Millennials and the Takeoff of Craft Brands: Preference Formation in the U.S. Beer Industry

Bart Bronnenberg (), Jean-Pierre Dubé () and Joonhwi Joo ()
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Bart Bronnenberg: CentER, Tilburg University, 5037 AB Tilburg, Netherlands; Centre for Economic and Policy Research, London EC1V 0DX, United Kingdom
Jean-Pierre Dubé: Booth School of Business, University of Chicago, Chicago, Illinois 60637; National Bureau of Economic Research, Cambridge, Massachusetts 02138
Joonhwi Joo: Naveen Jindal School of Management, University of Texas at Dallas, Richardson, Texas 75080

Marketing Science, 2022, vol. 41, issue 4, 710-732

Abstract: We conduct an empirical case study of the U.S. beer industry to analyze the disruptive effects of locally manufactured craft brands on market structure, an increasingly common phenomenon in consumer packaged goods industries typically attributed to the emerging generation of adult millennial consumers. We document a generational share gap : millennials buy more craft beer than earlier generations. We test between two competing mechanisms: (i) persistent generational differences in tastes and (ii) differences in past experiences or consumption capital . Our test exploits a novel database tracking the geographic differences in the diffusion of craft breweries across the United States. Using a structural model of demand with endogenous consumption capital stock formation, we find that heterogeneous consumption capital accounts for 86% of the generational share gap between millennials and baby boomers with the remainder explained by intrinsic generational differences in preferences. We predict the beer market structure will continue to fragment over the next decade, overturning a nearly century-old structure dominated by a small number of national brands. The attribution of the share gap to consumption capital shaped through availability on the supply side of the market highlights how barriers to entry, such as regulation and high traditional marketing costs, sustained a concentrated market structure.

Keywords: branding; consumption capital; formation of preferences; market structure; craft beer (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:41:y:2022:i:4:p:710-732

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