Moosehead Breweries LimitedMarket Entry Strategies for Moosehead in the Province of Quebec Moosehead Distribution Strategies. MOOSEHEADBREWERIESLIMITED395287557150DANS SOLUTIONS11/16/2009<br />Table of Contents TOC o "
h z u Problem Identification PAGEREF _Toc246145398 h 3Key Findings PAGEREF _Toc246145399 h 3SWOT Analysis PAGEREF _Toc246145400 h 4Competitive Analysis PAGEREF _Toc246145401 h 5Target Market PAGEREF _Toc246145402 h 5Alternative 1-Multichannel and Indirect Distribution PAGEREF _Toc246145403 h 6Alternative 2 –Direct Distribution PAGEREF _Toc246145404 h 7Alternative 3 – Multi-distribution and expansion PAGEREF _Toc246145405 h 8Solution PAGEREF _Toc246145406 h 9Implementation Plan PAGEREF _Toc246145407 h 10Product PAGEREF _Toc246145408 h 10Price PAGEREF _Toc246145409 h 10Placement PAGEREF _Toc246145410 h 10Promotion PAGEREF _Toc246145411 h 10Plan B- Placement Distribution PAGEREF _Toc246145412 h 10Appendixes PAGEREF _Toc246145413 h 12<br />Problem Identification<br /> The problem facing Moosehead Brewery is how to get it’s product into the hands of consumers in the province of Quebec. Moosehead has found that the distribution costs of $48 per hectolitre are too high and are interfering with the companies’ ability to profit and grow their business within the province. The company knows that the market for Moosehead beer exists, though finding the right distribution channels to get the product to their target market is a challenge. <br />Key Findings<br /> The Province of Quebec offers Moosehead an opportunity to grow their market share “right next door”. With a population of over 7 million, and an adult (18+) beer consumption of 78.6 litres per capita, the Quebec market consumes at least 5,500,000hL (hectolitres) of beer per year. In the most recent data (shown in the figure 1 below), in the seven months between January/09 and July/09 sales in Quebec were 3,500,295 hL of beer (6.2% draught, 75.6% bottle, 18.2% can). Quebec actually has one of the biggest preferences of bottled beer compared to canned beer. The Brewers Association of Canada website reports the ratio as 2,645,837 bottled hL consumed to 639,082 canned hL. <br />Brewers Canada also reports on-average prices for beer in the province of Quebec. Consumers are accustomed to paying $36.81 for 24 bottles of beer, $19.27 for 12 bottles, and $9.82 for 6 bottles. Cans are not cheaper in Quebec, which accounts for the preference for bottled beer. The cost for 6 cans is $10.53; slightly higher than the cost for the same number of bottles. Minimum beer price is 2.9498 per litre at 5% alcohol by volume or =$6.04 for 6 bottles.<br />247650268605 Figure SEQ Figure * ARABIC 1 Beer Sales in Quebec Jan. to Jul. 2009<br /> <br />SWOT Analysis<br /><ul><li>StrengthsWeaknessesThe largest fully Canadian owned brewery.Financially able to expand.Modern production facility. Strong brand positioning.Loyal customer base in New Brunswick.Ability to offer companies unused brewery capacity as a bargaining toolContract with Unionized employees until Jan/2011 Unionized labour force.High reliability on successful malting barley and corn crops Smaller than primary competitors in the Canadian market.Decreasing national beer consumption.High cost of shipping glass bottles long distances.Inter-provincial trade barriers between Quebec and New BrunswickOpportunitiesThreatsLarge Quebec market is underdevelopedLarge demand for Moosehead exists in Quebec Possibility of forming strategic partnership in Quebec for bottling, brewing, and/or distribution. 90% of the market is controlled by 2 large competitors.Unfriendly elements in the Quebec brewing industry.Variable cost increases such as barley or corn syrup.Regulators in government with bias favouring established breweries in Quebec. </li></ul>Competitive Analysis <br /> Moosehead Brewery is well prepared to enter the Quebec beer market. With it’s arsenal of 45 different product varieties and over 127 years of experience in the industry, Moosehead is ready to face the challenges that of product distribution in Quebec. <br /> Moosehead will encounter some unfriendly elements in the Quebec brewing industry. The challenges include facing Labatts and Molson, two very large brewing companies that control 90% of the market in the province. Moosehead will also come up against labour unions that fight to ensure member involvement in beer production. Moosehead will also have to compete with existing smaller breweries which also have effective channels of distribution in place, well identified target markets and an established client base. <br />The challenge for Moosehead is to place