Why Is It Difficult To Enter The Highly Competitive Brewing Industry?

Starting a brewery isn’t difficult in regards to obtaining the capital to set up the physical brewery. However, obtaining the certifications, licenses, abiding by ordinances, and paying taxes and fees associated with operating a brewery presents a high barrier. This legal maneuvering to establish a brewery as a legal entity is lengthy and pricy. Not to mention that these are different for every state in the US. Another barrier, is acquiring a proper supply chain to distribute our brews and obtain raw materials to make them. These barriers alone can make it difficult to enter the highly competitive brewery industry. The threat from potential entrants is a low threat. The path to stablishing your brewery as a legal entity makes or breaks new

Most of these raw materials are low level commodities like; barely, sugar, and malt corn. These types of raw materials are created by farmers. Those farmers can either sell independently or sell to a wholesaler who will turn around and sell the commodities on a larger market. These commodities fluctuate along with the commodities market in price. This takes away power from the supplier’s ability to haggle with potential breweries on raw materials pricing. For example, when countries tamper with their imports and exports via tariffs and quotas it can begin to affect the prices on the raw materials needed by breweries. Suppliers will have to stick with market pricing for the most part or get looked over by breweries. From this, the power of bargaining doesn’t lay within supplier hands, but in the market’s. Meaning, it wouldn’t be in our hands as a buyer of these raw materials putting the bargaining power at a medium

These buyers take the form of restaurants, stores, consumers, and distributers. Due to the three tiered distribution system of alcohol in the US breweries are put at a huge disadvantage. The three tiered distribution system requires that breweries pass their products through a distributor. The distributor then sells the products to stores, restaurants, etc. From there the products are sold to consumers the end user of the product. This places a lot of power in the hands of the distributors by allowing them to choose whose products they distribute. A distributor wants to distribute something that will generate revenue for themselves. The distributors know what sells because the retailers, stores, and restaurants want to increase their sales received from their consumers. The consumers drive demand for certain brands of products of breweries up the supply chain. This affects which brands of products from breweries that distributors distribute into the supply chain. Resulting in the breweries being at the utter mercy of their buyers giving a high level of bargaining power to the