logos and labels. The company s beers are distributed in 19 differ ent US states. 4. Spoetzl Brewery Annual sales: 409,000 barrels Share of segment: 4.49% Change in share: -0.14% Also known as the little brewery in Shiner , Spoetzl hails from Shiner, Texas. F ounded back in 1909, Spoetzl is also the oldest brewery in Texas and is distribu ted in 41 states. Spoetzl s flagship beer is the Shiner Bock, which has been bre wed since 1913 and contains 4.4% alcohol by volume. 5. Pyramid Breweries Inc. Annual sales: 192,199 barrels Share of segment: 2.11% Change in share: -0.34% Headquartered in Seattle, Washington, Pyramid Breweries was acquired by North Am erican Breweries Inc. in August, along with Magic Hat. With its introduction of Apricot Ale in 1994, Pyramid has been known as a leader in the fruit beer catego ry. They operate several ale houses and restaurants in Washington, Oregon and Ca lifornia.

6. Deschutes Brewery Annual sales: 186,783 barrels Share of segment: 2.05% Change in share: -0.07% Located in Bend, Oregon, Deschutes Brewery produces a range of beers, including Black Butte Porter and Mirror Pond Pale Ale as well as a specialty brew called T he Abyss, which is an imperial stout with 11% alcohol by volume. Aged in bourbon barrels, The Abyss has won numerous awards since its 2007 release and is consid ered to be one of the finest beers in the country. 7. Matt Brewing Co. Annual sales: 171,700 barrels Share of segment: 1.88% Change in share: -0.02% The brewers of Saranac Beers, the Matt Brewing Co. are the third largest craft b rewery in the US. Located in Utica, New York, it is a family-owned brewery that also produces soft drinks and is primarily available on the East Coast. 8. Magic Hat Brewing Co. Annual sales: 154,236 barrels Share of segment: 1.69% Change in share: +0.20% Located in South Burlington, Vermont, Magic Hat brews four year-round beers and four seasonal beers, with #9 as its flagship beverage. In August, Magic Hat was acquired by Rochester-based North American Breweries Inc, along with several oth er brewers.

9. Boulevard Brewing Co. Annual sales: 138,954 barrels Share of segment: 1.52% Change in share: -0.10% Boulevard is a regional brewery located in Kansas City, Missouri. When AnheuserBusch was sold to InBev, Boulevard became the largest independent American brewe ry in Missouri. Their beers are primarily available in 20 states across the Midw est and Great Plains. Boulevard has recently completed an expansion of their bre wing facility that gives them the capacity to produce up to 700,000 barrels per year, and they are actively looking to expand their market share. 10. Harpoon Brewery Annual sales: 130,516 barrels Share of segment: 1.43% Change in share: +0.05% Headquartered in Boston, Massachusetts, Harpoon Brewery is known best for its In dia Pale Ale, but also has a range of beers, including award-winning Munich Dark , 1636 brew and four seasonal beers. In 2000, Harpoon also acquired a Catamount Brewery

Craft Beer Sales Stats 1st half of year 20105 First Half 2010 Craft Beer Industry: Growth of the craft brewing industry in the first half of 2010 was 9% by volume and 12% by retail dollars. Overall, U.S. beer sales were down an estimated 2.7% by volume in the first half of 2010. 2009 Craft Beer Industry Production Volume: Regional craft breweries Contract brewing companies Microbreweries Brewpubs Dome stic Craft Beer Sales 2009 2008 7,053,996 bbl 365,132 bbl 989,644 bbl 706,863 bbl 9,115,635 barrels 8,501,713 barrels 5 http://www.brewersassociation.org/pages/business-tools/craft-brewing-statistics/ beer-sales

How big is the US beer market? Overall US Beer Market in 2009: 205,676,000 barrels of beer. Where: 1 barrel = 3 1 US gallons 31 US gallons = 2 half-barrels Down 2.2% approximately $101 billion Selling 2 half-barrels (15.5 gallon) kegs = 13.78 cases (of 24 12-ounce bottles).

Craft-Brewery Brewers A strategic group of The craft beer industry is able to march past the normal beer industry segment o n both margins and growth because of their unique product characteristics, organ izational structure and different marketing approach. Product Characteristics: The craft brewers form a definitive strategic group as their product the craft-b eer is horizontally differentiated and it has very little number of substitutes. The main differentiating factor between the craft beers and other normal beers is the brewing styles and distinctive flavors. The Craft beers have their unique taste likeness which comes from the traditional slow brewing styles and over th e years perfected recipes. This is the main reason craft beers differentiate the mselves horizontally based on the taste and quality. Craft type of beers appeal to the consumers who are seeking taste revolution . For these particular consume r group the increase in product features increases there economic benefit thus g ives them more satisfaction. Due to this unique feature the price elasticity of demand for Craft beers is much lower than the normal beers. Because of the econo mic benefit provided by craft beers they can demand higher price thus capture hi gher margins. The craft brewers are also geographically differentiated. A partic ular geographical area boasts a unique type of craft brew. For example: Boston B eer Company localized in a Massachusetts area. The success of the craft brew ind ustry and its appeal to mass population is based on two main reasons, the higher economic benefit consumers get even they pay premium price for the beers and in the consumers mindset, product is an experience rather than a general goods.6 Brewing Operations: The primary natural ingredients for making beer are Hops, Yeast, Malted Grain an d Water. Craft breweries use the finest of these grains, mostly barley malt with strains having two rows of grain in each ear. The hops are chosen according to the need of a specific flavor or taste. 6 http://www.stumptown.com/articles/mgmtbeer.html

