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Hockley Valley Brewing Co Inc Case Solution
Hockley Valley Brewing is a micro craft brewery in Ontario which sells five different craft beers. The two biggest competitors of Hockley are Mill Street and Steam Whistle. The beer sector in Ontario is overshadowed by two big players, Molson and Labatt, but apart from these two, there are several microbreweries in Ontario. In Ontario, light beer is the most selling beer, with The Liquor Control Board of Ontario (LCBO) selling all the beer in Ontario. Considering the demand for light beers, Hockley is contemplating the launch of Hockley Classic, a light beer but the production time and cost required to produce it is higher. The company is also considering the right alignment of pricing, placement and promotion of Hockley Classic to make it a hit. One consideration for pricing is penetration pricing, while one of the promotion techniques the company is considering is newspaper advertisements. Accordingly, the placement options available for the successful launch of Hockley Classic include LCBO and The Beer Shop boutiques.
Following questions are answered in this case study solution:
Perform an external (industry and competition) analysis. What implications can be drawn for the launch of Hockley Classic?
Perform a corporate capabilities analysis. What implications can be drawn for the launch of Hockley Classic?
Evaluate the proposed new product, Hockley Classic. Should Hockley add the product to its line of craft beers?
At what price should Hockley Classic be sold? Why? At this price, what would be the unit contribution?
Evaluate Hockley’s placement alternatives, including the sales needed to break even for The Beer Store. What distribution strategy do you recommend for Hockley Classic?
Case Study Questions Answers
1. Perform an external (industry and competition) analysis. What implications can be drawn for the launch of Hockley Classic?
External analysis for Hockley can be conducted through industry analysis and competition analysis, which are as follows:
An industry analysis for Hockley can be carried out using Porter's five forces, which are as under:
Competitive Rivalry: The beer sector was initially overshadowed by Molson and Labatt as the largest beer companies in Ontario, both of which possess the biggest stake in The Beer Store, which is known as the sole state-controlled beer retailer. The Liquor Control Board of Ontario (LCBO) sells all the beer in Ontario. Molson and Labatt ruled the Ontario market for decades until 1984, when the first microbrewery was started. Later on, many other microbreweries joined the race, which sells craft beer, so there is intense rivalry in the beer sector.
The threat of new entrants: Since few giants and numerous microbreweries heavily crowd the beer sector in Ontario, the threat of new entrants is moderately low.
The threat of substitute: A considerable substitute for beer could be soft drinks in the hot summer season to quench thirst and tea and coffee in the winter season to keep oneself warm. Since three soft drinks, tea or coffee, are not close substitutes, the threat of substitutes is moderate.
Bargaining power of supplier: When it comes to suppliers, microbreweries depend upon local raw materials for making beer and use hops and barley for making the beer, buying machinery, and procuring labor from nearby localities.
Bargaining power of customers: When it comes to consumers, they perceive craft beer as of greater standard than the imported version. Due to this reason, craft beer has a 10 percent yearly growth, but customers look for a greater assortment in the high-quality segment too. Due to this reason, craft beer only accounts for five percent of the total volume of beer sold in Ontario.
Hockley has around 150 craft beer-selling opponents in Ontario. However, the two most direct and biggest competitors are Mill Street and Steam Whistle, which sell a higher volume than Hockley. Both Mill Street's large variety of products and Steam Whistle's sole product are available at their outlets, LCBO and The Beer Store. On the other hand, Hockley does not have its own outlets, but it offers a multitude of craft beers. The external analysis implies that Hockley Classic's success as a craft beer is guaranteed because of demand. It should be sold through other locations in addition to LCBO and The Beer Store, as these both are already dominated by Mill Street and Steam Whistle.
2. Perform a corporate capabilities analysis. What implications can be drawn for the launch of Hockley Classic?
Hockley possesses many corporate capabilities, including intangible and tangible capabilities. Firstly, Hockley does not rely on The Beer Store to procure bottles for beers. Instead, it offers beer in cans, which are easily portable, storable, and convenient to chill, meaning easier and better packaging of the beer for Hockley Classic. Secondly, Hockley Dark has earned a lot of fame in Ontario for Hockley, implying that Hockley's brand name is more famous for its darker beers than the lighter ones. This suggests two things that consumers would give a chance to Hockley Classic (light beer) considering Hockley's brand name. The other thing that this suggests is that consumers could be hesitant to try a light beer, given that Hockley is more renowned for its dark beer.
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