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SWOT Analysis
PEST Analysis
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Political: Low importance. The political climate does not affect the production or sales of beer, though numerous laws govern these activities.
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Economical: High importance. Craft beer is a premium product that primarily appeals to people with high incomes. Therefore, sales strongly depend on the economic status of the populations where it is being sold.
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Social: Medium importance. Craft beer is associated with a specific social image of supporting local businesses, preferring quality, and having unique tastes. As such, its appeal is dependent on the prevalence of such trends in the local social climate.
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Technological: Medium importance. Most of the techniques used to brew beer are centuries or millennia old and do not require advanced technology. However, craft beer companies can use new equipment to differentiate their products from those offered by the competition.
Porters Five Forces
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Competition in the industry: High. Craft beer companies have to compete with each other, cheaper mass-produced brands, and European imports.
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New entry potential: high. While in-house brewing is expensive and difficult, contract brewing enables companies to enter the field with significantly lower costs.
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Power of suppliers: low. There are numerous sellers of hops, grain, and other beer ingredients, all of which come at mostly the same quality. As such, they are mostly interchangeable, where beer companies are concerned.
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Power of buyers: medium. Craft beer companies tend to have difficulty expanding into other regions and serve a small market. Price is usually not a concern for craft beer drinkers, but companies still have to fight for their loyalty.
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The threat of substitutes: medium. There are many other varieties of alcohol in the market, and more expensive options such as whiskey can appeal to craft beers target market. However, few alcoholic beverages can approximate beer closely or fulfill a social function that is similar to it.
Porters Generic Strategies
Overall, Redhook brews to appeal to a somewhat narrow section of the population, being both geographically limited and more expensive than other beer. As such, its brand strategy is narrow in scope, even though the IPO initiative is aimed to increase its nationwide appeal. Concerning focus, various craft beer brands generally did not compete on price, in which they would necessarily lose out to mass-produced brands. As such, they pursue a differentiation strategy, trying to be different enough from the rest that consumers would choose the brand. In terms of Porters generic strategies, this tendency would put Redhook in the differentiation focus strategy category.
Conclusion
The IPO initiative addresses Redhooks issues regarding its market expansion by providing sufficient finances to address its expansion problems. However, it is still going to be challenging for the company to grow due to its refusal to accept contract brewing and the narrow market of people who may try a craft beer. As such, it should invest in marketing to ensure that its products can penetrate the markets where they previously had low appeal.
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