The Boston Beer Company, known as the largest craft beer company in the US, is currently dealing with heightened competition in a market that is gradually shrinking due to the growth of the craft beer industry. To stay ahead and remain consumers’ top choice, The Boston Beer Company must explore inventive and unique strategies.
The Boston Beer Company should prioritize the creation of specialty beers that are available throughout the year, in addition to its range of seasonal offerings. These specialty beers could incorporate regional flavors tailored to appeal to the distinct taste preferences of consumers across different parts of the country. With its diverse regions, the United States encompasses various unique taste preferences that have been shaped by individuals’ upbringing and exposure to specific foods and flavors.
The tastes and flavor combinations that consumers prefer are influenced by the local cuisine and spices available in different regions. For instance, in New Orleans, people may enjoy a beer with a hint of Cajun-spice, whereas those in the Southwest US might prefer undertones of jalapeno or habanero spice. To cater to the preferences of specific regions within the United States, companies promote a variety of flavors such as potato chips and BBQ sauce.
If a flavor performs well, it is gradually introduced in other regions nationwide. Many craft beer companies offer regional flavors throughout the United States, but their scale and reach are usually smaller compared to the Boston Beer Company. In contrast to its competitors, the Boston Beer Company has already established itself nationwide, enabling it to access a larger customer base. Furthermore, the Boston Beer Company offers a variety of flavors that are available in all markets.
The Boston Beer Company effectively competes with smaller regional competitors by catering to individual tastes and preferences in various areas. They achieve this by focusing on popular flavors that are unique to each region, thereby expanding their market reach nationwide and providing more personal challenges to local craft beer producers. Currently, Sam Adams holds a 19% share of the craft beer market but only commands a mere 1% of the overall beer market.
By increasing its total market share, Boston Beer Company is expected to escalate its ownership in the craft beer industry by 6%, resulting in an overall stake of 25%. Additionally, it is anticipated that their presence in the entire beer market will expand by 4%, giving them a share of 5%. These advancements are likely to lead to revenue growth. In recent years, the company has experienced an average annual revenue surge of 12%. If the market share continues to expand, there is hope for sales to increase by 8%, ultimately resulting in a 20% boost in yearly revenue compared to the previous year.
To achieve these goals, the first step is to conduct a market study in various designated regions. These regions include Far West, South East, Rocky Mountains, Plains, Great Lakes, Mid-East, and New England. The focus of this study will be on individuals aged 21-30 with disposable income. The main objective is to identify the major cities in each region that are likely to support a nano-brewery. A nano-brewery is a small-scale brewery that produces multiple batches of beer (each being 10 gallons) for sampling purposes, similar to a test kitchen. This approach will help determine feasible test markets. It is recommended to hire an external consulting firm with nationwide coverage to conduct these regional studies.
The market studies should focus on three key factors: the local availability of craft beers, the number of bars in the area, and the demand for new craft beers. These studies must begin at the start of the fiscal year and end by the conclusion of the second quarter. It is important that each regional study does not exceed a cost of $75,000. The results from an external consulting firm will be presented to a committee consisting of representatives from Research and Development, Sales, Distribution, Real Estate, Finance, and Operations departments. Following this presentation, the committee will determine which cities have the greatest potential for growth.
Members of Real Estate Department will search for available small brewery locations to lease or rent. If no existing locations are found, they will identify potential competitors to buy out. The goal is to sign a 7-year lease with the option to extend after 5 years. All locations should be determined by the end of the third quarter. Once the areas are identified, Human Resource Department will start searching for Brew Masters to run each new nano-brewery location.
These Brew Masters can be recognized through their current brewery locations or by looking at competitors in the new locations. As soon as they are identified, they should receive training on the methods and policies of the Boston Beer Company. Subsequently, the company should carry out regional market studies to identify potential flavors for each specific region. These studies should be based on existing local craft breweries and popular regional flavor combinations. Furthermore, each smaller market study should be conducted by local consulting firms that already possess knowledge about the demographics and culture of the region being studied.
