Brewing Change at Breckenridge Brewery
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 1990s, 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 ENVIRONMENT
A 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%....