Some hops impart slight bitterness to the beer while others are used to bring ou t distinctive aromas. The most commonly used yeasts for fermentation process are Saccharomyces Cerevisiae used in production of ale and Saccharomyces Uvarum use d to produce lagers. There are numerous different strains of these yeasts and ea ch craft brewer has to carefully choose the correction combination of these ingr edients. The brewing process starts with milling specific strains of malts and t hen mixing them with warm water. A mash tun is used to stir and hit this mixture , which converts simple carbohydrates and sugars to fermentable sugars with the help of naturally occurring enzymes. This mash is then strained and rinsed in th e lauter tun to produce residual liquid, called wort. Wort is very high in ferme ntable sugars. Wort is boiled and concentrated in a brew kettle. Hops are added at various intervals to enhance the appropriate bitterness and aroma and to act as natural preservatives. Sometimes a mixture of different varieties of hops is used to create a distinct flavor and taste. After the boil the wort is strained and cooled down before it is moved to the fermentation cellar, where the interna lly cultivated specific yeast is added to induce the fermentation. Yeast metabol izes worts sugars to produce alcohol and CO2. CO2 is partially captured and abso rbed by beer providing a natural source of carbonation. After the fermentation i s over, the beer is cooled for several days during which beer gets clarified and a full-flavor develops. The unwanted yeast is removed from the beer by filtrati on which is roughly completed in 14-21 days. The fermenters and other necessary equipment required for the brewery are easily available for purchase in the mark et. Different breweries employ different styles and types of equipment s. Once t he beer is ready it is generally packed in kegs and bottles. Most of the microbr eweries have manually operated bottling equipment. The bottling operations are d one under maximum CO2 concentrations to ensure that minimal amount O2 gets disso lved in beer and it gets enhanced shelf life. As the breweries are getting more environmental conscious, they are trying to utilize less weighted glass bottles, tins or bigger (1/2 liter) size bottles to serve beer. Quality assurance is key factor in order to maintain the consistency in beer quality and flavor. QA for small breweries is generally done by tasting beer randomly within different batc hes. Large breweries like Boston Beer Co, Redhook Ale maintain a separate qualit y assurance department. This QA department can be further broken down into follo wing areas of concentration: Microbiology Brewing Chemistry Sensory Evaluation P ackaged Quality and Integrity

Each of these departments is responsible for qualitative and quantitative analys is of the batches to ensure superior product quality. Each new product is thorou ghly tested and retested before its mass produced and sold in the market. Larger breweries allocate extensive amount of budget to QA departments.7 Market Structure and Competition: The craft brewing industry has a different organizational structure. This struct ure is also based on the fact that the product is differentiated based on flavor and taste. This makes Craft brews competition based on differentiation and qual ity rather than cost. Thus craft brews organizational structure cannot imitate t he large brewers with higher economies of scale and price competitive environmen t. They have structure which focuses on scale production, maintaining the craft brew flavor and quality and to foster their brands name and image. The competiti on in the domestic craft beer segment and the other high quality beer categories is based on product quality, consistency, freshness, and taste, their ability t o differentiate products, promotional methods used, customer satisfaction, costs of distribution, and price. Beyond this category, craft brewers compete with th e regular beer products category, wines, spirits and flavored alcohol beverages. The craft beer segment has become highly competitive in recent years due to eas y availability of funds to finance the startup operations which has led to the e xplosive growth in the number of craft breweries operational in US market. As ma ny of craft brewers are expanding their distribution areas, the competition is r ising amongst the peers. Competition varies with the regional markets, depending upon the local market preferences and distribution techniques. The toughest com petition is amongst the microbreweries as their numbers are huge and their marke t shares are miniscule. Many of the specialty brewers, National craft brewers ha ve wider zones of distribution thus they are more financially strong to back up their products with expensive promotions but microbreweries possess the competit ive advantages of being unique flavored and highly appealing to the local custom ers. The Craft brewers also compete with the imported Craft brews especially fro m Germany, Dark Ale, Pale Ale, Lagers and other alcoholic segment products. The imported beer segment has very high percentage of market share in US, and also t hey are more economically strong than most of the local Craft brewers. The situa tion is changing rapidly with growth in craft brew market. Craft brewers are tak ing advantage of several factors such as lower transportation costs, quality and flavor of beers, proximity and familiarity with local consumers, federal and st ate tax incentives, higher degree of product freshness and crispness etc. 7 http://www.redhook.com/Default.aspx?p=21

Competition for the Craft Beers has also come from wine and spirits. Beer segmen t has lost about 1% of their market share to wine & spirits segments every year since 2003. However this trend is declining since the onset of economic downturn . The Craft Beers segment is showing growth in this downward market which is a v ery good sign. Pacific Northwest and California are said to be the most competit ive craft beer markets in US both in terms of number of breweries and consumer a wareness. One positive factor about increasing competition is Craft brewers need to constantly beat their competitors with high quality and diversified product lines. Craft brewers market is a healthy competitive market, but marketers state that soon this competition will go down to the pricing of the product. They fea r that price competition can lead to the drastic decline in quality of the produ cts which can harm the whole Craft brew industry. In order to get bigger slice i n this market Craft brewers are focusing more on consumer awareness, redesign of their brands and better alignment of their product lines.8 Marketing Focus: The craft brews marketing focus varies from localized to nationalize. The small scale geographically located brewers try and promote their products in near area s while the large national brewers such as Samuel Adams, Dog Fish, Sierra Nevada Brewing focuses on national market. They also compete with big regular brewers on local and national markets. The craft brews have an advantage because of thei r differentiation competence. They can compete on higher price points based whic h bolsters their image of high product quality and innovation. Market Characteristics: The Market concentration for Craft Brew industry is high. There are two sets of distinctive trends which set the competition in the market. The acceptance of Cr aft brews by large number of population has led to the extensive growth in the i ndustry. The number and diversity of craft brewers has grown while at the same t ime many of the national brewers are acquiring or being acquired by other nation al or foreign brewers in order to gain more market share in the expanding craft brew market. The bigger players like Boston brewing company, Pete s brewing comp any, Red Hook Ale etc. are looking forward to expansions in the global markets t hrough aggressive buy outs or setting up foreign subsidiaries. 8 http://www.konabrewingco.com/uploads/CBA_Kona_Partner.pdf

