...Barndt aul Shipman, Chief Executive Officer of Redhook Ale Brewery, knew that he needed to reevaluate his strategy and its execution. Redhook's rapid growth had ended shortly after it invested in a major increase in production capacity. Operating at about 50% of production capacity, the company suffered a net loss in 1997 that continued into 1998. Redhook brewed only specialty beer, referred to as craft beer. Craft beer is a more flavorful, fuller bodied premium beer. follows traditional old world brewing methods. and uses high-quality materials. The company started as a microbrewery but grew continually and reached national status by the end of 1996. Shipman, one of Redhook's founders, had guided the company from a small player in one city to a leading position as a national competitor and aimed at dominating the craft beer segment of the domestic beer industry. The company's three small-batch breweries. two in the Pacific Northwest and one in the Northeast, had a combined design capacity of 575.000 barrels (each containing 31 gallons) per year of Redhook branded beer to tap a growing market for craft beer. However, growth in the craft beer market attracted attention, and competition grew from other microbreweries, brewpubs, regional specialty brewers, and from large mass-market brewers. With increased competition, 1996 saw the beginning of a downturn with a reduction in sal•• ~and profitability. P I Ccmpany History Redhook was started in 1981 by Paul Shipman, with additional...
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...Hook Situation: Redhook began in Seattle producing European-style beer with high quality equipment and ingredients. Brewing was initially packed in 15.5 gallon kegs and sold to local taverns and restaurants. Redhook began to expand further in the mid 1980’s and acquired a new brewing facility in 1989 and another in 1994 with a capacity of 60,000 barrels per year. In 1994 Redhook distributed its products through Anheuser-Busch and by 1998 Redhook was available in 48 states. Redhook experiences a great deal of competition through import, national, and craft beers. The brewing industry in the U.S. is also regulated in areas such as product safety, quality, and environmental protection. The market also suffers from high product substitutability. Redhook production has gradually increased from 1991 to 1996 as well as the amount of barrels shipped. Problem or Potential Problem: Redhook does not have enough gross sales to justify its current expenses. As Redhook has increased its production and ability to produce, its costs have increased; however, income hasn’t increased in correlation with the increases in production capacity. Redhook purchased fixed assets with cash on hand and has yet to realize a productive return on that investment. Unfortunately there has also been a decrease in sales of Redhook beers. The growth of Redhook does not correspond to its current market conditions and is pushing Redhook into an ever tougher situation. Causes: Redhook has overestimated its...
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...University of New Hampshire University of New Hampshire Scholars' Repository Honors Theses Student Scholarship Spring 2012 Microbrewing in the US: An overview of the microbrewery industry and a business plan for future success Kevin Lapoint University of New Hampshire - Main Campus Follow this and additional works at: http://scholars.unh.edu/honors Part of the Entrepreneurial and Small Business Operations Commons Recommended Citation Lapoint, Kevin, "Microbrewing in the US: An overview of the microbrewery industry and a business plan for future success" (2012). Honors Theses. Paper 9. This Senior Honors Thesis is brought to you for free and open access by the Student Scholarship at University of New Hampshire Scholars' Repository. It has been accepted for inclusion in Honors Theses by an authorized administrator of University of New Hampshire Scholars' Repository. For more information, please contact scholarly.communication@unh.edu. Microbrewing in the US An Overview of the Microbrewery Industry and a Business Plan for Future Success Kevin Lapoint Business Administration, Finance and Management Whittemore School of Business & Economics Kpe8@unh.edu (603) 988-3438 Advisor: Prof. Fiona Wilson Whittemore School of Business & Economics 5/5/2012 Kevin Lapoint Microbrewing in the US Acknowledgements I would like to thank my brother Douglas, my mother and father, and especially my brother Richard. Without their support, edits, and...
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...Case: Boston Beer Company Address the following questions in a 4-5 page write-up of the Boston Beer Company Case to explore the issue of Initial Public Offerings. 1) What do you think of Boston Beer’s business model relative to the traditional beer companies’ business model? Relative to Redhook and Pete’s? (Hint: consider their brewing, production, distribution, marketing strategies. How is each firm attempting to achieve its own sustainable comparative advantage in the market place?) 2) Evaluate Boston Beer’s performance relative to its peers (Compare BBC's ratios to the ratios of its peers in exhibit 4). (Hint: how do differences in operating strategies translate into differences in financial ratios? Are there any downside risks to BBC's contract brewing strategy?) 3) What is your assessment of the intrinsic value of Boston Beer’s stock at the time of the case? What should be its IPO price? (Some hints below: First, you should look at the P/E multiples for Pete's and Redhook around the IPO time for BBC. You should also look at the average amount the price seems to jump on the day of the IPO, and the EPS of BBC for 1994 and 1995. From this, you should figure out what the implied price per share for BBC should be in this market environment. Second, you should try to justify this price per share by doing FCF analysis. Create a ten year pro-forma spreadsheet, projecting out barrels of beer each year, revenue per barrel, revenue...
