Case Critique: Black Fly Beverage Company Inc( Richard Ivey School of Business, University of Western Ontatio
Case Critique: BLACK FLY BEVERAGE COMPANY INC
Black fly is enjoying a comfortable growth, their product has been well received by consumers and they have also benefited from positive feedback from the media. Now would then be a very good time to undertake an expansion as the company would take advantage of the momentum and exposure it currently has to introduce new products or features to the market. Let’s evaluate the different options available to Black fly.
First Alternative: Launching a new Flavour:
Launching a new flavour of an existing product has been the most common expansion initiative taken by companies in the food and beverage industry. It is a conservative approach as it usually does no require a significant investment mostly because it benefits from economies of scale and often does not require any new equipment for the production as it is the case with Black fly beverages. Furthermore the company currently has enough capacity from a production perspective to support the expansion.
However the main risk, as it was assessed by the company, is that the new flavour may “cannibalize the original recipe” and will not result in an increase of market share but rather split sales between the products. The flavour is less likely to attract consumers and could only be an additional option to existing customers allowing them to choose or switch between flavours which does not increase revenues but rather keeps them steady. Also, if we take in consideration the psychological buying process of consumers it has not been proven that consumers are more likely to purchase a product because it offers more than one flavour nor does it help a consumer revisit his choice if he did not like the product in the first place.
Second Initiative: Creating a new product line ‘Spiked Ice”
The spiked ice is an innovative idea, a first in its kind to be introduced to the wine and spirit marketplace and like any new idea it is important to establish that
Black fly is enjoying a comfortable growth, their product has been well received by consumers and they have also benefited from positive feedback from the media. Now would then be a very good time to undertake an expansion as the company would take advantage of the momentum and exposure it currently has to introduce new products or features to the market. Let’s evaluate the different options available to Black fly.
First Alternative: Launching a new Flavour:
Launching a new flavour of an existing product has been the most common expansion initiative taken by companies in the food and beverage industry. It is a conservative approach as it usually does no require a significant investment mostly because it benefits from economies of scale and often does not require any new equipment for the production as it is the case with Black fly beverages. Furthermore the company currently has enough capacity from a production perspective to support the expansion.
However the main risk, as it was assessed by the company, is that the new flavour may “cannibalize the original recipe” and will not result in an increase of market share but rather split sales between the products. The flavour is less likely to attract consumers and could only be an additional option to existing customers allowing them to choose or switch between flavours which does not increase revenues but rather keeps them steady. Also, if we take in consideration the psychological buying process of consumers it has not been proven that consumers are more likely to purchase a product because it offers more than one flavour nor does it help a consumer revisit his choice if he did not like the product in the first place.
Second Initiative: Creating a new product line ‘Spiked Ice”
The spiked ice is an innovative idea, a first in its kind to be introduced to the wine and spirit marketplace and like any new idea it is important to establish that