Caves and Porter [1977] developed a theory of strategic groups to explain why national and regional producers behave differently in most consumer-goods industries. One implication of this theory is that the structure of demand and cost conditions differ between groups. This article tests for the presence of demand asymmetries between national and regional strategic groups by estimating a firm demand function for U.S. beer producers. The results suggest that these demand differences do exist. The impact of firm advertising differs between national and regional producers, and there is greater rivalry among competitors inside than outside strategic groups.