Millennials and the Take-Off of Craft Brands: Preference Formation in the U.S. Beer Industry

56 Pages Posted: 29 Mar 2021 Last revised: 30 Oct 2022

See all articles by Bart J. Bronnenberg

Bart J. Bronnenberg

Tilburg University, CentER

Jean-Pierre Dubé

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Marketing Science Institute (MSI)

Joonhwi Joo

University of Texas at Dallas - Naveen Jindal School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: March 2021

Abstract

We conduct an empirical case study of the U.S. beer industry to analyze the disruptive effects of locally-manufactured, craft brands on market structure, an increasingly common phenomenon in CPG industries typically attributed to the emerging generation of adult Millennial consumers. We document a generational share gap: Millennials buy more craft beer than earlier generations. We test between two competing mechanisms: (i) persistent generational differences in tastes and (ii) differences in past experiences, or, consumption capital. Our test exploits a novel database tracking the geographic differences in the diffusion of craft breweries across the U.S.. Using a structural model of demand with endogenous consumption capital stock formation, we find that heterogeneous consumption capital accounts for 85% of the generational share gap between Millennials and Baby Boomers, with the remainder explained by intrinsic generational differences in preferences. We predict the beer market structure will continue to fragment over the next decade, over-turning a nearly century-old structure dominated by a small number of national brands. The attribution of the share gap to consumption capital shaped through availability on the supply side of the market highlights how barriers to entry, such as regulation and high traditional marketing costs, sustained a concentrated market structure.

Suggested Citation

Bronnenberg, Bart J. and Dube, Jean-Pierre H. and Joo, Joonhwi, Millennials and the Take-Off of Craft Brands: Preference Formation in the U.S. Beer Industry (March 2021). NBER Working Paper No. w28618, Available at SSRN: https://ssrn.com/abstract=3814607

Bart J. Bronnenberg (Contact Author)

Tilburg University, CentER ( email )

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Jean-Pierre H. Dube

University of Chicago - Booth School of Business ( email )

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National Bureau of Economic Research (NBER) ( email )

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Marketing Science Institute (MSI) ( email )

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Joonhwi Joo

University of Texas at Dallas - Naveen Jindal School of Management ( email )

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Richardson, TX TX 75083-0688
United States
75080 (Fax)

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