Oland & Son Entry Into the Greater Boston Market
...eign imports into Massachusetts total less than 18,000 barrels. Local Massachusetts brewers have the largest market share with the top five leaders selling 1.8 million barrels in the Mass. Market. In fact, Lowenbrau is the only imported beer which makes the list of top twenty Brewers in Massachusetts. Firms Core Competencies – Strengths and Weaknesses Oland & Son is a regional beer company which produces an award winning ale. Over the years it has managed to gain a loyal following in the three Maritime Provinces and effectively competes with only one company, Moosehead Breweries, in the region. The company has limited experience advertising and has no experience advertising in the U.S. market. It has never had to “educate” its target customer. Oland also has no experience in missionary sales tactics as it is not allowed in Canada. One resource that Oland could tap into is the more than 750,000 émigrés from Nova Scotia who resided in Boston and Eastern Massachusetts. Distributors also seemed eager to distribute Schooner Beer and Ale. Financial Analysis (see Appendix A) A break-even analysis indicates that Oland would have to sell more than 8,000 cases to break even. At 8,000 and an average import price of $4.83 (the price of Schooner would likely be slightly lower) only $39k in revenues would be generated. This is insignificant in comparison to Oland’s overall sales of $10 million but it could provide a nice introduction into the rest of the Massachusetts market and other U.S. metropolitan markets. Core strategy If Oland were to enter the market it would need to have broad appeal. At break even, Oland would have to sell 583 barrels which is more than Molsons or Labatts. In order to reach this broad appeal Oland will have to target the correct customer segment and learn how to advertise effectively, a skill that they have yet to develop. It will be important for Oland to view all beer/ale breweries as competitors. Clearly, the import market has not really taken off in the GBM but there is certainly a huge market opportunity. In other words, a market share approach should be employed as meaningful profits, relative to its local market, can only be made after a substantial share of the market is gained. Customer Target and Segmentation As stated before, it is necessary to reach some sort of critical mass and widespread consumer appeal. Initially, however, Oland & Son should get a foothold in the easiest customer segment: émigrés (and their descendents) from Nova Scotia who number 750,000 out of 4 million. This population is substantial and will help to gain an immediate end user acceptance. If the population is somewhat concentrated, it should be easy to convince distributors to carry Schooner products. The blue collar workers, men between the ages of 25-55, of Italian and Irish ethnicities should also be a long term target. However, it will be a challenge for Italian and Irish men to accept a Canadian beer which is hard to differentiate (at least in taste) from Budweiser. It is confusing that market research was conducted on males and females between the ages of 25-30. The sample population was married couples and professionals (white collar). This is the worst possible segment to target as their frequency of alcohol consumption is minimal. The couples consume alcohol (on premise) and go to a restaurant or bar about twice a month. The men order every four or six such occasions and the women every five to eight occasions. Furthermore, the majority did not order more than one bottle on these occasions. It would be a mistake to try and focus on the white collar segment even as this segment may be more popular for imports (which are largely European). High volume, high frequency customers will be the most profitable customer segment and judging by the fact that Schooner has very little differentiation from Budweiser, a price sensitive and high volume customer would be the ideal target. In terms of distributors as a customer segment, the major segmentation would be broken out into on premise (restaurant, bars etc.) and off premise (stores). Oland should primarily target on premise restaurants to introduce its Schooner beer. The restaurant and bars are more accepting of import beers and a channel which is more accepting of imports (at least in the 60s). Consistent with the strategy to target the Nova Scotia end users, the on premise sites should be in areas with a population density rich with this target segment. Moreover, the strategy to have broad appeal would encourage on-premise purveyors to introduce Schooner during happy hours (and other high traffic times) with a low-price strategy. Geographically, Oland should first target areas in Massachusetts and the Greater Boston area which have a high density of Nova Scotia émigrés. Secondly, the entire Greater Boston area should be targeted and then the other high population areas of Mass. Competitor Targets The competitors are not limited to importers of beer into the Greater Boston Market. The largest breweries are not importers but, rather, they are local brewers. Even other Canadian brewers are not major competitors as they have such a small market share. As advertising will be important in a broad market strategy, heavily advertising breweries, such as Narragansett, Ruppert and Schaefer, will be primary competitors. Value Proposition Oland has developed a loyal following in the Maritime region and the challenge to the company will be whether it can develop a similar following in the Greater Boston area. Oland’s Ale is not well understood but can provide for a somewhat differentiated product. Given these factors, the Schooner product should be introduced at a lower price and appeal to the heart of the beer drinking segment. The positioning should be a high quality beer for the relatively low price. Programs & Tactics Product The Schooner Ale and Beers are different but the uneducated consumer really does not, at this point, differentiate between them. It will be necessary to try to market the product so that it is distinctive to its competitors. For the purposes of cost and differentiation it is recommended that Orland change its packaging whether it be adding foil to the bottles or switching to aluminum cans. Currently, the packaging in bottles represents the largest cost, 57%, of total brewing and packaging of Schooner beer and ale. If Schooner needs to educate the consumer anyhow, it can use the new packaging (aluminum cans) to its advantage. Distribution Orland is right to not launch a wholly owned distributor. At $50,000 for the cap-ex and $75,000 in annual operating costs, this is too big a cost for the limited benefits. Tapping into an existing distribution network is the right strategy. The on premise distribution channel will be more easily penetrated and is the more desirable route (in comparison to the off premise channel). On premise purveyors are more popular with imports as people are more willing to try different beers/ales when they go out for the night. The 900 taverns which sell 99% of all imported beers may be easy targets to gain acceptance but given that the individuals are “professionals,” the other on premise provider should be more attractive in a high volume, low cost model. Price Schooner should be priced below your average import price of $4.83. In fact, it should be priced to compete against the domestic beers which range from $2.00 to $3.10 per case (from brewer to distributor). This will allow retail sales to come in more than half of beers such as Lowenbrau and Bass Ale. Schooner will not be able to command a premium price as it is basically indistinguishable from Budweiser and Canadian beers do not have a positive perception among Americans. The price for Schooner beer could be dramatically lowered if an aluminum can is used as opposed to bottles. This will also differentiate the product in the market and can be used to help advertise the product. If bottles must be used it may not make economic sense to pursue a low priced strategy as a $3.00 per case pr...