Blackrock Craft Brewing Food and Beverage Strategies and Logistics Case Study The first case study takes an introductory approach to applying concepts from

Blackrock Craft Brewing Food and Beverage Strategies and Logistics Case Study The first case study takes an introductory approach to applying concepts from class in a real-life context. Detailed instructions are provided along with supplemental readings and materials. Please download the attached materials for further reference (in the files) FSM 4160 Foodservice & Beverage Strategies & Logistics
Case Study Assignment 1: (20 points)
Blackrock Craft Brewing
The purpose for this assignment is to allow you the opportunity to apply key concepts from the course.
These include application of Porter’s five forces model and completion of a SWOT analysis. The case is
based on a small craft brew house in transition from start-up to success. Start by reading the article
titled: Blackrocks: Craft brewing – from hobby to business: Applying strategic management to the small
firm. Once you have read the article by Gnauck, Hart, and Pagel, read the article titled: Guidelines for
applying Porter’s five forces framework: A set of industry analysis templates. This article will provide
insights on how to apply Porter’s five forces to the Blackrocks case. Review your notes about SWOT
analysis from readings in your text. Then begin the writing process. Reference all of the above while
writing up your case.
When your case is completed, you must submit your final draft via the Turnitin.com link in the week 7
folder. Please be advised that submissions will not be accepted via email or any other method.
Part 1 Background
1. Who is the target market?
2. What is the mission of?
3. What is the organizational structure? Who is in charge?
4. Who are the competitors? Describe them?
5. What is the company’s market niche (competitive advantage)?
Part 2 Analysis
6. What are the organizations Strengths, Weaknesses, Opportunities, Threats? (Please complete
and submit a SWOT analysis with narrative explaining your findings)
7. Apply Porter’s Five Forces using Dobb’s article for guidance
Part 3 Recommendations
8. List at least three specific recommendations for how Blackrock should proceed. Be sure to
support your recommendations with evidence from your analysis.
Note: You may have to do additional web research specific to the industry discussed in the case when
completing the five forces analysis – be sure to plan accordingly. Please answer these questions in
narrative not bullet form. Please use graphics as well as narrative when communicating your application
of Porter’s five forces and when completing your SWOT analysis. Weave your answers into a thoughtful
paper. Take your time and thoroughly proof read and edit your writing prior to submitting.
FSM4160 Case Study #2
Paper Format: your paper must be typed and edited.
Total Length: 6-8 pages including a cover page, 4-6 pages of content, works cited
Font Size:
12 point font
Line Spacing: Space and a half
Margin:
1” maximum (L an R)
Page Numbers: Bottom of page, center, starting on page 2
1. Cover Page Includes: Student Name, Professor’s Name, Class, Assignment, and Due Date
2. Introduction (Use Heading)
Your introduction provides the reader with the overarching perspective you will share
throughout your paper. Tell the reader what your paper is about.
3. Background & Analysis (Use Heading)
This is where you weave answers to the questions listed above into your paper. Make sure this
section progresses logically from one paragraph to the next. An easy way to assure you maintain
logical progression is to write up this section of the paper and analyze the content of each
paragraph to confirm that the main points in one paragraph link with or properly set up the very
next one. A well written paper flows from one paragraph to the next with intention and clarity.
4. Recommendations & Conclusion (Use Heading)
Review the highlights of the points you made in the body of your quick response. Make a final
point or recommendation. This is where you restate your overarching perspective and make
clear the link between the content provided in the body of the paper (as evidence) and your
final perspective.
5. Works Cited Page (Proper MLA format is required)
Note: Spelling, Grammar and Format matter
The assigned readings include:
Gnauck, B., Hart, C., & Pagel, L. (2014). Blackrocks: Craft brewing – from hobby to business: Applying
strategic management to the small firm. Journal of Business Case Studies (Online), 10(2), 103-n/a.
E. Dobbs, M. (2014). Guidelines for applying Porter’s five forces framework: A set of industry analysis
templates. Competitiveness Review, 24(1), 32-45.
