Local craft beer consumers don’t like it when their favorite brands are acquired and they show their displeasure through their spending habits, according to a new study on brand loyalty and craft beers.
The research study is published in the INFORMS journal Marketing Science. The peer-reviewed article is called “Local Market Reaction to Brand Acquisitions: Evidence from the Craft Beer Industry.” The authors of the study are from Koc University in Istanbul, Turkey, the University of California in San Diego, and New York University.
The study found that there is a 15% drop in baseline product demand in local craft beer markets following the acquisition of specific craft beers by larger companies.
“There is a strong emotional connection between consumer and brand which can induce a sense of psychological ownership of the brand itself on the part of the consumer,” said the authors. “The consumer sees the brand as part of his or her extended self. So, when a local craft beer brand is acquired, the acquisition can impact that sense of ownership on the part of the consumer.”
As of 2019, in the United States, the beer industry counted sales at roughly $120 billion per year, encompassing 6,400 breweries. The study authors conducted an empirical analysis of data on approximately 40 acquisitions of regional breweries between 2006 and 2016.
“We found that the decline in brand loyalty begins immediately following the acquisition and manifests itself in both sales and product ratings,” said the authors. “In conjunction with these findings, we found that there is a more pronounced reaction when the acquiring firm is perceived as ‘big business.’ Competing brands that remain locally owned are likely to benefit.”
The authors added, “The local nature of craft beer brands is a significant factor in their appeal to consumers. When you take that away, for many consumers, you take away some of the brand attributes that attracted the consumers to the brand in the first place.”
As part of their research, the study authors scrutinized news coverage on local and regional media, along with consumer reactions on social media surrounding acquisition news announcements. They used SerpAPI as a tool to conduct their analysis along with study of Google search and Twitter activity that coincided with acquisition news.
“Interestingly, we did an in-depth analysis of sentiments and emotions conveyed in tweets and posts, finding that the prevailing sentiment during the acquisition period was mostly negative,” said the authors.
The full study is available at this link.
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