Boston Beer Analysis

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Date: October 28, 2013 RE: CTM Exercise Four - Boston Beer ____________________________________________________________________________ I. Issue/Problem: Boston Beer was a very low budget start-up with expertise in only a specific area of overall 3 billion dollar beer industry. It competed against big players with vast amount of resources who produced variety of beers at competitive prices. A. Boston Beer was designing a company that to make a profit, had to sell beer at a 15% mark-up to other companies. 1. Beer in USA is almost a drink consumed regularly, hence consumers wouldn’t pay premium price very often just for the sake of better quality and taste. Due to frequent consumption everybody has reference price set in their mind to each product, quality and taste through which consumer derives the value of money paid to the bottle or can of beer. 2. This name in the beer market was new and also it was not an import, which would bring with them a certain cachet that allowed for the command of higher pricing. 3. Not only was it begging the higher price, it needed $20 a case just to break-even in a market where large distributors could run deals of 12 packs for $1.99 to compete. Mainly due to high transportation cost, packaging, government taxes and cost of contracting. 4. By already pricing higher than the competition brands it has little flexibility to raise it price when there is a tightening in barley and hop market. B. Boston beer did not leverage upon its existing beer business to expand to other kinds of beer. 1. Boston Beer had major sales in only the craft beer sector. It did not capitalize the other form of beer making. There were major players in industry that had resources to dominate any form of business 2. This micro brewing industry now had 3000 players including the biggest names like Anheuser-Busch

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