possible econ topics - Craft Beers Have Big Breweries...

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Craft Beers Have Big Breweries Thinking Small The Wall Street Journal November 20 th , 2006 Reid Benjamin 8571-6972 Econ 330, Fall 2006 Section 5 Osborne Jackson
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Usually, a craft beer being produced by a large firm wouldn’t perform well in sales mainly because its image gets deteriorated through its linkage with a big corporation. However, Blue Moon beer is defying logic through its parent corporation, Coors. This year alone, Blue Moon craft beer is estimating at least 400,000 barrels will be sold. Through a careful, strategic long-term plan, Coors has managed to capture a large part of the craft beer market. These sales are at a premium however, as a six-pack can be bought at retail for $7.49 while the same package of Budweiser sells for only $5.49. Stan Stephens, The President of Herot Bar, sums up the likeability of Blue Moon saying, “[Herot] is a real beer lover’s bar. It’s got 53 draft lines, 350 bottled beers and plaques on the wall for anyone who has tried 100 different beers”. There is no Budweiser, no Miller, and no Coors permitted, but Stan does make the exception for Blue Moon, “Blue Moon’s real popular”. When reading Craft Beers Have Big Breweries Thinking Small , the main issue that presents itself is the surprising success of Blue Moon Beer. After all, the lack of mass advertising with Blue Moon is a major difference from the dominating campaigns made by its parent corporation Molson Coors and its rivals, Budweiser and Miller. In contrast to these companies, by not advertising, Blue Moon does not glorify the image of the consumption of alcohol to the general public and in turn, this lessens irresponsible behavior. This lack of advertising lowers the negative externalities associated with advertising. Furthermore, relative to other beers, Blue Moon is expensive, costing $2.00 more per six-pack than the same package of Budweiser. The expense relative to cheaper beers also promotes drinking at a legal age. After all, it’s been proven that underage drinkers spend more money on cheaper beer 3 . From a public policy standpoint, the 2
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reasons why Blue Moon is doing well suggest the current structure of government in the beer industry can be improved. Before these improvements can be proposed however, a fundamental understanding is needed of how Blue Moon succeeds despite the high cost and lack of advertising. The high costs of Blue Moon beer comparable to a mass advertised beer like Budweiser is best explained through understanding Product Differentiation , or the adjustment of a product to make it more attractive for consumers. The objective for firms after their initial product differentiation is to increase their profits by increasing the demand and decreasing the price elasticity of demand. The main form of differentiation that Blue Moon exemplifies is in its physical characteristics. Blue Moon has strong tangible differentiation , or different physical properties, than Budweiser – its orange hue and “cloudy appearance”
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This note was uploaded on 04/13/2010 for the course ECON 330 taught by Professor Minetti during the Fall '08 term at Michigan State University.

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possible econ topics - Craft Beers Have Big Breweries...

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