Millennials and the take-off of craft brands: Preference formation in the U.S. beer industry
Bronnenberg,B.J.J.A.M. Dube,J.P. Joo,Joonhwi
Bronnenberg,B.J.J.A.M.
Dube,J.P.
Joo,Joonhwi
Abstract
We conduct an empirical case study of the U.S. beer industry to analyze the dis-ruptive effects of locally manufactured craft brands on market structure, an increasingly common phenomenon in consumer packaged goods industries typically attributed to the emerging generation of adult millennial consumers. We document a generational share gap: millennials buy more craft beer than earlier generations. We test between two competing mechanisms: (i) persistent generational differences in tastes and (ii) differences in past expe-riences or consumption capital. Our test exploits a novel database tracking the geographic differences in the diffusion of craft breweries across the United States. Using a structural model of demand with endogenous consumption capital stock formation, we find that heterogene-ous consumption capital accounts for 86% of the generational share gap between millenni-als and baby boomers with the remainder explained by intrinsic generational differences in preferences. We predict the beer market structure will continue to fragment over the next decade, overturning a nearly century-old structure dominated by a small number of national brands. The attribution of the share gap to consumption capital shaped through availability on the supply side of the market highlights how barriers to entry, such as regulation and high traditional marketing costs, sustained a concentrated market structure.
Description
Date
2022-07
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
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Journal Issue
Keywords
branding, consumption capital, formation of preferences, market structure, craft beer, D12 - Consumer Economics: Empirical Analysis, L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms, M31 - Marketing, M37 - Advertising
Citation
Bronnenberg, B J J A M, Dube, J P & Joo, J 2022, 'Millennials and the take-off of craft brands: Preference formation in the U.S. beer industry', Marketing Science, vol. 41, no. 4, pp. 282-304. https://doi.org/10.1287/mksc.2022.1371
License
info:eu-repo/semantics/closedAccess