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Antoine Sion

1. Situation Analysis (Whats happening in the marketplace?)

> Historic Lagunitas:

The beginning of beer in the United States begins in 1600 with imports, especially English brands.

Many independent breweries were born between 1600 and 1880, the year of prohibition.

The 21st amendment puts an end to prohibition.

After the prohibition, some brands take a considerable lead on the beer market such as the German
brands Miller Crooks and Anheuser Busch. The post-prohibition period is complex, a market in
reconstruction and complex, small brewers lacking a sufficient production capacity is ejected from
the market.

1976 marks a turning point for small brewers, they can now sell their beers directly on the spot,
which in a way changes the way they consume.

This is followed by the relatively difficult years of the 1980s, when market growth was around 1%.

It was in 1991 that the market was again buoyant, with growth of about 35%, and 58% in 1995, a
fruitful period for brewers.
It was during this period that Tony Magee decided to embark on the artisanal brewing of beer,
initially in his kitchen, but his wife chased him, which prompted him to settle in a more spacious
place and more appropriate.

He decides to call his Lagunitas beer (Lagunitas Brewings Company, Inc.), because of the name of the
town of origin, and even though he no longer lives in this city, he decides to keep the name, it is
indeed a name difficult to pronounce, and which remains at the head.

Magee begins to market its beer to restaurants and bars.

His company keeps growing, due to the demand that is increasing, and must therefore move to be
able to produce more.

In 1997, the brewing craft life a complicated period, indeed the number of independent brewery
decreases by 5% / year until 2003.

Magee could have been frightened, and tried to limit the gold costs of this unstable period, he saw a
real opportunity, cheap material, and a demand to fill.

In 1998, he sold half of his business for $ 650,000, to find a new place bigger and grow faster.

So, he buys a lot of second-hand equipment at low cost, to grow as quickly as possible and meet
demand.

From 2000 to 2008, he develops strategies to produce more without additional costs.

It is 35 states that are distributed in 2008.

Despite a constant renewal of machinery and production capacity that is steadily increasing, in 2010
the maximum production is reached (2008-2010: + 46% growth).

Magee decided to move to Chicago, one of the biggest markets, to open a larger warehouse, thereby
reducing (transportation) costs, being closer to its target market, and producing more.

It is a turn that marks the will of a national expansion, perhaps see an international expansion.

PESTEL
Political & Legal

Today, the beer industry continues to be subject to constantly changing alcohol consumption and
taxation policies, political lobbying for divergent market classification and anti-trust issues.

Alcohol Policies

Irresponsible consumption of alcohol can have detrimental effects on society, so there are
numerous social policies that exist to regulate the alcohol industry in general and the beer industry in
particular. Beer is unlike other consumer goods because it cannot be freely advertised, sold or
consumed. The beer industry players have to adhere to advertising norms that generally prescribe
the content and hours when beer advertisements can air to minimize instances of underage drinking.
America also has a three-tier alcohol control system that distinctly separates industry players into
manufacturers, wholesalers and retailers, and the former are not allowed to sell directly to the
public. There are also regulations on the days and time when alcohol can be sold, which affects the

beer industry. For example, most states limit Sunday sales of alcohol for consumption off-premises.

Taxation

The beer industry is a significant tax contributor because of its revenue-generating capacity in the
market. The tax code classifies brewers according to their size, defining those that produce up to two
million barrels per year as small brewers and any amount above that as a large brewer, although
taxes are paid on every barrel they produce. There have been initiatives to expand the classification
of small brewers to a ceiling of six million barrels per year and calls for the reduction of excise tax per
barrel, pitting large brewers against small brewers.

Political Lobbying

Since there are various policy and legislative concerns relating to the beer industry, political
lobbying is an integral part of the industry business. In 1920, political pressure groups that were
against the consumption of alcohol managed to lobby for and pass the 18th Amendment to the
Constitution and the Volstead Act, which prohibited the production and distribution of beverages
with more than one-and-a-half percent alcohol. Although the prohibition was repealed 13 years later
through the 21st Amendment, the situation is not much better today, and beer industry players still
should engage in intense lobbying to get Congress to pass favorable legislation. For example, small
brewers expend time and considerable financial resources lobbying for the passage of legislation to
qualify them for the excise tax discounts that are available to big brewers.

Anti-Trust Issues

The proliferation of craft beer that is not mass-produced has intensified competition in the beer
industry and brought about market shifts that Congress and regulatory agencies have to constantly
monitor to prevent the creation of monopolistic enterprises. Big brewers such as Anheuser-Busch
and MillerCoors largely dominate the American beer industry, while craft beers are just beginning to
take hold. However, declining sales numbers have led the large brewers to acquire smaller brands
which raises anti-trust concerns in the political debate, according to The New York Times.

Restrictions on drinking ages by governments across the world, coupled by even more strict
restrictions on the importation and sale of alcoholic products has effectively reduced beer sales.
Increased taxation on the industry has served to increase the prices of the beer products.

Economic
As we can see the growth of the beer brewing industry does not necessarily follow the course of the
current economy.

Moreover, alcohol, being a consumer good apart, suffers little financial crises.

Moreover, the growth of this sector has stabilized after 2005, growing between 6% and 12%.

The economic environment is therefore rather favorable, especially for American brands.

