Boston Red Brewery (BRB) Group 8 Team C Assignment 3 Boston University

Boston Red Brewery
(BRB)
Group 8 Team C Assignment 3
Boston University – MET College
AD715 02 Quantitative and Qualitative Decision-Making
Professor Zlatev/Facilitator Wilson
Fall 2021
Kiley Krafve, Yuhao Li, Robert Sok, Yi Yan, Congyu Zhao
Table of Contents
Executive Summary
Introduction
Beer Names:
Nighty Night Stout
BRB (Be Right Back) Stout
Afternoon Delight Lager
Hometown Hitter Lager
Functional Area #1: Marketing Management
Market Review
As of 2020, there are nearly nine thousand breweries located in the United states and the number has been steadily increasing since 2012 with an estimated 180 million barrels of beer being produced. (Conway, 2021) Each barrel equates to about 165 12oz pours, meaning 29,700 billion bottles of beer are consumed. Retail dollar sales of craft beer equate to $22.2 billion and account for 24% of the $94 billion U.S. beer market (previously $116 billion) as of 2021. (Watson, et al. 2021) Beer alone accounts for 48 percent of the total alcohol beverage gallons sold in casual dining restaurants. (Lock, 2019) Massachusetts currently has about 200 independent breweries and was the state that started the craft brewery renaissance. With the pandemic, many have had to close due to issues with debt and logistics, but this creates the perfect opportunity to start fresh with a new brewery that has a market eager and willing to try craft beers. (Dara & Grossman, 2021) Potential profits from this show a positive margin that would allow us to be successful within a few years.
Investing into a brewpub that serves as both a crafter brewery and restaurants is the suggestion being recommended as it would allow for an entry point that could fill the space in the Fenway neighborhood of Boston, conveniently located between Fenway Baseball Park and the vicinity of multiple colleges (Boston University, Northeastern University and Berklee College to name a few) Current estimates are that on average 200,000 pints of alcohol will be consumed in store and follow a potential 3.5% growth over the first 5 years of operations. The target market would consist of sports fans who want to have a beer before or after a baseball game, college kids who are of age and live/work/study close by, and the Boston professional crowd who work in the area that could celebrate accomplishments or grab beers after work at the pub. The state of Massachusetts only allows people who are older than 21 to be able to consume alcohol so this demographic of people and our target audience fits perfectly for the brew pub concept.
SWOT Analysis
To determine our competency as well as our weakness we performed a SWOT analysis to help us find out what areas we needed to work on. Our strengths and weaknesses were calculated and classified into Table 1.
Table 1: SWOT Analysis for BRB Brewpub
Strengths
-Brewpub experience – hiring staff that is knowledgeable from previous craft breweries
-City is a fan of Craft Breweries
-Location is popular with beer drinkers
Weaknesses
-Supply Chain Issues could delay brewing
-Initial Funding
Opportunities
-High earning city means people are willing to spend more for good beer
-Location has high foot traffic
-Market needs brewpubs to replace ones that closed
Threats
-Pandemic could go on longer
-If we don’t move fast, competition could move in
Boston’s expertise with craft beers allows us to enter into a market where there is already knowledgeable staff that are easy to hire, giving us a leg up from starting somewhere fresh. (Dara & Grossman, 2021) This also plays into our strengths as the city loves craft beers, and the location we picked for the Brewpub in the Fenway neighborhood fills the need for a craft brewery where other restaurants have closed due to the pandemic. The people and events that happen in the neighborhood will add to the success of the restaurant.
Initial weaknesses include the risk that the pandemic can continue as COVID-19 mutates, but the Massachusetts governor has declared he would keep the economy and restaurants going by not closing them down again. (NBC Boston, 2021) Additionally, the funding would need to be locked in which is why we are currently looking for investors to ensure amble cash flow to allow for the runway to reach a profitable course for the restaurants.
Opportunities include that Boston has one of the nation’s highest earning individuals – where the median household income for the Boston-Cambridge-Quincy Massachusetts’s metro area was $94,340 in 2019- which is $28,718 greater than the US median household income allowing for additional money to be spent at restaurants. (Department of Numbers, 2020) This location has high foot traffic and close to where recent brew pubs that were favored by the Baseball game crowd have closed due to the pandemic. (WCVB, 2021) All of this can be contributions for the success of the Brewpub investment.
