Mystic Monk Coffee: Case Study
BUS5480: Strategic Management
Uchena Nwabueze (Professor)
March 17, 2013
The Carmelite Monks of Wyoming are a religious order of the Catholic Church, founded by Father Daniel. Father Daniel Mary has a vision of moving the monastery from the current small makeshift home to a 500-acre Irma Lake Ranch capable of housing up to 30 monks, a Covent, a retreat center, and a hermitage. The current price of the Irma Lake Ranch is listed as $8.9 million, which presents a considerable financial obstacle in this pursuit. The Carmelites Monks of Wyoming currently run a coffee business called Mystic Monk Coffee (MMC). Father Daniel Mary, while looking at the financial capabilities of the monastery, is evaluating the possibility of achieving the Monastery’s strategic goal with current resources. This is a relatively large leap – compared to the current 4-bedroom range style home, which currently houses only 13 monks. Father Daniel Mary, who lacks the business experience, is considering to what extent the Carmelites can rely on the Mystic Monk Coffee operations to fund the remaining balance of the Irma Lake Ranch purchase. Our recommendations take into account the following considerations: • The received donation of $250,000 and current plea for additional funds. • The capacity and profit potential of the current roaster. • The capacity and profit potential along with ROI of upgrading to the larger roaster. • The market potential for sales and growth.
• The time constraints resulting from the strict Carmelite schedule and routine. • The needed $445,000 down payment (assuming 5%) on a negotiated $8.5 million purchase price and the $40,365 monthly mortgage payment on a 30yr loan at 4% rate. Our research provided some possible scenarios that will guide our recommendation: • Invest in the new roaster which will increase ability to double capacity of production. • Reduce the sales price to $8.00 per bag to entice additional sales and increase market share. • Relax the cloistered monastic restraints to boost daily production hours from 6 to 8 day. • Review packaging process and materials to reduce cost of goods sold. • Continue fundraising activities to secure additional revenue. The Group A recommendation for Father Daniel Mary is to pursue with the purchase of the Irma Lake Ranch. The following synopsis and strategic analysis will portray the key activities and positioning required to sustain the purchase of the property and Mystic Monk Coffee operation. SYNOPSIS
The Carmelite order of catholic monks under the direction of father Daniel Marry are looking to purchase a larger facility in the form of a ranch near the Rocky Mountains. This ranch would cost $8.9 million. Current operations at Mystic Monk’s coffee generate revenues averaging $56,500 per month. At the current 11% net profit margin, this interprets to $74,580 in annual profits. At this rate, it would take at least two and a half years to raise the funds needed to make the down payment – taking into consideration the $250,000 in donations. Thereafter, the monastery would require at least $34,150 in monthly donations from the fund set up by the local business owners in addition to the $6,215 in monthly income to make their $40,365 monthly note. In essences without improved sales from MMC, the New Mount Carmel project would not be possible to achieve. One strategic issue that is apparent is the daily schedule that the Carmelite monks follow is not business friendly as it restricts the number of working hours to six. The monks must find a way to possibly increase production while still adhering to the restrictive schedule of living in the monastery or relax the schedule to allow for more time for coffee operations. Another issue is the profit margin....
References: IRS, (n.d.). Tax guide for churches and religious organizations. Retrieved from website: http://www.irs.gov/pub/irs-pdf/p1828.pdf
Thompson, A. A., Peteraf, M.A., Gamble, J.E., & Strickland, A.J. (2012). Crafting & Executing Strategy: The Quest for Competitive Advantage, Concepts and Cases (18th ed.). New York, NY: McGraw-Hill/Irwin.
 Figure gotten from 2010 coffee bag estimate of $0.45 and added inflation at 8% for 2 years
Please join StudyMode to read the full document