Demanic Brewers was a class project in Zafar Iqbal's MKT 540: Developing Sustainable Business Models at DePaul University. The project compares four business models, three existing and one start-up, within the beer industry. It also provides details on customer outcomes served, core firm objectives, strategic themes, and more, as Demanic Brewers look to serve an untapped market of high end beer drinkers.
4. COMPLETE SOLUTIONEASY TO ACCESS
WIDE SELECTION OF
PRODUCTS
Deep Market Penetration Diversified OfferingsMany Product Complements
Operating Efficiencies
Maintain #1 U.S. Beer
Market Share
47%
Largest Distribution
Network in U.S.
900 Wholesalers
Brand Promotion
Highest Advertising
Expenditures in Industry
Innovate
Packaging
Entertainment /
Food
Subsidiaries
Integrate Supply
Chain
Develop New
Product
Offerings
Spend Heavily in
Product
Promotion
Diversify
Investment
Activities
Can Production /
Packaging Plants
Several Breweries
World-Wide
Massive
Distribution
Network
Strong Relationship
w/ Wholesalers &
Retailers
PROVIDE AN
EXPERIENCE
Invest in State-
of-the-Art
Breweries
Great Brand
Portfolio
Strong
Marketing Core
Supplement
Growth through
Acquisition
ANHEUSER BUSCH: CUSTOMER INTIMACY
Tech. to Scale Innovation Execution Innovation Core Strength Strategy Strategy
Strategy Asset Leverage Asset Leverage Focus Partnerships Innovation Core Strength
Firm Performance
Will and Vision
8. INCREASED
CONVENIENCE
Accessibility Reasonable Prices
WIDE ASSORTMENT OF
SERVICES
Abundant Store LocationsOne-Stop-Shop Open 24 HoursGood Quality
Efficient Distribution System
Deliveries placed by 10AM and delivered
within 5AM the next day
Win Fresh Foods
Capture as much as the 47% that people
spend on meals outside of home
Leverage Original Items
50% of Total Store Sales
A-B-C Rating System
Maintain high standards by dropping
companies dropping below C
Five
Fundamentals
of Convenience
Supplier
Relationships
Knowledge
Transfer
between Corp
and Franchise
Active
Employee
Culture
High Store
Level
Autonomy
Powerful Brand
Equity
Combined
Distribution
Center Concept
Fresh Food
Infrastructure
Stores Located
in Key
Residential
Areas
Operational
Field Counselors
Item-by-Item
Management
Consolidated
Shipments
Low Inventory
Refined Strategy
Management
Practices
7-11 BUSINESS MODEL: OPERATIONAL EXCELLENCE
Powerful Brand
Equity
Combined
Distribution
Center Concept
Item-by-Item
Management
Consolidated
Shipments
Efficient Distribution System
Deliveries placed by 10AM and delivered
within 5AM the next day
Leverage Original Items
50% of Total Store Sales
Abundant Store LocationsOpen 24 Hours
Accessibility Reasonable Prices
9. NE MIGRATION
• Goose Island Purchase by Anheuser Busch
• Utopia & Imperial Series by Boston Beer Co
11. SUPERIOR TASTE AND
QUALITY
FRESH INNOVATIVESOPHISTICATION
Extensive DistributionPremium Price
Year Round and
Seasonal Craft Beer
Superior Ingredients
Close monitoring of freshness dates
2-3 months past brewing, or thrown
out
Extensive product testing
Close to 125 tests, tastings,
and evaluations
Large % of revenue spent on sales
and marketing
40 cents of every dollar
Low transportation costs
Meticulous
selection of
ingredients
Supplier
Relations
Careful
monitoring of
brewing
process
Brewed via
traditional
European
methods
Integrated
manufacturing
Proprietary
Recipes
Network of
Contract
Brewers
Experienced
Brewmasters
Product Line
Innovations
“Hub and
Spoke”
distribution
Elimination of
“filler”
ingredients
Educate
distributors and
retailers on virtues
of quality beer
Educate
consumers on
process &
ingredients
Seasonal
product
innovations
Large Sales
Force &
Extensive
Marketing
BOSTON BEER COMPANY: PRODUCT LEADERSHIP
12. • The leader in luxury beer
• Four-year round brands, one seasonal
– Blue Ocean Belgian
– Porters 5 Porter
– Christensen Cask Stout
– Iqbal Imperial IPA
• Beer Cellaring: Melted Wax Closure/Cork
13. • Interactive Website
– Track Brewing Process
– Place custom orders
• Customized batches
• Personalized labels
• Ingredient Package with each order
– Metal Tin
14. • Red & Black
• Control all aspects of brewing
• Sizes: 750mL, 1 L, 1.5 L
• Market leading price point $75 per 1 Liter
• $1,125 per custom batch (2 cases)
15. HIGHEST QUALITY
PRODUCTS
SOPHISTICATION AND
EXCLUSIVITY
PERSONALIZATION
Product Scarcity
Unique Product
Selection
Asset Utilization
Inventory Management
Low Raw Materials &
Finished Goods
Inventories
Leverage Online Model
80% of sales conducted
online
Quality Management Process
10 point quality assurance process,
3 step product testing procedure
Make to
Order/Custom
Beers
Experienced
Brewmasters &
Support Staff
Produce in
Small Batches