FSM4160 Case Study #2
Journal of Business Case Studies – Second Quarter 2014
Volume 10, Number 2
Blackrocks: Craft Brewing – From Hobby
To Business: Applying Strategic
Management To The Small Firm
Brian Gnauck, Northern Michigan University, USA
Claudia Hart, Northern Michigan University, USA
Larry Pagel, Northern Michigan University, USA
ABSTRACT
Blackrocks, a craft beer start-up company, first opened in Marquette, Michigan, a town of 20,000
residents, in 2010. The business evolved around a friendship and a mutual interest in craft beer
and is located in Marquette’s “Village,” an area close to the local university consisting of several
full-service restaurants, sandwich shops, bars, and retail shops. The Village considers itself an
independent retail section of Marquette.
The ambience of Blackrocks is “fun and good times.” People of all ages are attracted to the bar to
enjoy craft beer with their family and friends. The physical setting is rustic with a current capacity
of 50 customers (soon to expand to 100 customers). Customers can bring in their own food or call
a local eatery for pizza or sandwich delivery.
Blackrocks has a very loose organizational structure which has worked well in the past. This case
will allow students to identify the problems faced by Blackrocks in today’s economy; to describe
the internal and external environment of Blackrocks; to identify their core competencies; to
identify Blackrocks’ strengths, weaknesses, opportunities, and threats; and to develop
management strategies which could further enhance the business and help them attain their
mission and goals.
Keywords: Craft Beer; Organizational Strategies; Organizational Structure; External Environment; Internal
Environment; Core Competencies; Management Strategy
INTRODUCTION
L
et’s meet the employees of Blackrocks. The owners, the Ambassador of Fermentology and Brewsician –
Andy Langlois and David Manson were two, but there were also characters like the Wizard of Ales, the
Monk of LaMash, the Gangster of the Great White North, and the Friend of Woodland Creatures
Everywhere (the longest name of any employee in the business).
Blackrocks, the company, liked to enjoy life, have fun, and at the same time make money. The general
attitude the business presented was pure Adam Smith “laissez faire,” anything goes. Formal titles were few, but fun
titles abound. At the same time, it was a real business with concern about sales, cost controls, growth, and serving
customer needs.
Andy and David expressed concerns about the future demand for craft beer and beer in general. Craft beer
in the U.S. represented 7.5 percent of beer by volume and 9.1 percent by revenue. Would the demand for craft beer
crash or begin to fall off? (Remember, the demand for pop in the U.S. declined in the last 10 years.) Would the
overall interest in craft beer begin to wane? These were unknowns. They also expressed concern whether the
demand for onsite beer would decline. Should they develop bottled beer for resale through wholesalers to retail
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outlets? The policy of Blackrocks had been to stress variety. Each week new and different flavors of beer were
created. Since opening in December 2010, they brewed over 150 different beers. Some beer rotated on a semiregular basis, but the majority was new every week. They had not established a “brand” that represented the brewer,
“Blackrocks.”
Samuel Adams, for example, had created “Samuel Adams Boston Lager,” which supported a variety of
other beer. Could Blackrocks create a brand that would sell over the counter? Did they need a beer that represented
the brewer, “Blackrocks”? Was their business model sound? What issues should Andy and David focus on?
Answers to these and other questions were constantly on their minds.
THE ORIGIN
Blackrocks started in December 2010 in Marquette, Michigan, a town of 20,000 residents, which expanded
by 50 percent when the students of Northern Michigan University arrived each fall. The business was the brain child
of Langlois and Manson.
Both men were in their 40’s and faced the typical challenges of family life. Andy was married with two
kids. He was a Northern Michigan University graduate. His previous work included Director of Sales for a surgical
parts company and a drug representative. David was a Michigan State University graduate and worked for a
Midwest food distribution company and also as a pharmaceutical sales representative for 16 years. Their wives
worked – one was a school teacher and the other was a government manager.
The business evolved around a friendship and a mutual interest (avocation) of craft beer. This hobby grew
into the idea of a business, and in 2010 they opened to the public in an old, private residence (zoned business by
2010) at 424 N. Third Street in Marquette, Michigan (see Figure 1). They were able to buy the building, giving up a
small interest in their business.
Figure 1: Blackrocks, 424 N. Third Street
Photo by M. Vroman, 2013
Third Street in Marquette, Michigan, was called “The Village” and consisted of a number of full-service
restaurants, sandwich shops, bars, and unrelated retail outlets. The Village promoted itself as an independent retail
section of town. It was a natural corridor of 13 blocks leading south from the university to the “Main” Street of the
town.