Foreign brewing companies have also entered the merger and acquisition market. S ABMiller and Molson Coors came together in joint-venture, merging their U.S. ope rations as Miller-Coors to compete head on with market leader Anhauser-Busch. Mi ller-Coors was then momentarily was the world s largest brewer by volume, until InBev s acquisition of Anhauser Busch, in the fourth quarter of 2008. According to the industry stats, Anhauser Busch and MillerCoors have accounted for roughly 80% of total beer shipped in the United States, including imports, since 2008. While in the Craft Brew segment, Boston Beer Company became the largest brewer o f Craft brews. The US beer market is similarly and increasingly concentrated in a small number of microbrewers, nano brewers and brewpubs. The largest 4 have es tablished the combined market share estimated at just over 50% of the world mark et. Budweiser-brewer AB-InBev had beer volumes of around 350 million hectoliters in 2009, Miller-brewer SABMiller at just under 250 million, Heineken at just ov er 200 million, and Carlsberg around 125 million, while Tsingtao trailed at just over 50 million hectoliters a year. 9 As far as the consumers of craft beer are concerned, the following percentages are found: The majority of craft beer drin kers are primarily Caucasian (90%), male (70%), urban (65%), which have househol d incomes of at least $50k per year (75%), are college educated (65%) and are be tween ages 21 to 50 (90%). Craft national market for Craft brewers has an eight firm concentration ratio of 53.4%. The largest of this share goes to Boston Beer Company which holds market share of 25.1%. Thus, Craft brewing industry has a l arge untapped market which is made up of small to very small brewers. Most of th e larger players are trying to gain market share in this craft brew segment. The Chicago based Miller-Coors have established a separate division named Tenth and Blake Beer Co. which will now concentrate on the domestic and imported craft be er segment which contains beers like Blue Moon, Peroni and Pilsner Urquell. The trend is supporting this move as most of the consumers of internet age are choos ing flavored, innovative, full-bodied and diversified beers over regular beers i f they are in the affordable range. Guinness has also started concentrating on t he craft brew industry with launch of the Guinness Black Lager designed for Guin ness drinkers who are looking for taste revolution.10 9 http://www.sabmiller.com/index.asp?pageid=1878&blogid=45 10 http://articles.chicagotribune.com/2010-09-21/business/ct-biz-0922-craft-beers-n ew-20100921_1_craft-beer-craftsegment-craft-brewers

Business Strategy11: Majority of the Craft Brewers are small microbreweries brewing 1000 bbl to 30,00 0 bbl per year. As most of them are start-ups they have different business strat egies for growth of business and capturing larger audiences. The main parts of t heir business strategies are: Production of superior quality of Craft Beers: The main strategy for any Craft Brewer is producing high quality of Craft Beer. The beer is tested thoroughly with regards to its crispness and freshness. Brewe rs concentrate on producing full bodied and favored craft brews. The craft beers are brewed by selecting superior quality of barley, hops and other ingredients. The equipment used is state of art and as a symbol of high quality most of the brewers get their products Kosher certified by the orthodox union. Companies see k to produce their beers in sustainable environment and help reduce the total ca rbon footprint by improvising on brewing mechanisms. Diversified product lines: The craft brewers have identified the need of diversification and now are aggres sively pushing to offer a variety of beers under the same flagship brand. Most o f the craft breweries actively brew different kinds of beers for different festi vities or seasons. This strategy helps when customers switch beers; they general ly choose different beers from the same brewers. This is a good customer retaini ng strategy which is highly effective. Through different flavors and brand aware ness created by the company customers are able to seek strong relationship with the brand. Craft brewers are attentive regarding their customers tastes and pref erences and they brew products with distinctive tastes and capacity to meet thei r requirements. Strategic Relationships with Distributors: Maintaining the strategic relationship with distributors is one of the most impo rtant factors for success of craft brews. Most of the craft brews are location b ased and serve a limited set of area. They lack the necessity manpower to distri bute the beer themselves thus they forge strategic relationships with the local successful distributors. These distributors are kind of their 11 http://www.annualreports.com/HostedData/AnnualReports/PDFArchive/hook2009.pdf

front office for sales. The distribution relationships offer efficiencies in log istics, product delivery and after sales services. Control of Production: Except some of the contract distributing companies like Boston Beer Co. most of the microbreweries and large breweries control their own production. The control of production is vital to maintain the production efficiencies, consistency in product quality and taste. The control of production also allows brewers to opti mize employee productivity, check on unnecessary batch costs and consistently pr oduce superior quality of beers. Craft brewers boast their smaller production vo lumes, highly controlled brewing conditions and best tasting beers. Targeted Sales and Marketing Efforts: For the Craft Brewers the targeted markets are usually local restaurants, liquor stores, bars and clubs. Creation of different families of products under the sa me brand name definitely helps in marketing efforts. The sales and marketing eff orts are channeled to the areas where the demand is more. In order to boost the marketing efforts and achieve higher sales, most of the breweries adopt to a var iety of advertising programs. Breweries also undertake training and educating th e wholesalers and retailers about brands, flavors and distinguishing factors. Pr omotion at various events, local festivals, venues, sponsoring certain activitie s/sports etc. also is undertaken by breweries to widen their communication netwo rks. As stated above, the wholesalers are face of the company for the outside wo rld, and wholesalers carry many beer brands both national and domestic, thus it is most important function of sales and marketing team to elevate their brands n ame in the perspective of wholesalers. The brewers have a tough job to increase the transparency of their products in distributor s eyes, generate and maintain their attention on its brews and through distributors promoting the sales of com pany s products. The breweries work personally with each distributor, detailing them about the products and directly involving them in the promotional activitie s and events. Representatives from the Craft Breweries many a times personally v isit the restaurants and bars, talking to the owners, giving them samples of the products thus creating a pull for their products in the market. It is always ea sier to sell the product when customer is already aware of it than to push it on new customers. The chain of education travels through all the strata for Craft brewer. The time he/she spends with a distributor creating awareness is rewarded by distributor giving quality and sales pitch to retailers/restaurants/bars whi ch then spread the word to the end

