Firm Strategy, Structure and Rivalry

In this section, I will analyze the competitive landscape, of the Copenhagen microbrewery cluster. I will investigate, how rival firms interact with each other, as well as the outcomes for the industry in terms of innovations as well as the individual firm. Furthermore, I will investigate difficulties, in context of founding new microbreweries in the local context. Furthermore, I will analyze the managerial systems found in the local microbrewery industry. As two of the investigated firms of this research are operating globally, I will again divide this section into local as well as global aspects.

5.4.3.1 Local Firm Strategy, Structure and Rivalry

To start of this section, I will investigate with what difficulties or ease the foundation of a microbrewery can be approached in the Copenhagen area. The registration of firms is an easy process for the population registered in Denmark. The process of registering, can be conducted online through the Danish website “Virk.dk”. Here you have the option to register solely owned firms as well as firms that are owned by a partnership. Whilst the owner of the firms are fully liable in this approach, microbreweries are generally registered as “Anpartsselskab” (APS) (Virk Data, 2020). An APS is defined as a limited private company and separate legal entity. The

foundation of an APS requires 50.000 DKK of seed capital. The advantage of the APS is the liability of the owner(s), as you are only liable for the capital you have invested in the company. To

support the foundation of new local companies, the Danish government implemented the

“Iværksætterselskab” (IVS) an Entrepreneurial Limited Company. Whilst being similar to the APS, and IVS can be founded for only 1DKK, and doesn’t require seed capital from the entrepreneur.

Whilst this approach applies stricter regulations in terms of capital growth and dividends are prohibited, until the company has grown to 50.000DKK in value, it allows entrepreneurs to

circumvent the barrier of the 50.000DKK required as seed capital by the government. (Startupsvar, 2021) Whilst this process is easy and just requires little time to set up, a further requirement to the foundation of microbreweries, is the required capital to purchase equipment and location as well as raw materials. Whilst these costs are high in the microbrewery industry, the process of raising the capital through bank loans became even more difficult over time, as stated by J. Storm, (2021) during the interview. As I established previously, microbreweries in and around

Copenhagen took different approaches in this manner.

64 In terms of managerial systems, a common occurrence in the microbrewery industry around Copenhagen, is either a joint or single owned entity. A. Knage (2021) mentioned in this context that decisions in terms of the brewery are taken democratically, and everyone’s opinion is considered. This allows the owners to consider multiple opinions and suggestions. Still a general hierarchy as in owner and his employees can be found, even though the social environment of the workplace was described by the interviewees as friendly and family like.

In terms of rivalry, multiple competing microbreweries can be found in the Copenhagen microbrewery cluster. The general opinion on competition is by all interviewees seen as supportive and full of opportunity. As I established previously on multiple occasions, the collaboration in between microbreweries around Copenhagen is a crucial part of the

microbrewery cluster. Whilst it is a source of leaning, gathering knowledge as well as branding for multiple breweries, a further outcome of the joint production is innovation in forms of quality and taste of the final product, as well as technology and equipment, contributing to the strength of the cluster. This granted the cluster participants to grow a reputation about the local craft beer industry, that is internationally acknowledged (S.Wagner, 2021)

5.4.3.2 Global Firm Strategy, Structure and Rivalry

Whilst the previous data was concerned and focused on the local aspect of the firm, it is

unrealistic to assume that firms gather resources and knowledge only on a local dimension. In the globalized world, access to foreign sources of raw materials, knowledge as well as technology has never been easier. Especially in terms of solving problems, foreign sources in terms of knowledge can be valuable. In this section I will investigate, if and how microbreweries, make use of foreign resources. I will further investigate to what extent cluster activities support these efforts. P.

