Journal of Tourism and Hospitality Management December 2017, Vol. 5, No. 2, pp. 1-11 ISSN: 2372-5125 (Print), 2372-5133 (Online) Copyright © The Author(s). All Rights Reserved. Published by American Research Institute for Policy Development DOI: 10.15640/jthm.v5n2a1 URL: https://doi.org/10.15640/jthm.v5n2a1 A Comparison of Marketing Strategies of Microbreweries in the U.S. and Canada Dr. Lise Heroux1 & Delena Clark2 Abstract The beer industry is being transformed with the exponential growth of craft beers and microbreweries. This comparative exploratory study examines the marketing mix strategies utilized by microbreweries operating in the rural touristic regions of the northern sections of the state of New York, United States and the southern regions of the Quebec province of Canada. The findings suggest that microbreweries in the two regions implement similar marketing strategies in many respects, emphasizing their private beer labels, location and personal selling to generate sales and repeat customers. Less emphasis is placed on price and media advertising to attract customers. There is room for creative promotional approaches that can generate engagement with the customers and encourage repeat visits. Key Words: Microbreweries, Beer, Marketing Strategies, Canada, United States. 1. Introduction Beer is a widely consumed beverage around the world and made out of water, malt, hops, and yeast as basic ingredients (Statista, 2017). According to this source, global beer production has shown a growing trend from 1.3 billion hectoliters (hL) in 1998 to 1.96 billion hectoliters in 2016. In the United States approximately 200 million barrels or 234.7 million hL were produced, and in Canada approximately 18.75 million barrels of beer or roughly 22 million hectoliters were enjoyed (Reid, McLaughlin, Moore, 2014). In Canada, domestic beer sales industrywide for the first six months of 2015 were 8.972 million hL slightly down from 8.980 million hL for the same time period in 2014; if you attribute nine percent of those sales to craft beers, roughly 800,000 hL were sold the first six months of 2015 (Beer Canada, 2015). The number of licensed breweries in Canada has risen almost 70 percent from 2009-2014 (to 520 microbreweries), and another 49% (to 775 microbreweries) in 2016; and over half of these breweries make their products in Ontario and Quebec (Beer Canada, 2017). According to Agriculture and Agri-Food Canada (2014), 85 percent of Canadian- made beer sold domestically is controlled by two major multinational companies and the third largest brewer controls roughly six percent of the market, while the balance of domestically-produced beer is supplied by micro-breweries. In the United States, the overall beer market is $107.6 billion and the craft beer market is $23.5 billion, with a total of 5301 breweries, 3132 of which are microbreweries (Brewers Association.org, 2017). An American craft brewer is small, independent, and traditional meaning his annual production is 6 million barrels of beer or less (Brewers Association, 2014). The craft industry contributed $55.7 billion to the US economy in 2014 more than 424,000 jobs. This figure is derived from the total impact of beer brewed by craft brewers as it moves through the system of breweries, wholesalers, and retailers as well as all non-beer products like food and merchandise that brewpub restaurants and brewery taprooms sell (Brewers Association, 2014). In the United States from January through the end of June 2015, approximately 12.2 million barrels of beer were sold by craft brewers, up from 10.6 million barrels during the first half of 2014. 1 Department of Marketing and Entrepreneurship, State University of New York, Plattsburgh, Plattsburgh, United States 2 Department of Marketing and Entrepreneurship, School of Business and Economics, State University of New York, Plattsburgh, 101 Broad Street, Plattsburgh, New York USA 12901 2 Journal of Tourism and Hospitality Management, Vol. 5(2), December 2017 “Industry growth is occurring in all regions and stemming from a mix of sources including various retail settings and a variety of unique brewery business models,” said Bart Watson, chief economist, Brewers Association. “The continued growth of small and independent brewers illustrates that additional market opportunities and demand are prevalent, although competition in the sector is certainly growing and the need for brewers to differentiate and produce world-class high-quality beer is more important than ever.” (Business Wire 2015). According to IBISWorld Industry Report (2015), the craft brewing phenomenon that has taken the U.S. Beer market by storm has not been as significant in Canada. This is largely due to the greater difficulty of entering the Canadian market. Since nearly every province regulates and distributes beer through provincial liquor control boards, the regulatory costs associated with establishing a new microbrewery are far greater for Canadian breweries than their U.S. counterparts. U.S. brewers