their product as a desirable substitute to the existing products in their target markets. The larger competitors’ vast amounts of resources create a situation where Moosehead should be careful to only engage competing brands that are within its target market. By doing this, Moosehead will be able to use its resources more effectively. <br />Target Market<br /> Moosehead as a premium Lager should use a socio-geographic method of targeting its segment of the beer market. Baby Boomers who have been identified as the most interested group for premium beer, they are also the fastest growing segment in Quebec’s society. Baby boomers have more disposable income than other segments on a whole and tend to live in larger cities.<br /> Moosehead will save resources by using secondary data that Costco has already identified. Moosehead will primarily target cities with Costco locations as a method as to identify target markets (Anjou, Brossard, Chicoutimi, Gatineau, Laval, Montreal, Point Claire, Quebec City, Sherbrook, St Hubert, St Jerome, St Foy, Terrebonne, and Trois- Rivieres).<br /> By targeting the affluent Baby boomers and cities that they live in, Moosehead can focus its marketing strategy and resources on its primary target market segment. <br /> <br />Alternative 1-Multichannel and Indirect Distribution<br />There is a smaller Quebec brewery that is trying to lead a charge against having Moosehead in Quebec. They do not want Moosehead stealing a piece of their profit sectors in Quebec, but they also have the problem of poor sales in New Brunswick due to high distribution mark-ups from the provinces government. <br />We believe that a merger of the two companies and targeting both the Quebec and New Brunswick region’s, would help Moosehead Breweries get a jumpstart into selling its product in the Quebec region. We have come to an agreement with the Quebec Company, that we will use a portion of the unused capacity in our brewery in New Brunswick to brew their beer, and that they will subcontract distributing our Moosehead beer for a lower price then the minimum rate. Both Moosehead and the Quebec Company will reach their target markets and be able to place their products in the beer competition at a lower price. <br /> Saving money, while placing our product in Quebec, is our central goal. By merging the two companies, to produce each other's beer in different provinces, we have the potential to save quite a bit on distribution mark-ups and expenses. Quebec Company already has distribution channels and potential stockers in place. Studies have shown that once the product is inside Quebec, retailers are quite interested in stocking Moosehead, and they are confident they will attain high-volume sales. Moosehead Brewing Company will use a multi-channel distribution system, through the Quebec Company, liquor stores and “mom and pop” convenience stores, and even wholesalers such as Costco to get their product to the consumers in Quebec. By getting the Moosehead beer to as many retailers as possible in centralized areas in Quebec, they believe an intensive distribution policy will be successful in their attempt to find a niche in the Quebec beer market.<br /><ul><li>ProsConsReduce distribution expenses by brewing beer in that area through multichannel distributionAcquire more profit without having to raise price of their productDistribution expenses would also be reduced for retailers, pushing them to stock our productUsing the Quebec Company to brew Moosehead, allows them to work around inter-provincial beer shipment policies that Quebec has with every province except for New BrunswickStart up cost to start producing different types of beer in two different breweries would be significant to both companiesBy brewing another companies product even though the companies are merged, this increases Moosehead’s liability and could issue more responsibility for this brand extension down the roadResponsible for maintaining the same product and quality in another region (reputation must be kept)</li></ul>Alternative 2 –Direct Distribution<br />To stay relevant to consumers in today’s marketplace, Moosehead needs to market to the public online, and take advantage of people’s willingness to buy products online. For this alternative our solution is for Moosehead to set up a state of the art website to serve the customers of Quebec. By doing this they are getting their foot in the door in the provincial marketplace and better situating themselves for the future. With this website they will be able to serve the customers in our urban target areas and the residents of rural Quebec.