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...IPO Pricing for Boston Beer Company Inc. Case Summary We address the following key questions regarding Boston Beer Company (BBC) to explore the issues surrounding its Initial Public Offering. First of all, we determine the fair value of BBC to be $211 million based on a DCF valuation of projected future cash flows and explain our key assumptions and potential problems arising from those assumptions. Second, we find BBC’s fair value to be $314 million by relative valuation and discuss how differences in operating strategies might translate into differences in financial ratios. Third, we determine BBC’s IPO price to be $15 per share. Finally, we look at the craft brewer industry as a whole and we find that it may be overvalued by the market. PART I: DCF Valuation In our intrinsic valuation approach, Boston Beer Company’s future free cash flows of the next ten years are projected in the spreadsheet. Present value of the company at the end of 1995 is calculated by discounting ten year’s free cash flows and terminal value by weighted average cost of capital. As we can see from the spreadsheet, the company fair value is $210.78 million. Subtracting the debt level of $1.95 million, the equity value is therefore $208.83 million. Appendix 1 includes the full valuation model we used. The key assumptions we made and the calculation methods we used are listed as follows: BBC’s annual sales growth rates from 1992 to 1994 are 63.55%, 60.14% and 48.84% respectively...
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...IPO Pricing for Boston Beer Company Inc. Case Summary We address the following key questions regarding Boston Beer Company (BBC) to explore the issues surrounding its Initial Public Offering. First of all, we determine the fair value of BBC to be $211 million based on a DCF valuation of projected future cash flows and explain our key assumptions and potential problems arising from those assumptions. Second, we find BBC’s fair value to be $314 million by relative valuation and discuss how differences in operating strategies might translate into differences in financial ratios. Third, we determine BBC’s IPO price to be $15 per share. Finally, we look at the craft brewer industry as a whole and we find that it may be overvalued by the market. PART I: DCF Valuation In our intrinsic valuation approach, Boston Beer Company’s future free cash flows of the next ten years are projected in the spreadsheet. Present value of the company at the end of 1995 is calculated by discounting ten year’s free cash flows and terminal value by weighted average cost of capital. As we can see from the spreadsheet, the company fair value is $210.78 million. Subtracting the debt level of $1.95 million, the equity value is therefore $208.83 million. Appendix 1 includes the full valuation model we used. The key assumptions we made and the calculation methods we used are listed as follows: BBC’s annual sales growth rates from 1992 to 1994 are 63.55%, 60.14% and 48.84% respectively. The unaudited...
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...Boston Beer Company- Case Analysis You are the investment banker assigned with the task of setting the IPO price for Boston Beer Company (BBC). Prepare a research report to support your recommendation. As you prepare this report, you may find that you would like to have more field information than what the case offers you. However, the case contains critical information that gives you a reasonable basis to compute its valuation. In addition use the following information for 1995.1 Sales ($ millions) Redhook Pete’s BBC 25.89 59.17 151.31 EPS .75 .25 .40 Book value/share 7.70 4.33 3.00 Price 27.00 24.75 ? Also, use the following information for BBC for 1996. Make additional assumptions as necessary (and state any additional assumptions) to compute free cash flows for subsequent years: 1. The ratio of Net profit before taxes to sales is 12%. 2. Tax rate is 35% 3. For every dollar of increased sales BBC will increase working capital by 15% (or working capital will increase by $0.15 for every dollar of increased sales) 4. Capex is 2% of sales 5. Depreciation is 2% of sales 6. BBC’s beta is 1.2. Use BBC’s cost of equity as its WACC since its debt is a trivial part of its capital structure. 7. Analysts’ growth forecast for BBC and for the craft brewing segment in general is 30% per year over the next five years. Present the following: 1. Overview of the industry – competitive landscape, expected short-term and longterm industry growth, key players in the industry. Summarize the key...
