South Delaware Coors

Topics: Costs, Variable cost, Fixed cost Pages: 5 (1256 words) Published: June 15, 2011

Based on our analysis of the South Delaware Coors Wholesale Distributorship opportunity, we recommend proceeding with the application process for the following reasons: 1.The expansion of Coors Inc. into southern Delaware fills a market void that is normally supplied by the fourth largest brewery in the United States. 2.The break-even analysis which indicates a considerable positive difference between the figures required to reach the break-even point for the South Delaware Coors Wholesale Distributorship and the figures possible based on the predicted percentage of market shares for Coors Inc. nationally. 3.The sensitivity analysis illustrates that investment in the South Delaware Coors Wholesale Distributorship would be able to be profitable under several types of negative scenarios. Basis for Recommendation

Our recommendation to pursue the South Delaware Coors opportunity is supported by the three following reasons: 1.Coors brewing company produces a high quality produce and fills a void within the South Delaware market. The venture provides a unique opportunity to introduce this product and to expand throughout the market area. Market research indicates that Coors would be very well received within the market area and would prove to be an exciting opportunity for investment. 2.The Break Even Analysis which indicates a break-even point of 305,000 gallons, which is 5.98% of the total beer market within our two county market area, a market share which is significantly lower than Coors Inc. current national market share average of 8.8%. Achieving a market share consistent with the Coors Inc. national average would make Mr. Brownlow’s return on investment equal 38.2% 3.The Sensitivity Analysis explored the overall increase of fixed costs, the need to increase/decrease the cost of a six-pack and an increase in the interest rate. Overall fixed costs could be increased by 33.77%, the price of a six-pack of beer could be reduced to $2.21 and the interest rate could be raised to 46.75%.


Coors, which has become the fourth largest seller of beer in the country, has announced an opportunity to expand and start a distributorship for a two-county area in southern Delaware. Nationally, Coors has a consistent projected market share of 8.7-8.9% for the years of 1990 through 1995.

Estimates that have been obtained determine that the initial investment for a Coors’ distributorship is $800,000 with annual fixed expenses of $236,000. Next year, the prospective owner Larry Brownlow will receive the full amount of $500,000 which has been held in trust by his family. A local banker has approved a $400,000 line of credit for Larry, and an additional $400,000 might be available from other family resources. While break even analysis is critical in evaluating this franchise, the other factors that require consideration are: industry demand, competition, market size, market share/volume, pricing, costs (both variable and fixed) and of course, risk.


Studies C, E, F & I from Manson & Associates will be utilized in determining the feasibility in pursuing the South Delaware Coors distribution opportunity with a total cost of $4,249.50. •Initial Costs estimated by Brownlow include Inventory, Equipment, Warehouse and Land purchases totaling $800,000. •Relevant Fixed Costs include

Fixed Costs
Utilities $12,000
Insurance $10,000
Personal Tax $10,000
Maintenance $5,600
Miscellaneous $2,400

Salaries $160,000

Travel $10,000
Advertising $10,000
Bonuses $16,000

Total $236,000

oTravel totaling $10,000 was estimated to cover a trip to a trade expo, a corporate meeting and various local courtesy visits oAdvertising totaling $10,000 was estimated to be able to follow corporate ad campaigns oBonuses totaling up to 10% of salaries or $16,000 was estimated as the maximum bonus that would be dispersed.

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