MBA Foundations Copy
Nano Brewery
1
Evaluation of the Nano Brewery
MBA Foundations Course
Patten University
James P. McQuiston
Abstract
The Nano Brewery is a very small business that has been operating for two years. The two owners have found that demand for their product has outstripped their ability to supply it. They are considering expanding their company to meet this demand. We will analyze their financial performance and evaluate broader environmental factors before providing a recommendation on company expansion.
Nano Brewery
2
Introduction
The Nano Brewery operates in the microbrewery industry. A commonly cited definition of a microbrewery is a brewer that produces less than 10,000-15,000 barrels per year. This relatively small quantity fosters the consumer’s perception that the brewer values quality and craft more than larger beer production companies. Because of this perception, the beer that microbreweries produce is often called “craft beer.”
Although microbreweries are small, they are a rapidly growing segment of an enormous market. Over $100 billion of beer was sold in 2013. The vast majority of this was sold by very large distributers such as Anheuser-Busch, but microbreweries and their craft beers are making a big dent.
The Nano Brewery was founded two years ago. However, it has only been open for business since 2013 due to the process involved in obtaining the appropriate license from the state liquor control board. There are two stockholders that maintain an equal partnership. These owners are in the enviable position where the demand for their product has outstripped their ability to supply. To put it another way: they are selling beer faster than they can make it.
Despite being such a young company, they are faced with several decisions that can effect long term viability:
• Is now the time to expand?
• Should they acquire use of a new brewing tank?
• If so, how should they finance the acquisition?
Nano Brewery
3
To answer these questions, we will first
1
Evaluation of the Nano Brewery
MBA Foundations Course
Patten University
James P. McQuiston
Abstract
The Nano Brewery is a very small business that has been operating for two years. The two owners have found that demand for their product has outstripped their ability to supply it. They are considering expanding their company to meet this demand. We will analyze their financial performance and evaluate broader environmental factors before providing a recommendation on company expansion.
Nano Brewery
2
Introduction
The Nano Brewery operates in the microbrewery industry. A commonly cited definition of a microbrewery is a brewer that produces less than 10,000-15,000 barrels per year. This relatively small quantity fosters the consumer’s perception that the brewer values quality and craft more than larger beer production companies. Because of this perception, the beer that microbreweries produce is often called “craft beer.”
Although microbreweries are small, they are a rapidly growing segment of an enormous market. Over $100 billion of beer was sold in 2013. The vast majority of this was sold by very large distributers such as Anheuser-Busch, but microbreweries and their craft beers are making a big dent.
The Nano Brewery was founded two years ago. However, it has only been open for business since 2013 due to the process involved in obtaining the appropriate license from the state liquor control board. There are two stockholders that maintain an equal partnership. These owners are in the enviable position where the demand for their product has outstripped their ability to supply. To put it another way: they are selling beer faster than they can make it.
Despite being such a young company, they are faced with several decisions that can effect long term viability:
• Is now the time to expand?
• Should they acquire use of a new brewing tank?
• If so, how should they finance the acquisition?
Nano Brewery
3
To answer these questions, we will first