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...Boston Beer Company Performance and Competition Boston Beer’s sales performance triumphs over its leading two competitors, Redhook Ale Brewery and Pete’s Brewing Company. As seen in the table (appendix 1), BBC achieved net sales of $114,833,000 in the year ending 31 December 1994. This was a growth of 48.84% from the previous year, compared to Redhook’s 30% growth in net sales to $14,929,000 and Pete’s striking growth of 152.02% to net sales of $30,837,000. Pete’s impressive growth in net sales is evidently the greatest by far, however it does not compare as its net sales is only 26.84% of BBC’s. BBC utilises contract brewing for its beer production. This was a central part of BBC’s company strategy as it allowed excess capacity among the larger brewers in the beer industry and the permit to strategically select breweries based on geographic location, thus lowering transportation costs. Operating as a contract brewer meant the company incurred lower capital and overhead costs resulting in higher gross margins. This is evident in BBC’s gross profit/net sales of 53.98% in the year ending 31 Dec 1994, compared to Pete’s gross profit margin of 45.20% and Redhook’s 41.82%. Like BBC, Pete’s also operated as a contract brewer, whereas Redhook owned and operated its own breweries. This required greater capital expenditure and increased fixed assets, resulting in a lower asset turnover. We can see this from Redhook’s net sales/ average assets of 0.55 in the year ending 31 Dec 1994...
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...CRAFT BREWERS ALLIANCE, INC. 2010 Annual Report UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2010 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to ______________ Commission File Number 0-26542 CRAFT BREWERS ALLIANCE, INC. (Exact name of registrant as specified in its charter) Washington (State of incorporation) 929 North Russell Street Portland, Oregon (Address of principal executive offices) 91-1141254 (I.R.S. Employer Identification Number) 97227-1733 (Zip Code) (503) 331-7270 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Common Stock, Par Value $0.005 Per Share Name of Each Exchange on Which Registered The NASDAQ Stock Market LLC Securities registered pursuant to Section 12(g) of the Act: None. (Title of Class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act...
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...changes completely diffrenct which is very impressive. Their current brewery right now about 6500 square foot , with more than 150 employees work there, they produce about 1200 barrels/ day. 450000/years. Here is timeline of Widmer Brothers 1984 Kurt and rob widmer turned their home brewing hobie in to actual vocation. That’s how Widmer Borthers was found 1989, The most popular product, unfilter wheat beer heifeweizen came out. I can say this the main key behind their success because mostly 2 out 3 of their sale was from heifeweizen. It has gain so much popularity for widmer throughtout the US 1997. Widmer sold the27% stake to anheuser busch in order to reach national market 2007 wimer brother officially announce to merge with the redhook ale company, forming a new company named craft brewer company. The company will maintain both name they still produce their own product under their own name 2010, the third company merge w Craft brewer alliance was Hawaii kona brewing company. The goal for this deal is trying to get their craft beers into wider distribution Widmer Brothers they turn the home brewing hobbies into a vocation. 1986,...
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...Anheuser Busch Inbev SA (BUD) Anheuser-Busch InBev SA/NV, a brewing company, engages in the production, marketing, distribution, and sale of beer. The company offers a portfolio of approximately 200 beer brands. Its international principal brands include Budweiser, Stella Artois, and Beck’s; multi-country brands consist of Leffe and Hoegaarden; and local brands comprise Bud Light, Michelob, Skol, Brahma, Antarctica, Quilmes, Jupiler, Hasseroder, Klinskoye, Sibirskaya Korona, Chernigivske, Harbin, and Sedrin. The company also produces and distributes soft drinks. Anheuser-Busch InBev SA/NV sells its products in 120 countries. The company was founded in 1366 and is headquartered in Leuven, Belgium. Let’s examine its financial info. BUD’s Current Ratio ranges from 0.6 to 1 in five year’s period and Quick Ratio ranges from 0.5 to 0.9. Those figures show BUD’s ability to pay back it short-term liabilities (debt & payables) is not so good, and it is not in good financial health. The company is not very liquidity. Craft Brew ‘s Current Ratio ranges from 0.8 to 1, better than BUD, but its quick ratio is worse, ranging from 0.1 to 0.3, indicating its low liquidity problem. BUD’s Fixed Asset Turnover Ratio ranges from 1.5 to 2.5, indicating that the company has been more effective in using the investment in fixed assets to generate revenues. However, Total Asset Turnover ratio is much lower, ranging from 0.2 to 0.4, indicating it is not effective in using its total assets to...
