Strengths Of Breckenridge Brewery The Company example essay topic

ASSIGNMENT 1: CASE STUDY ANALYSIS Case 6 - Brewing Change at Breckenridge Brewery INTRODUCTION Breckenridge Brewery is a craft brewer which was established by Richard Squire. Richard turned his passion for brewing good home made beer into a lucrative business. In 1989, he started his first Breckenridge Brewery and Pub at Breckenridge which has a production capacity of 3,000 barrels per year. During his first two years in business, he sold out the brewery's annual maximum capacity. He opened a second brewery and brew pub in Denver in November 1992. By the end of 1994, even this brewery failed to satisfy the increased demand and plans were made for a new brewery which opened in May 1996 in Denver.

This brewery had a maximum output of 60,000 barrels per year after expansion. In the mid 1990's, Breckenridge Brewery started expanding eastwards and their first brewpub outside Colorado opened in Buffalo, New York in December 1995. Five other brewpubs were subsequently opened in other states. However, from its opening till 1997, the brewpubs have not turned in a profit although the main brewery was making money. Richard believes that his vision for the company, a two-tiered concept with a top microbrewery producing fresh, quality beer and a chain of brewpubs, has potential. However, due to the more complex nature of running a restaurant, he believes that the company has yet to figure out how to run its restaurant business profitably.

The company is now at the crossroads. Richard is in a dilemma as to whether to continue the brewpub business or to give it up and just concentrate just on brewing beer. He is also unsure about bringing in new leadership to help solve the company's performance problems. THE EXTERNAL ENVIRONMENTA firm's external environment is divided into three major areas: the general, industry and competitor environments. Below is an elaboration in further detail regarding the firm's opportunities and threats in these three environments. Opportunities in the General Environment 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 well. In addition, society is getting more affluent, people have higher disposable incomes. Therefore, there are always people out there who will look for something that is different from the mainstream beers that are available from the mass market brewers. Surveys have shown that adopters of microbrew are getting younger and 70% of Generation X under 34 years old buy microbrew beer.

In 1997, the large brewers still command 80% of the beer market but their growth has hit a standstill. However, for craft brewers, observers expect their market share to grow to 10% from the current 2.8%. Hence, there are tremendous opportunities for growth. Breckenridge Brewery has not ventured into any other markets besides the home country.

The global market is an attractive one. The Big 3 (Anheuser Busch, Miller and Coors) had made substantial inroads into global markets. There is a huge potential in global markets as American products have a high take up rate due to the influence of American culture globally. Opportunities in the Industry Environment Compared to the general environment, the industry environment often has a more direct effect to the firm's strategic competitiveness and above average returns.

The number of regional specialty breweries has grown steadily from 1 in 1986 to 33 in 1996. Breckenridge Brewery falls into this category as it has a production capacity between 15,000 and 1 million barrels per year. Although the start up costs of such breweries may be high, this has not deterred new competitors from entering the business. These specialty breweries compete based on differentiation of products, each positioning themselves as an alternative to the large breweries. As of 1996, there are only 33 regional specialty breweries and the market is by no means saturated yet. Any promotional efforts are not likely to elicit a response from competitors.

Although the industry is still growing, it is slowing down in 1997 as compared to earlier years. Threats in the General EnvironmentA threat is a condition in the general environment that may hinder a company's efforts to achieve strategic competitiveness. Studies have shown that there is a growing market for "alcohol pops" which is a mixture of alcohol with fruit juices or sodas. More youngsters especially women are taking to these drinks as an alternative to beer. There are also many pressure groups in America, e.g. MADD (Mothers Against Drunk Driving) which may put unwanted pressure on beer manufacturers. Legislation banning the sale of any alcohol in certain counties and additional legislation pertaining to the legal drinking age may also be of concern to the company.

Threats in the Industry Environment As the craft beer industry is still growing, there is always a possibility of new entrants. Breckenridge Brewery is not turning in a profit at the time and a price war with competitors is not going to help them. As the majority of these specialty breweries only operate in the United States, protecting their home turf is vital for their very survival. THE INTERNAL ENVIRONMENT Every firm has their own distinct resources and capabilities that is unique to themselves and it can be used to create an exclusive market position.

Strengths of Breckenridge Brewery The company has a visionary leader in Richard Squire who is also the founder. He knows what he wants for the company and motivates people to work towards it. Richard has a good partner in Ed and they complement each other. The management team is also dedicated to the company and many of them have substantial experience in their respective fields.

Breckenridge Brewery has a strong product line up which is different from the large breweries. The emphasis is on freshness and most important of all, quality. This justifies the selling price of US$5.99 as compared to US$2.99 to US$4.99 for mainstream beers. Weaknesses of Breckenridge Brewery There is no formal system of planning and there is no detailed, company wide strategy.

This is apparent by the rapid expansion into the brewpub business with no management know how. The growth was deal-driven and lacked thorough planning and communication. Hence, there is limited consistency from one brewpub to the other. Although Richard Squire is the founder and visionary for the company, he has limited managerial capabilities to take the company to a higher level.

The same applies to Ed Cerkovnik. The company has only a range of five products and although they are successful, the range does not cater to every beer drinker's taste, e.g. someone looking for a 'lite' beer or 'dry' beer. Breckenridge Brewery produces its beer in small batches and hands-on processes, therefore, it cannot compete with the large brewers or even other major regional specialty breweries in terms of costs or economies of scale. Also, the company has not penetrated the entire United States with distributors in only 32 out of 51 states. There is no presence in states with the highest disposable incomes such as California or Washington. Responses: Suggested Strategies If the company is to turn in a profit or to strive to grow further, it needs a professional management team to run it.

Both Richard Squire and Ed Cerknovik do not possess the skills to take the company to the next level. Although there is a huge potential in the brewery business, the company currently does not have any formal planning and there is also no detailed, company wide strategy. The company will need to institute formal strategic planning to take the company further. Not a single brewpub is profitable at the moment and if the company cannot find someone with the expertise to run it, they will be better off if they exit the brewpub business and concentrate on what they do best; which is brewing beer. As there is still spare capacity in the Klamath St. brewery, Breckenridge Brewery can use this untapped capacity to produce more beer for the untapped markets. To ensure that their expansion into other states will be successful, an advertising campaign promoting the beer must be launched to create awareness of the product.

Breckenridge Brewery can stress on the freshness and quality of their beer and even promote themselves as the 'king' of all craft beers. More varieties of beer will help the company to reach out to existing customers of other brands who may not be able to find a suitable product within Breckenridge Brewery's current range. Breckenridge Brewery has spent a lot more in property and equipment in the year ended December 28, 1997 as compared to the previous year. This has resulted in a huge increase in long term debt that is payable in a year. To cater to increased demand, the company can consider acquiring other breweries that are going out of business and that will see substantial savings on capital investments. It will be advantageous for the company if they can project themselves as responsible corporate citizen and an environment friendly company.

Social enrichment schemes, recycling schemes and educational funds can be initiated to cater to this cause and long term goal. CONCLUSION Breckenridge Brewery has a strong business in brewing beer. Due to the lack of professional management expertise and venturing into the wrong business, the company has not been able to turn in a profit. It is important that the company try to resolve these problems as soon as possible. Only then, will the company get out of the red and hopefully, move on to a higher level.

Bibliography

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