Analysis on Company's Segmentation

Situation Analysis

Customer

        Segmentation refers to the identification of all possible groups of potential customers. This is done by dividing up the groups of customers based on demographics (age, sex, location, and income) and psychographics, or behaviors and lifestyle. Positioning is when a company asserts how it wants to be perceived by customers. Targeting is the follow up stage of segmentation. In targeting, a company chooses the specific segments it would like to target.

        For Due South it is clear that two market segments exist. The first segment is a younger crowd. This segment consists of both males and females ages 21-35. The group enjoys moderate disposable income according to census data. 182,015 people in this segment reside in Palm Beach County. The other segment is an older crowd. This segment has families and also resides in Palm Beach County. Because of the nature of Due South’s business and that it sells alcohol, there are important implications regarding this segment. It is easy to reach the first segment because they do not have to worry about making special arrangements with children.

        The fact is though that there are 306,002 family households in Palm Beach County. People with families also like to drink. Typically, bars do not allow children. Due South has realized the opportunity though. Consequently, the brewery created ways to cater to the family household segment. Children are allowed in the brewery up to 6P.M. to accommodate people with children. Further, wine is available for family members who do not like the taste of beer and soda is available for children.

        Therefore, even though complications exist in serving this segment, Due South targeted them anyway because of the potential for increased revenues. Further, targeting families doesn’t take away from Due South’s ability to target the 21-35 year olds that make up the other segment. The good news is that both segments can be reached in the same way. Both segments visit the tap room to enjoy good craft beer.

        It is clear that the targeted segments are looking to consume high quality craft beer. To play to that need, Due South has positioned itself as having the best tasting craft beer at an area brewery. Constant rewards for craft beer competitions, most specifically, best large Florida brewery have helped solidify Due South’s position as the producer of Palm Beach County’s best craft beer.

• Positioning statement- Due South has the best tasting beer of all micro breweries in Palm Beach County because of its experience with the brewing process and continued experimenting with new flavors.

Context

        Craft beer is becoming more popular and the demand for it is on the rise.  As the brewers of such beer open more breweries, the beer becomes more accessible and enhances the rise in demand for craft beer. According to the Miami Herald, more than 2,500 small, independent or craft breweries already exist. Another 1,500 craft brewing companies are said to be in the planning stages also according to the Miami herald.  The Miami Herald reports that according to the marketing company Technomic, the production of craft beer increased by 9.6% in 2013 compared to the production of 2012 (Miami Herald).

        While sales of macro brewers have flattened out, the sales of micro or craft brewers have continued to increase consecutively over the last three years according to the Miami Herald. In fact, the Miami herald reports that craft breweries have taken considerable shares of the total beer market. More specifically, craft breweries made up 5.35 percent of the market in 2011 and increased to 6.3 in 2012 (Miami Herald).

        Major beer companies like Anheuser Busch are also respecting the market share of micro brews. AB, therefore, has been interested in acquiring established craft breweries with a strong brand position and awareness. According to a press release dated February 5, 2014, AB has agreed to purchase Blue Point Brewing. Blue Point Brewing gives AB a brand with over 40 beers and a huge foot in the craft brew door. The brewery, found in 1998, is the long Island area’s oldest brewery and often wins awards for its creative brews. Further proving that the brand is established is the 60,000 barrels produced just in 2013 alone. All of these facts made the company an attractive target of AB which now realizes the power of being in a craft brewing market that is enjoying increased sales and market shares industry wide. (Anheuser-Busch).

        Even municipalities recognize the increase in demand. Knowing that there is a demand for craft brews, Oakland Park sent a delegate to Washington D.C., the location of a high end beer festival. There, the city official invited small breweries to open up a facility in their municipality as to attract people to the artsy town in the outskirts of downtown Ft. Lauderdale (Miami herald).

