Black Fly Case Study Case

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Cathy Siskind-Kelly and Rob Kelly founded Black Fly Beverage Co. to meet the growing demand for premium coolers in the Ontario market. They wanted to differentiate their product from other spirit coolers by using natural ingredients and chemical free sweeteners, economically friendly packaging, and a brand name that represented northern Canadians. Furthermore, the final product would be less saccharine than competitors. Black Fly established a micro-distillery in the heart of downtown London, Ontario for maximum exposure and promotional opportunities, unlike many competing manufacturers due to the higher cost of real estate. To further capitalize on this competitive advantage, Black Fly partnered with a nearby sporting and special events arena to open a lounge in their facility that would market Black Fly products. The main production facility could produce 12,000 bottles of the cranberry-blueberry coolers in a process that around 26 hours. Black Fly struck a deal with the Liquor Control Board of Ontario (LCBO), a government corporation known for their distributing and marketing position, to carry their product on a trial basis dictated by strict benchmarks. The brand’s flagship flavor was a hit, and received “general listing status” albeit they continued to meet standards. Black Fly continued to show strong results with a rise in sales, while also receiving positive feedback from the media and LCBO, but were still only selling with limited availability throughout approximately one-third of LCBO’s stores. The Kellys contemplated taking advantage for the strong demand of their product, and came up with two alternatives for further expansion to increase market share. The first would be to create a new flavor of their vodka spirit c...

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...ed Ice would require some equipment, materials, and processes specific to the product, not allowing them to benefit fully from their economies of scale as some equipment would be needed for both product lines. Furthermore, the outstanding debt that they have in the form of a second mortgage ($300,000), and an obligation to pay back family and friends ($200,000), makes choosing too risky of an option illogical. Once the company has better established sales and reduced debt, they should consider producing the Spiked Ice product line. Furthermore, the seasonality aspect of selling a frozen beverage would further the volatility of Black Fly’s already sporadic sales. Due to these facts, the alternative of creating a new flavor seems to be the most reasonable move for Black Fly to take advantage of the large growth they are experiencing and further increase market share.

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