Business Plan For A BrewPub In Grand Rapids-Kentwood Area Of Michigan

Goals and Assumptions

Moving from theoretical into goals into real services Outlines goals, assumptions, and planned business activities for 3 year Prepare business plan to present to the financial institution 

In order to verify the feasibility and payoff of investing in a BrewPub for making craft beer in-house, our consulting team evaluated our forecasts and optimizations against success on the owner’s key objectives, outlined below: 

• Utilizing a brand-new turn-key brewing system (BrewPub), which will allow the business to brew, ferment, and serve craft beer all from the same tank
• The business proposal outlines a strategic vision as well as economic projections for the current year (2022), and three years into the future (2023-2025)
• The BrewPub’s overall efficiency should fall at 50% or above over the course of three years, on average
• The consulting team utilized a dynamic VBA-based Monte Carlo simulation package called ‘Strategies and Decision Support in Organizations’ in order to synthesize and adjust detailed data points across all functional areas (Financial, Marketing, Operations, Innovation) to produce the optimal results forecast for the business
• The business proposal accounts for estimated marketing and personnel costs, in alignment with the strategic vision 
• To ground forecasts, supplemental quantitative and qualitative decision tools such as Break-Even Point (BEP), PESTEL, and SWOT analyses were applied 

In addition to defining objectives, it is of utmost importance to also define starting assumptions for the proposed business. These inferences will guide the company’s planned activities and forecasts, which will ultimately help the restaurant owner decide whether or not to invest in a craft brewery. The strategic assumptions are outlined below: 

• The final offer for the in-house BrewPub package from the system integrator is $150,000
• The BrewPub can brew a maximum of 8 types of beer simultaneously, and the ingredients provided can make up to 25 different kinds of craft beer
• The multiple-step infusion process ensures the quality of brews is all-natural and proprietary recipes are prepared based on standards for quality control
• The production cycle has a one week turnaround
• The minimum size requirement for the operation is 100 square feet; one personnel will be needed to operate the BrewPub, per shift 
• The BrewPub will be located in the Grand Rapids-Kentwood metro area in Michigan
• Is this where we enter our final starting assumptions from the Excel sheet? Need clarity.. 

The future success of the business can largely depend on the chosen location. In order to select an optimal location, we first identified areas of the continental United States in which beer is ingrained in the culture. Upon defining a region, we researched target audiences with a higher likelihood to seek craft beer experiences, and selected a city location where there is high demand from brewing enthusiasts. Based on our analysis, our final location will be located in the Grand Rapids-Kentwood area. 

In the past decade, the United States began to undergo a beer revolution, as more and more people turned from mass-produced beer to craft beer, often made in small local breweries. One of the areas that capitalized on this boom was the state of Michigan. As of 2020, Michigan’s beer industry had an overall economic impact of $9.9 billion (Price, 2021). The “Great Lakes State” is increasingly nicknamed “The Great Beer State” and a “brewer’s paradise” as Michiganders are choosing to drink Michigan beer over out-of-state brands (Moore, 2019). This trend can likely be attributed to the quality of Michigan-made beer, derived from the number-one fresh water source in the country. 

In Michigan, beer is a cultural phenomenon, and residents are united by a shared passion for beer. Every year, the statewide Oberon Day tradition marks the unofficial start of spring. In the week preceding the event, thousands flock to local breweries across Michigan to celebrate the arrival of spring and Bell’s Oberon Ale with special beer tasting events (ABC News, 2022). Even more, local breweries can partake in Michigan’s beer festivals and brewery trails, which increasingly attract thousands of enthusiasts from the local area and across the country (Figure 1). Breweries can also expect significant support from the Michigan Brewers Guild. According to executive director Scott Graham, the guild’s long term goal is “to help locally brewed beer attain 20% of all beer sales in the state by 2025” (MBG, 2022).