Threats include that the pandemic could continue and a new variant of Covid could delay the opening of the restaurant. (Mandavilli & Mueller, 2021) Additionally, some of the closed Brewpubs could come back and steal the attention away from our restaurant since the market is demanding new restaurants that cater to the craft beer crowd as games and events resume and people begin going back to the offices. (WCVB, 2021) This only confirms that the time to invest and move forward with the project now is more important than ever.
4P’s Marketing Mix
To help market our idea, we would focus on the 4P’s marketing mix analysis method to help give us insight into what products we want to produce and how to go about it. Each letter has been defined and a plan created to ensure success as demonstrated in the following metrics:
1. Products
Our restaurant would only produce the best beer on the market, and would rival that of the initial craft Breweries that reach success in Massachusetts. We would mimic the flavorings and options that local craft breweries such as Sam Adams, Trillium, and TreeHouse breweries have to ensure that our market demand is being met and the customers have multiple choices to satisfy every palate – plus presents us the opportunity to upcharge by offering multiple tastings. Our initial aim is to have 8 kinds of beers being produced within the spectrum of light to dark and various alcoholic content.
2. Price
The price range would include the retail price and wholesale price so that customers who become fans of the beers can also purchase some to take home with them after they are finished at the restaurant brewery. Retail price would be between $5.50 to $7.50 and wholesale price would be $3.00-$5.00 with the caveat that the customer buys a certain amount (4 packs, cases). This price puts us in line with comparable craft breweries and is competitive based on the Fenway neighborhood location. This price would allow us to meet our goal of a 38% profit margin. Further details about pricing are located in innovation and financial sections below.
3. Promotion
Our suggestion for the promotion would be based on clever marketing campaigns that would appeal to the sense of humor of our target markets. The Brewery nickname of “BRB” would contribute to the idea that you could sneak away for a quick break for beer, and we could play to our favor and offer specials based on limited time windows. We would aim to partner or place ad space in Fenway park, and along the Mass Pike billboards so those entering the city would know of the new brewery being created.
4. Place
The location of the Fenway neighborhood ensures success of the business. Currently, the owners of the Boston Red Sox who operate at Fenway Park recently submitted over 1,000 pages of renderings for their new construction projects around the Fenway Park area – which will undoubtedly make the area more updated and consistently busy. (Decosta, Klipa, 2021) This area of Boston is currently being revitalized and by buying our location now and catering to not only the potential fans, but also construction workers who get off their shift and want a beer break will further fill our sales.
Decision Tree/Fishbone Analysis
To maintain the competitive edge and ensure we reach the market before competitors, we consider and analyze why the market could be present for competitive brewpubs – and why our investment is a sound choice. The Decision tree analysis is used to document and categorize problems and presents the cause and effect in a simplified diagram. The problem – competition could move in to our market share before us – is the head of the tree and each branch or bone displays a direct connection to the main problem answering the who, what, why, when and where questions to the problem at stake. Our diagram and though process shows that the pandemic closed some of the craft breweries in the area down, multiple new startups breweries are desperate to take on our same opportunity, potential profitability is assumed, the availability of vaccines is allowing life to return to normal and people want to celebrate, and recent revitalization of the neighborhood will undoubtedly increase foot traffic giving a solid customer base that wants to spend money. All of this as displayed in the below analysis diagram, contributes to the threat and is why we need to act fast to gain market presence before a competitor steps in.
Functional area #2: innovation management
Innovation is a technological change that directly depends on invention. Invention is “the first discovery and feasibility proof”, while innovation is “the first successful commercial introduction of a new product, the first use of a new method, or the creation of a new business form”. It is also usually defined as “the process of introducing new ideas or inventing/creating things that have not yet been discovered or developed by the market. Innovation is usually divided into product innovation, process innovation and service innovation.” (Brem, A., Maier, M., 2016 ) In each category, innovation can be divided into three types:
1. Extreme or radical innovation involving breakthrough products, processes or services,
2. A unique innovation that substantially improves existing products, processes or services.
3. Incremental innovation that makes small improvements to existing products, processes or services.
The innovation management in the brew brewery case is divided into two parts, namely product innovation and process innovation.