have witnessed the gradual loosening of state distribution regulations in recent years, which has facilitated the surge in the number of U.S. microbreweries. Additionally, the market for craft beer is not as large in Canada as in the United States. The U.S. has many more markets across a diverse range of climates that make many styles of beer suitable for brewing. Different types of surface water containing different pH levels and minerals play a key role in brewing variant styles of beer. (IBISWorld, 2015) 1.1 The Beer Story Native Americans made corn beer long before Europeans found their way to America, bringing with them their own version of beer. Although most of that was brewed in the home during the seventeenth and eighteenth centuries, a fledgling industry began to develop from 1612, when the first known New World brewery opened in New Amsterdam (now Manhattan) (Hieronymus, 2015). In Canada, the first commercial brewery, La Brasseries due Roy, was established in 1668 in Quebec City (Eberts, 2007). 1.2 Craft Brewer Defined A craft brewer is small, independent, and traditional, meaning the annual production is six million barrels of beer or less (approximately three percent of US annual beer sales). It is independent, meaning less than 25 percent of the craft brewery is owned or controlled by an alcoholic beverage industry member that is not itself a craft brewer. It is traditional in that he has a majority of his total beverage alcohol volume in beers whose flavor derives from traditional or innovative brewing ingredients and their fermentation. Concepts related to craft brewers include: small brewers, innovative, generally made with traditional ingredients with some non- traditional ingredients added for distinctiveness, community involvement, unique approaches in connecting with customers, and maintaining integrity by what they brew (Craft Brewer, 2015). These establishments aim to provide quality beer with an emphasis on taste balance and quality rather than sales volume and production efficiency. This is a sustainable differential advantage over large breweries as the small scale production allows for more wholesome tasting beer while also providing other accommodations for customers to enjoy. 1.3 Craft Beer Industry: Market Segments According to the Brewers Association (Craft Beer Industry market Segments, 2015), there are 6 craft beer industry market segments that are defined as follows: Microbrewery: A brewery that produces less than 15,000 barrels (17,000 hectoliters ) of beer per year with 75 percent or more of the beer sold off-site. Microbreweries sell to the public by one or more of the following methods: the traditional three-tier system (brewer to wholesaler to retailer to consumer) the two-tier system (brewer acting as wholesaler to retailer to consumer); and, directly to the consumer through carry-outs and/or on site tap-room or restaurant sales. Brewpub: A restaurant brewery that sells 25 percent or more of its beer on site. The beer is brewed primarily for sale in the restaurant and bar. The beer is often dispensed directly from the brewery’s storage tanks. Where allowed by law, brewpubs often sell beer “to go and/or distribute to off-site accounts. Note: Brewers Association re-catergorizes a company as a microbrewery if its off-site (distributed) beer sales exceed 75 percent. Lise Heroux & Delena Clark 3 Contract Brewing Company: A business that hires another brewery to produce its beer. It can also be a brewery that hires another brewery to produce additional beer. The contract brewing company handles marketing sales and distribution of its beer while generally leaving the brewing and packaging to its producer- brewery (which confusingly is also sometimes referred to as a contract brewery.) Regional Craft Brewery: An independent regional brewery with a majority of volume in “traditional” or “innovative” beer(s). Regional brewery: A brewery with an annual beer production of between 15,000 and 6,000,000 barrels. Large Brewery: A brewery with an annual beer production over 6,000,000 barrels. 1.4 Craft Beer Marketing: According to McQuiston (2013), the common marketing trait of successful craft beer brands is that they utilize guerilla marketing strategies and tactics by focusing on stuff that actually produces returns. He advocates that the first step to successful marketing for craft brewers is “Great Beer.” He further states that it is important to have Point of Sale (POS) pieces for use. McQuiston believes that the craft brewer has a genuine passion about his beer and his company and that people relate to this and buy from those they know and trust and suggest they “Craft a Compelling Story.” He feels that personal selling through beer festivals, tastings, events and promotions offer not only opportunities to distribute your product but also to tell your story and get others involved, especially the “mini influencers” who can reiterate your story to their connections. Finally he suggests taking your story online.