customers. Every element in this command chain is vital and brewers need to give respect and quality to earn their trust. Distribution12: Distributors are very important personnel in beer industry. They are responsible for transportation, cold storage requirements and maintenance for perishable be er from the time it leaves the brewery till the time they arrive for sale at res taurants, bars or retailers. Variety: Each distributor is equipped with state of art cold storage facilities. They sec ure the beer from a variety of breweries and preserve those products in the cont rolled environment till their safe delivery at end points. They are the face of the beer brands to the retailers thus they employ skilled sales and marketing cr ew to market the products they carry to different retailers. Distributors have v ariety of trucks and they employ number of drivers who deliver customized invent ory to a vast network of small and large retailers which include different retai lers, restaurants, pubs, bars and neighborhood stores. Distributors work with th e retailers even after the product deliver where they monitor the products for f reshness of quality and taste. Safe storage and Transportation: Distributors are key channels for storage and transportation of the beer. They m aintain state of the art warehouses, fleets of temperature controlled trucks and vans, warehouses, delivery and merchandizing personnel to ensure efficient and safe delivery of wide range of products at minimum cost possible. Thus they prov ide great value in terms of product quality and consumer choice. They also work with state regulators to ensure rules and regulations are followed which deliver ing the products. 12 http://monarch-beverage.com/Files/Pdf/Americas%20Beer%20Distributors.pdf

Chain of Custody: The distributors work with chain of custody method in the sale of beer. This sys tem makes it very easy to enforce state laws and local ordinances. The same syst em also regulates the sales to the retailers ensuring that they hold the correct licenses, do not sell to the underage, pay the required state and local taxes a nd comply with the state and local alcohol beverage laws. The same regulations w hich check for the accountability in beer sales also allow the states to effecti vely collect the taxes on the sales of alcohol products. Distributors monitor th e data of the sales from the point it leaves the brewery till it arrives at the licensed retail outlet, thus they have all the necessary information to collect taxes. Many states find it much easier to collect the taxes from a limited numbe r of federally and state licensed beer distributors than from thousands of indiv idual retail outlets. Market Access: Distributors are spread wide in different states across the country. Thus sellin g the beer through distributors allow many small and large breweries to get thei r product to diverse markets and provides the small scale retailers to offer var ieties of beer under one roof. The system provides the same level of playing fie ld for all the breweries irrespective of their size. Distributors allow a health y competition between the breweries. State Alcohol Control: The rules and regulations for alcohol are different in various states. The main reason for this being nature and effect of alcoholic drinks. Alcoholic beverages are unique and can have negative consequences if consumed by illegally underage teens or abused by adults. Thus to create a responsible society, it is very imp ortant to maintain effective regulation on alcoholic beverages. The 21st amendme nt gives states the total control to design and implement their own rules and re gulations for sell of alcoholic beverages. This regulatory system allows states the flexibility to deal with the local circumstances.

Choice and Convenience: The distributors work with numerous breweries small and large scale, imported or domestic thus they are able to provide a wide range of product offerings to the consumers. They provide equal access to market for all brewers alike. Beer dist ributors especially help small scale brewers to gain substantial market reach. T hey unlock the access for startup and small beer brands and other innovative bev erages. Distributors provide the necessary infrastructure for small brewers so t hat their products can reach wide network of retailers. The consumers of the bee rs benefit by having wide variety of choices from famous brands from large domes tic or international breweries to specialty craft microbreweries. Because of the economic efficiencies of the distribution system, retailers can offer hundreds of choices of beers at a great price. Economic Contribution and Community Support: Beer distributors are businesses who are socially responsible. They are most of the times associated with particular beer brands they carry but at the same time they are small business owners active in economic development and local busines s groups. Distributors also actively support local community events and programs , sporting contests, philanthropic activities and beer fests. There are more tha n 1900 beer distributors US wide who employ more than 92,000 Americans and provi de their employees with competitive work place, health care and quality wages. E very dollar spent on beer distribution adds $1.50 in economic activity generatin g 30 cents in taxes for federal government and 18 cents for state and local in t ax revenues.131415 13 http://www.centraldistributors.com/ http://www.probrewer.com/resources/distribut ion/specialty.php http://nbwa.org/industry-tech/craft-beer-distributor-of-the-ye ar-award 14 15

