Local Craft Beer Consumers Lose Loyalty When Their Favorite Brands are Acquired

Key Takeaways:

• Local craft beer consumers have a sense of psychological ownership of their beer brands.
• When “big business” acquires their favorite craft beer brands, sales for the brands drop by 15%.
• Competing craft beer brands that remain local tend to benefit thanks to consumers switching their brand loyalty.

BALTIMORE, MD, October 8, 2024 – Local craft beer consumers don’t seem to like it when their favorite brands are acquired, showing displeasure through spending habits, according to a new study on brand loyalty and craft beers.

The research study published in the INFORMS journal Marketing Science is called “Local Market Reaction to Brand Acquisitions: Evidence from the Craft Beer Industry.” The authors of the peer-reviewed study are Ali Umut Guler of Koç University in Istanbul, Turkey; Kanishka Misra of the University of California, San Diego; and Vishal Singh of 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,” says Guler. “The consumer sees the brand as part of their 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,” says Misra. “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.” 

Singh adds, “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/X 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,” says Guler.

Link to Study

About INFORMS and Marketing Science

Marketing Science is a premier peer-reviewed scholarly marketing journal focused on research using quantitative approaches to study all aspects of the interface between consumers and firms. It is published by INFORMS, the leading international association for the data and decision sciences. More information is available at www.informs.org or @informs.

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