Rotate Seasonal
Offerings
Educate
Consumers
“Outsource”
Recipe
Innovation to
Customers
Motivated
Employees
Modular
Brewing Setups /
Components
Proprietary and
Interactive Customer
Ordering / Tracking
Process
End to End
Integration
INNOVATIVE OFFERINGS
Shorten Order
Fulfillment
Process
Supplier
Relations
Customer Satisfaction
% of repeat business
vs. new customers
Company Owned
and Operated
Farm/Field
Maintain
Rigorous
Quality
Standards
Premium Pricing
Proprietary
Recipes
HIGH END ENTRANT
Modular
Brewing Setups /
Components
Proprietary and
Interactive Customer
Ordering / Tracking
Process
End to End
Integration
Company Owned
and Operated
Farm/Field
Make to
Order/Custom
Beers
Produce in
Small Batches
“Outsource”
Recipe
Innovation to
Customers
Inventory Management
Low Raw Materials &
Finished Goods
Inventories
Leverage Online Model
80% of sales conducted
online
Product ScarcityPremium Pricing
HIGHEST QUALITY
PRODUCTS
PERSONALIZATION
16. POTENTIAL WEAKNESSES
• Small Number of Customers
• Constant Attack from the Southwest
• Difficult to Create Scale/Efficiencies
17. HIGH END MARKET
Cristal
CHAMPAGNE
Dom Perignon
CHAMPAGNE
Utopia
BEER
Dark Lord
BEER
Opus One
WINE
$195
$705
$100 Retail
$1,000 EBay
to
$139
$540
to
$180
$396
toto
$15 Brewery
$300+ EBay
to
18. FUTURE REVENUE SOURCES
• Store for Distribution; Selling Merchandise
• Expansion into other cities
• Distribution to local high-end restaurants
• Sampler Pack available at lower cost
19.
20. Cheers
DAN BERNS | ERICH PARKER | MONICA FRAGER | ANDREW PHILLIPS | NEIL KENNEDY
21. REFERENCES
• The Boston Beer Company, Inc. – Harvard Business School Publishing, Case # 9-196-138, Rev. June 2, 2000.
• Anheuser-Busch and the U.S. Brewing Industry – Harvard Business School Publishing, Case # 9-799-026, September
6, 1998.
• Anheuser-Busch in 1999 – Harvard Business School Publishing, Case # 9-700-056, September 28, 1999.
• The all-American beer: A case of inferior standard (taste) prevailing? Kelley School of Business, Indiana University.
2004.
• Gordon Biersch – Stanford Graduate School of Business, Case: E-2. March 2004. Revised March 2010.
• Gordon Biersch: New Challenges and Opportunities – Stanford Graduate School of Business, Case E-122. May 2002.
• Most Expensive Journal (most-expensive.net)
• 7-Eleven, Inc. – Harvard Business School Publishing, Case # 9-504-057. January 27, 2004.
• Wine-searcher.com for wine prices
• 7-11 to sell private label beer. CNN Money. http://money.cnn.com/2010/04/16/news/companies/7Eleven_beer.fortune/
• Chicago based Goose Island Brewery sold to Anheuser-Busch. Chicago Sun-Times. 4/30/11
http://www.suntimes.com/business/4546037-420/chicago-based-goose-island-brewery-sold-to-anheuser-busch.html
• Game-Day: A Beer brewed by 7-11…Would you buy/drink it? 4/31/2010
https://2oldformaxim.wordpress.com/tag/santiago-beer/
Editor's Notes
Dan
Dan
Dan/Drew
DREW
When you think of the US Beer Industry, A-B is probably the first name to come to mind. It's been in business for over 130 years and has grown into a behemoth, owning close to 50% of the market. It has scale, deep pockets, and is like the Toyota of beer - it offers something for just about everyone.
If you take a look at A-B's Resources and Activities, each one relates to some aspect in Strategy Lane (click...wait). It's clear that to have amassed such an enormous market share, A-B has excelled at Will & Vision. Yet, like most large scale, "legacy" brewers, it is struggling to stay relevant in a market where tastes are clearly moving to more full-flavored, locally produced craft beers.
DREW
If A-B can't accomplish scale, it won't compete in that segment, which is why it is the master of R-A-V. Bud Light Lime is a prime example - and you can probably think of about 15 others from A-B - of what we like to call "me too brews": If Miller or another big brewer offers it, we do too!
Resources - AB has access to breweries and distribution network that allow it to add similar beers easily. Has enough cash to launch a new product. Leverages current large brand name.
Activities – Brewing is very similar, the required distribution/sales channels are the same, this is in their wheelhouse
Values – This matches the current values – same target customers, lends itself well to mass market, complements current revenue sources.
Transition: And although the market’s tastes are becoming more sophisticated, we still see new products coming out that cater to the super low-end market. Neil's going to discuss 7-11's Game Day beer.
DREW/NEIL
By show of hands, how many of you are familiar with Slurpees? How about Big Gulps? How about Gameday Beer?
