Business Environment Analysis 1

Soothsayers Brewery

Jonathan Wright

Southern New Hampshire University

MBA-515-Q1987

Professor Susan Dixon

12/6/2015
Business Environment Analysis 2

Microbreweries are small breweries that produce less than 15,000 barrels of beer per year

and distribute for consumption. Microbreweries sell to the public by one or more of the

following methods: the traditional three tier method (brewer – wholesaler/distributor-retailer),

two tier system (brewer acting as the distributor to consumer) and direct to the consumer through

carry outs and on-site tap room sales.

The success of the brewery is solely based on the superiority of freshly brewed beer. By

selling the beer onsite, and not by a distributor, this will mitigate costs greatly which is extremely

important for a new company. The only benefit of using a distributor is it will create a cash flow

but at a higher cost of business. A new growler (64 oz.) of fresh beer sells for $19.99 at the tap, a

growler refill will sell for $17.99 and a 4 pack of 12 oz. bottles sells for $14.99. By following

this model for sales, the product cost will be approximately $0.75 or 3.75% of the retail of a new

growler fill and as high as 5.0% on a 4 pack of bottles. That is 95.0% - 96.25% of beer sales

income to cover the fixed and variable expenses.

The development and formation of Soothsayer’s Brewery has full support of the members

of the Board of Directors and the following individuals for their time and contribution:

Matt Hemeon: Matt is currently serving as President of the Board and is a craft been extremist

and active member of the local home brewing community. He has spent the past 12 years home

brewing and the last 2 years developing the pilot beer for Soothsayers – Realization. Matt has a

Bachelor’s of Science in Chemistry from Boston University. Matt will serve also as brew master.
Business Environment Analysis 3

John Slauter: John got this whole project rolling in 2013 with the idea, with Matt, of the recipe

of Realization as well as the startup capital of $10,000, John has had thousands of different style

of beers from all over the world specifically from North America, Germany, Italy and Japan. He

will be the Finance Manager.

Paul Deziel: Paul is a technology expert and has an associate’s degree in Computer Sciences

from ITT Tech. Paul has experience in the designing of websites, IT infrastructure, and social

media marketing.IT Manager

Jo Santiago: Jo is a licensed attorney and advocate of children’s rights and graduated with

honors from Quinnipiac University and received her law degree from Massachusetts School of

Law – magna cum laude. Jo is our General Manager and Legal Advisor for all contracts and

licensing for the brewery. She is deeply connected in the Burlington community from her

children rights advocacy work.

Jonathan Wright: Jonathan has over 15 years’ experience in sales and project management.

Jonathan has shown great ability to grow his previous ventures as a liquor store owner. He also

has a Bachelor’s of Science in Management from Merrimack College where he developed

multiple projects and new leadership groups for entrepreneurial advancement. He will be in

charge also of marketing the brewery.

Market Overview

Craft beer is a beer with distinct flavors that are produced in small batches and distributed

in a particular area. Most craft beers now are not sold in pubs or restaurants but are tasted in the

brewery and filled into large containers called growlers for the patron to take home. “The

Internal Revenue Department counted 2,830 ‘ale and lager breweries in operation’ in 1880, down
Business Environment Analysis 4

from a high point of 4,131 in 1873.”[Bar152] What that meant was that breweries were

developed in small rural towns and were likely developed and sold in local salons/pubs.

Unfortunately, the number of breweries dwindled in size and “in the late 1970s, when the

number of American breweries dipped below 100”[Bar152] due to the onset of prohibition from

1920 to 1933. When the U.S. came out of the prohibition era, the government had restrictive

laws to limit the sales of beer from the breweries pubs. This meant they could not sell on site as

easily and the larger brewers developed distribution lines to capitalize. [ACo10]

Some of the driving factors that led to the micro brewing of beer was for home brewers to

find different ways to enjoy different beer that was not just was out there. As stated above by

1970 there was less than 100 breweries in operation. That is a reduction of 97.6% from their all-

time high. What happened from there was these home brewers grew in popularity because they

were brewing to the tastes of their local region and eventually moved into a microbrewery status

and from the 1980s through the early 2000s, the number of breweries soared to roughly 1,400

and sales were climbing at an average rate of 40% a year [Ogl06]. Growth for the craft beer has

since leveled off to a strong 10% year over year growth from 2007-2011[Jef], while the overall

beer industry has been declining, according to the Demeter Group from their 2013 study of the

U.S. beer industry. Due to this growth, there is increased competition in the market and many

new breweries can fail relatively quickly because they are not producing a high quality product

or an improper business model that does not lay out the right foundation for success.

