A Case Study Over the Breckenridge Brewery
for help. In the last three years, Breckenridge had expanded quickly into new markets. Craig wasn’t so sure that this was a wise decision on the company’s part. Had they expanded too quickly? Did they spread themselves too thin when they expanded across the United States? He felt that these were questions that needed to be answered if Breckenridge Brewery was going to move forward and be profitable.
In order to help answer these questions and others, Craig examined data to see if they were targeting the right consumers and were in the right markets for their beers. He found that a 1996 survey discovered that 18.9% of consumers with incomes of $50,000 plus ordered more craft beer than in 1994. He also found that consumers in the Generation X group, or those between the ages of 21 and 34 were more likely to purchase a handcrafted beer than those over the age of 55. Based on this information and other sources, he identified the Breckenridge target market as individuals who were upper-middle class, well-educated, interested in outdoor recreation, and between the ages of 24 and 45. Craig next looked at consumption patterns of Americans to determine whether or not they were opening brewpubs and distributing in the right regions. He found that the West South Central region and the Mountain region had the highest annual per capita consumption rates (see chart below).
With all of this information, he set forth to find a way to turn the Breckenridge business around and make each individual unit profitable.
The Value Chain
According to the textbook the value chain analysis is the building blocks of competitive advantage. Breckenridge Brewery has many challenges throughout its value chain. It all started with the tidal wave of growth in the craft brewing industry. According to industry information from 1992 to 1996 companies were showing between 25%-75% growth per year. However, there was no growth in 1998. The company was driven primarily by opportunistic real state deals and executed without a comprehensive plan. The brew-pubs suffered from a lack of consistency, poor communication and inefficiency. They did have an experienced workforce because most of the employees had been there since the beginning. One of their strengths was the freshness of their beer, because they used pure ingredients. The downside to this was that its life span had to be monitored and rotated it was also costing the company 50,000 per representative to carry out this task. The beer also had to be shipped-out in refrigerated trucks, which was costly. Breckenridge beer was distributed in about 30 states, but the Colorado market generated over 50% of the total sales. There was not sufficient information to build a chart for the value chain activities using overall cost leadership or examples of differentiation because they simply did not list them [next page]