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Demanic Brewers
- 2. DAN BERNS |ERICH PARKER | MONICA FRAGER | ANDREW PHILLIPS | NEIL KENNEDY
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- 4. COMPLETE SOLUTIONEASY TOACCESS 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
- 5. ADJACENCY MOVE • BudLight Lime – Product Line Extension – Resources? – Activities? – Values?
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- 7. DISRUPTION IN INDUSTRY •7-11 Game Day Beer
- 8. INCREASED CONVENIENCE Accessibility Reasonable Prices WIDEASSORTMENT 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 • GooseIsland Purchase by Anheuser Busch • Utopia & Imperial Series by Boston Beer Co
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- 11. SUPERIOR TASTE AND QUALITY FRESHINNOVATIVESOPHISTICATION 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 leaderin 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 ProductScarcity 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 • SmallNumber of Customers • Constant Attack from the Southwest • Difficult to Create Scale/Efficiencies
- 17. HIGH END MARKET Cristal CHAMPAGNE DomPerignon 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
- 20. Cheers DAN BERNS |ERICH PARKER | MONICA FRAGER | ANDREW PHILLIPS | NEIL KENNEDY
- 21. REFERENCES • The BostonBeer 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
- #2 Dan
- #3 Dan
- #4 Dan/Drew
- #5 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.
- #6 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.
- #7 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.
- #8 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/)
- #9 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:
- #10 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.
- #11 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
- #12 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
- #13 MONICA Say something like this before revealing the slide: Ladies and Gentlemen, I’m proud to present to you: Demanic Beer
- #14 MONICA
- #15 MONICA Red & Black embody sophistication
- #16 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
- #17 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
- #18 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
- #19 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…
- #20 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?”
- #21 DAN