Introduction
The case analyzes the growth of the breweries industry in the United States. It traces the revolving of the industry since the 1800s and the turbulences the industry has faced. The industry has had challenges which have made it impossible for several companies to survive. According to Mitchell and Koopman (2015), several brewery companies could not manage to survive in the market due to government strict regulations, and therefore, they decided to quit the market, leaving a few which managed to concentrate on specific regions and market segments as well. The brewery industry in the United States is very competitive since there are several companies across the state competing for the same market. Research established that, from 1876 to the 1900s, there were about six brewery firms in the U.S. competing for customers (Ford, 2015). The competition was very stiff, and large breweries could not manage to survive, forcing many of them to concentrate on a specific region. By 2012, the list of breweries across the U.S. had grown to fifteen, and therefore, the competition environment in the brewery industry was very stiff and needed a lot of strategies for a company to survive.
However, there are several barriers which make entry into the brewery industry very difficult. As stated by Ford (2015), one of the major barriers is government regulations. Research indicates that the capital investment required to set up a brewery company is high, and therefore, it scares many interested investors. High competition is also a major barrier to entry into the brewery industry because it will take longer before breaking even. The introduction of Lagunitas’ beer in the 1900s was not without having some issues. Even though it had a successful beginning, the company faced some internal wrangles since Tony and Magee, the founders of the company, disagreed, and then Magee kicked out Tony, remaining with the name (Mitchell & Koopman, 2015).
It is also noted that Lagunitas Beer faced the problem of expansion since Tony never wanted to grow big, but immediately after the company started to realize profit, he decided to do more nationwide. Mitchell and Koopman (2015) noted that though LBC was a tip to grow, Magee was conscious of that, and it never believed in the strategy since LBC was meant to grow. It created a big financial problem for the LBC, which was needed for the expansion of business to other regions. The lack of a clear strategy is also one of the challenges that LBC faced during its introduction. The company did not have an expansion strategy, though it wanted to go nationwide, and such a lack of strategy made the company delay several of its plans, like the commissioning of the Chicago plant.
Based on the long-term objective of the LLBC, it is essential for the company to allocate resources to capital. The long-term objective of LBC is to expand to the international market, and such expansion requires a lot of capital investment. Therefore, it would allow LBC to expand its production to other regions where it has not established its presence. The company should allocate resources as a priority so that it can facilitate its expansion plan to other nations and regions.
Due to the story presented in the Lagunitas cases, the recent news regarding craft beer is not surprising. This is because the high number of beer companies reported across the United States is also analyzed in the case study (Hahn, 2016). The latest news also indicates that craft beer focuses on the taste; therefore, most craft beers have a lot of calories. It is, as a result, a market competition which is compelling every firm to do value addition to the beer, and this is not healthy. The same was witnessed during the early days when different Beer Companies were producing different tastes and colors of beer, so it is surprising to me.
References
Ford, M. (2015). Beer Brewers Industry Analysis.
https://www.nku.edu/~fordmw/mgt490projectbeer.pdf, 2-38.
Hahn, F. (2016). America now has more breweries than ever. And that might be a problem.
https://www.washingtonpost.com/lifestyle/food/america-now-has-more-breweries-than-ever-and-that-might-be-a-problem/2016/01/15/d23e3800-b998-11e5-99f3-184bc379b12d_story.html?utm_term=.847e7b579bc6, 2-37.
Mitchell, M., & Koopman, C. (2015). Bottling Up Innovation in Craft Brewing. A Review of the
Current Barriers and Challenges, 2-34.
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