Macroenvironmental Forces That Affect the Beer Industry

Macroenvironmental forces refer to the broad set of socio-economic factors that affect the market for an industry’s goods – the global beer industry, for example. The domestic beer market has two tiers, the huge market consisting primarily of domestic lagers that is dominated by brewers with global reach, and the fast-growing market for craft beers. Macroenvironmental factors include demographic, social, technological and economic factors that affect consumers’ decisions. Of all macroenvironmental factors, cultural and economic factors have the most substantial impact on individuals’ buying habits.

Historically, one factor has led to the creation and later evolution of the current beer market as we know it, the proliferation of India Pale Ale. Now, we take the availability of clean, potable drinking water for granted. But for thousands of years, people drank diluted beer, wine and spirits regularly, because drinking water was dangerous. During the colonial period, when India was a vital cog in the British Empire’s engine, India Pale Ale became the beer of choice among British soldiers. It was specifically developed to withstand shipping to and from hot climates by increasing alcohol content to kill bacteria. More hops were added to maintain a consistent flavor. To this day, India Pale Ale and its descendants dominate global beer markets.

Beer consumption is largely driven by changes in the income levels of consumers. This is especially evident in China right now, where economic growth has led to inflationary wage conditions. The Chinese are earning more and are drinking much more beer. Around 1980, almost no beer was consumed in China; by 2007 consumption rose to 40 billion liters. However, economists have shown that after a certain point, increased trade and globalization leads to lower beer consumption. The tipping point is when income reaches around $22,000 per capita, at which point wine consumption increases at beer’s expense. This, too, is evident in China, especially among the newly rich, among whom wine consumption is soaring. Domestic beer consumption is relatively inelastic, but beer consumption is related to the price of wine, a substitute good. When wine prices rise, beer consumption rises.

Part of the reason changing economics leads to changing beer consumption rates is the cultural changes that economic prosperity ushers in. Increased wealth makes people more susceptible to marketing, which is something large brewers do aggressively. Also, beer consumption in Germany and surrounding locales is extremely high, because it is so ingrained in the Germanic cultures. This has an economic angle also, as many large, regional brewers are long-established in areas such as Bavaria and Silesia. Also, countries with moderate climates tend to consume more beer and, as may be expected, countries with higher populations of Muslims and Jews consume far less beer. Catholic and Protestant countries tend to drink the most beer.

The craft beer industry best demonstrates how natural, political and technological trends have affected consumption. Natural factors refer to the availability of raw materials. During Prohibition, political factors were ideal for individuals with technological expertise and access to raw materials to produce their own beer, although liquor was produced more due to sheer economics. Today, brewing technology has been available to anyone who wants it via beer-making kits, many of which are sold via another technological advance – the Internet. Furthermore, craft beer makers have access to a large variety of hops and other ingredients online, and can advance knowledge via online discussion boards.