After selecting the state of Michigan for our business, we identified a target audience with a strong desire to seek craft beer experiences. Many speculate that the craft beer revolution was largely redefined by the Millennial generation, united by a desire to do business with companies that closely align to their values and causes they care about, prioritize sustainability across all operations, and sell products that are made of high-quality natural ingredients. Driven by a desire to intentionally support their local communities and spend on unique experiences, Millennials turned to craft beer instead of the historically dominant national brands. Nielsen sales data shows that in 2018, Millennials purchased 34 percent of craft beer, and the demand is continuing to grow as Millennials continue to increase their buying power and mold their preferences (Wallheimer, 2021)

Location Analysis

Based on our designated region and target market, the restaurant will be located in the ever-growing Grand Rapids-Kentwood metro area. We believe that location will be advantageous for several reasons:

• It is the fastest growing city in Michigan, and is expected to continue attracting new residents (Figure 2). Even further, Grand Rapids has the seventh fastest growing economy in the United States, with no signs of slowing down (Headlight Data, 2018)
• The city has a large Millennial population – in the past five years, 73% of the movers to Grand Rapids were Millennials (Richardson, 2019) 
• Residents have more buying power than other areas in Michigan. Grand Rapids has a median household income of $65,739, 10% above Michigan’s median household income (Suneson, 2021)
• The Grand Rapids area is undergoing planning for investments to further position the county as a high-profile destination for local, national, and international visitors. These investments include a downtown amphitheater, soccer stadium and several city restoration projects (Experience Grand Rapids, 2021). This continuing influx of visitors, especially during the summer months, allows for strong growth potential for the BrewPub

• Apply at least two: Decision Tree Analysis, Sensitivity Analysis, SWOT Analysis, PESTEL Analysis, Break-Even Point Analysis, What-If-Analysis, Optimization Analysis, Risk Analysis, others

A what-if analysis is considered to be a sensitivity analysis which is accepted as a quite effective decision-making tool to help the brand assess the nature of business impacts usually takes place after changing the variables. According to Jensen et al., (2020), it is noted to be done through the method of reverse calculations usually on an Excel spreadsheet. The reason the brands should prefer this analysis tool is to be able to be informed about the decision-making areas determined by the mix of variable data. As suggested by Pourghassemi et al., (2019), the initiative approach in data handling assures that the businesses are provided with significant opportunities to review the risks and advantages prevalent in the market. For example, if a company is likely to introduce a new product or product line, it is essential for the organisation to apply a subsequent mix of data and market assessment to understand the consumer behaviour. Through a what-if analysis, the companies are able to be prepared for any kind of changing attributes in the consumer preferences. According to Schmid and Srba (2018), the preparation of the company can be assessed through the use of the what-if analysis tool to weigh the variables like setting up of a pop-up shop, a new outlet for BrewPub, low or high product adoption and letting the customers taste the product in the opened outlets.

Figure 1: Michigan Craft beer sales and production n 2020

(Source: Data, Watson, Gatza & Obenchain, 2022)

The chart mentioned above directs to the production and sales rate of Michigan cedar beer in the recent fiscal year of 2022. It can be further noticed from the directive analysis of the data summary from the collected data that the overall volume of the US beer market has been initiated by a height of 1% whereas the craft beer market had witnessed a rise of 8% in 2021. This has marked a profitable encounter in terms of breweries’ business in the industry to provide significant profitable marketing opportunities for independent small breweries to flourish in the beer market (Brewers Association, 2022). The retail dollar sales have also been increased for the craft beer segment which is calculated at around 21% evaluating somewhere over $26.8 billion. The increasing sales rate in the present market has been notated to be accounted for over 27% which is estimated to be around a $100 billion increase from $94 billion. The reason behind this gradual can be the market shift in the beer production and sales volume to bars and restaurants through packaged sales.

Figure 2: The production volume of US beer in 2021

(Source: Brewers Association, 2022)

The discussed production volume can be understood from the chart provided above. Moreover, reviewing the internal and external factor analysis of the Michigan BrewPubs, it can be noticed that the gradual change in the consumer preference can be an issue that the companies are likely to face ahead in the business. Hence, the what-if analysis tool can be effective in identifying and evaluating the certain shift in the consumer preference from alcohol o healthy drinks. To analyse this marketing segmentation, a hypothetical calculation depicting the changes in the various has been provided below. 