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Volume 10, Number 2
Given that Marquette was a university town, it was common for students to start a night celebrating by
moving from bar to bar along Third Street. In this context, Blackrocks was a flow-through site as the customers
moved north or south along this street. In simple terms, it was a great location for a craft beer business.
The ambience of Blackrocks was “fun and good times.” Its physical setting was rustic. The hardwood oak
floors creaked, as did the stairs to the second floor. The bar was an old, aged-oak structure that had seen extensive
use by customers and lots of spilled beer (see Figure 2). In the spring of 2013, Andy and David planned to renovate
the second floor to accommodate an additional 50 people. When finished, the legal capacity was 100 people (1,200
sq. ft.). There was a porch around the building which served as overflow when temperatures reached over 40 degrees
(outdoor heat lamps were prevalent) and in the summer and fall periods. Seating capacity was limited to about 15 so
the rest of the patrons stood.
Figure 2: Blackrocks Bar
Photo by M. Vroman, 2013
The fun-loving, informal atmosphere was even more evident by patrons carrying in their own food or
calling local eateries for pizza or sandwich delivery. Crowded tables and benches were often filled with crock pots
full of soup, appetizers, or other favorite accompaniments. Blackrocks did not have a kitchen so food regulation was
not an issue. A night at Blackrocks was characterized by a high decibel rating and lots of conversation and laughter.
Local musicians frequently entertained and open mic nights were common.
TARGET MARKET
Blackrocks targeted patrons of all ages. Lots of 21st birthday parties occurred, but the brewery attracted
people in their 30’s, 40’s, 50’s, and 60’s, as well as an occasional 90 year-old. It was not uncommon to see a 21
year-old sitting next to a surgeon with a university professor as part of a conversation.
THE MUGS
Shortly after opening, a friend and an art teacher at NMU suggested Blackrocks try to promote interest in
German ceramic beer mugs. These mugs were all unique and fit the fun, rustic ambience of Blackrocks (see Figure
3). The mugs cost the customer $40, but they brought the customer to the business. They hung on the walls, ceiling,
and just about everywhere at the bar. Customers came in the door, grabbed their mug and had it filled at the bar. The
mugs were truly works of art. In the course of 2½ years, they sold 986 mugs. A side benefit to Blackrocks was that
the company did not have to invest in as many glass mugs because the customers supplied their own. The mugs also
accommodated the rustic nature of the building and enhanced the “fun and good times” ambience.
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Figure 3: The Mugs of Blackrocks
Photos by M. Vroman, 2013
THE MISSION
Even though the environment was one of fun and laughter, there was a serious side to the business. Andy
and David established their “mission” as an integral part of what their business stood for when they created it in
2010 (see Figure 4).
Blackrocks is committed to fun, our community and diverse craft beer. We started as a nano brewery and will
operate as such always. Our goal is steady growth brewing with quality ingredients and keeping a little crazy in our
culture. We encourage our members, employees, and customers to give input in our operations and demand they
know the brewing process and encourage mistakes.
Figure 4: Blackrocks Mission
Source: Company Records, 2013
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This mission tied the product to the customer and helped define what Blackrocks was all about – a happy,
fun place to be and a mutual interest (proprietor – customer) in craft beer.
ORGANIZATIONAL STRUCTURE
The easiest way to explain Blackrocks’ structure was to say there was none. Andy and David were the
owners (the former building owner had a small interest). There were four full-time employees of the company.
Besides the owners, the following is a description of the two other full-time employees, Andrew Reeves and Chris
Hutte.
Andrew Reeves: Andrew was the head brewer. He was a 27 year-old having grown up in Holland,
Michigan, and then worked for AmeriCorps in Colorado where he was exposed to the craft beer business. He then
attended Northern Michigan University majoring in history.
Chris Hutte: Chris earned a Computer Information Systems degree from Northern Michigan University.
He had been a part-time worker at a local party store that sold home hobby craft beer supplies and equipment.
There were seven part-time employees of the business. These people were brewers, bartenders, servers, keg
cleaners and took on marketing responsibilities.