Alcoholic Beverages Regulation and Taxation: All of the Craft breweries are highly regulated at the federal, state and local level. These levels govern the production and distribution of the beer which inc ludes permitting, licensing, labeling, marketing, trade practices, distributor a greements, advertising and variety of other matters. There are different entitie s at federal, state and local level which collect various taxes, licensing fees and other similar charges. They also make sure each brewery is adhering to the l aws and regulations. Licenses and Permits All the breweries who sell beer commercially are subject to licensing, permittin g approvals by a number of governmental authorities at the federal, state and lo cal level. At the federal level, the Alcohol and Tobacco Tax and Trade Bureau of the U.S Treasury Department ( TTB ) are responsible for administration and enfo rcing of the related federal laws and tax codes to production and taxation of al coholic products. A federal brewer s notice is required by each brewer in order to brew beer for public consumption and an amended brewer s notice is to be file d is there is any change in material process, brewing equipment, brewing or ware housing locations, brewery ownership or change in management team. Similar types of TTB permits are required if brewery is entering in a contract brewing agreem ent or into an alternating proprietorship agreement. These are very important pe rmits and they can be revoked, cancelled or suspended in case the brewery doesn t comply with the correct protocol and standards which directly affects companie s production and reputation. Also TTB can inspect or audit any brewery at any ti me. At the local and state level, the level of regulation varies widely. Some of the breweries distribute their products in areas where a mere notice to the aut horities regarding the change in the operations, management, materials or owners hip is suffice but in other areas an advance notice and approval is required. St ate and local laws and regulations which govern the sale of the craft beers with in particular state, especially for an out of state brewing company vary from lo cale to locale.

Taxation: The breweries producing less than 60,000 barrels of beer pay taxes of $7 per keg while large breweries brewing more than 60,000 barrels pay $18 per keg in taxes . The tax is on production and applies as soon as a keg is removed out as a fini shed product. The individual states in which the breweries operate also impose e xcise taxes on beer and other alcoholic beverages which vary depending on state. Environmental Regulations: The environmental regulations differ being federal and state bound. There are sp ecial environmental permits required by the federal and state authorities. These requirements consider permissions for air emissions, water discharges from the brewery and handling and proper disposal of hazardous waste materials. The proto cols needed to be strictly followed by the breweries and violation If occurs can lead to adverse effects on breweries credibility. Investors for Craft Brewery Start Ups Many investors are lining up to support the exploding growth in the craft beer i ndustry. But investors are being very careful in selecting the breweries they wa nt to invest in. Multiple factors are catching investors eyes which are making i t tough for them to make investment decisions. Some of those factors are: The co mpetition in the craft brew industry is heating up every day with additions of n umber of Micro/Nano breweries. A petition is filed against craft brewers with th e U.S Treasury Department Bureau of Alcohol, Tobacco and Firearms by Anheuser Bu sch, Red hook Ale and several other breweries. They are demanding craft brewers add names of who actually brewed the beer on their bottles. The growth of the Cr aft beer industry is mainly because customers think Craft brews gives them added advantage. The product is carefully brewed and is richer in favor and taste the n mass produced beers. The Contracting out of Craft beers- is not mentioned anyw here but Boston Beer Company and other major breweries actively engage in contra ct brewing. Investors further fear that Craft Brewers are expanding based on hyp e created by the larger players and one missed step can hurl the industry in dow nward direction.

 There are also worries of strong internal cannibalization and questions such as what if big brewers make a malt flagship product which is much higher in quality and taste. Microbreweries on the other hand are looking forward to the lawmakers tax cuts f or craft beer industry. Craft brewers have different sets of tax burden even if they fall in the broad category of Small businesses. For these brewers the tax i s levied on the production rather than on the actual sales. The tax cut bill wil l reduce this $7 per barrel for first 60,000 barrels of beer to nearly $3.5 per barrel. And for breweries producing more than 60,000, it will reduce tax from $1 8 to $16 per barrel. If the bill is passed, it will bring the small breweries on the same playing field as the small business owners. Harvard study shows, if th e bill is passed, it will create 2,700 new jobs within 18 months and 375 new job s will be created every year for next four-five years. Thus as most of the inves tors are trying to figure out which upcoming breweries to invest in, the micro-b reweries are more hopeful more investors will line up as the craft brew market r eally explodes in terms of market share and total beer sales in near future.1617 Craft Beer in a Tin initiative: In 2002, Oskar Blues brewery in Colorado decided to pack their beers in cans rat her than in bottles. Both bottles and cans are environmentally friendly, but can s being more easily recyclable provided a bigger push towards environmental awar eness. Plus, packing beers in cans is cheaper and product is more easily distrib utable. This cheap old style can beer was a nice way for Oskar Blues to bring cr aft brews to general population who enjoys beers on occasions such as social gat herings around campfires and back side barbeques. Oskar Blues CEO first laughed at the notion of canning the craft brews, but after learning the number of advan tages quickly adopted the mechanism. The initial production was of the Oskar Blu es flagship beer Dale s Pale Ale. This was only possible because Cask Brewing Sy stems, the canning machine company has convinced a local manufacturer to produce 200,000 cans for Dale s Pale Ale which was way below industry average of 1 mill ion cans. The initial reaction was utter shock in the craft beer market communit y. Tin canned beers are considered as low quality and no craft brewer wanted his /her flagship brand to considered one. Oskar Blues decided to distribute the can ned beer themselves to the retailers and also participate in beer fests to demon strate the freshness of the canned beers. Oskar Blues decided to pursue critics and retailers to consider canning of craft brews based on strong arguments on be half of canning beer: 16 17 http://www.cnbc.com/id/39232270/Craft_Beer_Business_Is_Booming http://www.inc.co m/magazine/20101001/a-craft-beer-stimulus-plan.html

