Brewery & Restaurant Business Venture Case Study Left Coaster s Team Assignment Pennsylvania State University Executive Summary
LEFT COASTER S BREWERY & RESTAURANT CASE STUDY 1 This report was commissioned to present the board with a formal document detailing the Left Coaster s research and results of the new business venture project. The research draws attention to a fantastic business opportunity within the brewery and restaurant industry, to be located in a prime location in San Diego, CA. The business is slated for success in the shore side community of Ocean Beach, offering stunning, aesthetically pleasing views, and perfect year-round weather. Paired with floor plans that take advantage of the aforementioned location features, and you have a recipe that is sure to exceed customer s highest expectations. Our in-house brewed beer selections and fine-tasting seafood cuisine are the perfect mesh of commodities that take advantage of the thriving beer industry and local food the San Diego area has to offer. In addition, this superior venue is further justified by the lack of strong competition in the region, presenting a unique business opportunity that pleads to be taken advantage of. Though the scale of this venture may seem large and costly, our current investigation suggests a payback period of less than four months from initial opening, with hundreds of thousands of dollars in net income at the conclusion of the first year. Market research currently suggests a consumer s strong dissatisfaction with the flavor monopoly of national beer corporations. With the brewery s dedication to crafting high-quality beer, the lofty goals of taking on brewery giants Anheuser-Busch InBev, Carlsberg Group, Heineken, and Samuel Adams are more than feasible. Mark Twain may have said it best, The secret of getting ahead is getting started. The secret of getting started is breaking your complex overwhelming tasks into smaller manageable tasks, and then starting on the first one. The Left Coaster s have followed this advice and in the process discovered a viable business opportunity that is slated for huge success. The Left
LEFT COASTER S BREWERY & RESTAURANT CASE STUDY 2 Coaster s Brewing Company has positioned itself uniquely in the microbrewery industry through its location, pricing, product quality and selection, and marketing strategies. Together, we will first capture the taste buds and hearts of the locals, shortly followed by tourists across the nation and worldwide! Description of Opportunity and Specific Region Selected
LEFT COASTER S BREWERY & RESTAURANT CASE STUDY 3 The Left Coaster s have decided to open a brewery and seafood restaurant combination in Ocean Beach, CA. Ocean Beach is a beachfront neighborhood in San Diego and is considered to be one of the most relaxed places in all of Southern California. With beautiful weather, an ocean view, and local attractions and events, Ocean Beach has drawn millions of people to its neighborhood year round. Left Coaster s Brewery and Co. hopes to combine two of San Diego s most popular commodities, beer and seafood, to create a relaxing and fun place for its customers to enjoy great food with a wide craft beer selection. Competition Evaluation Aside from its perfect location and popular attractions, Ocean Beach is the perfect place to open the brewery and seafood restaurant because there are currently only two other microbreweries within the Point Loma/Ocean Beach area in San Diego. Since there is a lack of competition, it will be easier for Left Coaster s Brewery and Co. to create a new experience for its customers by providing them the opportunity to try great quality and freshly brewed craft beer that will be measured by a complex set of sensory characteristics that are only unique to the brewery. Even though Left Coaster s Brewery and Co. will not be in stiff competition with other microbreweries, we will be observing big beer breweries since we want more people to choose our craft brews over older national macro brands such as Anheuser-Busch InBev, Carlsberg Group, Heineken, and Samuel Adams. Detailed financial profiles of the four top brewery companies in the United States show that craft beer is still a small piece of the beer market. The income statements for Anheuser- Busch InBev, Carlsberg Group, Heineken, and Samuel Adams show that these companies made
LEFT COASTER S BREWERY & RESTAURANT CASE STUDY 4 millions of dollars from 2012 to 2014 (Appendix A-D). On the other hand, even the biggest craft brewery in the United States capitalizes on just 1% of the overall beer market (Franklin). Despite this, craft breweries remain popular because they challenge the normal. Craft breweries are able to offer new beer styles that are well-above-average flagship beers. Therefore, while there is no way to escape the taps of macro brands at the bar, Left Coaster s Brewery and Co. will strive to be innovative in our craft brews to ensure that our customers are satisfied and will remain loyal to our brewery business for many years. Venue Location and Layout San Diego is home to more than 100 breweries locations with many more in the works (WestCoasterSD, 2015). Although San Diego has been deemed Craft Beer Capital of America, many of the breweries are concentrated within North County San Diego, which leaves potential consumer needs unmet in the southern coastal region of San Diego. Left Coaster s Brewing Company has decided to open its brewery and restaurant operations in Ocean Beach, CA because of its hometown demeanor and minimal brewery competition. Don t get us wrong, there are plenty of places to grab a drink in Ocean Beach, but only one brewery that also serves food and Left Coaster s main competition, Pizza Port Ocean Beach. Left Coaster s Brewing Co. will operate on the corner of Santa Monica and Abbott Street (reference map below).