<br /> Quebec has a growing population of approximately 7,600,000 with approximately 4000,000 people of those people living outside of the Montreal metropolis area. If Moosehead focuses on the rural areas as well as the city dwelling Baby Boomers, it will give Moosehead more room to expand and will be more lucrative for the company. Moosehead has strong product recognition already so the company just needs to create a media storm leading up to the website launch. This can be done with advertisements in newspaper’s, magazines and television commercials during French programming and especially Montreal Canadians games. <br /> This alternative will allow us to cut out the middle man and deal directly with the public which will allow us to charge lower prices. This is especially important because of the current economy people are very sensitive to prices. If Moosehead is able to deliver a quality product to there door for less everyone in Quebec will take notice. If Moosehead partners with a courier service such as FedEx, the company will have a reliable and dependable associate who will help them deliver their product. Direct distribution has been successful with such businesses as Netflix and Dell computer s so it only seems logical that more companies will start to market there products this way. <br /> In conclusion, while there are many advantages of this option such as cost and target market, the disadvantages outweigh the positives making this an illogical solution for Moosehead<br /><ul><li>ProsCons Can sell at lowest price in marketplaceTakes advantage of rural Quebecois consumersBuilds infrastructure of the company for the future Can’t get customers “off the street” Not everyone is computer savvy and willing to buy products online High shipping costs and time to deliver productCould be bad legally as for Moosehead and sell product to minors.</li></ul>Alternative 3 – Multi-distribution and expansion<br />One of our alternative options was to concentrate brewing more intensively at our Niagara Falls Brewery, Brampton, Ontario location. We have found that this idea is logical due to the Trade agreement between Ontario and Quebec. The new and improved trade agreement between the two provinces dramatically reduces the trade barriers and would make it easier for Moosehead breweries to ship their product between them. Another reason as to why we feel that this idea is good is because it would decrease the length we must ship the beer. Once the product has been shipped to a logistical centre in Quebec, it will be distributed to Couche-Tard’s distribution centre. Subsequently, this will then be dispersed throughout their extensive retail locations situated in key socio-geographic locations within the major cities, following the Costco model. <br />However, one flaw to this plan is that there current location in Brampton, Ontario does not have the capacity to produce this much beer and therefore we cannot use it to supply their customers’ demands. Thus, the facility would need to be expanded considerably, which could be very expensive. Counteracting this expense would be the substantial profits they would achieve if they effectively penetrated the target market. An agreement would need to be established between Moosehead Breweries and Couche-Tard. This would include an outlined market and advertising plan, which would attract potential customers to both Moosehead beer and the Couche-Tard convenience stores.<br /><ul><li>ProsConsCheaper shipping – less distance to cover than our previous brewery locations.Currently facility would need to be upgraded and expanded to meet demand.Improved, expanded facility that would be beneficial in the future – new products could be efficiently distributed to nearby markets with little effort.Agreement with Couche-Tard would be beneficial in the future for any new products Moosehead releases. Incorrect penetration of the Quebec market sector = expansion costs would not be recovered and would result in debt and substantial losses.Cross-province taxes would greatly affect our profits.Guaranteed market visibility – Couche-Tard has over 500 stores that could sell Moosehead beer.Brand association with our beer and convenience stores. </li></ul>Solution<br />Danys Solutions has confirmed that we will be going with Alternative 1-Multichannel and Indirect Distribution. Moosehead Brewery and Quebec Company will merge together and co-ordinate brewing each other’s beer in the different provinces, allowing the distribution mark-up’s to be reduced. Quebec Company has the brewer’s permit and distribution permit that the province requires of a