 UV light is biggest enemy of fresh beer. If too much comes in brew gets bitter. The cans illuminate this risk. Oxidation is also a brew spoiler which can happen with bottled caps, but the cans are hermetically sealed. The saying that canned or kegged beer tastes like aluminum is a myth. Canned beer remains crisp and fr esh in taste. Aluminum packaging for craft beers means more product shelf-life, manufacturing & distribution costs go down as they weigh less than a third of th e bottles. Aluminum is much more earth friendly than glass. It is 100% recyclabl e, energy used to create it is much less than bottles thus fuel costs are lower which means shrinkage of carbon footprint. Currently less than 1% of the Craft beers are canned. 52 breweries in US now off er canned beers. The point of view towards canned beer in craft beer segment is changing especially after larger craft breweries are shifting to green initiativ es. In some years it is estimated that canning of craft beer will increase multi fold as more customers will realize its true advantages. 18 Corporate Social Responsibility It s the golden era for Craft Beer industry. The Craft Beer sales are going up e ven in these stagnant economic conditions. As Big shot beer producers continue t o dominate the world markets with their expensive advertising campaigns and prof its from cheap selling beers, the craft brewers are seen as revolutionaries, who are more localized, green and adopting socially responsible business models wit h focus on quality and diversity over the defamed mass production. In his book, Fermenting Revolution: How to Drink Beer and Save the World, author and active b eer activist Chris O Brian states that American Craft brewers are countries unli kely revolutionaries, and their adoption of sustainable business practices helps fight globalization and break the market control of major beer companies . Micr obreweries are fighting in the smaller markets but with larger players, they are supporting their communities by using fresh local ingredients for their brews; they understand their customers and they have ability to develop and respond to the needs of the local markets. They are building loyal followers, giving back t o the society by promoting various events something that hasn t been done by the beer giants. 18 http://www.inc.com/ss/canned-beer-renaissance?nav=related

From the craft beer biggies like New Belgium, Boston Beer Co, and Red Hook Ale t o small microbreweries and brewpubs, an overwhelming number of craft brewers hav e embraced green technology to run their businesses. But maintaining a sustainab le modern-day brewery involves more than just buying local ingredients and follo wing a protocol. Eco-friendly brewers need to be aware of things like the type o f energy used to power their operations, the sources of raw materials, the equip ment used to build the brewery, the packing and distribution materials used and how to dispose of the waste products. Vermont has highest breweries per capita i n U.S where there is a craft brewery per 32,698 people. Vermont also boasts firs t ever certified organic breweries in nation, Wolaver s brewery. Wolaver s belie ve that people are attached to a particular type of Craft beer because they feel the connection for that brewery. And part of building and nurturing that connec tion is through implementing local, sustainable business practices. They have th e vision: local, organic, collective, green and background . Every step of their beer making process has been well defined to be sustainable. Alaskan Brewing Co mpany in Juneau is the first beer producer who has started recycling the CO2 nat urally created during the fermentation process. Alaskan Brewing Company tries to tie in their location and environment in their brewing process. They state that if a consumer is enjoying their product, he/she is not only supporting the envi ronment and helping local community become sustainable but also supporting a bus iness that is consciously trying to make a difference. Sedibeng Breweries are ac tively involved in a wide range of social responsibility engagement programs whi ch aim to invest back into the community. Through their social responsibility pr ogram they are trying to assist in improving people s lives. They contribute to development in a sustainable way and they support projects that communities need . They study the community requirements, rather than strictly creating solutions for our communities. This works because then they can spread their resources wi de on various sustainable projects. However, before company commits to a project , it ensures that skills will be transferred, communities are involved and the p rojects will be able to become self-sustaining. Wherever can, company assists an d sometimes may form partnerships so as to increase capacity. Small brewpubs are also paving the way for environmentally sustainable business in America. Salt L ake Brewing Company in Utah was awarded the 2006 Environmental Company of The Ye ar award by the Recycling Coalition of Utah. Kona Brewing Company in Hawaii empl oys a full-time sustainability coordinator. The ultimate sustainable brewpub in the country is the Hopworks Urban Brewery in Portland, Oregon. Portland is famou s for two things: beers and bicycles. And Hopworks, Portland s first eco-brewery , does its best to combine both. It was opened by former awardwinning Laurelwood brew master Christian Ettinger, Hopworks considers sustainability its primary m otto. From its brew kettle and the brewery truck are run on biodiesel which is m ade from oil used in the deep-fryers , to the pizza ovens that warm the brewing water.

The Hopworks brewery is cleaned with collected rainwater caught from the roof, a nd the entire brewery building is built from reclaimed or recycled materials. Lo cal, sustainable beer is infusing the American beer market. According to the Org anic Trade Association (OTA), organic craft beer sales increased 40 percent in 2 005, tying only with organic coffee as the fastest-growing organic beverage segm ent in the country. The big companies are also starting to notice the glitter pr oduced by the organic beers. Anheuser-Busch released two Organic Beers to the ma rket named Wild Hop lager and Stone Mill pale ale since then A-B have dedicated separate sustainable development department to improve the social corporate resp onsibility rating. In 2008 the Molson Coors Brewing Company set the rolling glob al target to reduce water-use efficiency by four percent. And, according to a 20 08 promo video, Miller claims to now be recycling 99.9% of all packaging waste. Most of the larger players in beer business have taken up environmental initiati ves which have resulted in reductions of carbon footprints, and in less water an d energy usages. But these sly larger players are going green for better PR, the proof lies in the lobbying of U.S. Department of Agriculture by Anheuser Busch to drop the hops as the item on list of organic beers ingredients which doesn t have to actually be organic. According to the USDA, for a product to be consider ed organic, it must be made with at least 95 percent organic ingredients. The co mpany now claims to be using 100% organic hops in its organic beer.1920 Economics of Beer: Terms used to explain Economics of Beer: ATC Average Total Costs TC Total Costs Q - Total Quantity FC VC Fixed Costs Variable Costs Average cost for production of one unit (ATC) = Total Cost (TC) / Total Quantity (Q). Total Cost (TC) = Fixed costs (FC) + Variable Costs (VC). For Beer making, fixed costs are costs associated with the cost of brewing equipment, lease on b uilding etc. These costs don t change with change in the output (Q). Although if you have reached your maximum out and need to expand further, the FC changes. 19 20 http://www.bplans.com/brewery_business_plan/strategy_and_implementation_summary_ fc.cfm#ixzz10BwnF1Yy http://www.triplepundit.com/2011/01/green-brewhaha-craft-be er-makers-green/