        Out dated laws prevent craft breweries from selling 64 OZ. growlers which are to go containers that are sealed. The Florida legislation is fighting to keep the restrictions even though 128 o. growlers can be bought legally in the state of Florida. The problem is that the 64 oz. size is smaller and more consumable and in most states is the most popular choice of craft brewery visitors. According to the new proposed legislation, brewers like Due South would have to sell their product to distributors and then buy it back to sell in the Due South tap room. This adds to the profits of large beer companies which often double as the distributors and add to the costs for the micro breweries which pipe out the craft beer (Miami Herald).

        The Beer Wholesale Lobby is responsible for the push of the new legislation according to the Miami herald. The Herald also reports that craft breweries have created a guild in the state of Florida to combat against large beer lobbyists and anti- craft beer legislators. Mike Halker is the head of the guild and owner of Due South Brewing. According to the Miami herald, Halker calls the growler law archaic and ridiculous. The Herald reports that Halker went on to say that the law needs changed (Miami herald). Halker’s position as president of the Florida’s Brewers Guild allows him to leverage his political relationships and knowledge gained by those relationships to make sure his brewery is in accordance with all regulations and takes advantage of any loopholes to get around legislation.

        On April 29, 2014, The Sun Sentinel reported that although the bill is gaining steam through the Florida state legislature, the content of the legislation has seen changes. Now according to the proposed bill, the craft breweries would be allowed to sell the 64 oz. growlers in a to-go fashion. Unfortunately, however, the amount of to-go containers that the brewery tap rooms can sell will be capped. Senator Keli Stargel from Lakeland, sponsored the bill according to Fort Lauderdale’s, Sun Sentinel.  The newspaper reports that according to Stargel, the craft beer industry is growing at a very fast and uncontrolled pace. Stargel does not believe the bill is punishing but is meant to make sure the industry grows in a controlled manner (SunSentinel).

        Even with these restricting regulations, Due south has found ways to keep the beer flowing whether it be enjoyed in the taproom or brought home by taproom patrons. For example, the brewery recently acquired a canning line which will allow the brewery to more efficiently can its own beers for both distribution and as to go purchases for taproom customers. The can sizes are within the regulated size requirements and thus no distribution deal is needed to sell its own beer in the Due South taproom. The taproom now sells several sized growlers, kegs, 6 packs of cans, and now crowlers, or can growlers which are all available to patrons wanting to take home some beer. As of right now, Due South has avoided being impacted too heavily by imposing regulations put forth by the Florida state legislature.

        No food is cooked on site since the company is not a brewpub. Per regulations, if they did serve food they would not be able to sell kegs, bottles, or cans so serving of food would have negative effects on the main line of business. The brewery finds ways to capitalize on this regulation, however. The law prohibiting breweries from selling food allows for specialization in beer leading to greater economies of scale. The profits from beer sales can be invested in improving the beer and atmosphere at the tap room. The cost of food and building a kitchen would take away capital to invest in new beer technologies.

Competition

        Palm Beach County is the home of 4 microbrewers besides Due South. To the north is Inlet Brewing and Tequesta Brewing located in Jupiter and Tequesta, respectively. Inlet brewing focuses only on distribution and does not have a taproom. Therefore, the brewery does not sell growlers and thus is not affected by past and pending legislation. Inlet brewing has regional distribution focused on the Eastern United States with its main brewery in Jupiter, Fl and another brewery in the Carolinas, according to the Inlet Brewing website. Its beers can be found in Total Wine.

        Tequesta Brewing, on the other hand, is a microbrewery with a taproom. The taproom is setup very much like any bar. In fact, the brewing element of the business is closed off so at first glance it looks like any neighborhood bar. Growlers and kegs can be filled for to go consumption. Tours are not given of the brewing facility as it is not accessible to customers. The staff is very knowledgeable, however, and will answer any questions about the brewing facility and operations. According to management, the brewery’s location was strategically located since it is surrounded by restaurants giving dining options to the brewery since it cannot legally serve food. The brewery has a good presence in the northern part of the county. According to management, Tequesta Brewing is looking into increase its concentration in the north county area by opening a new location in Palm Beach gardens.