LEFT COASTER S BREWERY & RESTAURANT CASE STUDY 5 This location will be advantageous because of the ocean views and large crowds that pass through this small beach town each day. Who doesn t want to enjoy delicious food and refreshing beverages while taking in the ocean breeze and moderate temperatures? As you approach the brewery location, you ll notice people enjoying their food and beverages in the San Diego climate at one of the outdoor seating areas (see floor plan below). Upon entering Left Coaster s Brewing, small fermenting tanks will greet you with the newest brews being developed. Looking to have a sit-down seafood dinner and enjoy hand crafted beer? You ll be escorted to the left to enjoy the freshly made cuisine and drinks. Wanting to enjoy the sense of community and take in the ocean scenery? You ll be escorted to the right to find seating at one of the pub tables or at the bar to eat and drink with locals and take in the fresh air through the roll up doors facing the ocean. The larger brewing equipment and kitchen will be located towards the back of the building to provide as much open space for customers, while having easy access to loading docks for materials, shipments, and ingredients.
LEFT COASTER S BREWERY & RESTAURANT CASE STUDY 6 (Mad Fox Brewing, LLC floor plan edited for Left Coasters Brewing Co.) Break-Even Point Operating a brewery and restaurant of this size will not be inexpensive. Many times, breweries and restaurants start small and increase operations as their profit margin increases. Left Coasters is starting medium sized with the hopes of growing larger and opening additional locations over time. Left Coasters is projecting just over $1.8 million in year one revenues, with $1.5 million in year one total costs ($1 million in COGS and $500k in expenses). Therefore, the
LEFT COASTER S BREWERY & RESTAURANT CASE STUDY 7 company is expecting to reach its break-even point within the first year. However, the company will lose money during its early days of operations. Left Coasters Brewing is projected to see its first profits on the 25th day of operations. Although revenues will be larger than costs, the company will need to make up for the previous week s losses. Specifically, the brewery will be in the red approximately $80,000 dollars at the end of the first month. Assuming Left Coasters is operating at the average monthly profit within 60 days ($27,000 profit per month), the brewery will see its operating break-even point during the fourth month. By the end of the year, Left Coasters is anticipating just over $316,000 in net income, thus being in a position to pay dividends to investors (depending on unexpected variable costs that may occur during the year such as equipment repairs). Argument and Analysis In the last two decades, national interest in craft beer production has increased dramatically. Arising from a strong dissatisfaction with the flavor monopoly of national beer corporations, the distinctly grassroots craft beer movement has elevated beer consumption to a degree of connoisseurship formerly associated only with wine (Whitcomb). Since 2011, the total number of craft breweries in San Diego has more than doubled to 30 breweries, scattered throughout the county producing award-winning beers. This particular industry contributes to San Diego s tourism industry by hosting year-round events, festivals and facility tours, further exemplifying the craft beer trend and distinguishing San Diego as a destination for beer aficionados. According the National University System Institute for Policy Research (NUISPR), craft breweries have a significant regional economic impact.
LEFT COASTER S BREWERY & RESTAURANT CASE STUDY 8 The State of California s Department of Alcoholic Beverage Control (ABC) issues two main licenses to craft breweries. Type 23 licenses are for "small beer manufacturers" (brew pubs, micro-breweries) that produce up to 60,000 barrels per year. Type 1 licenses are for larger breweries that produce more than 60,000 barrels per year. The ABC data reveals just how extensive craft brewing is in California and how its epicenter is located in San Diego County. More than half of the new brewery licenses in San Diego County have been issued in the last two years. More than half of the new brewery licenses in San Diego County have been issued in the last two years. In 2011, San Diego craft breweries generated a $299.5 million direct regional economic impact, as well as $680.9 million in sales. This translates to 1,133 direct brewpub and 497 direct brewery jobs in San Diego County. To put this figure into perspective, Comic-Con International, San Diego s largest convention, generates a $180 million regional economic impact (San Diego Convention Center). The NUSIPR further calculated that breweries and brewpubs in San Diego indirectly supported an additional 1,630 jobs. Attributing the strong multiplier effect to the high percentage of industry revenues that stay within the region as well as the relatively good
LEFT COASTER S BREWERY & RESTAURANT CASE STUDY 9 wages earned by brewery workers. Overall, the industry sustained or created approximately 2,796 jobs in the region. In addition to the economic impact, San Diego s brewing industry is important driver of regional tourism. Greg Koch, Stone Brewery CEO and co-founder, remarked that his facility is the third largest visitor destination in North County, after the San Diego Zoo Safari Park and Legoland. Like Stone Brewery, many of the other San Diego breweries also offer facility tour, provide event space, and have active event calendars. Additionally, more than half a dozen independent tour guide companies also provide brewery tours. Furthermore, the San Diego Tourism Authority promotes brewery tourism under their What To Do section of its visitor website with a directory of local breweries. Similarly, the San Diego Brewers GUild also provides an updated illustrated map of the region s breweries and brewpubs on its website (NUSIPR).