The process of brewing beer is can be a long process depending on the flavors you are

trying to gain in your beer. One of the main ingredients is grain. It is in the beginning process of

creating a “mash” which is what gives your beer body or heaviness. One of the ongoing
Business Environment Analysis 5

regulations that all breweries are now going to have to deal with is the FDA’s regulation called

“Food Safety Modernization Act.” [Lyn14] At the end of the boiling stage, when the mash was

done with, breweries would store the used grain for local farms in their area to use as feed for the

animals. This new regulation would require all breweries that recycle their waste as food to now

be treated as an animal feed manufacturer. This will require the breweries to put the mash

through a process to dry and packed the mash prior to donation and distribution. This will cause

additional cost to the consumer if breweries do want to donate their waste for feed. The

additional cost will come from the purchase of the equipment as well as the installation/set up

and according to Scott Mennen, vice president of brewery operations at Widmer Brothers

brewery in Oregon, it will cost about $13 million per facility. That will mean that to recoup that

output of expense, the consumer will be the one to pay for it with the additional cost on the beer

they like. If the facilities do not install this equipment then they will no longer be able to help

support the local area with animal feed as they once did. This law is set to take effect in

September 2016 for some businesses.

The brewery is called Soothsayers Brewery. The idea is for the brewery to market,

produce and distribute craft beers from our brew master. We will strive for the brewery is to

produce quality products that are reasonably priced that will keep customers coming back for

more. Soothsayers is planned to start out very small because we want to focus on brewing one

beer perfectly – Realization. This beer is an IPA (India Pale Ale) which is a hoppy beer that will

hit on many tastes due to its blends of hops, citrus and malt. It is meant not to be an overly bitter

beer but subtle and very drinkable. Our initial plan is to sell all beer from the brewery itself with

different partnerships with local businesses and pubs to create our brand.
Business Environment Analysis 6

The brewery would be located in the Burlington Area near the I-95 and Rte. 3. This will

allow easy access from all areas for customers to purchase beer directly from our brewery. We

chose the Burlington area because is a booming area for business. The area as well is very

affluent. In Burlington alone, the median household income is $95,191 which is over $28K

higher than MA median household income of $66,768. This will lead to people who have more

money available and would be able to purchase our craft beer. There are only a total of 7 craft

breweries within the Boston area but most are closer to the city like Clown Shoes Brewery

located in Ipswich and Sam Adams located in Jamaica Plain.

The craft brewery market is still maturing and breweries are constantly entering and

leaving. It is extremely important for this brewery to have its own identity and not try to be like

other craft breweries. The goal is to make Soothsayers Brewery a unique experience for people

to really embrace our flagship beer Realization. The booming craft beer market has shown that if

you can produce a high quality beer consistently than there is an opportunity for potential

success in this growing market.

SWOT ANALYSIS

Craft beer is a highly competitive market that is rapidly growing. Soothsayers Brewing

will have the foresight to respond quickly to how the market will develop as well as make a

quality beer in the growing market. In addition, a focus and detailed marketing strategy will help

prove how good the brewery will be. The brewery is going to be a privately owned microbrewery

engages in the manufacturing, packaging and selling of craft beer products. The weakness of the

brewery will be its size because there is no brand recognition out there yet and competition from
Business Environment Analysis 7

other established craft beers. Below are the summarized strengths, weaknesses, opportunities,

and threats of staring up Soothsayers Brewing.

Strengths

 Craft Beer industry has grown from 8.5% in 2007 to 13.7% of the total beer industry in

2012[Men13]
 Soothsayers Brewing is small and privately held brewery which gives the local beer

drinker a more personable feel to develop long term customer relationships for the

growth of the brewery

 Craft beers base themselves on taste and quality so there are fewer immediate substitutes
 Unique bottle for the beer with packaging and designs that will set us apart from the other

craft beers.
 Innovation is at the forefront for Soothsayers Brewing because producing beer with

distinct flavors will help the brewery stand out and build and develop brand image.
 Quality is the going to be at Soothsayers forefront because selecting quality ingredients

for the brewing process will set Soothsayers apart from the rest of the craft beer

community.
 Focused marketing of the beer with clearly defined goals and strategies.

