South Delaware Coors
What research should be conducted by Manson and Associates to allow Larry Brownlow to estimate the feasibility of a Coors beer distributorship in Delaware and why?
Would you recommend a go/ no go decision by Brownlow regarding his application and why/why not?
A. Strategic issues and problems
Larry Brownlow is considering whether or not to apply for the distributorship of Coors in South Delaware. Coors started as a small brewery back in 1873 and has since grown to become the 4th largest seller of beers in the country. Coors focuses on high quality beer which is well known both to its suppliers and to its consuming public.
Larry Brownlow is 29-year old and just completing his …show more content…
I have therefore used 77% as Cost of goods sold (COGS). Calculations for cost prices for bottles and cans equals US$ 5.00 (6.50x77%) and for kegs US$ 2.26 (2.93x77%).
The Break-even analysis shows that Larry most sell 216,635 gallons of beer to break-even or gain what is equal to a market share of 2.7%. With a forecasted market share for Coors beer of 8.7% the break-even target looks very promising.
In the Pro forma income statements below several values have been assumed for the pessimistic option:
• Market size of 6,361,200 gallons (Optimistic market size x 0.8).
• Market growth: 3.5% (based on the lowest growth year in Study X).
• Weighted price per gallon US$ 5.02 (based on selling at the lower prices of Miller, Miller Lite & Budweiser).
• Fixed cost per year assumed to be 20% higher than in the optimistic option.
• Estimated firm market share assumed to be 7.0% per year.
The previous analysis indicates a positive case for Larry Brownlow. Both the optimistic and the pessimistic options show that Larry will be making a good investment. First year income after tax shows US$ 410,445 in the optimistic option and US$ 120,684 in the pessimistic option. The market share break-even of 2.7% against a forecasted 8.7% is also a very comfortable margin to base the investment on and the timing of Larry’s trust and MBA graduation all adds to the overall positive view. It is therefore my recommendation that Larry sends his application for the Coors