Maskell (2013) terms the establishing connection to foreign resources as the building of

“Pipelines”. He further points out three steps, that should be considered before establishing foreign connections:

1. Knowledge distortion 2. Determining the problem 3. Locating a source

65 During the interview, the participants were asked, if they have sources and networks to foreign entities in place. They were further asked how these connections were, established, what was the motive behind it as well as how they are maintained. S. Wagner (2021) points out, that the whilst the microbrewery scene is very well embedded in Denmark, it is a global phenomenon. According to him, the inspiration of craft beer was not found in Denmark.

“If it wasn't, we wouldn't know Lambic, if it wasn't for Belgian, we wouldn't know American hops Seeing the way they do that. You can't do that in Germany. I'm sorry. It's just like it's one of those Unfortunately, these things we cannot get around.” (S. Wagner, 2021; p.12, Question 33)

This statement clearly shows that the influences on beer style produced in Denmark by most microbreweries in terms of craft beer were from foreign nature. Asked about how he approaches connections to foreign entities and what drives the wish to establish foreign relations, S. Wagner (2021) refers to his curiosity. An important source of establishing foreign relations, is according to him, the existence of beer festivals. Bringing microbreweries from multiple nations together, it allows him to see and taste products of his competitions. If a product should exceed his

expectations, or is unique, his curiosity is coming into play. This is leading to an exchange of contact information in the hope it will lead to a long-term relation, including the potential to collaborate and share knowledge. Whilst this is the natural approach, it is not the only way relationships are formed. S. Wagner (2021) further mentions to target specific breweries of interest. This is usually the case with high profile microbreweries, known on a global scale, and considered the global leaders in the industry. A. Knage (2021) further mentions the import of raw material, which is in many instances sourced from the outside. She mentions that the hops

required for certain styles of brewing, can only be sourced from foreign suppliers, due to its nature that the hops only grow in certain areas and is in many cases patented.

“But we are very broad brewery, we both brew European styles when we brew with European ingredients, which are more local than American. But we also love IPAs, and you have to get your hops from the States and, and even from New Zealand and stuff like that. It's patented, and there's no way to go around it.” (A. Knage, 2021; p.11)

This statement is a good indicator on the international dependence of raw material for

microbreweries. When asked about her approach in sourcing the right supplier, she refers to the

66 importance of the local cluster. Through communication with the fellow local microbreweries, A.

Knage (2021) mentions that the communication in between microbreweries is very important in this aspect. When they find a product of interest, they will ask breweries using the product about their experiences. By sharing experience about a product as well as suppliers, Slowburn Brewing can form its own decision, which supplier to pursue. The chosen suppliers will then be contacted via mail or in a Skype meeting. She further mentions the importance of nurturing these relations.

As an example, she refers to their approach of sending the suppliers samples of the final product.

To maintain a good relation towards the suppliers is, according to her, very important in context of access. Many resources, especially from high quality, are in great demand and a good relationship contribute to a constant access. She further mentions the limitations of breweries in accessing raw materials.

“But it's there's such a high demand, and the things sell out and the good stuff gets taken first. And the bigger companies have the first right to buy and all these things. So yeah, so a better

relationship is good.” (A. Knage, 2021; p.12, Question 32)

Whilst a good relationship towards the suppliers can grant access to high quality raw materials, the brewery is still limited in the size and its bargaining power, due to Slowburns nature of being a small and upcoming brewery. Here the local cluster comes into play again with the important role of well-established microbreweries in the Copenhagen area. Having the required bargaining power, well established breweries have greater access to raw materials. Through the nature of the cluster activities in the microbrewery industry around Copenhagen, the aspect of resource sharing, allows Slowburn to gain access to raw materials, which would be inaccessible to their bargaining power limitations. J. Storm (2021) confirms this difficulty for smaller breweries, to gain access to certain raw materials. During the Interview he states that he therefore is helping smaller

microbreweries around Copenhagen in gaining access to resources in question. Asked about the reason for this phenomenon, he stats that it is due to the order size. To gain access to certain raw materials minimum orders are required, which in many cases exceed the needs and financial capabilities of smaller microbreweries. A further aspect, mentioned by J. Storm (2021) is the age of Amager Bryghus. As the brewery started in 2007, the popularity of microbreweries was not as extensive as it is today. Whilst in 2019 over 7000 microbreweries were registered in the EU, it was just 1755 in the year of 2008 (Beer Statistic, 2014; European Beer Trends Report, 2020). As

