Five Forces Model

In applying the Five Forces Model to New Belgium Brewing, let’s first look at the Threat of Entry. The biggest two aspects of the Threat to Entry are economies of scale and governmental regulation. Beer brewing has a large capital outlay required to produce beer, so enough must produced to recoup that large equipment purchase. This is why the economies of scale are so important to a company like New Belgium. The second threat to entry is governmental regulation. Beer brewing is highly regulated at federal, state and local levels. With their recent expansion from Colorado to a second location in Ashville, they must navigate the regulation in two separate locations. Both the Threat of Rivalry and the Threat of Substitutes are low. Craft breweries continue to experience record growth (http://www.cnbc.com/2015/07/27/craft-beer-growth-posts-solid-numbers-again.html) with both the number of breweries producing beer and the amount of craft beer sold both increasing. As there is plenty of room for growth no need to worry about rivalry or substitutes in this wide open market. There is a reasonably high Threat of Powerful Suppliers as one of the main ingredients in craft beer is hops. The majority of the market’s hops are produced in a small growing region in the Pacific Northwest. These growers are uniquely positioned to control their portion of the supplies needed to brew. The final threat is the Threat of Powerful Buyers, which is low in the craft brewing market. While many beers are now sold large buyers like grocery chains, the distribution model is so varied as to keep this threat low. In summary, the Threats of Entry and Powerful Suppliers potentially are high but the remaining other threats are low making the craft brewing market and New Belgium’s industry a good one.