LEFT COASTER S BREWERY & RESTAURANT CASE STUDY 10 While there is no study profiling visitors of the San Diego brewery tourism market, there is a profile of brewery patrons in general. In 2012, a study from the University of North Carolina found that among brewery patrons surveyed, 38% where tourist. The study further found that these brewery tourist were mostly married, highly educated men with jobs and disposable income. Among these brewery tourist, 75% had completed a Bachelor s Degree or higher level education, 71% were employed full-time, and 51% have a household income of $80,000 a year or higher (NUSIPR). It is undeniable that craft brewers are creating jobs, tourism visits and tax revenue. While the fate of the industry s meteoric growth rate is unpredictable, stronger partnerships and greater research may yield more indefinite economic benefits for both San Diego and the brewing community. To concisely put it, [We must] not only strike while the iron is hot, but make it hot
LEFT COASTER S BREWERY & RESTAURANT CASE STUDY 11 by striking (Oliver Cromwell). With a thriving beer culture, and world-recognized breweries, San Diego is an excellent retreat for beer connoisseurs and enthusiasts. By becoming a part of San Diego s craft beer community, Left Coaster s Brewery and Restaurant will be supporting San Diego s craft beer movement, advocating the local food movement, and contributing to the ever growing San Diego economy.
LEFT COASTER S BREWERY & RESTAURANT CASE STUDY 12 References Craft Brewer Defined. Brewers Association website. Accessed april, 26, 2015. <http://www.brewersassociation.org/pages/business-tolls/craft-brewingstatistics/craft-brewer-defined>. Franklin, T. (2013, August 26). Top 15 craft beer breweries in the USA. Retrieved April 26, 2015, from http://www.usatoday.com/story/travel/destinations/2013/08/10/top-15-craftbeer-breweries-in-usa/2637493/ Oliver Cromwell. (n.d.). BrainyQuote.com. Retrieved April 26, 2015, from BrainyQuote.com Web site: http://www.brainyquote.com/quotes/quotes/o/olivercrom383639.html Press Release. San Diego Convention Center. San Diego Convention Center 2012 Forecast. Page 2. Accessed April 26, 2015. <http://www.visitsandiego.com/resources/2012forecast.pdf>. SD Brewing Industry Watch. (2012, March 2). Retrieved April 26, 2015, from http://www.westcoastersd.com/sd-brewing-industry-watch/ "The Economic Impact of Craft Breweries in San Diego." National University System Institute for Policy Research. N.p., 28 May 2010. Web. 26 Apr. 2015. <http://www.nusinstitute.org/>. Whitcomb, Amelia. "San Diego Craft Beer: Creating a Culture of Connoisseurship." - Type: Articles. San Diego Restaurant.com, 17 June 2008. Web. 26 Apr. 2015. <http://www.sandiegorestaurants.com/article.cfm/article/10/san-diego-craft-beer-- Creating-a-Culture-of-Connoisseurship>.
LEFT COASTER S BREWERY & RESTAURANT CASE STUDY 13 Appendix A Budweiser s Income Statement from 2012 to 2014.
LEFT COASTER S BREWERY & RESTAURANT CASE STUDY 14 Appendix B Carlsberg Group s Income Statement from 2012 to 2014.
LEFT COASTER S BREWERY & RESTAURANT CASE STUDY 15 Appendix C Heineken s Income Statement from 2012 to 2014.
LEFT COASTER S BREWERY & RESTAURANT CASE STUDY 16 Appendix D. Samuel Adam s Income Statement from 2012 to 2014.