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Paper Bart Bronneberg accepted for publication at Marketing Science

Published: 23rd November 2021 Last updated: 23rd November 2021

Bart Bronnenberg, together with his co-authors Jean-Pierre Dubé (University of Chicago Booth School of Business & NBER) and Joonhwi Joo (University of Texas at Dallas, Naveen Jindal School of Management) have their paper accepted for publication at Marketing Science: “Millennials and the Take-Off of Craft Brands: Preference Formation in the U.S. Beer Industry”.

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 86% 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.