New Century Brewing:

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New Century Brewing
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Brief Case Summary

• New Century Brewing founded in 2000 by Rhonda
  Kallman
• Two products Edison, a premium light beer and
  Moonshot, a caffeinated beer
• Moonshot was launched in 2004, as a light
  pilsner with 45 mg of caffeine
• Marketed toward 21 to 25-year-old with disposable
  income, promoted in nightclubs and bars
• Moonshot was re-launched in 2005 with a new image
  and 69 mg of caffeine

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Brief Case Summary Cont

• Three large international brewers released their
  own caffeinated brands
• Anheuser-Buschs BE had non-beer flavor that beer
  drinkers found repulsive
• Campaigns were soon launched outlining health
  risks of mixing alcohol and caffeine
• With no capital and no advertising, the companys
  limited resources were devoted to Moonshot
• To be successful, Kallman would need to increase
  awareness of product and overcome consumer
  resistance

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Video

• http//www.youtube.com/watch?viySSjJ1g0B4eurl

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Questions

• Has anyone tried rum and Coke?
• Has anyone tried Red Bull and vodka?
• Has anyone tried caffeinated beer?
• What did you think of it?
• Would you be interested in trying it?
• Who is the target market?

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Industry Analysis

• Beer is a mature market
• Generic sales remained flat in 2005
• Craft beer sales growing at 7 a year
• Low-carb diets influence trends (Atkins)
• Most growth is in low-carb beers
• Customer preferences shifting towards locally
  brewed beers

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Industry Analysis

• Most other caffeinated beers contain coffee and
  are dark
• Moonshot is a unique light bodied pilsner
• It has value because it is different than
  competition
• Strong threat of substitution from other
  beverages
• Strong threat of new entrants due to growing
  craft beer market

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Industry Analysis

• Exit barriers relatively low due to lack of
  capital and investment
• Strong buyer power due to Moonshots need for
  exposure
• Supplier power relatively weak due to size of
  business
• No complement exclusivity, however
  product/service within restaurant/bar industry
  are applicable

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Strategic Positioning

• Refers to the ways managers situate a firm
  relative to its rivals along important
  competitive dimensions
• Purpose is to reduce the effects of rivalry
  improve profitability
• Firms choice of position depends upon
• Firm resources capabilities
• Industry structure

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Strategic Positioning Model
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Class Exercise

• What strategic position has New Century Brewing
  taken with respect to Moonshot?
• What are the drivers of this strategic position?
• What are the threats to this strategic position?
• Is this strategy attractive for New Century
  brewing?

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What strategic position has New Century Brewing
taken with respect to Moonshot?

• Focused Differentiation
• Unique product of a high quality caffeinated
  light-bodied pilsner manufactured under a
  patented process
• targeted toward a small segment of the beer
  market 21-25 year olds with disposable income

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Drivers/Threats of Focused Differentiation

• Drivers
• Premium brand image
• Unique styling
• Unusually high quality

• Threats
• Failing to increase buyers willingness to pay
  higher prices
• Underestimating costs of differentiation
• Overfulfilling buyers needs
• Lower-cost imitation

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An Attractive Strategy?

• Target market is not big enough to be profitable
  and offers little growth potential
• Industry leaders already have a presence in the
  niche
• Multi-segment competitors can easily put
  capabilities in place to meet needs of the niche
  mainstream customers at minimum cost
• Few niches available within industry

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An Attractive Strategy?

• Little room for focusers to avoid each other in
  competing for same customers
• Other rivals are attempting to specialize in the
  same target market-segment leading to
  overcrowding
• New century cannot compete effectively against
  challengers goodwill has not been built up
• Preferences needs of the niche shift over time
• Differentiating on the basis of something that
  does not enhance a buyers well-being or
  perceived value

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• Case Questions

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1 How can New Century Brewing create more brand
awareness

• Packaging the product needs to stand out in
  todays competitive marketplace
• Logo an icon, logotype and colour palette
• Target a different market, e.g.
  college/university students
• Promotion
• Rename

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1 How can Moonshot differentiate itself from
other caffeinated beverages?

• Unique taste
• Quality manufacturing
• Top-of-the-line image and reputation
• This differentiation can be created through
  product RD and marketing, and sales.

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2 What are the Opportunities and Threats of
Caffeinated Beer?

• Opportunities
• Energy drinks are already popular mixers in night
  clubs
• Energy drinks are one of the fastest growing
  beverage categories
• 2004 energy drink revenues grew to 2 billion
• 2004 more then 200 energy drinks were sold in
  the US alone
• There is not much innovation in the beer
  industry. This is something NEW (Kallman)

• Threats
• Energy drinks known to taste bad and are
  expensive
• BE received bad reviews
• Health Risks
• MADD Campaign
• The beer gives a false impression it will keep
  drivers awake enough to drive drunk
• Canadian caffeinated brands taste like real lager
  beer
• Target market has little brand loyalty

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• Survey

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3 What Strategic Alternatives will help sell
Moonshot to a wider range of customers?

• Re-Launch Moonshot
• Rename (Moonshot ? Moonshine?)
• Change the Label
• Target high energy night clubs (Raves and
  after hours bars)
• Focus more on women
• Sponsor Parties, Collage events, Taste Tests in
  Stores, Consumer Labels, Beer caps
• Diversify the product line
• Create other products such as ciders and teas

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4 Is Caffeinated beer just a fad?

• Energy drink market is still growing
• Micro brewing industry is growing
• Caffeinated beer is a newer idea than energy
  drinks, therefore they have more room to grow
• Rum and Coke! Combination of alcohol and caffeine
  has been around forever.