company, and have the equipment needed to start producing Moosehead beer. The product will then be distributed indirectly to as many retailers in Quebec as possible. <br />Quebec is responsible for 27% of all beer sales in Canada. It is a lucrative market that Moosehead has not touched yet so the potential for profits is definitely there. Two of the major Canadian breweries enjoy a 90% percent market share, and Moosehead has the largest market share of smaller breweries. If Moosehead attempted to target 5% of the market share, and sales for Quebec were over 5.5 million hectolitres per year(2007 sales), then it is safe to assume that Moosehead has the potential to reach sales of 275000 hectolitres of beer during that time. <br />The minimum distribution markup is $48.00 per hectolitre of beer, or $.16 a bottle. Reaching an agreement with the Quebec Company to reduce the markup to $32.84 per hectolitre, or $.11 a bottle, Moosehead will save 4.17 million in distribution costs. This is not including the transportation costs and inter-provincial import tariffs they would incur if they were to transport the product from their New Brunswick brewery. <br />Implementation Plan<br />Product<br />Moosehead Beer is one of Canada’s most respected brands, and sells in over 60 countries in the world. The product itself could not come more regarded, we will not be changing anything in this area. By distributing Moosehead in one of the leading provinces in beer sales, we are increasing our profits using the same product we always have. Under Quebec laws, the only thing we would change about our product, is the labels that promote the beer.<br />Price<br />Moosehead Beer is considered a Canadian premium beer, and will be sold as such. Our placement alternative is where we will increase our profit. By reducing our distribution expenses through the merger, our variable costs will go down, and profits will go up. Premium beer in Quebec has an average price of 9.82 a six pack, and Moosehead will have competitive rates around this price.<br />Placement<br />Using the Quebec Company as a multi-channel distribution system cuts down on our expenses, and creates a more efficient way to place our product in the hands of consumer’s. Our distribution routes will be primarily focused in cities such as Montreal and Quebec city, where there is more potential customers per capita. Our indirect distribution technique will include supplying small liquor stores, grocery corner stores, and wholesalers such as Costco. We would like to place our product in as many different markets as possible, in the area’s with the most concentrated population. <br />Promotion<br />Placement and Promotion go hand in hand in this Case Study. We will be investing the money saved from our distribution plan into promoting the product once it is in the retailer and wholesaler’s point of purchase. Displaying signs in strategic area’s around stores, and having promotional taste testing venues, will provide Moosehead with more “brand recognition” opportunities. The focus at first has to be to make beer consumers aware that Moosehead beer is available in Quebec and at a competitive price. Promoting our product in areas such as concert, art and sporting venues will help get our name around the Quebec area. <br />Plan B- Placement Distribution<br />Our Plan B is to completely change our target market and distribute Moosehead products into rural areas around Quebec. Moosehead will use model of the onlinegrocer.ca that markets to northern areas. While this alternative does have its disadvantages such as the high shipping costs directly to consumers, Moosehead will be the only brewery that will sell directly to these fringe markets. This will help build a reputation outside city centres and encourages consumers to either buy from home, or indirectly from retailers and wholesalers that are often quite far from the more remote locations. Advantages of this strategy include, direct contact with our customers, allowing online purchasing and mail order purchasing saves our customers time and money, and making this an ideal back up alternative.<br />Appendixes <br />Key TermsReferencesIndirect Distribution, MultiChannel Distribution, Brand Recognition, ProfitsDistribution Markup’s per provinceAnnual Beer Sales and CostsMoosehead WikipediaMarketing, Canadian Edition-Grewal, Levy, Persaud, LichtiMoosehead Brewing Case Study #3Brewer’s Association of Canadahttp://www.brewers.ca/default_e.asp?id=35Canada’s Brewery Industryhttp://www4.agr.gc.ca/AAFC-AAC/display-afficher.do?id=1171560813521&lang=eng http://en.wikipedia.org/wiki/Moosehead<br />