Beer leaders against craft brewers: will Goliath end up defeating David in the US?

Martin Alfaro

Applied Economics, 2022, vol. 54, issue 5, 554-567

Abstract: The last decade has witnessed an unprecedented rise of craft brewers in the American beer industry, with market leaders actively seeking to hamper their growth. In this paper, we set a model with craft brewers and macrobrewers, where leading firms engage in strategic moves to shape market outcomes. The framework results in leaders strategically targeting craft brewers to disadvantage them, and hence crowd them out. On the contrary, non-leading macrobrewers are neither targeted nor hurt. A calibration for the American beer industry in 2019 shows that, even though the emergence of craft brewers in the last years has hurt leaders, strategic moves have allowed them to mitigate its consequences. Specifically, these moves have respectively enabled AB InBev and Molson Coors to prevent further losses of market share of 5.1 and 2.8 points, implying that the craft brewers’ market share would have been even 7.9 points higher in absence of strategic moves.

Date: 2022
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DOI: 10.1080/00036846.2021.1967278

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