Case memo

Case memo

INTRODUCTION

This provides recommendations and analysis for addressing how Cooley Distillery should go about the running of the company to be competitive in the world spirits market. This memo will look at: (1) what methods and ingredients to use in making their whiskey; (2) whether to penetrate new markets or stick to the local niche; and (3) whether to partner with other multi-national spirit companies to improve distribution.

RECOMMENDATIONS

1. Use traditional brewing methods and ingredients to manufacture the spirits.
2. Penetrate new markets more so abroad.
3. Partner with larger multi-national companies with better distribution and advertising means.

ANALYSIS

The basis for the above recommendations was optimal support of the critical decision criteria, including (1) production of high-quality Irish whiskey for the market; (2) increased profit margin for the company, and (3) improved distribution facilities and personnel.

1. Use traditional brewing methods.

The company has three options for brewing the whiskey, including: (1) use of different varieties of barley in production; (2) roasting its own malt for use during production; and (3) using corn only during production. In looking at how each option supported the critical decision criteria (see Exhibit V), the third alternative provides the most support.

The first option of using different varietals of barley offers flexibility to the company in that they won’t be dependent on the availability of specific strains of barley to continue production, but they can simply grow their own source. This is more sustainable as it provides fall-back options in the future, hence production will not stop in the event of a shortage, but a different strain of barley will be used, therefore it offers a more long term outlook for the company. However, it has an adverse impact on the general quality and taste of the whiskey. The Irish whisky has a certain acceptable standard to the customers; hence any tweak in the method of production or ingredients may conjure up an unfamiliar taste hence the risk of losing a large portion of the customer base.

The second option of smoking their own malt adds a whole new twist to the flavor of the whiskey, which would appeal to a broader customer base, as it caters more for the diverse tastes of its customers. It, however, carries the same risk of lower quality standards, or lack of appeal to the more ardent whisky-consuming customer base, due to change in the usual process of production. This will lead to a significant loss in the customer base.

The last alternative provides the best solution as it results in a smoother, sweeter whiskey compared to other conventional methods. This is due to the unique taste of corn when distilled to maturation, which takes three years, coupled with the favorable moist climate and the temperate winds, which all combine to produce the quality Irish whiskey, acceptable by the broader market. This type of whisky, too, is what was initially manufactured in the early years of its foray into the spirits market, hence holds a familiar taste to its customer base hence will command a larger market.

2. Penetrate new markets

The company has three options for improving its market reach, including (1) reducing the pricing of the products. (2) Targeting a more varied range of consumers; and (3) exploring broader markets abroad. In looking at how each option supported the critical decision criteria (see Exhibit V), the third alternative provides the most support.

The first option of temporarily reducing the pricing of products will work to lure a wider range of customers, including low- wage earners who may deem the current pricing too high. However, it is more of a short term solution as it can only assure a slight initial increase in customers, whose preference will eventually prevail and will revert to their previous products. The profit turnover will also experience a dip as the product will be sold at a lower price despite high production and distribution costs.

The second option of targeting varied customer types, such as the beer and vodka consumers, for instance, has little chance of success as preference is a significant player; hence few will readily change their taste to accommodate the Irish whiskey when it hits their market and having to tweak the production process of whiskey to better suit their tastes will eventually spoil its quality.

The last alternative provides the best solution as it brings the immediate benefit of offering a larger market of customers to Cooley while still retaining their already established local market and maintaining the quality of their product. This will only target a specific type of customer, whiskey drinkers, in the other countries hence doesn’t need to tweak its product to suit their taste.

3. Partner with large multi-national companies.

The company has three options for improving its distribution network and picking up profits including, (1) investing heavily in distribution equipment and personnel; (2) slowly build up its own distribution network; and (3) partnering with large multinational companies. In looking at how each option supported the key decision criteria (see Exhibit V), the third alternative provides the most support.

The first option of investing heavily in distribution equipment and personnel has the immediate effect of widening the market reach for the company and increasing profits, since the number of customers will increase rapidly upon its implementation. The low-profit turnover registered by the company, however, doesn’t allow for such a large capital outlay and will result in losses in the future despite initial success.

The second option of slowly building up the distribution network; while saving up on company funds; keeps profit earnings at a minimum and further hurts their already limited position in the market. Long periods taken in improving the market for Cooley company not only offers the chance to its competitors to further stride ahead and widen the gap in terms of profits but also affects its own profit-making.

The last alternative provides the best solution as it makes use of already established distribution and advertisement networks as well as additional investment from the parent company, without using up much of the company’s current profits. The company therefore benefits from the shared profits while at the same time widening its own customer base using the facilities of its partner company. This would however pose some issues when it comes to the management of the partner companies and will cause conflicts and eventual offloading of staff.

CONCLUSION

To meet the goals for producing high-quality whiskey, while maintaining a sustainable, improved distribution network, and increase profits, Cooley Distillery should (1)use traditional brewing methods like use of oak casks while using traditional ingredients and take advantage of the moist climate. (2)They should penetrate new markets especially those untapped abroad. (3)They should partner with large multinational companies with quality, established distribution and advertisement facilities. These actions best match the key decision criteria of Cooley Distillery (as defined in Exhibit IV, and project to provide an incremental profit for the coming year (see Exhibit VI).

EXHIBITS

1. Responses to guide questions 
2. Pros and cons of alternatives

• SWOT analysis 

1. Identification of decision criteria 

1. Comparative analysis of alternatives 

The three tables below examine the various alternatives for each recommendation against the key decision criteria.

Types of ingredients

Market reach

Improved distribution

Porter five forces analysis

Financial

The analysis below calculates the total cost of ownership for the alternatives (calculated for monthly impact).

€000’s

€000’s

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