Porter Five Forces Analysis
| Forces | Beer Industry | Craft Beer Segment |
| Competitive Rivalry | · Primarily competes with non-price based rivalry such as product innovations · There is a lot of product differentiation within the industry. Beer styles vary on the color, recipe, strength, flavor, ingredients, manufacturing methods, history, or beer origin | · Limited competition as the craft brews has a unique color, taste, recipe, strength, flavor, and ingredients. · Huge profits in this segment may attract attention from large brewers, potentially increasing competition. |
| Threat from Substitute | · Switching costs of shifting to a substitute brew is non-existent · Wineries and distillers make more money for every dollar spent on the input than brewers. Thus, profitability is higher in the wineries and distillers sector than in the brewing industry | · Major producers of regular beer records decreasing sales with craft beers benefiting · Brewing enterprises may acquire craft brewers of start own craft-brewing operations increasing rivalry |
| Bargaining Power of Suppliers | · Suppliers have little bargaining power in the brewing industry, which works in favor of the craft brewing segment · Larger brewing companies produce enough capital to achieve forward integration · Production cannot replace ingredients such as water, hops, barley, and hops. Brewers need their suppliers to keep this industry afloat. | · A handful of large suppliers of malt and hops as well as a couple of yeast · Bargaining power of suppliers is high |
| Bargaining Power of Buyers | · Main customers in the brewing industry are distributors · Bargaining power increases when there are few distributors, and new competitors cannot emerge · Distributors have excellent contacts with retailers | · Buyers are individual brew enthusiasts seeking for a taste revolution · Buyers are captivated by craft brew drinking experiences and the tastes of individual brews · Customers buy in low quantities thus low bargaining power |
| The threat of New Entry | · Huge capital requirements to operate in the beer brewing industry offers an advantage to the enterprises currently in the industry · Access available to important distribution channels | · Craft brewers can begin with limited capital · Technical know-how to create appealing brews · Access available to important distribution channels
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References
Cardinal Health Inc. (n.d.). 2018 Annual Report. Retrieved May 3, 2020, from http://annualreports.com/HostedData/AnnualReportArchive/c/NYSE_CAH_2018.pdf
