Case Assignment 1: Amsterdam Brewery
Business 2210: Introduction to Marketing Tactics
Submitted by: Jordan Loder, Chelsea Noftall, Junxian Shi, Erin Tucker, Erin
Vance
Submitted to: Professor Lyle Wetsch
June 5, 2016
I. Industry and Competitive Analysis
Problem(s)/Issue(s) Identification:
Issue 1) 5.6% short of EBITA goal (9.4% out of goal of 15%). This comes from capital spent on relocation and the opening of the Brewhouse in 2013 (Furgiuele, 2015, p. 15). This is also linked to the second issue of not meeting market demand, which is affecting their profitability.
Issue 2)
Not producing enough for summer market demand stems from the deeper problem of Amsterdam losing time and capacity on switching between brews.
Issue 3)
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416 Local Lager marketed towards females)
• External changes to Downtown Brown alone increased product sales by 20%
• Adventure Brews often successful while available
• Boneshaker won several awards
• Wide variety of products Weaknesses
• Adventure brews not always available (making them “disposable”)
• Limited resources for marketing (85% going to All Natural Blonde)
• Not able to meet demands
• Variety of products requires a variety of marketing expense and equipment time
• Adventure brews more time consuming to brew and more expensive to create
• Amsterdam products not available at all TBS/LCBO stores - customers needed to use online tracker
Opportunities
• Beer is Canada’s most popular alcoholic beverage
• 447 TBS locations and 639 LCBO locations across Ontario means there is lots of room for expansion across the province
• Slightly better margins at TBS vs LCBO
• Beer festivals to get easy customer feedback (especially for new products)
• Market moving toward favouring specialty beers (leading at LCBO beer section and growing each year), which can be sold at a higher
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Research and development incur high costs, which minimizes profitability. New beers are more difficult to implement due to changes in equipment, process of brewing various batches, but since this method is already in process at Amsterdam, they are practiced in overcoming these issues. Cost incurred would be high due to research and development, and changes in equipment. New products would also limit brewing capacity as they would not be able to make vast amounts of one kind, and the speciality beers required a longer brewing time.
Alternative 2)
While re-focusing on the original products would bring about high profits, as these are the high sellers and they could finally meet market demand, they run the risk of becoming boring and obsolete in the customers’ minds without new products. This makes the potential profitability high in the short-term, but also more risky in the long-term. It would be very easy to implement an original focus, and it would cut down on equipment and research development costs. In the time it takes to brew thirteen batches of the risky Adventure Brews, Amsterdam could brew twenty batches of All Natural or Downtown Brown.
Alternative
The beer brands were classified as popular, premium, super premium, and ultra-premium. The distinguishing factor determining if brands belonged to different classes was whether beer was produced by four largest companies (Anheuser-...
In a period of nine years, Rahr has been able expand the beer brewing business greatly. It has increased from two thousand barrels of beer annually to twenty thousand beer barrels per year. The Rahr and Sons Brewing Company has been a significant phenomenon in the beer-brewing sector, where it has acquired over
Simpson, B. (2008). “New Belgium Brewing (B)” in Ferrell, O. C., and Hartline, Michael D., Marketing Strategy, Fourth Edition, Mason, Ohio: Thompson Southwestern Publishing, pp. 1-5.
TBS carried 447 brands from 104 breweries. The 80 per cent of the beer sales in Ontario. TBS represented approximately 11 per cent of Amsterdam’s sale. But, the Amsterdam products is only available in locations of Ontario. TBS offered slightly better margins than the LCBO.
From our research, Anheuser-Busch is content with being the number one beer company in the world, increasing sales each year in operation. We found that Anheuser-Busch met many views associated with the world, business, and behavioral dimensions. The company also displayed its stability as we reviewed one of its most successful products Budweiser, owned by Anheuser-Busch, under the marketing view and the financial view. Not only do they hold almost half of the market share in the industry but their stock prices, sales volume, and net sales have all increased from 2002 to 2003. We also looked at Budweiser in terms of geography and culture. We found due to the fact that the "western" countries consume the majority of beer, it only makes sense that Anheuser-Busch concentrates on that market. Along these lines, another key goal that is also important to Anheuser-Busch is to boost other beer markets that are located in other cultures, where at the time beer is not a major consumption.
