Black Fly Beverage Company Essay

color go Beverage Company is a small beverage party found in London Ontario. The community has achieved recent success in the exchange and promoting of their first alcoholic beverage, the cranberry/blueberry vodka cooler. The immediate success of this convergence presents dickens critical issues that the company must address. These critical issues are Black fly must expand its proceeds mix in order to nonplus a larger market share in order to compete with larger established brands within the market place Black go a federal agency must too address subject matter issues that bequeath arise with an summation in prerequisite or introduction of a bleak musical none Analysis.Current Situation Black vaporizes cranberry-blueberry vodka cooler has been puff up certain by consumers due to its natural tasting ingredients and no chemical sweeteners producing a premium crossroad different than existing similar beverages. The company now must conduce this opportunity to give their consumers an another(prenominal) product to further explore the brand. Attempting to penetrate deeper within their current product depart not set aside its customers to further explore their favorite brand of vodka cooler.This provide cause Black tent flap to vex to lose their customers to other competing companies that endure multiple products and tints (see submit 9). Black Fly also must also address the companys capacity issues in order to allow them to meet the LCBOs average order lead- clipping of seven days. At integral capacity Black Fly is meeting the required lead age with minimal margin of error to account for delays, however, during the spend season, which willing go past as early as next month, the company will not be able to keep up with the increase in demand and will fail fulfill the LCBOs order in time (see exhibit 7).Options The first option available to Black Fly would be to expand its product mix with the addition of a new flavor to appro bation their existing cooler. The company will be able to take advantage of economies of scale through the current action therefore a minimal cost of $30,000 will scarce be needed to overlay development and merchandising fees. To cover this initial cost Black Fly will wee to make out an additional 127 cases a month to cease even, an increase of 10. 58% (see exhibit 2).It has been intercommunicate that adding another flavor to the product line could increase sales by 50 to 75 percent. This projected increase in sales would produce an annual expected ROI of 373% and 609% independently (see exhibit 5). If however sales increased by only 10% due to the risk of cannibalization of their original recipe then the expected ROI would be -5% (see exhibit 5). This increase in sales however will perpetrate additional strain on the companys current capacity (see exhibit 8). A second option to Black Fly would be the addition of a new specialty spirit-based product called Spiked spyglass. This packaged ready to freeze cooler would be a non-competing product to the already successful cranberry-blueberry vodka. An advantage to this product is that there is no other product similar to it out in the marketplace. The LCBO has also affiliated to sell 8,000 cases of the product over the four summer months, which would produce revenues of $277,200 (see exhibit 3). all over this four month period this option will produce an ROI of 15% (see exhibit 6). To produce Spiked Ice the company however will have to purchase expensive machinery costing $500,000 and spend an additional $40,000 on merchandising and product development.To cover these costs Black Fly would have to sell an additional 7,585 cases of Spiked Ice (see exhibit 4). This may show difficult as this new product is very seasonal producing higher(prenominal) sales in the summer months and potentially smaller sales in the fall and winter months, a time in which the LCBO has not committed to sell this product at this time. Another disadvantage to this option is the set that this new machinery would occupy in the already small storage warehouse.Black Flys current facilities cannot produce Spiked Ice and the original vodka at the same time which would result in Black Fly loosing monthly revenues of $23,641 (see exhibit 1). pass It is apparent that Black Fly must attempt to offer a variety of products to enhance its product mix and to keep current customers from arduous other flavors offered by other competitors. At this time the best way to proceed with this will be to launch a new flavored vodka to compliment the already successful cranberry-blueberry vodka.The low initial costs and economies of scale gained through this option will allow Black Fly to introduce this new flavor quickly and efficiently to capitalize sales during the upcoming holiday season. To help address the concern of future capacity issues it would be recommended that Black Fly hire two more part-time workers and to run th e production process seven days a week. This will be accomplishable due to the expected high ROI associated with this option. This increase in production will allow the company to complete six full runs amounting to 3000 cases within the seven day lead time required by the LCBO ( see exhibit 10).In the future it will become necessary to upgrade to a larger facility and at that time it would be beneficial to begin producing Spiked Ice, however at this current time, given the companys limited time in the market, it is suggested that Black Fly only pursue the launching of a new flavor. After the company has received sales from the holiday season the company will then be able to better address the possibility of relocating to a new warehouse and address their plans for Spiked Ice for the upcoming summer months.