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...and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685 or write Harvard Business School Publishing, Boston, MA 02163. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School. 1 The Boston Beer Company, Inc. Making a buck at craft brewing has been as easy as falling off a barstool the last few years. So Wall Street is now bellying up for a couple of IPO brewers. They’d better start chugging; the party won’t last long. The intoxicating roundup of offerings began in August when Redhook Brewing, a specialty beermaker started in Seattle by former wine marketer Paul Shipman and Starbucks co-founder Gordan Bowker, tapped the market. The stock was priced at $17, never traded below $24.75 and was recently at $27.25. Again, investors went on a bender last month when Pete’s Brewing Company hit the market. The stock, priced at $18 a share, closed its first day of trading at $25.25 and hasn’t sold below $23.75 yet. Boston Beer, of Sam Adams fame, will roll out in mid-December; the Northwest’s Hart Brewing, which makes Pyramid Ales, is not far behind. 1 Eileen Gunn Fortune Magazine, December 11, 1995 Company Background History Boston Beer Company (BBC) was founded in 1984 by Jim Koch, who was the sixth generation of...
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...In 1998 Howard Schultz had ample reason to be proud of what Starbucks had accomplished during his past 11 years as the company's CEO. The company had enjoyed phenomenal growth and become one of the great retailing stories of recent history by making exceptional coffee drinks and selling dark-roasted coffee beans and coffee-making equipment that would allow customers to brew an exceptional cup of coffee at home. The Starbucks brand was regarded as one of the best known and most potent brand names in America and the company had firmly established itself as the dominant retailer, roaster, and brand of specialty coffee in North America. It already had over 1,500 stores in North America and the Pacific Rim and was opening new ones at a rate of more than one per day. Sales in fiscal year 1997 were a record $967 million and profits reached an all-time high of $57.4 million. The company's closest competitor had fewer than 300 retail locations. And since going public in 1992, Starbucks has seen its stock price increase nearly ninefold. Exhibit 1 contains a summary of Starbucks key performance statistics for the 1992–97 period. Company Background Starbucks began in 1971 when three academics—English teacher Jerry Baldwin, history teacher Zev Siegel, and writer Gordon Bowker—opened a store called Starbucks Coffee, Tea, and Spice in the touristy Pikes Place Market in Seattle. The three partners shared a love of fine coffees and exotic teas and believed they could build a clientele...
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...CASES IN FINANCIAL MANAGEMENT SYLLABUS FIN 522 Professor James A. Gentry Cases In Financial Management 343M Wohlers Hall Spring Semester 2009 333-7995 2043 BIF j-gentry@uiuc.edu Office Hours: 10:30 a.m. to 11:45 a.m. on Mon. and Wed/. or by Appointment I. Teaching Objectives Financial decision making cases are used to… • Create a highly interactive learning environment; • Learn about the application of financial management and credit analysis concepts; • Discover what you do not know about the practice of financial management; • Show what you have learned; • Highlight the relationships between strategic goals and the creation of firm value; • Develop techniques for interpreting a firm’s financial data and strategic plans; • Enhance your critical thinking and problem solving skills; • Expand your understanding of financial theory and its application; • Improve your listening and cooperative learning skills. II. Learning Promises At the end of this course your will be able to… • Think like a financial manager; • Interpret a company’s financial health by evaluating the performance...
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...Company | Starbucks Cafe | Type | Public | Traded as | * NASDAQ: SBUX * NASDAQ-100 Component * S&P 500 Component | Industry | Coffee shop | Founded | Pike Place Market in Seattle, Washington, United States (March 30, 1971) | Founders | * Jerry Baldwin * Zev Siegl * Gordon Bowker | Headquarters | 2401 Utah Avenue South, Seattle, Washington, United States | Number of locations | 21,160 shops[1] (Nov. 27, 2014) | Area served | Worldwide | Key people | * Howard Schultz (Chairman, President and CEO) * Troy Alstead (COO) | Products | Coffee • Tea • Pastries • Frappuccino beverages • Smoothies | Revenue | US$14.89 billion[2] (FY 2013) | Operating income | US$325.4 million[2] (FY 2013) | Net income | US$8.8 million[2] (FY 2013) | Total assets | US$11.5167 billion[3] (2013) | Total equity | US$4.48 billion[2] (FY 2013) | Number of employees | 182,000[4] (2014) | Subsidiaries | * Starbucks Coffee Company * Ethos water * Evolution Fresh * Hear Music * La Boulange Bakery * Seattle's Best Coffee * Tazo * Teavana * Torrefazione Italia | Website | starbucks.com | Starbucks Corporation, doing business as Starbucks Coffee, is an American global coffee company and coffeehouse chain based in Seattle, Washington. Starbucks is the largest coffeehouse company in the world ahead of UK rival Costa Coffee, with 21,160 stores in 63 countries and territories, including 12,067 in the United States, 1,570 in China, 1,451 in...
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