Product Innovation
Through technological innovation, the system supplier provides a full set of ingredients to form up to 25 different types of craft beer. And all the recipes are carefully crafted to create a refreshing, highly drinkable beer. However, these alone are not enough to support product operations. The goal of increasing sales is achieved through incremental product innovation in the following two methods.
1) Classify the drinking tastes of consumers of all classes through market research, and launch different flavors of beer as seasonal features in different seasons.
2) In a complex and challenging market, the product itself is difficult to market. You should benefit directly or indirectly by joining the platform. The overall revenue generated can increase the value of any single component or product. (Chen, C. Y. 2006) For example, while the main product is to promote beer, it also studies dietary collocation and sells beer and ham/cheese as a combination.
Process innovation
The original sales process of brew brewery is to sell (retail) beer directly in existing restaurants/pubs or through licensed distributors. But now it is necessary to separate the new business from the existing business of the restaurant/pub, and plan to use it as a separate business management unit, completely controlled by the existing company. This shows that we can create new ways of customer experience, new media connecting customers and other components, and hundreds of millions of data points that understand the impact of customer behavior and marketing plans (Lewnes, 2019) to expand the customer base so that we can be effective Decompose the market, measure market demand, and find the target market. For example, short video marketing through TikTok or YouTube.
The reason why short video marketing has received widespread attention in recent years is mainly because it has a lot of value to brand marketing activities, for example, it can transform the original traditional marketing model of brew brewery into network marketing. The placement of short video ads on the platform can enable consumers to generate brand associations, increase brand awareness, and achieve a unique innovation that substantially improves existing processes (Liu, G. F., 2019).
Risk Analysis
After raising the uncertainty in the decision-making environment, how to use risk analysis is an important part of the matter. The purpose of risk analysis is to support decision-making. From this starting point, we have established a prediction method for risk and uncertainty (Aven, T., 2012).
First of all, the global business environment has been affected by the new coronavirus in 2019. People’s demand for daily necessities has increased, but the demand for consumer goods has decreased. (Zhang, J., Hayashi, Y., 2021) Innovation management is not friendly. Secondly, because the process of refrigerating and transporting beer needs to be kept cold at all times, the industry has standardized at 38°F. Under these conditions, the storage life of craft beer is 30 days.
In the transportation process, the brew brewery may face long-distance transportation resulting in increased beer loss and transportation costs. In the face of this situation, we can target the target market in the cities surrounding the brewery, and the cold chain transportation of trucks will reduce the time. The cost also reduces the transportation risk.
In the sales process, the sales model has changed from cooperating with restaurants/pubs to selling by an independent business management unit. The brew brewery may face the problem of low consumer awareness of craft beer. However, if you sell beer to surrounding cities, it will be helpful to conduct market research and familiarize yourself with local tastes, and it will be easier to increase brand awareness and increase sales.
Functional Area #5: HR Management
Organization
The following below is the organization chart with everyone’s prospective listed roles, responsibilities, and duties.
Owner
The business owner plays a strategic role, as they make the final say. They have the knowledge and authority to make strategic decisions and clear the path of political and financial obstacles (Florida Tech 2021).
Board of Directors (Investors)
The board oversees the operations. The board generates governing documents, sets policy, and hires and directs executive employees (Murray 2021).
General Manager
General managers oversee the daily operations of a business segment, department, or stand-alone retail location. They ensure strategic goals are met by setting operational policies, creating, and maintaining budgets, managing employees, and more (Linkedin 2021).
Accountant Payable
The accounts payable is responsible for accurately tracking what’s owed to suppliers, ensuring payments are properly approved and processing payments. Accurate information on accounts payable is essential to producing an accurate balance sheet (Beaver 2020).
Brew master
A brew master is responsible for all things related to making beer, including selecting the ingredients, creating unique beer recipes, preparing beer mixtures, and overseeing the fermenting process. A comprehensive understanding of the brewing process is a must since every aspect must be overseen (Sokanu 2020).
Apprentice Brewer
An apprentice brewer has the enthusiasm and work ethic that convinces a head brewer to hire them, but their responsibility is to follow instructions, rather than provide insight or ideas (Indeed 2021).
