Forked River is a brewery that began in September of 2012 in London, Ontario. Recently, as of January 2016, they have begun to expand considerably and are reviewing their original business plan. The brewing company was originally located away from retailers and restaurants as a way to remain scalable, and to make sure that the “business was not dependent on external financing”. This is because their location was merely used for production, rather than a pub-style store. One of the original founders, Dave Reed, reduced the initial costs to develop through the use of his own engineering abilities. This gave the company specialty machines capable of rapid expansion. For the first three years of business, no full-time employees were hired. This kept costs low and allowed for increased capital for growth. As a matter of fact, Forked River has been able to return a consistent profit since the middle of 2013. Focusing on the main objective, “to produce great beer”, David Reed, along with Steve Nazarian and Andrew Peters, used their advanced educations to create jobs during economic difficulties.
Internal Strengths and Weaknesses (SWOT)
The Forked River Brewery has many strengths, from high quality products to a diverse product line. Poor logistics and retail sales provided complications, though, hindering the company’s ability to run smoothly. A list of obvious strengths includes the following: diverse product range, seasonal products, award-winning quality and flavor, highly educated and competent owners, good social media marketing, and extensive research and development. In contrast, a list of apparent weaknesses includes the following: poor retail management, licensee costs, and logistic costs. In addition to the strengths and weaknesses of this brewery, many friendly competitors are providing potential environmental threats by quickly becoming rivals. Not only that, but the founders of Forked River are expecting, what they are calling, “craft beer fatigue”. Where there isn’t fatigue, there will be higher demands. With new exotic flavors and elaborate packaging, Forked River shows concern with how they will progress in an increasingly competitive market.
External Environment Analysis
Before the opening of the brewery, the original founder, Reed, predetermined the other breweries that would provide some friendly competition. Because these competitors are quickly becoming rivals, and this industry is seen as highly attractive and rapidly expanding, the external environment can be considered very risky. In addition to a highly concerning rivalry amongst established firms and a high risk of entry, we can look at the other three forces used in Porter’s Five Forces to determine how much the external environment could affect Forked Rivers. Another very concerning force would be the bargaining power of the buyers; due to little customer loyalty in an ever-expanding field, it is hard to provide a product that can guarantee customer support. Without these loyal consumers, a small business can easily fail. A slightly less concerning, but still an alarming, force is the threat of substitutes. Craft beer is a very niche product but can easily be substituted with other alcoholic beverages. The last, and least worrisome, force would be the bargaining power of suppliers. Given the high concern for the first four forces, this one is of little concern.
SWOT Evaluation
Having acknowledged key strengths, and weaknesses, we can use them in our favor to combat the seemingly concerning external environment. Thankfully, the biggest weakness, poor retail management, came from overwhelming unexpected sales. After this problem is solved, the strengths that Forked River has seem to outweigh the problems that are caused by the environment. Extensive research and development can combat the risk of new flavors and elaborate packaging. Award-winning quality and flavor can combat the expected “craft beer fatigue”. Additionally, good social media marketing can combat lack of loyal customers.
Corporate-Level and Business-Level Strategy
Said before, the goal of the founders is “to produce great beer”. Because the owners now need to make a living off of their product, they are using their education to produce it at a lower cost, while also using their own personal interest to diversify the flavors of it. They now have 13 labels for their brand. The owners have already noticed that a greater profit is to be made in the retail-side of the industry, so “after extended negotiations with provincial regulators throughout 2015” they changed and expanded the amount of retail space that they use. Another strategic change that has occurred was in 2015, when they hired on their first full-time employees. Probably the most important business-level strategy came when Reed cut costs by delivering kegs directly to the customers, getting rid of the middle-man. This, and the belief of superior customer service being a major selling point, are integral parts of the brewery’s strategy.
Structure and Control Systems
In the beginning (pre-2015), the business structure and all control came from the three co-founders. Reed, the original brewer, owned “80 percent of the capital” and devoted his efforts towards the sales and R&D. This was beneficial in the motivation behind expansion. However, by 2016, seven more employees were hired. These ten employees had to split all required tasks such as “installing, maintaining, and cleaning equipment; buying ingredients; brewing and bottling beer; marketing; and delivery of the final product”. As seen in the case, each new employee would be given their own designated role. Roles such as “brewmaster”, delivery driver, and salesman were held by one person preventing the whole too many cooks in the kitchen problem.
Recommendations/Advice
In the question of “should Forked River continue along its current business path or should the three founders be more strategic about the future and pursue a focused growth strategy?”, I would continue alongside their current path. Expanding would not only increase their tax bracket, as they said, but it would also require excessive capital. Since they do not appear to want more employees, only having hired when necessary, it does not make sense to expand to a size where many more employees are required. Given that retail and the expansion of retail caused the biggest issues since inception, requiring more retail locations would cause even more problems. Lastly, because the owner’s “main purpose of the brewery was to produce great beer, while allowing them to maintain a modest lifestyle”, expansion is not necessary to provide them with the life that they desire. There is no need to develop a more focused growth strategy and expand; continuing their current path would be enough.
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