67 Amager Bryghus managed to brew a beer early on, that was ranked in the to 10 best beers in the world, this had a positive effect on its supplier side, the brewery is benefitting from until the time of this research in 2021. J. Storm (2021) mentions during the interview, that the top ranked beer led to suppliers contacting the brewery, offering their products. Looking at the situation at the time of this research, foreign suppliers contacting microbreweries is highly irregular.

The gathered data aligns with the notion of the establishing “Pipelines” to foreign resources by P.

Maskell (2013). As the example of S. Wagner shows, connections to foreign breweries are formed under the notion of gaining knowledge. The notion of curiosity is described by P. Maskell as low problem awareness as well as low source awareness. This is since new trends as well as unique brewing styles have to be discovered in the first place. Maskell´s solution in form of trade fairs, further aligns with the answers given by S. Wagner (2021) since most of his discoveries have been during beer festivals. Beer festivals or as P. Maskell (2013) terms it trade fairs, are important in multiple aspects. Whilst it allows the consumer, to explore the new and upcoming beer trends, as well as the personal contact, it is as well a great basis of forming connections in between business.

Whilst it allows local beer bar owners, to establish connections to new breweries, these types of events can be used as base for future sales for the microbreweries. Even more important, is the aspect of exchanging knowledge, as well by getting in contact with fellow microbreweries. P.

Maskell (2013) stresses the importance of the gathering at traid fares as source of potential knowledge. According to him, trade fairs allow the attendants to explore the almost unbiased trends of the industries in this way. Furthermore, industry wide standards are established, through the gathering of multiple national as well as international participant exchanging their business standards. Lastly, trade fairs have high potential in tackling broad or highly complex problems intuitively thorough knowledge exchange (Maskell, 2013).

S. Wagnern(2021) refers here to the importance of beer festivals as a source of scouting the international competition, scouting for new trends, as well as getting insides about their technique, as well as daily operations. Collaborations with international borders can therefore lead to mutual learning, as well as innovation, which can be implemented in the home market and contribute as well to the local cluster. J. Storm (2021) mentioned additionally underlining the S.

Wagner´s (2021) notion:

68

“And that's also the other things that other breweries, you normally have an after party. And then you meet all the other breweries and talk to them. Yeah, and that's normally the best thing about it (Beer Festivals).” (J. Storm, 2021; p.13, Question 52)

A. Knage (2021) further mentions the need of foreign raw materials. Whilst the need for specific raw is not specified by P. Maskell (2013), who’s theory is based on access of knowledge, it is to mention that networks are formed in between foreign suppliers and the local microbreweries. It is to mention that pre the network establishment, A. Knage (2021) mentioned to gather information from local sources using certain suppliers and raw material. Whilst Maskell terms this case of low source awareness crowdsourcing, in the case of the microbrewery cluster around Copenhagen, cluster participant is a great source of knowledge. Whilst in the case of Amager Bryghus, they got approached by suppliers, this phenomenon is still based on a contract established through a network of foreign nature. The first approach on the other hand is unique in the industry.

As mentioned previously, two of the three representatives in the interviews, mentioned to be globally active in form of exporting their product worldwide. Whilst this does not influence the foundation process of the firm, since they do not have to register in foreign nations, and use the service of distributors, it is to acknowledge that they are taking part in the global rivalry as well.

Collaborations with international breweries in this context, grant them the opportunity of experiencing different managerial systems, to learn about the business procedures of their competition, as well as a further enhancement of their skills in different brewing techniques and beer styles.