New Century Brewing:

1. New Century Brewing:

2. 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

3. Brief Case Summary Cont… • Three large international brewers released their own caffeinated brands • Anheuser-Busch’s 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 company’s limited resources were devoted to Moonshot • To be successful, Kallman would need to increase awareness of product and overcome consumer resistance

4. Video • http://www.youtube.com/watch?v=iySSjJ1g0B4&eurl=

5. 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?

6. 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

7. 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

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

9. 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 • Firm’s choice of position depends upon: • Firm resources & capabilities • Industry structure

10. Strategic Positioning Model

11. 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?

12. 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

13. Drivers Premium brand image Unique styling Unusually high quality Threats Failing to increase buyer’s willingness to pay higher prices Underestimating costs of differentiation Overfulfilling buyer’s needs Lower-cost imitation Drivers/Threats of Focused Differentiation

14. 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

15. 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 buyer’s well-being or perceived value

16. Case Questions

17. #1: How can New Century Brewing create more brand awareness • Packaging: the product needs to stand out in today’s competitive marketplace • Logo: an icon, logotype and colour palette • Target a different market, e.g. college/university students • Promotion • Rename

18. #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 R&D and marketing, and sales.

19. 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 #2: What are the Opportunities and Threats of Caffeinated Beer?

20. Survey

21. #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 (“Rave’s” 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

22. #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.