The Coors Distributorship
...inferred that the most important data for Larry consists of three points: 1. The level of beer consumption in Delaware. 2. The retailers’ attitude towards Coors beer. 3. The expected sales and profits arising from adequate market share and an balanced price. Therefore, the research has to contain studies C, E, F, H and I, at a total cost of $9,050 (see appendix 1), well within the budget. With this information, Larry will have enough information to take actions in the right direction, whether it is to go for the distributorship or not. Addressing of the managerial problems Coors market share: This has to be determined in order to know if the brand is strong enough in the total market. Average market share for the last five years is equal to 8.8% (source: study C) which together with study E can give us Coors’ possible level of sales in gallons per year. Level of consumption in Delaware: Beer Taxes are used to know the number of gallons sold by wholesalers and therefore determine the level of consumption in the Delaware region. Study E provides this information, since it can be inferred from the table that sales are increasing every year. Gallonage can be easily obtained by dividing the Taxes paid by the Tax Rate (see Appendix 2). This enables us to calculate the average gallonage sold, which is equal to 799,944 gal. for 1987 and 850,000 for 1988. Coors’ possible market share would then be 8.8% of the average of these amounts, that is approximately 435,585 gallons per year in average for Coors’ wholesaler. Intention of the Retailers to sell Coors beer: Retailers’ interviews and questionnaires are needed to measure attitudes towards Coors beer as well as competing beers. From the table, some data can help us to have a better understanding. This information is given by the Retailer study. An impressive high percentage of retailers are certainly willing to sell it (around 90%). This could be due to two main points shown in Study H: • Coors is perceived as a Very Expensive beer, which would give the retailers a higher profit per gallon than any other brand, despite the fact that an ideal beer should be only somewhat expensive. • Coors beer is new to the zone. Taking into account that this is the only major difference between Coors and Budweiser, which has currently the highest sales’ level in the area, it is likely that it would be accepted by the consumers. This is seen from the perspective of the retailers. Sales If we assumed earlier that a Coors’ wholesaler will approximately sell 435,585 gallons per year, on average for, then we can calculate the number of kegs and 6-packs based on their respective units volumes (as seen in appendix 3). From that and the fact that we are told the volume of beer sold in 6-packs is 3 times greater than that of kegs’, we can make the estimation that Coors would sell 7,026 kegs and 604,980 6-packs, each year, while the whole market would annually sell 79,836 units of keg and 6,874,768 units of6-packs. Pricing and Revenues : Surveys F and I provides the necessary information to setup prices for wholesalers, and hence determine the potential revenues and break-even market share. Since Coors is perceived to be an expensive beer by the retailers, and despite this fact, most of them are certainly willing to sell it (as shown is study H), price can be fixed higher than most of the other brands. From study we get 4 different prices for the other brands sold in the market. Since we know that kegs are priced at 45% of the 6-packs’ price, it allows us to take the wholesale prices for a six-pack and transforming it into a gallon price (times 1.77), and then multiplying the result by 45% and the volume of keg, to get a keg price for each of the 4 six-pack’s prices. (see appendix 4). Knowing the estimated number of units to be sold by Coors for each of its products, we can now figure out it’s annual revenue which is ranging from $1.7 million at the lowest price to $2.5 million at the highest price. From study F we can derive the variable and fixed costs and the get the total contribution margins and profits for each price. Coors’ profits would range from $46,000 to $66,000. Contribution Margin/Unit and Break-Even Market Share: Sin...