Variable costs are made up of basic raw materials, energy requirements, and manu al labor hours. Thus VC depends upon the output. The more the output the more wo rking hours and raw materials etc. Now, TC = FC + VC; and ATC (Cost for brewing one ounce of beer) = TC/Q Hence, ATC = FC/Q + VC/Q. Thus you can understand that , both the FC and VC falls with increase in Q that is increase in scale of beer production will lower fixed as well as variable costs. As the production expands the costs for brewing per ounce of beer decrease and profits increase. It is sa id that operations can be profitable till output reaches 2.5 million barrels a y ear after that economies of scale will exhaust. Still, the basic solution is sam e, increased scale of production will result in lesser costs and higher profits. 21 Building a Craft beer brand: Building successful beer brands is a step by step process which takes into consi deration various factors such as quality of beers, availability in marketplace, competitive pricing, marketing and promotions etc. The balanced combination of P ush and Pull in the marketplace creates brand recognition and attracts both new and repeat customers. Creating a valuable craft beer brand is creating a valuabl e brand following by offering quality product. Push strategies utilize the resou rcefulness of distributors to put the brands on retailers shelves while Pull str ategies create a liking for the brands in minds of consumers which then regularl y ask for the same brands/products. Creating this pull strategy is highly essent ial for creation of a successful brand. Pull effect focuses on consumers, their interests, likings and strategically aligns the brands to meet the same. Followi ng are considered the basic steps for building a successful Craft beer brand: Identify your customers: Identifying your target market is important. Every Craft brewer should know the demographics of the market, but at the same time should understand the age group s, income levels, and other key attributes who are buying your product. Seller s hould know why a 21 http://www.oregonbusiness.com/guest-blogs/4075-the-economics-of-nanobrewing-

particular age group is buying your product, are there repeat customers, what ar e other age groups drinking and reasons behind it etc. The craft brewer should t ry and reach for a dedicated niche market based on product quality and pricing. Once a loyal base has been established, Craft brewer can expand further by creat ing targeted marketing campaigns. Craft a dedicated brand message: Every Craft brewer needs to establish a clear communication channel with the con sumer. The message should be clear, concise and appealing. It should be repeated and it has to be established as your mantra of your brand. The message has to b e communicated throughout the organization from the brewers to distributors to r etailers and consumers. Brands packaging and accessory materials should carry th e message. For example: Boston Beer Co. Leading brewer of handcrafted and full-f lavored beers. The brand message should take into consideration the vision and mission for the brand. The strategy behind building a message is customers will then be able to identify your brands based on the unique message. Creating Image of the brand: Creating an image or reputation is essential. This is usually done through desig ning unique logos or images which will make a Craft brew brand stand out from th e rest. Reputation is also dependent on quality of beer and customer service pro vided. Based on all these factors an image will be created in consumers mind reg arding the brand. Providing consistent quality: Quality can be conveyed in many ways, but for a Craft brewer the most important factor is products consistency. The freshness and crispness of the beer should b e same in every batch, every bottle should bear the same logo and brand message and every product packaging should be identical. Every brewery regardless of its size should have a basic level of quality control department. High level QC pro grams are very costly but each brewery should have at least the following: A pro gram which in some way allows measuring the quality of the beer before it sets o ut for sale.

 A well calculated and defined shelf life for each type of beer and a technique t o identify age of the product at retail outlets (best before date stamp). A cons istent way to randomly sample the products to enforce consistency in products. S ufficient budget to remove the expired products from the shelves and returned to the brewery. Brand recognition: Making your brand recognizable is most important. Breweries that are dominating in the market have recognized the need of establishing brand recognition and bas ed on that they get larger share of shelf space for their products. The more peo ple who see brand s logo-message, the more comfortable they get with it and more likely that they will consider buying that brand. This can be achieved by simpl e steps such as hanging a sign outside the door, creating accessories such as po uches for Beer bottles, T-shirts, Pens, Mouse pads etc. These are excellent mean s to spread the brand name. Every craft brewer should every move to display name of their brand at all the places possible esp. at point of sale. Consumer Ownership: Why do people choose to buy one types of brands over and over? The main reason b ehind this has been attributed to the feeling of ownership/attachment with the b rand. Most of the brands try to create an aura around then which makes them attr active for targeted customers. For Craft brews, it can be the taste revolution w hich most of the customers are seeking now days which can instantly attach a pec uliar taste with a brand, or a visit to the brewery which has gone really well a nd consumers then feel a kind of attachment towards the brewery and its brands. The good saying Give respect to Gain respect goes very well in this scenario. Cr aft brewers should give proper attention to each and every consumer that comes i n their sphere of influence. These people then act as brand ambassadors, spreadi ng the name of your product like wildfire. Customer centric approach is vital an d it successfully established connection between brand and consumers. Packaging: Packaging is conveys how your brand is perceived by the consumer. The best examp le is Coca-Cola bottle; the new shape of the bottle is easy to handle which have catapulted the sales of coke over other sodas. Same goes for Craft beers, if co nsumers are going to pay special price to buy a Craft brew, it should be package s well. This appreciable packing instantly creates a