Weaknesses

 Small scale operation can have a negative impact on productivity because the yield from

the batch needs to cover all of the business costs and if you are only making 42-45

gallons every batch there is little room for error

 Small scale operation can limit availability of having the brewery open for retail houses
 Single product line – craft beer only to be produced
 Short lifespan of the beer- some craft beers are best suited to have been drunk within 14-

30 days of bottling.
 Lack of reputation and awareness in comparison from other breweries can be

challenging.
Business Environment Analysis 8

 A small distribution network for the brewery can be a problem until the brewery can

develop relationships with wholesalers so the craft beer can be placed in retailers for sale
 Craft beer price point is more expensive than the large scale beer on the shelves
 Small financial base in comparison to more established breweries
 Balancing the needs of a new business like marketing and work/life balance while only

being a small startup

 Larger brewery could try to acquire the brewery if the business is very successful

Opportunities

 Craft beer is an emerging market because from 2007-2011 while the beer industry has

been declining, craft beers have group at least 10% year over year.
 Internet marketing and sales is still a less expensive way to market than the traditional

ways
 Promote Green opportunities for brand enhancement.
 It is a niche market because many beer drinkers have an appreciation for high-quality

beer and the style a quality beer can bring.

 There are no local beers from the Burlington, MA area so the local beer drinkers would

embrace a local brewery

 Long term growth potential for expansion into other New England states.
 The addition of local food trucks to cater to beer release can help drive local awareness to

the brewery.

Threats

 Existing competition of other local breweries and large scale beers.

 If the economy dive low again so can the type a beer a consumer will drink domestic

beers because the cost is less for them.

 Product costs for the ingredients can be more volatile for a small scale brewery because

the purchasing volume is smaller than larger breweries.

 Demand for craft beers is creating a black market for small batch brews and inflated

prices[Vas14]
Business Environment Analysis 9

 It is easy to enter the craft beer industry so there is a possibility of new breweries starting

up very fast.
 A shift in culture is possible because as fast as craft beers have grown they can shrink just

as fast.
 The older the age group that drinks alcoholic beverages tend to move toward wine as they

grow older.[Cla12]
 Change in local drunk driving laws can have a negative impact on the brewery.

PEST Analysis

Craft beer is still the smallest beer market in the U.S. industry but has grown significantly

over the past 10 years. Craft beer early on produced slightly over 5 million barrels a year. But

now that number has almost tripled to 15.1 million barrels per year. Even more surprising is that

Anheuser-Busch took in over $43 billion globally on their latest 10K, however craft beer has

grown to over $14 billion in the U.S. alone. Will craft beer ever exceed the juggernaut called

Budweiser probably not but the growth is seriously progressing and is not slowing down at all

considering that according “with the Brewers Association database passing 4,000 active [U.S.]

breweries.”[Bar15]

Strengths of Soothsayers Brewery

 The brewery is small and privately held brewery which gives the local beer drinker a

more personable feel to develop long term customer relationships for the growth of the

brewery
 Unique bottle designs and fresh flavors sets us apart from the other craft beers.
Business Environment Analysis 10

 Quality is the forefront because by selecting quality ingredients for the brewing process

will set Soothsayers apart from the rest of the craft beer community.

Weaknesses of Soothsayers Brewery

 Small scale operation can have a negative impact on productivity because the yield from

the batch needs to cover all of the business costs and if you are only making 42-45

gallons every batch there is little room for error

 Small scale operation can limit store hours for customers to come and try the beer
 The price point is more expensive than the large scale beer companies like Budweiser
 Lack of reputation and awareness can hinder growth

Political

 The US has a no tolerance policy when it comes to crimes such as drinking and driving.
 Massachusetts has a high tax rate of $0.11 per gallon of beer produced, and a 0.57% tax

on private club sales. [Fed15]

 Legislation is instituting a new craft beverage modernization and tax reform act of 2015.

