"Did diehards stick with them after the acquisition?" Deming Center for Enterpreneurship’s Brad Werner asks the million-dollar question during the latest Creative Distillation research podcast.
In Episode 28 hosts Jeff York and Brad Werner are joined by Griffin Bohm, second year MBA student student from Leeds and brewer, along with Dan Garfinkel, CEO and Founder of Finkel & Garf Brewing Company. Episode 28 features a sampling of Finkel & Garf beers, a conversation on the business of craft brewing and an analysis of the study titled “Watered Down: Market Growth, Authenticity, and Evaluation in Craft Beer” published in Organization Studies.
Start-ups and new ventures often begin with an opportunity to solve a problem, address an unmet need or the ability to enter into a market that lacks substantial competition. In the case of Finkel & Garf Brewing Company, they decided to join the already established craft brewing industry in a city filled with craft brewers, Boulder, Colorado.
Why you might ask?
CEO Dan Garfinkel explains their early beginnings in a city and market deeply entrenched with established brands to start the podcast. Along with a sampling of a Finkel & Garf rye saison, blonde ale and their ‘22 Bourbon BA Imperial Stout, Garfiinkle also shares the insights and perspectives gained since his family launched their venture in 2014.
Questions about profitability and margins through keg versus canned distribution then compared to beverages served through a taproom offer a c-suite perspective applicable to a variety of business settings to the listener.
Authenticity After Acquisition
Host and leading researcher Jeff York segues the conversation to the research discussion and offers that, “being small, being authentic, appealing to customers in a way that you're not a mega brewer” are foundational to craft brewing brands. However, what happens to the brand when the craft brewer is acquired by a mega brewer?
It can be challenging to say the least.
During Episode 28 hosts York and Werner delve into this topic and the findings from the study titled “Watered Down: Market Growth, Authenticity, and Evaluation in Craft Beer.”
In one example of the challenges brands face, York offers that, “what they find here is that as a category gains more adherence, and particularly as members of the category, the craft beer category, in this example, gains more adherence, as a brand attracts more people doing in their case, they're doing the readings of beer on on online website about the rated beer, those brands get penalized less for their inauthenticity.”
Actionable Insights
How can an organization buck the trend? One consistent factor was the importance of quality.
Craft brewers that were able to maintain loyalty with their core customer base after an acquisition by a mega-brewer stuck to their product’s quality instead of serving what could be considered “watered down” versions of their products.
Additionally, York pointed out that the loss of loyal customers raises an interesting question.
“Does that actually present an opportunity in the industry life cycle for someone to now enter with a more authentic brand, and capture the audience that used to be paying attention to that brand?
Listen to Episode 28 of the Creative Distillation Research Podcast to learn more.
About the podcast
Creative Distillation is a research podcast co-hosted by Jeff York and Brad Werner, both of the Deming Center for Entrepreneurship at CU Boulder’s Leeds School of Business. Each episode distills academic research on entrepreneurship into actionable insights. This season, the hosts connect with researchers from around the globe to discuss sustainability, yoga, cannabis, food trucks, entrepreneurship programs and accelerators.
Comments/criticism/suggestions/feedback? We'd love to hear it. Drop us a note at CDpodcast@colorado.edu.
Research:
Watered Down: Market Growth, Authenticity, and Evaluation in Craft Beer.
Abstract:
Research in organizational theory suggests that category-spanning organizations typically suffer penalties in evaluations, as consumers downgrade producers they see as violating authenticity norms. We challenge this view by linking two heretofore separate insights: first, that categorical boundaries erode as categories become taken for granted and, second, that consumers in a given category tend to become more heterogeneous as their numbers increase. We argue that newer consumers employ diverse evaluative schemata and rely less on established conceptions of authenticity than do veterans, leading to more generous evaluations as the ranks of consumers grow. Using the canonical case of craft beer, we test the effect of audience growth on consumer evaluations, particularly when producers violate categorical authenticity norms. Our analysis of an original dataset of more than 1.2 million unique ratings of craft beers from a popular online forum finds both that overall beer ratings increase and that penalties to authenticity norm violations attenuate as the number of new reviewers participating in the evaluative process rises. These results refine our understanding of shifting demands for categorical purity, conceptions of authenticity, and consumer evaluations as functions of market growth.
Pozner J-E, DeSoucey M, Verhaal JC, Sikavica K. Watered Down: Market Growth, Authenticity, and Evaluation in Craft Beer. Organization Studies. 2022;43(3):321-345. doi:10.1177/0170840621993236
https://journals.sagepub.com/doi/full/10.1177/0170840621993236
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