These studies should be completed by the end of the fourth quarter and should not exceed $25,000 each. The representatives of each consulting firms will meet with the existing committee to discuss their findings. Research and Development will look at the feasibility of each potential flavor combination and begin working with the Master Brewers for each nano-brewery location to begin production. After locations are determined and nano-breweries are functioning Boston Beer Company should conduct a test with a sample population from our target demographic to determine which beers should be put into production.
Once Master Brewers have finished multiple test batches of beer, a group of volunteers will be selected to sample the beers and share their feedback with the Master Brewers. Surveys and taste tests will be carried out by local market research companies that are contracted for this purpose. The ideal candidates for these surveys and taste tests can be found at local universities and military bases because they fit the desired age group and are likely to consume alcoholic beverages in social environments.
Each study must have at least 200 participants who come from diverse taste preferences and demographic backgrounds. Instead of receiving money, participants will be given free samples of beer and a case of any existing Sam Adams beer product, which will help reduce costs. The market research company will arrange transportation for study participants to ensure they do not drive after consuming alcohol. Each market study should not exceed $5,000 and should be conducted within a one-month timeframe.
Master Brewers and a group of 5 selected members from the research and development team will evaluate the feedback received. They will analyze the data to identify any prevalent patterns, such as highly rated beers in terms of taste and appeal. This analysis will guide the decision-making process regarding which beer flavors to pursue and how to improve less desirable ones. Lastly, Boston Beer Company should collaborate with local bars and pubs to establish mutually beneficial agreements, enabling them to showcase newly created flavors on tap for a period of three to six months. This will help determine the popularity of the beer in the regional market.
If the beer flavor remains popular for one year, it will be sent to a brewery in Georgia for increased production and distribution in bottled form to grocery stores and other outlets. The local sales of the bottled flavors will be closely monitored to assess overall approval. If sales continue to grow for approximately a year, studies will be conducted in other regions to determine profitability for a national release.
The Boston Beer Company ought to establish regional sales teams in each region for closely monitoring local markets. This will enable them to identify important local bars and regional festivals where they can showcase their new flavors. Another crucial matter for the company is ensuring the freshness of their beer as it goes through the distribution system from the breweries to consumers. To address this, Boston Beer should construct or acquire more company-owned breweries throughout the U.S. This will assist them in strategically positioning themselves geographically, thereby reducing the need for wholesalers and distributors to stockpile inventory. Efficient information systems that provide accurate forecasts and real-time data should be utilized to achieve this objective, and Boston Beer should collaborate with distributors on developing and integrating these systems. By expanding their network of company-owned breweries, Boston Beer can uphold the exceptional quality of their products while consistently offering customers fresh beer options in any setting.
Expanding allows the Boston Beer Company to counterbalance initial costs using loyal customers who appreciate high-quality beer. Consequently, this leads to increased revenues and a greater market share. At present, the company must store inventory for long durations in order to fulfill demand; however, with the inclusion of new breweries, they can implement a Just in Time approach to manage their inventory.
In order to expedite the delivery of inventory to wholesalers and distributors, Boston Beer plans to establish new breweries in more convenient locations. This will result in smaller order sizes as wholesalers and distributors will be able to consistently order smaller quantities instead of purchasing enough inventory until the next shipment. As a result, Boston Beer Company’s Accounts Receivable will decrease. To achieve these goals, a real estate campaign is scheduled for the first quarter of 2014 to find suitable properties in Texas.
Reps from the Real Estate Department will search Texas for existing brewery locations available for lease or rent. If none are found, they will look for possible build locations. Boston will proceed with the Texas project if total implementation costs are under $45 million. The company aims to have their new company-owned brewery up and running by Q4 2014. The campaign will also assess Georgia breweries in the same manner.
The breweries in Georgia will be leased for 5-7 years, with the option to renew after 5 years if successful. They will present their findings to the board, explaining why they chose certain properties and breweries. The board will evaluate each property and brewery’s value and potential impact on their supply chain network. The final decision rests with the board.
The Finance Department will analyze the capital structure of the Texas brewery and decide how much debt to take on, as long as the equity level stays within the board’s limit of 55%-65%. However, the board will have the final say. Once the breweries are built or leased, beer production will commence. This step will be seamlessly integrated with the previous critical issue’s action step. The new Texas brewery will produce Boston Beer Company’s main products, such as Sam Adams Boston Lager and Rebel IPA, along with seasonal beers like Winter Lager and Summer Ale.