Target Audience

Table 1: A look of the What-if Analysis Calculation

(Source: Created by author)

Risk analysis is considered to be the process that is often used for identifying and analyzing risks related to businesses or organizational management. According to Bogdanova et al., (2018), this management tool enables the companies to locate the potentially risky factors which can subsequently impact the business performance. This also helps the organizational plan significant mitigation processes to eliminate the risk factors. The enterprises are provided with the opportunity to anticipate probable harmful impacts over the business characteristics that can bring adverse effects on the reputation of the brand. As suggested by Devos et al., (2019), the micro brewing industry has been subjected to the safety standards of the brewing market in the US. Michigan has been noted to be a subsequently favorable location for the craft beer market considering its greater sales and production value. The total economic contribution to the market has been noted to be around $133 million through only four major beer tasting events. Even though everyone has been favoring the taste of its craft beer in the market which has enhanced the financial segment of the country, the industry can be considered liable for several safety issues. This makes it important for the breweries to implement a subsequent risk analysis matrix in identifying and mitigating the potential risk factors. 

Table 2: The Risk Analysis Matrix

(Source: Created by author)

The risk matrix provided above is an essential tool to apply whenever the companies are considering the risk analysis approach. The different variables of the matrix have been highlighted in various colors signifying the intensity and impact of the identified risk factors. Through the recently updated data in the newspapers, it has been assessed that the Michigan beer industry has flourished strongly enough to support about 66,000 new jobs in its 4,900 distributors spread across the country.  However, with the establishment of new job opportunities, the industry is liable to provide significant employment benefits to retain the employment base. Moreover, with the challenges of managing a diverse workforce, the industry would also need to define its supply chain management (Media News Group, 2021). Considering the growth in the number of breweries being opened within the last few years, The Brewers Association has significantly been working towards strengthening the potential marketing risks related to common health and safety hazards (Media News Group, 2021). Through the Administrative procedures act of 1969, 1969 PA and others the government has subjected the beer industry to licensing the products after meeting the safety standards of the nation. To maintain the financial security of the industry, liquor liability policy has been introduced in the market to authorize the production under the section of 801 of the administrative regulation in the country.

References

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Brew News – Michigan Brewers Guild. (2022, February 2). Michigan Brewers Guild. https://www.mibeer.com/Resources/News/tickets-go-on-sale-thursday-february-10-at-10am-for-michigan-brewers-guild-spring-beer-festival-in-traverse-city

Brewers Association. (2022). State Craft Beer Sales & Production Statistics, 2020. Retrieved 18 April 2022, from https://www.brewersassociation.org/statistics-and-data/state-craft-beer-stats/?state=MI

Conway, J. (2021, April 20). Craft Beer Industry in the U.S. – Statistics & Facts. Statista. https://www.statista.com/topics/1806/craft-beer-in-the-us/#dossierContents__outerWrapper‌

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Devos, Y., Craig, W., Devlin, R. H., Ippolito, A., Leggatt, R. A., Romeis, J., … & Topping, C. J. (2019). Using problem formulation for fit?for?purpose pre?market environmental risk assessments of regulated stressors. EFSA Journal, 17, e170708. Doi: 10.2903/j.efsa.2019.e170708

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Media News Group. (2021). Report: Beer is a nearly $10 billion business in Michigan – The Oakland Press. Retrieved 18 April 2022, from https://www.theoaklandpress.com/2021/06/28/report-beer-is-a-nearly-10-billion-business-in-michigan/

Moore, L. (2019, July 24). Craft brewing booms in Michigan amid national decline in beer production. Mlive. https://www.mlive.com/news/kalamazoo/2019/07/craft-brewing-booms-in-michigan-amid-national-decline-in-beer-production.html

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Price, S. (2021, July 1). Michigan’s beer industry has $9.9 billion economic impact. Midland Daily News. https://www.ourmidland.com/news/article/Michigan-s-beer-industry-has-9-9-billion-16284102.php

Richardson, B. (2019, May 3). The Top Five Most Popular Destinations For Millennials To Move And Stay. Forbes. https://www.forbes.com/sites/brendarichardson/2019/05/03/the-top-five-most-popular-destinations-for-millennials-to-move-and-stay/?sh=2016e4327b36

Schmid, S., & Srba, J. (2018, April). Polynomial-time what-if analysis for prefix-manipulating MPLS networks. In IEEE INFOCOM 2018-IEEE Conference on Computer Communications (pp. 1799-1807). IEEE. https://doi.org/10.1109/INFOCOM.2018.8486261

Spring is here and that means Bell’s Oberon Day. (2022). WZZM13.com. https://www.wzzm13.com/article/life/food/beer/bells-oberon-day-monday-march-21/69-307f1b1e-902f-4067-89a1-0e112598dc6b

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