Pyramid Brewing Inc.
Introduction
Most consumer product companies have huge advertising budgets which they use to market their products. Most of these companies have been able to establish a substantial market share because of their ability to utilize these high budgets. We have established that what makes a consumer product company outstanding is the ability to hold a high market share and have respectable products in the consumers eyes without having a huge advertising expenditure.
Pyramid Brewing company is one such company which has established itself as an exceptional marketing company based on this criteria. Not only does Pyramid offer a wide array of quality products, but they are able to do so with minimal advertising expenses. Pyramid's main means of advertising is not based on expenses, but on its customers. Customers play a key role in marketing and are responsible for most of Pyramids geographical expansion. Demand and word of mouth, for and about Pyramid micro-beers, makes this possible. Pyramid's marketing success also depends on its packaging, which plays a key role in targeting customers.
Pyramid brewing company offers a wide base of high quality micro-beers which is composed of both Pyramid and Thomas Kemper ales and lagers. Pyramid is able to produce and offer Kemper beers as the result of a 1992 acquisition. This acquisition had a strong affect on Pyramid because it broadened their product base and gave them a higher market share. This broader range of distinctive beers also creates additional confidence when putting their beers into the marketplace. With this broader product line, Pyramid has successfully become the number one micro-beer producer in the Pacific Northwest and has established a 13% market share. Considering the fact that there are 62 micro-beer producers in this area, this percent is outstanding. We can look closer at Pyramid Brewing by means of analyzing the marketing mix.
Product
Pyramid Brewery offers a wide variety of beers which has enabled the company to become the top micro-brew seller throughout the Northwest. The acquisition of Thomas Kemper in 1992 expanded Pyramid's product line even further. The following columns exhibit the Pyramid and Thomas Kemper line of premium micro-brews.
Pyramid Thomas Kemper
Draught Pale Ale Hefeweizen
Hefeweizen Pale Lager
Pale Ale Amber Lager
Wheaten Ale WeizenBerry
Best Brown Bohemian Dunkel
Apricot Ale Roggen Rye
Espresso Stout HoneyWeizen
Scotch Ale Belgian White
Pyramid Rye Oktoberfest
Pyramid Porter WinterBrau
Snow Cap Ale Mai-bock
Anniversary Ale
Many of these brews are seasonal products while the company continually "experiments" with new brews. This "experimentation" is what makes the micro-brew scene enjoyable as brewers and consumers alike love to sample the latest concoction. Micro-brew consumers can be likened to wine connoisseurs in that they are passionate about their fine brews. Pyramid strengthens this attribute of micro-brews by offering "best food combination" suggestions. For example; Pyramid suggests Hefeweizen should be enjoyed with Caesar salads, halibut, cod or salmon. If you desire a brew to go with your porterhouse steak, Pyramid porter will more than satisfy your thirst. The flavor of these micro-brews can be enlightened even further by adding lemon or lime which is a common practice.
Another attribute that sets pyramid apart from other hand crafted brews is the bright and colorful packaging. Pyramid uses pastels and other bright colors to entice the consumer's eye as he or she scans the specialty beer section at grocery stores. This is very important because the more colorful the package, the more flavorful the beer appears. Another aspect Pyramid considers when packaging their products is which market they are targeting. Pyramid focuses on the demographic age group which is composed of beer drinkers 21-35 who care about what they like to drink. Pyramid packaging designs are suppose to attract the lower end of this segment and persuade the funky, party type personality. Kemper, on the other hand, utilizes more pastels and designs focused toward the conservative, upper aged person.
Pyramid also uses freshness dating to ensure the consumer that every beer will be fresh. Pyramid and Kemper micro-brews are un-pasteurized, which means they need to be consumed by a certain date which Pyramid Brewing Co. stamps on the bottle to ensure freshness. Domestic beer companies such as Budweiser have jumped on this bandwagon with their "born on date" in an effort regain lost sales to the micro-brew revolution. However, Budweiser cannot compete with the superior flavor of Pyramid and other micro-brews. In addition to superior flavor, Pyramid also has a higher alcohol content than the domestics which provides more "bang for your buck."
Price
Walking through the beer section of a local grocery store a consumer will come across three different price ranges for three different groups/styles of beer. First, we have the macro-beers, such as Budweiser, Coors, etc., that are priced significantly lower than Pyramid beers. Second, the consumer will reach the imported beer with prices often in the middle of the macro-beers and micro-brews. Finally, the consumer will see the domestic micro-brews, which are priced at the higher end of the beer market. This is where a consumer will see a number of Pyramid's beers. The price for a six-pack of a beer produced by Pyramid and Thomas Kemper retails for about $7.49. Redhook, Sierra Nevada, and Samuel Adams are just a few brands of micro-brews that sell for the same price in local grocery stores.
The following chart provides a break down of the estimated cost to produce a macro-beers and micro-brews.
(Note that the six-pack pricing is slightly different.)