Slurpees were introduced by 7-11 in 1965 and Big Gulps were introduced 8 years later. These are two examples of 7-11’s commitment to Leveraging their original items. We’ll look at that in the business model, but I first want to familiarize you with Gameday Beer.
NEIL
Gameday Light and Gameday Ice aren’t 7-11’s first forray into PRIVATE LABEL beer. Released in 2003, Santiago directly competed with Corona but failed to gain much of a foothold.
Now 7-11, the third largest beer retailer in the U.S., is back with a low cost offering: Gameday Light and Gameday Ice. Priced at $6.99 for a 12 pack and $1.49 for a 24-oz single, 7-11 will again attempt to steal share from CI players like AB and Miller. Game Day Beer will benefit from 7-11’s mass distribution and superb inventory control
Categorized as LOW-END Distribution
REFERENCE: 7-Eleven, Inc. – Harvard Business School Publishing, Case # 9-504-057. January 27, 2004.
Game-Day: A Beer brewed by 7-11…Would you buy/drink it? (https://2oldformaxim.wordpress.com/tag/santiago-beer/)
NEIL
Founded in 1927 in Dallas, TX by four Ice Companies
Adopted the “7-Eleven” name and logo in 1946 to mirror its new extended hours: 7am-11pm
Hired the head of the Army and Air Force Exchange systems in 1969 to create a new distribution system for the company (outcome=reduced inventories and consolidated shipments)
7-11 is efficient due to its self-created distribution system and Gameday beer will leverage that to become a disruptor in the industry from the Southwest. Now lets see how Anheuser Busch and Samuel Adams are reacting to the disruption:
NEIL
In response to disruption coming from the SW AB, Sam Adams, and others have chosen “runaway” to the NE creating more premium beers and choosing not to compete directly with the disruptor.
Anheuser Busch’s purchase of Chicago’s own Goose Island Brewery gave them a firm foothold in the craft or premium beer segment, a place in where they lacked a significant presence.
Utopia and the more recent Imperial Series by Boston Beer Company are premium and ultra premium offerings that further distant themselves from low end disruptors. To learn more about the Boston Beer Company and how they’re able to do this, I’d like to pass it onto Erich.
NEIL/ERICH
Now let’s talk about a beer company considered to be a Product Leader – click next and show Boston Beer in PL tier
ERICH
As a Product Leader Boston Beer has to do a lot of the same things Anheuser Busch does but in order to be a Leader, they must do the following: (click to reveal important pieces of model)
Boston beer embodies everything a Product Leader must do in the beer industry until now…
Hand over to Monica without clicking…
Reference: The Boston Beer Company, Inc. – Harvard Business School Publishing, Case # 9-196-138, Rev. June 2, 2000
MONICA
Say something like this before revealing the slide: Ladies and Gentlemen, I’m proud to present to you: Demanic Beer
MONICA
MONICA
Red & Black embody sophistication
ERICH
In order for DEMANIC to enter the market above Boston Beer, there are a number of things we must do that is similar to what Boston Beer does, However, there are a number of things that we must do that set us apart from Boston Beer.
Must employ modular brewing setups and components in order to produce custom batches
Employ an interactive customer ordering system and allow customers to track their brewing processes
Must have end to end integration – controlling all aspects of production/distribution as opposed to modularizing with contract brewing or distributors
Own our farms/fields to ensure quality ingredients much like a vineyard
Allow for custom orders and make to order
Lean on our customers for innovative ideas – if one customer comes up with a great recipe then we can bottle it and sell to others – the customer is PAYING US for their innovation
Keep finished goods inventory low by shortening beer conditioning/order fulfillment process – ship to consumers with “Don’t enjoy before” dates
Leverage online distribution/sales channel
Maintain product scarcity and premium pricing
Provide the highest quality product and allow for personalization
ERICH
Due to the high price point we will have a limited number of consumers as opposed to lesser brands that are meant for mass merchandising
Competitors will constantly be chasing Demanic in order to charge premium prices and increase margins
Due to small batch sizes it will be difficult to scale up production and gain efficiencies, however, we’re not looking to be a mass merchandised offering
ERICH
Many of you are familiar with the high end offerings featured on this slide, but are you as familiar with their prices as you are with their names?
Reference: Most Expensive Journal (most-expensive.net) Most expensive semi-mass produced beer is Sam Adams UTOPIA – only 8,000 produced more similar to wine, drink at room temperature, etc $100
Wine-searcher.com for wine prices
ERICH
Retail stores will include Demanic branded merch, retail beer, and specialty glasses for consumption
We will start in NYC, Chicago, and LA and expand to other large cities such as San Francisco and Portland
Then we will increase distribution to restaurants, specially brewed for them of just offer our branded line on their menu
We will then offer a lower cost “sampler pack” to allow someone with a thinner wallet to purchase DEMANIC and keep Sam Adams at bay…
DAN
Click to Next Slide for Black Screen Close: “So when you’re out with clients (some high end scenario) and you want to order a sophisticated beverage, are you going to order a beer? Or are you going to order a Demanic Beer?”