“The intent of the bill is to update and modernize the excise tax and regulatory

requirements for craft brewers as well as cider makers, vintners and distillers, and thereby

help to ensure the continued growth of America’s craft beverage industries. This

legislation is tailored to promote job creation in each industry. Among other things, the

bill would: reduce excise tax and regulatory burdens for brewers, reduce compliance and

tax burdens for all producers and improve excise tax enforcement and

administration.”[Cra15]
 All craft beer brewers must be in compliance with all FDA requirements for labeling of

calorie count and suggested serving size per bottle

 MA legislation also seeking the ability for consumers to “fill empty growlers, provided

by consumers for retail sale, if said growler was purchased for the purpose of holding
Business Environment Analysis 11

malt beverages. For the purposes of this section, the term “growler” shall mean a large

glass, including bottles, jugs, or other containers, which can hold up to 100 ounces of a

malt beverage.”[How15] This will allow consumers the ability to reuse and recycle

previously used growlers and save the consumer money and the brewer will save money.

Economic

 The beer industry has been proven to be recession proof over time but with time in a

recession consumers can change to a less expensive beer.

 Soothsayers will try to use only the highest quality ingredients this will equate to high

prices of fixed costs as we shop for the best hops, barley and malts
 To go along with the increased market share, “craft brewing industry contributed $55.7

Billion to the U.S. Economy in 2014, more than 424,000 jobs”[Eco15]

Social

 Beer is the world’s most widely consumed alcoholic beverage, and third most popular

drink overall, after water and tea.

 “Light beer (domestic beer) is always centered on quenching thirst and refreshment as

opposed to complex flavors. Craft beer has always been focused on the total opposite –

bold flavors with plenty of depth. Many regional breweries offer food pairings on their

menus, showing what flavors can be accented by the food and beer

combination.”[And14]

 Social media is playing a large role in the growth of the craft beer industry because more

people who are out enjoying different beers are more likely to tweet, Instagram, or
Business Environment Analysis 12

Facebook the beers they are drinking if they enjoy it. It creates more buzz about

companies that are unknown and it will help those smaller breweries make their mark on

the industry.

Technology
 Technology helps the brewing industry develop efficient distribution channels and

upgrade the facilities to make the brewing process more efficient.

 Beer cans have evolved recently and Crown has developed “Crown Global Vent — a dual

aperture end that facilitates a smoother pour directly from the can. This new end features

two holes, rather than the single hole featured on standard ends — a design that improves

airflow and allows consumers to enjoy their drinks with less foam.” [Jan14]
 The other improvement on for the beer industry as a whole has been seen as a holy grail

and that is the can that can be sealed again after opening and the company Crown has

also developed it. “In 2013, Crown’s XO Reclosable end features a simple two-step

operation that creates an airtight seal every time the tab is re-closed, offering enhanced

convenience and product protection for on-the-go consumers. Opening the end is easy

and intuitive: the consumer simply lifts the tab at the back of the can to open the vent seal

and then slides the rest of the tab backward to reveal the drinking aperture. Reversing the

process recloses the can, giving consumers the confidence that their beverage and

carbonation will be safely contained and preserved. “ [Jan14]

Readiness for Competition

 Soothsayers Brewery will have its flagship beer, Realization, ready for day one of

opening in both growlers and our unique throwback bottle with laser etching on the

bottom of the bottle to allow the beer to breathe for a better flavor.
Business Environment Analysis 13

 Our distribution is starting small with only the growler and bottles because the goal is to

produce the best quality beer possible and perfection is key for the release
 Growler pricing is set, for 64-oz of beer at $19.99 for a new growler, $17.99 for a refill

and 4-pack 12-oz bottles will be available for $14.99

 Marketing is set on social media (Twitter, Facebook and Instagram) for a tasting and

release party

Intrapreneurial and Entrepreneurial Opportunities

Entrepreneurial Opportunities

 After reviewing all of the possible entrepreneurial opportunities, this list has a

few concepts to review and compare. During the decision making Soothsayers Brewery

realized the most valuable factors in determining the best opportunities is uniqueness,

creativity, and the consumer’s needs and wants. The list of opportunities includes beer

delivery service, a cooling coaster, tip proof bottles, and cooler based beer box.

