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Big Sky Brewing Company has been in expansion mode. They are in need of huge financing.

BSBC tied up with Montana Business Capital Corporation(MBCC). MBCC is a Boutique Investment Firm. Mr. Swenson of MBCC is working on this proposal. Lack of an organized report denied them the loan approval from USDA.  However, the company is confident of getting it with little more efforts.  Currently, they are planning to showcase a more organized report to convince the USDA about feasibility on their expansion plan.

     

 BSBC is a craft brewing company  Located in Missoula, Montana  Sales of $729309 growth of 57% over the past year.  Need of Capital for expansion for In house bottling capacity  MBCC a boutique investment firm for raising capital through USDA  BSBC signed a contract with Portland Brewing Company(PBC)  Excess capacity to meet BSBC needs.  First 10 month of contract bottled beer surpassed draft sales by 10%  Unable to meet the demand during the months of June, July and August.  BSBC vast majority of sales came from 4 brands  Moose Drool Brown Ale, Scape Goat Plae Ale, Powder Hound Winter Ale, and Slow Elk Oatmeat Stout.  97% of beer sales through 4 brand of which 80% was accpunted nearly by Moose Drool.

 BSBC was founded in 1993 producing and selling craft brewed ales.  Largest brewery in the Northern Rockies region.  Strong sales growth rates of 52% in 1997, 30% in 1998, 18% in 1999 and 57% in 2000.  Main brewery and distribution center near Orange Street Bridge in downtown Missoula, Montana.  Change in the product mix sales. ( 44% keg beer to 28% , 55% bottled beer to 70% and 1% taproom beer to 2%)  BSBC generated revenue through sales of branded merchandise.  Sold more merchandise than craft brewery  Acted as a advertisement - T- shirts, drinking glass and hat.  Sold $380000 of merchandise and generated $ 2 million in gross revenue.

 BSBC signed a contract with Portland Brewing Company(PBC)  Excess capacity to meet BSBC needs.  First 10 month of contract bottled beer surpassed draft sales by 10%  Unable to meet the demand during the months of June, July and August.  BSBC vast majority of sales came from 4 brands  Moose Drool Brown Ale, Scape Goat Pale Ale, Powder Hound Winter Ale, and Slow Elk Oatmeat Stout.  97% of beer sales through 4 brand of which 80% was accpunted nearly by Moose Drool.

 $83 million in 2000 estimated to grow by 1% annually till 2003  Four industry segment  National Breweries  Import Breweries  Regional Breweries  Microbreweries.

 4 largest National breweries accounted for 87% of beer in US. They are Anheuser Busch, Miller, Coors and Pabst  Profits realized by using  Inexpensive ingredients, Large stock of purchase, Production  Distribution economies of scales.  Imported beer were consider as  Premium , high quality ingredients, variety of styles and flavor.  Priced at double the rate of National breweries  Regional breweries were small, local, geographic region.  15000 to 2 million barrel brewing capacity  Profits through sales of large quantities of inexpensive beer.  Micro Breweries is a truly local product.  <15000 barrel , using top quality ingredients  Quality similar to Imported beers( advantage being of fresh) .  Flexibility in production of variety of beer styles.

 Craft Brewing Industry  Both microbreweries and regional breweries  High Quality and favorable beers  48% market share in US  Rapid sales growth of 30 to 50% per year from 1990-94  Contract brewing companies provide bottling and brewing facilities  Enough capital expenditure for facilities and equipment  On site by brewpubs and sold as draft beers.  3 tier system of structure.  Brewers to Distributors  Distributors to individual or chain of retail outlets  Retail outlets to consumer.  Distributors High sales of volume of brands ( Portfolio of brands)  Retailers High sales volume ( Shelf space and low margin)  Consumer - On premise consumer and Off premise consumer  On premise consumer Draft beers, Taste and quality great concern.  Off premise consumer Image as an important factor.

 BSBC constraint growth due to contract forced them for expansion  Bottling every three weeks , minimum order size of 1750 cases.  Lead times for orders 6 weeks, Net 20 payment terms  Total capacity 34000 barrels  BSBC operation after expansion  Bottling every weeks, 450 cases, 2 week or less  Net 30 payment terms , total capacity of 100000 barrels.

 BSBCS contract with PBC offered certain constraints to their growth, such as following :  Bottling every three weeks , minimum order size of 1750 cases.  Lead times for orders 6 weeks, Net 20 payment terms  Total capacity 34000 barrels

Due to above constraints , BSBC thought about organizing an In House Bottling facility. This would help them in following ways:  BSBC operation can expand.  They can plan for bigger orders at a time.  Bottling every weeks, 450 cases, 2 week or less  Net 30 payment terms , total capacity of 100000 barrels.  Unlike before , there would be no travelling expenses for the Team Managers

If they go for In House Bottling:


Parameter Bottling Minimum size orders Lead time for orders Payment terms Total Capacity Current Operations Every three weeks 1750 cases 6 weeks Net 20 on all orders 34,000 barrels Operations after expansion Every week 450 cases 2 weeks or less Net 30 is standard Up to 100,000 barrels

In home state, following competitors: Bayern Deschutes New Belgium In western Washington, following competitors: Redhook Pyramid Full Sail

In the home state, New Belgiums Brewing Fat Tire Ale was a major threat in 1999. But in 2000, BSBC beer outsold the New Belgium comfortably. In Washington market, BSBC ranked among top 20 craft brewers in 2000. Drool was the flagship brand of BSBC.

Retail prices per 6 pack


Brand Big Sky Alaskan Bayern Deschutes New Belgium Pyramid Windmer Sierra Price in dollar 6.49 7.6 6 6.1 6.1 6.8 5.8 5.8

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