Georgia will exclusively concentrate on specialty and regional beers as stated earlier. If a new beer from one of the regions is created and approved by the Master Brewers, passes the taste test conducted by volunteers, and remains popular for over a year in local bars and pubs, it will be produced in bottled form in a different region. The Master Brewer from the region where the new beer originated will be brought to Georgia brewery to instruct the Master Brewer and staff on the recipe and beer-making process.
Georgia will produce and distribute the new beer to other regions. To align with the Freshest Beer Program, Boston Beer’s logistics department will use linear regression and exponential smoothing forecasts to determine the inventory required for shipment to wholesalers on a weekly or biweekly basis. The logistics department will then meet with the sales and operations departments to share the test results. Based on these results, the operations department will develop a distribution plan for the beer.
The sales department of Boston Beer will collaborate with the sales departments of their wholesalers to improve the forecasting and production planning of the supply chain, thus increasing efficiency. By reducing inventory held by wholesalers, Boston Beer will see a decrease in both Accounts Receivables and in the Allowance for Doubtful Accounts and Stale Beer Reserve. This will enable them to establish more reliable collection terms for their sales.
In addition, this will enable them to have more cash readily available. They should utilize this cash to promote their local flavors in the Far West, South East, Rocky Mountains, Plains, Great Lakes, South East, Mid-East, and New England regions. This effort will help generate more sales for the Georgia brewery. Furthermore, they should market their traditional flagship brands in the Midwest to increase sales for the Texas brewery.
Engineers from the MIS Department will receive $150,000 to install operating systems and create e-business tools for the Texas brewery. These tools will track order and delivery time, manage weather conditions, and address customer demands. Additionally, the Distribution Department will implement an internal communications system to coordinate shipping vehicles and intervene if necessary.
Management at Boston Beer Company is planning to utilize the DMAIC model of Six Sigma to enhance their distribution processes and decrease variability in their distribution system’s performance. To expand their distribution network in Georgia and Texas, it is recommended that the company hire an external national consulting firm to locate potential brokers or agents for distributing and stocking their beer. Currently, the company relies on a single distribution channel. However, due to variations in alcohol regulations across states, additional distribution channels are required.
Due to state laws prohibiting beer manufacturers from directly selling and distributing beer to retailers and consumers, Boston Beer Company is required to rely on brokers or agents, which will be sought out by the consulting firm. The consulting firm will share its findings with the Finance, Accounting, Sales, and Operations departments. Subsequently, the committee will decide whether to initiate operations with any of the brokers or agents identified. Two separate studies will be conducted, one in Georgia and one in Texas, each costing no more than $50,000.
Furthermore, with the consolidation of the beer industry, major corporations such as InBev, SABMiller, and Molson Coors have a possibility to enhance their impact with distributors. This situation may pose challenges for Boston Beer in maintaining favorable contractual agreements with these distributors, especially considering that they carry fewer Boston Beer products compared to the larger company products. Thus, in order to address this risk, Boston Beer will allocate a budget of $3,000,000 for the acquisition of smaller distributors located near their Texas and Georgia brewery.
In order to meet the distribution requirements of the new facilities, all acquisitions must be finalized by the end of 2014. The final step to guarantee the freshness of Boston Beer Company’s beer is for the purchasing department of the Texas brewery to secure their malt ingredients from their current vendor in the U.S. They will also establish long-term agreements with English vendors for their hops ingredients, with whom they already have a connection. However, they will protect themselves against potential depreciation of the Pounds Sterling by hedging their foreign currency commitments.
The European market will acquire apples from different vendors for multiple years, while yeast will still be obtained from current suppliers. The company will allocate $150,000 to build a cold storage facility at the production site. This facility will have the capacity to store a six months’ worth of hops, yeast, malt, and apples. Its purpose is to protect against potential disasters at other company facilities. The breweries in Georgia and Texas will adopt a similar strategy as the Boston brewery.
