Local Market Reaction to Brand Acquisitions: Evidence from the Craft Beer Industry
by Umut Güler
Place: Faculty of Business Administration,
Ümit Berkman Seminar Room (MA-330)
A large stream of literature shows that the emotional bond between consumer and brand can induce a sense of psychological ownership, and shocks to this relationship such as brand repositioning or acquisitions can induce a negative consumer reaction. This article provides a large scale empirical study on such brand “transgressions” in the context of acquisition of local beer breweries by large conglomerates. Our analysis covering 40 brand acquisitions shows a strong negative reaction to acquisitions in social media. More importantly, the negative sentiment translates to a significant reduction in demand in the local market post acquisition. Across different specifications, we estimate that this decline is between 20% and 30%. This represents a significant negative shock to the acquired brand, as the local region accounts for more than one-fifth of brand sales on average, even in the long run. The decline begins immediately following the acquisition, and manifests in both sales and product ratings. On the flip side, acquisition helps the local brand in markets close to the acquirer’s facilities, with improved distribution and higher sales. Theoretical and managerial implications of our findings are discussed.