positive effect on consumers mindset. Good packaging should Stand out but fit in , it should be compelling, interesting and comfortable. Most of the breweries re -evaluate their packaging every time they make changes in their package designs, logo changes etc. They allow their packaging to evolve as the brand matures. Th e subtle changes in brand packaging can be easily understood if famous brands su ch as Sierra-Nevada, Boston Beer Co. packaging from last 15 years are studied.22 Contingency Planning Contingency planning is essential to build a craft beers portfolio. Craft brewer ies need to watch individual brands sales records very carefully. If one or othe r brands is not doing so well, they can be an economical risk for the company. I n such scenarios, brewery must take tough decisions to stop production of one or more of its beers. There can be several other reasons why this might happen inc luding sudden drop of demand, lower production volumes, difficulties in accessin g the raw materials etc. On the other hand through contingency planning, craft b rewery can focus on its main products in the scenario of rise in competition in other segments. Craft Beer industry is currently a niche market and limited by t he people who are following the taste revolution. But as its growing exponential ly every year large beer companies like Miller-Coors, A-H etc. are trying to gai n market access in the craft beer market, also every year many new microbrewerie s are staring up. Thus in face of rapidly changing scenarios in the craft beer i ndustry contingency planning is highly important. 23 Social Media Marketing & Craft Brewing Industry: Social Media has changed the way people used to interact with their brands. The one way flow of communication from brands to customers is changing and on a larg er part the change driver is Social Media. With the help of social media network ing, through the websites such as Facebook, Twitter now companies can show their presence on the same playing field as their customers, allowing them to have a one-one kind of interaction with them. In the world of social media, everyone is connected with each other on same levels and can freely communicate, express or spread messages. Companies being able to closely monitor their followers and br and messengers can easily measure the sphere of their influence, the reaction fo r their products and administer response measurement for new products. Social Me dia is allowing companies and corporations 22 http://www.probrewer.com/resources/library/brand_building.php http://www.bplans. com/brewery_business_plan/controls_fc.cfm#ixzz10BxMSyeU 23

alike to craft specific messages, advertising campaigns and promotions for their products directly based on consumers needs and wants. Craft brewers have picked up on the scent of this new marketing platform. They are using Social Media to send and receive instantaneous feedbacks about their existing and upcoming produ cts. In the world of beer makers, it has always been the case that company with more financial resources to spare had an upper hand because of their behemoth ma rketing expenditure. But the situation is changing. Social Media has brought Mic robreweries, Nano-breweries and Large Breweries to a common battlefield and the one who will strategically utilize these networking resources will prevail in th is battle. The giants of the Social Media stream are Facebook, Twitter and YouTu be. Every company/brand or product is marking its presence on these social media websites. On Facebook they create a Fan page, On twitter they create official t witter account which allows its followers to follow the brand and On YouTube the y have company dedicated Channels through which they share their videos about br and, best practices etc. There are some common strategies which are used by Craf t brewers. Most of the Craft brewers create a Facebook Fan page and make users a ware about it. Some even give out free beer samples or pints once customers user s check on become a Fan. This is a strategy to increase the sphere of influence on Facebook. The more followers the brand will have the more chances that a new user will consider checking the brand out once he/she stumbles onto the page. Se cond strategy is creating an official account on twitter. Twitter allows users t o follow the brands and celebrities they like. The sphere of influence on twitte r is roughly calculated by how many followers a brand will have plus how far a m essage posted by brand/company travels. Third most commonly used strategy is by creating a dedicated video stream on YouTube. The videos included by Craft Brewe rs will focus on their best practices, Fun to make beer videos etc. After markin g the presence of the brands and companies on various social media platforms, co mpanies then need to pay attention to what customers are saying about them, how are their competitors are interacting with the customers and how effective is th eir influence on social media. Nano and Microbreweries can easily gather informa tion about their current customers and spread the word to their potential custom ers through use of very low marketing budget. Social Media network is a boon for small breweries who can t dedicate much of their finances to specialize and cos tly marketing practices. After the generation of followers, there are specialize d online tools which are available for the companies through which they determin e the level of influence the company has, how many new followers company/brand h ave gathered, how effective was their social media strategy etc. The

ROI of a Social Media Marketing plan for a Craft brewer is increase in its spher e of influence which can be directly translated to more effective pull for his/h er products from the market.2425 24 http://www.bplans.com/brewery_business_plan/controls_fc.cfm http://craftbeer.us/ 2010/02/14/film-it-and-they-will-watch/ 25

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Oregon Business. (2010, 11 07). The economics of nanobrewing. Retrieved 1 18, 20 11, from OregonBusiness: http://www.oregonbusiness.com/guest-blogs/4075-the-econ omics-ofnanobrewingRotunno, T. (2010, 11 17). Craft Beer Business is booming. Re trieved 1 18, 2011, from CNBC: http://www.cnbc.com/id/39232270/Craft_Beer_Busine ss_Is_Booming S. Berghoff, C. H. (1997). Tapping into the Craft-Beer Industry. R etrieved 1 16, 2011, from StumpTown: http://www.stumptown.com/articles/mgmtbeer. html Sabmiller. (2010, 12 22). Our response to the FT's news analysis on the cra ft ale market. Retrieved 1 15, 2011, from sabmiller: http://www.sabmiller.com/in dex.asp?pageid=1878&blogid=45 Sedibeng Breweries. (2010). Sedeinberg Brewery Bus iness Plan. Retrieved 1 19, 2011, from bplans: http://www.bplans.com/brewery_bus iness_plan/executive_summary_fc.cfm Wehrum, K. (2010, 10 1). A craft beer stimul us plan. Retrieved 1 18, 2011, from inc: http://www.inc.com/magazine/20101001/acraft-beer-stimulus-plan.html York, E. B. (2010, 11 21). Craft Beer Market Draws Attention of Larger Breweries. Retrieved 1 17, 2011, from Chicago Tribune: http ://articles.chicagotribune.com/2010-09-21/business/ct-biz-0922-craftbeers-new-20 100921_1_craft-beer-craft-segment-craft-brewers