Entrepreneurial Assessment

 The entrepreneurial opportunity I have chosen is a beer delivery service. This is a

different idea of a normal keg delivery service. There are some mail order beer delivery

services like Beer America. Beer America is a beer of the month club where you will

have a monthly membership fee of as little as $36.95 per month for 3 months ($110.85

total). This will let you enjoy 4 beers from different microbreweries across the nation and

shipping is included in the monthly fee. Soothsayers would benefit greatly from a

delivery service because a courier would transport the beer from the brewery to the

delivery address or event. Then afterwards Soothsayers would return, upon agreement of

the consumer, and collect any recyclable items. Currently, beer-drinkers rely on traveling
Business Environment Analysis 14

to the local store to purchase the requested beer, but we will not take care of that. The

largest benefit is that it will help reduce drunk drivers and accidents that are related to

over drinking.
 The beer ordered from the brewery would be the same price as someone buying at

the brewery, however, there would be an extra fee for the delivery service depending on

distance of the customer and how much is being ordered. The more beer ordered would

mean the less fee they would have to pay. The average delivery fee would be from $5 -

$10 depending on the distance needed to be driven.

Trends

 The trending of the craft beer market as a whole is upward. Growth for the craft

beer has since leveled off to a strong 10% year over year growth from 2007-2011, while

the overall beer industry has been declining, according to the Demeter Group from their

2013 study of the U.S. beer industry. [Men131] “The Internal Revenue Department

counted 2,830 ‘ale and lager breweries in operation’ in 1880, down from a high point of

4,131 in 1873.”[Bar151] Currently by the end of September 2015, there is now over

4,000 active breweries in the Unites States.” What it does not mean is that we’ve reached

a saturation point. Most of the new entrants continue to be small and local, operating in

neighborhoods or towns. What it means to be a brewery is shifting, back toward an era

when breweries were largely local, and operated as a neighborhood bar or restaurant.”

[Bar151].
 “For the 25-34 age group, which represents the segment's heaviest consumers, 70

percent say that the brand of beer says a lot about a person, and 66 percent say the style

does the same.”[Cra14] This means that more craft beer drinkers are more likely to enjoy

the beer but they also want the status as well as the one drinking the high end beer. Mintel
Business Environment Analysis 15

believes that “there is a strong sense of community in the craft beer world, consumers

like to share knowledge with one another and are highly invested in the products that they

choose. Not only that, but craft brands share exposure through collaboration, a practice

almost wholly unique to the craft beer market.”[Cra14]

Impact on Opportunities:

 Overall, these trends will only help the growth of the brewery. The beer delivery

service is a one of a kind opportunity because some breweries will offer keg delivery

service, Soothsayer Brewery will offer the delivery of a 6-pack of beer to the consumer. It

will be as if you were ordering takeout food for delivery but you are ordering your

favorite beer instead. It would be easy to implement a beer delivery service for

Soothsayers Brewery because of the proximity to the local highways. Other beer

companies would find it hard to duplicate because some of the big box breweries like

Budweiser are in less populated areas where the factories are like Merrimack N.H.

Impact on Sustainability

 This would not be very hard to implement and sustain this type of opportunity. To

implement, Soothsayers would need to purchase a 1 delivery car and 1 delivery van

equipped with coolers and 3 courier drivers, an ordering system by telephone as well as

ordering thru the website. This is going to be marketed thru social media because there is

no cost and to consumers who like to drink beer that are 21 and older. The brewery would

only benefit from this type of service because there would be more beer sold and also

increase the foot print of where Soothsayers beer would be.

 There are no specific trends that would need to improve the sustainability of this

operation because this idea. The major benefit is that there would be less intoxicated
Business Environment Analysis 16

drivers on the road to get more beer. The only negative benefit of this services is that

consumes would be increasing their alcohol intake they would still end up on the road.

This is out of the hands of Soothsayers but it would be an issue concerning safety.

By utilizing the information provided, Soothsayer’s Brewery has found a unique opportunity

in the brewing industry by entering the market in the within the high traffic area of the I-95 &

Route 3 corridor. Craft beer is a booming market that has double digit growth from 2007-2011

and has still continued to grow with 4,000 active breweries in the U.S. alone. Soothsayer’s

experience in beer management and sales will keep the company on the right path for growth and

fruition.

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