Running Head: HEMRLICK BREWING CASE STUDY
Hemrlick Brewing Case Study: Choice of Distributor
Hamrlick Brewing had been operating at a loss since the introduction of its critically acclaimed Saxonbrau beer two years ago. The company faced an urgency to increase revenue from sales and break even. It considered selling the Saxonbrau beer through distributors, as a marketing strategy to bring about profitability and increase Saxonbrau’s branding as a super premium beer. To do so, Hamrlick Brewing had to first determine if there was a distribution agreement that would meet its needs, otherwise it could continue distributing its products by itself. Hamrlick Brewing considered different distribution agreements from distributors Kalagwine Corp, Bistwells and Hansrife Beverages, and included the option of continuing direct distribution of its products. Each of these options had different strengths and weaknesses in their abilities to improve the revenue of Saxonbrau beer.
After analysing the strengths and weaknesses of the four options, Bistwell provided the best fit in meeting Hamrlick Brewing’s needs to promote the Saxonbrau brand, maximise the value of Saxonbrau beer, and optimise the company’s retail structure.
By branding Saxonbrau as a “super premium” or an “import and specialty” beer were, Hamrlick Brewing could be certain that the demand for its beer would increase. Sales of the “super premium” and the “import and specialty” beer segments had been projected to grow by 15% in 2011. Also, the market size of this segment was worth $7.6 billion in 2010, with no single brewery dominating the market space. Also, since Hamrlick Brewing aimed to increase Saxonbrau beer’s sales and revenue, and given the limited production capacity, Hamrlick Brewing could aim to sell Saxonbrau at the highest possible price possible. As a result, Hamrlick Brewing
may not want offer attractive price competitiveness, and so it would need to differentiate Saxonbrau in terms of branding.
If Saxonbrau were to be continually positioned as “super premium” or “import and specialty”, it would command a higher price premium, since consumers in the super premium beer category are less price sensitive and are willingly to pay more for quality. In addition, Saxonbrau’s current 61% brand loyalty is also higher than the industry average of 41%. This would differentiate Saxonbrau beer further, and protect it from price competition.
Hamrlick had to avoid the situations where Saxonbrau may be positioned to compete as a “premium” or “popular” beer, even though the demand for these beers was generally higher. If Saxonbrau was marketed and priced in the “premium” or “popular” segment, it would face very intense competition in terms of branding and pricing. Beer brands in this segment are not highly differentiated from another. Also, customers consuming beer of this segment are relatively price sensitive and tend to make purchasing decisions based mainly on price. Large brewers like SAB Miller could afford to compete on price, but not Hamrlick Brewing, as it did not have the cost structure advantage to do so. If it insisted on offering competitive prices, it would run into even deeper losses and may be forced to shut down, as shown in its income statement (Exhibit 1).
Of the three distributors, Bistwell intended and was most able to position Saxonbrau within the “super premium” beer category in the Chicago market, given its previous success in developing the market for super-premium beers. This is in line with Hamrlick’s intentions for Saxonbrau’s branding. Hamrlick Brewing could also be assumed to be able to provide for appropriate branding. However, Hansrife Beverages’ marketing strategy intended to position Saxonbrau within the premium
beer category in the Chicago market, which would do more harm than good to Saxonbrau’s sales. In addition,...