Social

-Government campaigns against excessive alcohol consumption have resulted into increased
awareness among the populations and markets about the negative effects of beer, which has in turn
led to reduced consumptions and sale

-Change societal perception of alcohol

Technology

Economy of Scale
Cost reduction

Increased technology in the brewing industry has led to the development of innovative techniques in
the maturation, manufacturing and packaging of products.
This has increased the quality of the products, prolonged expiry durations and perhaps most
crucially, reduced wastages that are associated with the production and distribution. Increased
efficiency leads to increased revenues and profitability.

Blee & Whittington (2010)


Environment

The beer brewing industry is a very polluting market, and it is wasting a lot of water.

Water and energy consumption being the two primary natural resource considerations.

Barley farming and beer production are the largest consumers of water.

Glass manufacturing, barley production, and malting make up more than three-quarters of the
upstream environmental impact of making beer

a half barrels of water to one barrel of beer wastewater

Transportation by truck to far-away markets carries a formidable environmental cost.

2. Problem Definition (What challenges is the business facing? Use SWOT Analysis)

Strengths

Strong Growth
Unique Quality
Unique Product
Promotional Niche (music)
Strong Management
Differentiation positioning
Strategic Brewery Locations
Loyalty Customers
Private Ownership
New Chicago Brewery Quadruples Capacity
Branding built on Magee

Weaknesses
Strong Growth, fast strategy and/or little-thought strategy
Cash Flow, most of cash if reinvest
Wastewater, environmental issues
Low Profit Margins, low/premium price
No Major Marketing, reposed principally on the image of Magee
Hard to Raise Capital Being a Private Company, no shareholders = no raise capital
Premium Price
Cannot Compete with Major Competitors for Festival deals
Branding built on Magee

Opportunities
Global Expansion, due to the globalization
Marketing TV, not use yet
Event Exposure, as sport event or art event
Loyalty programm
Strategic Partnership
Craft Beer is the Fastest Growing Beer Segment

Threats
2,403 Breweries in the U.S. in 2013 compared to 89 in the year 1980 intense competition,
tight market
Market Saturation
Water Supply, the fabrication of the beer depends of the quality of the water
Uncertain future, might be a crisis
Craft Beer might be a temporary trend

3. Development of Alternatives/Solutions

The choice of the city of Chicago is a good thing, in addition to increase the production capacity LBC
is approaching one of its biggest markets. However, it faces a greater challenge, how to continue its
expansion, overcome its image as a beer of music, and succeed in catching up with its biggest
competitors while continuing to keep its image of traditional beer.

And all this in an increasingly saturated market, anti-alcohol campaigns, and an opening to the world
that can bring a lot or on the contrary cause a lot of damage.
The values that Magee wants to convey are not necessarily in line with the objectives achieved and
to come a beer accessible to everyone and a craft beer, but with the objective of expanding and
conquering United States and the world, while keeping the hand on the company.

Despite a lack of long-term vision, a lack of marketing certain, LBC has been successful in its growth.

LBC must once again set its values, its will to expand and above all its strategy, which will provide a
longer-term vision and thus ensure a stable financial, marketing and production plan.

Another solution envisaged could also be a merger with another brand which would allow it to
accentuate their visibility outside the borders but also to gain market shares compared to its biggest
competitors. But also new knowledge that could improve the quality of beer, management, financial
stability and thus access markets not envisaged.

Restructuring of the company can also be envisaged, thus defining key positions, with the right
people in the right positions and not those who have seniority in the company.

Indeed, having experience in the company, knowing its history is good, but it should not allow access
to the key positions that more qualified people with a more "strategic" vision might have.

The restructuring of the company could also lead to the arrival of new investors and thus the arrival
of more capital.

The most important, no matter which strategy is used, is to provide financial stability and long-term
vision to the Magee company.

4. Evaluation of Alternatives and Recommendation to Management (State your


assumptions)

All the strategies discussed above have positive and negative points. However, if Magee wants to
retain the values it has been trying to convey since the start of its business, the best strategy seems
to be internal restructuring.

Indeed, this would allow to have a long-term vision with more competent people, advisers with a
global vision of the market and not just concentrated on Lagunitas.

While retaining their values externally and their production processes.


Indeed, there is a true loyalty of customers to LBC, who want to create a "sense of belonging" not
through his beer, so we must keep this and try to accentuate it, everything changed will not be
productive, it must be evolved.

Moreover, the fact that the brand image was built only on Magee can be dangerous, it means that an
accident in his private life can cause his company to fall.

Therefore, the restructuring of the company will also have to be accompanied by a reinforced
marketing plan and a long-term financial strategy.

5. Site references used

https://www.brewersassociation.org/category/insights/

http://www.xerfi-knowledge.com/

http://smallbusiness.chron.com/beer-industry-legal-political-factors-75952.html

https://beerandbrewing.com/dictionary/4eLmiwX9aV/environmental-issues/

http://www.brewersguardian.com/brewing-
features/international/heineken_unveils_green_targets.html/

http://www.newbelgium.com/files/shared/the-carbon-footprint-of-fat-tire-amber-ale-2008-public-
dist-rfs.pdf/

https://lagunitas.com/tags/history

https://en.wikipedia.org/wiki/Lagunitas_Brewing_Company

http://www.bayareacraftbeer.com/beer-news/the-history-of-lagunitas-brewing-company/

http://mashable.com/2015/03/08/lagunitas-beer-st-patricks-day-massacre/

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