According to recent research on brand loyalty within the craft beer sector, local craft beer consumers appear to be disenchanted when their favourite brands are acquired, and their dissatisfaction becomes apparent through their purchasing behaviours.
The study, published in the INFORMS journal Marketing Science under the title “Local Market Reaction to Brand Acquisitions: Evidence from the Craft Beer Industry,” was conducted by a team of scholars comprising Ali Umut Guler from Koç University in Istanbul, Turkey; Kanishka Misra of the University of California, San Diego; and Vishal Singh of New York University.
Researchers discovered a significant decline in product demand—by approximately 15%—in local craft beer markets following larger entities’ acquisition of these breweries.
Guler explains that the bond between consumers and their preferred brands is deeply emotional, often fostering a sense of psychological ownership over the brand. “Consumers regard the brand as an extension of themselves,” Guler notes. “Therefore, when a beloved local craft beer brand is acquired, it can disrupt this personal connection, impacting the consumer’s perceived ownership.”
As of 2019, the beer industry in the United States recorded sales of around $120 billion annually, with over 6,400 breweries in operation. The study’s authors analysed data about roughly 40 regional breweries acquisitions between 2006 and 2016.
Misra points out that brand loyalty erosion commences immediately after an acquisition, reflected in dwindling sales and lower product ratings. “Our findings also suggest a more pronounced negative reaction when the acquiring entity is seen as ‘big business,'” Misra adds. This situation typically benefits competing brands that are still locally owned.”
Singh elaborates on the unique appeal of local craft beer brands, noting, “The local identity of craft beer brands significantly contributes to their allure. Removing this element can detract from the very attributes that initially drew consumers to the brand.”
In their methodological approach, the researchers examined news coverage across local and regional media outlets and consumer responses on social media following announcements of such acquisitions. They utilised SerpAPI to aid their analysis, alongside evaluations of Google searches and activity on Twitter/X correlating with times of acquisition news.
Guler further shares intriguing insights from their in-depth analysis of sentiments expressed in tweets and posts during the acquisition phase, revealing that “the predominant sentiment expressed was overwhelmingly negative, showcasing the consumer’s adverse reaction to these corporate takeovers.”
More information: Ali Umut Guler et al, Local Market Reaction to Brand Acquisitions: Evidence from the Craft Beer Industry, Marketing Science. DOI: 10.1287/mksc.2022.0383
Journal information: Marketing Science Provided by Institute for Operations Research and the Management Sciences