The organizational structure was flat with two levels of management. Andy and David were co-owners, and
the rest reported to them in somewhat of an undefined, unknown manner. Things seemed to get done, however. To a
degree, beer was brewed on schedule to make sure sufficient supplies were available when the business was open,
supplies were ordered (barley, hops, wheat, rye, oats, nutella, lavender, honey, and peppers), and hours were
assigned for work shifts.
THE 2013 ECONOMY
The Wall Street Journal reported that the 4th quarter gross domestic product of the U.S. in 2012 was revised
upward from a -.1 percent growth to a +.1 percent growth in January 2013. At the federal level, the U.S. House of
Representatives was in an ongoing stalemate with the U.S. Senate and the President regarding spending cuts and tax
increases. Unemployment stood at 7.7 percent, and interest rates were at historic lows. The federal funds rate was 0
to .25 percent, while the home mortgage rate for top-line borrowers was 3.25 percent for a 30-year mortgage.
The State of Michigan had recovered from its depressed state with a balanced budget and 8.8 percent level
of unemployment (“Department of Numbers,” 2013). The Upper Peninsula of Michigan was somewhat depressed
with an unemployment rate of 10.3 percent (Walton, 2013). However, the City of Marquette, the largest city in the
Upper Peninsula of Michigan, was rather robust. This was because of Marquette General Hospital’s 2,000
employees and 200 physicians (a for-profit hospital, part of the Duke Lifepoint System), Northern Michigan
University’s 1,000 employees (student body of 9,500 students), gambling in the Upper Peninsula which employed
about 1,500 in the Central Upper Peninsula, and Cliffs Natural Resources’ 1,800 employees (an iron ore mining
complex located 40 miles west of Marquette).
THE BEER BREWING PROCESS
Brewing the beer began with the raw grain, which was most commonly malted barley for most beer styles.
Other raw materials were wheat, rye, and oats, which could be added at different proportions for various beer styles.
The malted barley was first crushed to break open the hulls. This was then mixed with hot water (roughly
145-158 degrees) to create the “mash.” During the mash, two enzymes (alpha and beta) worked to break down
complex carbohydrate chains into simple sugars within the grain. This was important because yeast needed simple
sugars to convert to alcohol later in the fermentation process.
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Mashing usually lasted for 60-90 minutes, then the liquid (called the “wort”) was transferred to the boil
kettle, and the spent grain was disposed of. The wort was then boiled for 60-90 minutes. During the boil, hops were
added to balance the beer and provide bitterness and hop flavor/aroma. Hops added during the beginning of the boil
were called “bittering” additions since the longer hops were boiled, the more bitterness they provided to the beer.
Hops added at the end of the boil were called “aroma” additions because these provided hop flavor and aroma
without as much bitterness.
Once the boil was completed, the wort was cooled and transferred to a fermentation tank. This was
essentially the end of the first step.
Step 2 was the fermentation process. Once yeast was added to the cooled wort, sugars were metabolized
into alcohol and carbon dioxide, and the product can be called beer for the first time. This process usually took 1-2
weeks. The style of beer and strain of beer affected how long fermentation took. This was an incredibly interesting
process and had a lot of factors that affected the end beer product. It essentially came down to yeast converting sugar
to alcohol, thus creating beer.
Once fermentation was finished, beer was transferred into what was called a “brite” tank. This was where
the beer became carbonated. CO2 was applied to the beer until a desirable level of carbonation was achieved. The
carbonation process took about 12 hours on average in a brite tank. Then the beer was transferred into kegs, cooled,
and made ready to be served.
BREWING AT BLACKROCKS
Blackrocks had about a 600-barrel beer capacity per year. Their major competition, the Vierling and Ore
Dock, had approximately 350- and 1200-barrel capacity, respectively. In the spring of 2013, Blackrocks bought an
old Coca-Cola bottling plant on Washington Street, about a mile from the Blackrocks retail outlet, with the prospect
of producing a bottled craft beer.
COMPETITION
From a broad perspective, craft beer was in competition with all beer; but in reality, craft beer like that
made at Blackrocks was in competition with two other craft brewers in the city – the Vierling and the Ore Dock. In
the general area, Jasper Ridge Brewery in Ishpeming, Michigan, a city about 15 miles west of Marquette,
represented nearby competition. Also, KBC in Houghton (90 miles north) was, to a degree, a competitor. They sold
craft bottled beer that was distributed in the area. Indirectly, Blackrocks also competed with the largest…
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