Macro-beers produced Micro-brews from
from major US brewers regional brewers
(six-pack $4.01) (six-pack $6.44)
Retail Markup .80 1.29
Distributor Markup .66 1.19
Tax, Shipping .69 .62
Brewer Profit .24 .67
Ads, Management .33 .54
Labor, Production .47 1.06
Packaging .66 .83
Ingredients .16 .25
*data from Consumer Reports June 1996 (page 11)
The beer brewing industry is made up of a three tier system. This system arose after prohibition and establishes the means by which a brewing company gets its product to the market. This system is basically composed of relationships between the producer who ships to the distributor and the distributor to the retailer. In any one geographic area there are four main distributors for the various brewing companies. Typically, Budweiser infuses the biggest and strongest with mass amounts of capital for widespread distribution of Budweiser and Budweiser related products only. The second channel is usually controlled by Miller and Coors. The third channel is controlled by Strohs, Henrys and Lowenbrau. The fourth distributor is left for the other domestic and specialty micro-beers. Typically there are more than 100 companies fighting for part of this distributorship. This has presented Pyramid with a problem. Pyramid only has a small piece of this distributor. The distributor plays a key role in any beer producers success because they essentially control the availability of the product. An unreliable distributor can have drastic affects on the profitability of any beer producing company.
Pyramid places their products in two main channels, bars and supermarkets. This requires the use of a distributor to stock these products. In grocery stores the distributor is responsible for keeping shelf space fully stocked and represented with Kemper and Pyramid products. This channel is very important to Pyramid because it is the one which offers the product to the consumer. If Pyramid does not have a quality distributor other micro-beer products may be placed in Pyramid and Kemper tiers causing Pyramid products to be underrepresented.
Bars and taverns are also important to Pyramid. This channel broadens awareness for Pyramid products. Consumers who try Pyramid products in the bar often demand these beers be carried elsewhere. This channel is also used for experimentation purposes. New micro brews are typically placed within this channel to see how they are perceived by consumers. The usefulness of supplying to the bar scene is that consumers are willing to pay .50 cents more to try a good pint of beer rather than a domestic. Whereas, in the supermarket they may not be willing to pay three to four dollars more for a six pack of micro-beer compared to a domestic.
One suggestion to this distribution problem is that Pyramid establish their own distributorship. This would ensure that they control their own product and their beer is presented to the consumer at its freshest point. Although this may be very expensive, controlling their own distribution would ensure accurate representation among the various micro-beers. Another suggestion is that Pyramid "piggy back" with another micro-beer giant, possibly Sam Adams or Sierra Nevada, and form their own distribution chain. Not necessarily join companies, but share the expenses and advantages of a joint distributor.
Promotion
Pyramid Brewery engages in several forms of promotion to raise product awareness. Pyramid's promotional strategy employs a marketing pull approach through the use of low-cost advertising, publicity, and word of mouth. However, their strategy also incorporates a market push through sales promotion.
Pyramid's advertising campaign emphasizes the desired attributes of its targeted consumers. Here they focus on their premium quality and variety. To create this customer desire and pull through distribution channels Pyramid utilizes several publications. These consist of: Seattle Weekly, The Daily (Univ. of Wash.), and occasionally The Seattle Times. Pyramid has also gained exposure using billboards. This is rare however, but when used display a new product.
Pyramid brewery also uses a public relations approach to further promotion of their products. They often grasp the opportunity for publicity by utilizing the media. This past August the company changed its name to Pyramid Brewery from its founded identity of Hart Brewing. The change occurred so their name is synonymously identified with its flagship brand, Pyramid Ale's. As a result the change was publicized in newspapers and business periodicals. Pyramid also engages in sponsorship of charitable events. One such occurrence is the "Beat the Bridge" race/walk-a-thon across the 520 bridge. This event raises financial support to benefit Children's Hospital. This socially responsible behavior enhances the company image through favorable media exposure, and as a result builds product awareness.
Pyramid's promotional strategy relies heavily upon word of mouth. While this promotion primarily relies upon independent consumer verbalization, Pyramid participates in several activities to generate additional word of mouth. Each year Pyramid partakes in the annual Oregon Brewers Festival held in Portland, Oregon. This festival consists of eighty different micro-breweries who present their beer to consumers to induce additional word of mouth. Pyramid also utilizes its brewery for tours and its adjoined brew pub to improve product awareness. Because Pyramid produces a wide array of premium beers their pub attracts and satisfies any individuals palette. These activities attempt to build brand image and create brand equity through word of mouth.
Sales Promotion is another primary strategy of Pyramid to stimulate public interest. Pyramid sponsors a multitude of events in order to encourage consumption of their products. They participate in beer gardens and brewers nights in which their products are discounted, and items such as T-shirts, hats, and glasses with Pyramid logos are given away. Pyramid also spends considerable effort on its point of sale displays in grocery stores. An aesthetically pleasing display attempts to communicate the quality and freshness of their product and build brand image. In addition, the distribution of elaborate neon signs, coasters, and banners attempts to invoke similar associations.
Pyramid's promotional mix contains a variety of techniques to reach each consumer. These techniques converge into a strategy that accentuates their greatest attribute, quality.
As you can see from this analysis Pyramid has established itself as a remarkable marketing company. They not only have low advertising budgets but a broad product line which satisfies different customers needs. Pyramid is also remarkable because they have become so successful mainly through word of mouth advertising. Almost all customers are satisifed with their beers and demand has lead to geographical expansion.
Bibliography
1. Brewer Drops Hart for Pyramid- Name Change puts focus on top brand. (1996, May 17). The Seattle Times, pg. C1.
2. Can you judge a beer by its label?. (1996, June). Consumer Reports, pp. 10-13.
3. Ellis, M. (1997, April 3). Sam Adams brewer serves up shares for its drinkers. Reuter Business Report.
4. McDowell, B. (1997, March 10). In Craft Beer, It's style over brand substance: But advertising may be crucial if an expected shake out ends territorial growth. The Advertising Age. pp. 20-21.
5. Personal Interview: Benjamin Meyers, Communications and Marketing Director.
6. Web Site: http:\\www. pyramidbrew.com.