Docx 3d5w4d

Forked River Brewing Company Case Study Due: October 25, 2016 Kiana Lewis 0830924 B 4100*02 Aziz Memon

Executive Summary

This case study report analyzes the Forked River Brewing Company establish in London, Ontario in 2012, co-funded by three residents named Dave Reed, Andrew Peters, and Steve Nazarian. In this report the company’s background, goals, objectives, and key problems will be identified. Along with a marketing, competition, customer/segmentation, and SWOT analysis. Next a list of solutions with pro and cons, recommendations, an action plan and long term considerations will be addressed.

Problem Statement

The co-founders of Forked River Brewery are happy with the success with their company, but are facing challenges with changes to Ontario’s retail liquor laws, the increasing non-brewing istrative work, looming decisions about the product portfolio and distribution strategy, and how to manage the growth of the company. Now that Forked River has ed its start-up phase of the business cycle, the owners need to know if their company needs to reinvent their current business strategy/plan in this fastchanging craft beer industry to ensure long-term success. In addition, because the craft brewery industry has a small market share and other new breweries keep emerging, there is a lingering competition scare as well.

Company’s Objectives and Goals

Objectives and goals for Forked River Brewery is to create a new strategic plan to adjust to changes in the brewery industry such as managing the growth of their business so that they don’t get taxed as hard compared to other giant commercial companies due to production volumes according to the size of the brewery. With the emergence of new breweries, Forked River Brewery should focus on new types of beers, packaging, and non-beer alternatives to stand out from their competition.

Company’s Background and Forecasts

Forked River Brewery is a self-financed company that was incorporated in 2012 in London, Ontario with three founders. The brewery was built in a commercial industrial area away from retail and restaurant area to keep overhead costs low. Dave Reed one of the owners who invested 80 percent of the capital and owns majority of the shares, is an experienced engineer who built and designed most of the brewery. In the beginning of the startup there was delay in hiring full time employees to help keep costs low. By January 2016, Forked River had 10 employees including the founders (8 full-time, 2

part-time). Forked River Brewery has a total of thirteen different regular and seasonal brews in their portfolio.

The original business plan forecasted sales to be $167,000 in the first year with $147,000 coming from sales from general restaurants and pub, and $20,000 from pubs and restaurants that and promote crafted beers. The plan also projected $114,000 in sales of half barrel kegs ($220 each) and $33,000 in sales of quarter barrel kegs ($120 each). Projected gross margins for each half barrel and quarter barrel kegs were 76% and 77%. Bottled beer ($3 each) sales we're projected to be $6,000 in the first year and gross margins of 55% per bottle.

Market Analysis (PEST)

Political/Legal

• Changes to Ontario's retail liqour laws • Production and sales of alcoholic beverages are highly regulated in Ontario

Ecomonic

• Taxes are based according to size of the brewery • Brewers with annual production less than 50,000 hetolitres benefited from reduced provincial beer-tax rate and a special provincial tax credit

• Brewer allow to sell directly to their customers compared to retail. Retail has to go through LCBO and the Beer Store

• OCB have to produce less than 400,000 hectolitres annually to be declared at independent

• Ontarios's breweries are in an organized industry association called OCB (Ontario Craft Brewers) founded in 2003

• Forked River has a concern for their increasing growth in production volumes. Their tax rate is 10th of what commercial companies make

Sociacultural • Founders made it a pride and priority to garantee consistently high quality beer • Local downtown London pubs and restaurants Forked River • Focused on seeling to "craft friendly" pubs and restaurants • Cut out middle man delivery and personally delivered directly to bars and restaurants. This makes them flexible • Had marketing efforts on social media, word to mouth, press coverage, and various events • Won awards at craft beer competitions • Sold beer in larger restaurants chains such as Jack Astor's and Moxie's

Technological • Dave Reed designed and built the brewery and its equipment and customized it to Forked River needs

Market Analysis (5 Forces)

Threat of New Entry • increasing numbers of craft brewers entering into the industry every year

Buyer Power

Competitive Rivalry • 11 small craft breweries in Ontario as potential competition

Suppler Power • Source their goods from local ingredients • source

• Local london pubs and restaurant • Personal delivery to pubs and restaurant • Sells beers to larger companies • Expanded into the GTA Toronto

Competiti ve Rivalry

Threat of Subsitution • As new small brewers enter the indusrty more speciality flavours compete against what Forked River already has

Competition Analysis

There are several craft breweries in Ontario as potential competitors for Forked River, this list includes small and large companies. Companies include Mill Street Brewery, Beau’s all Natural Brewing, Railway City Brewing Co., Amsterdam Brewing, Black Oak Brewing, Toboggan Brewing Co., and Anderson Craft Ales.

Company SWOT (Strengths, Weaknesses, Opportunities, Threats)

Strengths • Has a strong relationship with local London restaurants • Self-financed • Built by it's own owner

Opportunities • Can expand retail stores in central locations

Weaknesses • Not a big commerical company • Has a retail store connected to factory, but location is not in a place with frequent customers

Threats • The increasing growth of craft brewers entering into the industry • The selection of flavours that new companies carry • Chnages in retail liquors laws • tax laws againt growing craft brewers

Case Key Points/Uncertainties

The case key points of the case study is that Forked Brewery is self-financed, the business plan for the company needs to be renewed due to changes in Ontario’s retail liquor laws, increasing entrants into the industry, looming decisions about product portfolio and distribution strategy and managing the growth of the company is another serious implication. The key uncertainties of the case study is the large amount of taxes on the company due to its

increasing growth and the increasing amount of new entrants entering into the industry.

Alternative Solutions (Pros and Cons of each alternative solution)

Solution 1 Expand the company and deal with the taxes that come with it. The pro of this solution is that the company gets to grow, but the con of this option is that taxes on breweries depend on how big the company is and how many hectometers of product is produced.

Solution 2 Another alternative solution is to just sell the company is instead of dealing with the current problems. The pro to this option means that the co-founders won’t have to come up with a new business plan and doesn’t have to deal with worrying about getting a larger tax percentage while the business grows. The con to this solution is that the owner lose their business/job that they created, designed, and self-funded.

Solution 3 An alternative solution is to come up with a new business plan that fits and adjust to the changes within the industry. The pro to this solution is that the company will eventually find a way to adjust to the changes in their industry. The con to this solution means time will be taken away from working at the factory to write and come up with a new business strategy.

Recommendation (use a decision criteria/matrix)

Cost

Complexity

Time

Total

Solution 1

2

2

3

7

Solution 2

4

3

3

10

Solution 3

2

1

1

4

1 means the Worst, 4 means the Best 1 = no, = yes Therefore, solution 2 would be the easiest way to deal with the problems within the company.

Long-term Considerations Some long term considerations for Forked River Brewery would be that the more their business grows the more they they taxed, therefore if owners want to control getting tax they either need to slow down production to lower sales or invest less into their marketing plan to also help decrease sales to avoid a larger tax cuts. If the company considers this long term consideration then there will be a possible risk of the company losing a lot more than just avoiding rising taxes, there can be a possible chance of the business to stop doing well, or even go bankrupt.