Operations Manager
Business operations managers are the go-to people in a business. They help various departments within a company coordinate to meet the end goal. Their job includes hiring people, negotiating contracts, addressing budget matters, understanding general business operations, and guiding work teams for projects. They also make strategic decisions about what customers are likely to buy and create company policies that help the staff operate efficiently (U.S. News 2021).
Marketer
A marketer is an individual who is responsible for creating an involvement chain between the customer and the product or service offered by the company. This involvement is properly advertising the product to invite huge sales (Pandey 2021).
Quality Assurance
Quality assurance (QA) is the act or process of confirming that a firm’s quality requirements are being met. Managing the quality of production involves planning, fulfilling, and monitoring activities. Quality assurance is the monitoring facet of that discipline (Bucki 2020).
Packaging Team
Packaging Team Leader is responsible for managing production personnel to maximize quality and output in a manufacturing and packaging operation while being accountable for achieving production targets while maintaining cost controls.
Waiter / Waitress
Greets customers and offers Brewery menu, answers questions about menu offerings, processes food and drink order, carries food and drinks from kitchen to tables, and prepares bills and process payments (Monster 2021).
PESTEL
Functional Area #4: Financial Management
The analysis showed that the business still had the ability to achieve improvements. This will be accomplished through a well-designed approach to controlling budgets for employees, utilities and rent, and marketing.
1.Employees Budget
The budgeting of the critical success factors such as retention of crucial employees such as technicians and marketing personnel is necessary to improve the sales and the image of the firm. It is necessary to plan the employee structure reasonably and control the budget of employees. At the beginning of the establishment of the company, cutting slightly can improve operational efficiency. An office assistants employee’s basic salary budget is 24,000 per year. The salary of salesmen consists of basic salary and performance commission, and the budget is 30,000 per year per person. The executive salaries maintains 32,500 because it’s a role for decision-making. Moderate salary increase is conducive to improving employees’ enthusiasm while ensuring sufficient capital flow of enterprises.
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2.Utilities, Supplies and other
Start-up companies cannot afford to buy fixed assets due to limited capital, so they need a sufficient leasing budget. However, according to the sales budget, the leasing cost can be reduced to 6,000 per year and keep growing at about 10%. Office supplies belong to daily consumables, and the approval system can control the budget at about 3,000, and the annual growth can be slow. Heat, electricity, and communication costs were reduced by $1,000, insurance costs were all reduced by $2,000, and the growth rate for each fiscal year was reduced somewhat, toned down by 10 to 20 percent, because in the early stages of the business, funds were limited and more money had to be invested in product quality.
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3.Marketing Cost
We will raise $5,000 for local advertising and also raise $2,000 for commercial performances, but with a reduced growth rate. Merchants through a large number of advertising, whether for consumers in television advertising or for distribution of print advertising, the direct purpose is to promote the sale of merchants’ products, which in turn creates a scale effect, reduce costs and enhance the competitiveness of the merchants themselves. Successful advertising can stimulate consumer demand and expand the influence in the channel. Extensive advertising spread creates conditions for mass production, which is to reduce costs, which is an inevitable requirement for brand creation.
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4.Rent
With the increase in market price, the rent has been increased by US$2,500 accordingly. A good location is crucial, as it determines, to some extent, the amount of customer traffic, the size of the customer’s purchasing power, the customer’s consumption structure, the attractiveness of the store to potential customers, and the strength of competitiveness. Proper location can attract a large number of customers, and business will naturally flourish. Address selection should be the primary principle of customer convenience. From the point of view of saving customers’ purchasing time and transportation costs, we can satisfy customers’ needs to the maximum extent.
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5.Debt
At the same time, the amount of bank loans is reduced, and later the sale of products will generate capital turnover, so if the time required for the use of funds by entrepreneurs is not too long, the number of short-term loans chosen can be reduced accordingly.
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6.Break-Even Point
Due to the reduction of fixed costs, resulting in a lower break-even point, the lower the break-even point, the better, because the lower the break-even point, it means that the production and sales of production is less and better, then the lower the risk, the greater the profit. It reduces the operational difficulty of the enterprise and is conducive to the sustainable development of the enterprise.
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