Using consumer survey information, we devised a metric for calculating and projecting Coors market share. While only 300 customers were surveyed (Research Study G), we made an assumption that this sample sufficiently represented the preferences of the greater population in the two-county market area. We also assumed that attitudes toward Coors were equally distributed amongst consumer weekly beer consumption levels. Then, we forecast Coors market share by multiplying the percentage of people with a certain preference by the Coors purchase percentage for that preference. We projected an anticipated market share range, between 13.7% and 21.5%, illustrated in Exhibit 2.
The United States of America has a population of 260 million people. This is a big market with substantial purchasing power. As of 1997, Breckenridge Brewery has only expanded eastwards and the west side of the country is relatively untouched. According to Exhibit 2 in the case study, there were only distributors in 32 states and that leaves a potential to sell to the other 19 states as w...
Choosing to forfeit market share in several states was an unlikely success, but it didn’t come without opportunity cost. Growth before Expansion: balancing production capacity, brand equity, and development. Production capacity issues will arise and could impact our ability to “mine” current markets. Opening two additional breweries allowed us to adequately serve current markets and enter new ones (15 states total). Still, demand is steadily increasing in and around these markets and should be a priority over new ones.
Market penetration involves with entering a new market with an existing products (Ansoff, 1957). Red Bull can make changes in the products they offer by introducing different flavours and non-caffeine drinks to penetrate the new market. This diversification of products will show their innovative skills to their customers. The company should improve their existing product and use market research, product adaptation analysis, and legal review to seek expansion for the existing products (McDonald, 2007).
The investment is an excellent option because the probability of profit is very high. Based on our Pro-forma Income statement, profit will be substantial and will increase each year even after losing .2% of market share. Pessimistically, the market share to break even is very generous making 2.5% room for error if needed when tapping into a brand new market. The ability to make a high market share in the southern part of Delaware would be very substantial. Because it is a beer perceived to be higher class (study H) than its competitors, it will be introduced into a brand new market.
Relationships with interest groups and the public policy makers has been one of the many things that the Boston Beer Company has strived to maintain and expand. The company realizes that these relationships are critical for the future success of the company. Being in the brewing industry the policies and publics opinion can influence the changes in future policies and procedures that would affect the industry. Developing and maintaining the relationships with the interest groups as well as the policy makers could prove to be very beneficial to not only the company but the brewing industry as a whole.
As larger beer corporations move toward this growing market, NBB will have to develop measures to maintain market share (Gorski, 2013).
Deutsche Brauerei has been a family owned and operated corporation for 12 generations, which has created a high level of focus and control. Each generation has kept the management and operations processes relatively simple, centered on brewing practices and quality. Deutsche Brauerei’s rapid growth in recent years can be attributed to several factors. First and foremost, the company’s success is centered on the product itself, which has won numerous quality awards and is quite popular in Germany. Another contributing factor to the recent growth may have been a bit inadvertent. The purchase of new equipment in 1994, which was necessary as a result of a fire that destroyed the old equipment, allowed the company to increase brewing capacity and efficiency. Finally, Deutsche Brauerei’s decision to enter the Ukranian market in 1998 contributed significantly to the rapid growth. The collapse of the U.S.S.R. brought market reforms, and Deutsche Brauerei jumped on the opportunity to enter the fragmented beer industry, capture the large population and capitalize on the prime location in Europe. Lukas Schweitzer was savvy enough to hire local expert Oleg Pinchuk away from a competitor as the marketing manager, and Oleg was instrumental in building the business in Ukraine by securing accounts and implementing the field warehousing to support distributors. Deutsche’s beer was hugely popular in the Ukraine almost immediately, and volume sales more than offset the depreciation of the Ukrainian currency. Sales in Ukraine accounted for 28% of Deutsche’s total sales, and skyrocketed from 4,262 euros in 1998 to 25,847 euros in 2001.
The beverage industry is highly competitive and presents many alternative products to satisfy a need from within. The principal areas of competition are in pricing, packaging, product innovation, the development of new products and flavours as well as promotional and marketing strategies. Companies can be grouped into two categories: global operations such as PepsiCo, Coca-Cola Company, Monster Beverage Corp. and Red Bull and regional operations such as Ro...
Too often, a marketing function is misunderstood, because many people do not understand what is meant by ‘Marketing’.