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Case study on blackfly essay

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| 2012| | Company: Black Fly Coolers Products: Ready to Drink SegmentTarget Market: Georgia(US)Names: Pavitra Parikh Falguni Patel| | MARKET RESEARCH OF BLACKFLY COOLERS| | | | | Introduction: Black fly beverages INC is a London base family owned business. Since 2005, the company is committed to serve Canada with ultra premium vodka coolers and a distinctively Canadian profile for the clientele who are interested in quality drinks. The company shares very good business term with liquor control board of Ontario.

The company currently has five different products in three categories over 5oo LCBO in six Canadian provinces. The company deals with the ready to drink segment of the alcoholic beverage industry. The History: Black Fly Beverages Company is Ontario’s first micro distillery. It was founded by a husband and wife Rob Kelly and Cathy Siskind Kelly in the mid 2005. The name black fly itself has an interesting history and significance, the name comes from a small northern Ontario insect who has a mighty bite. The company also being small has created a bite that’s unforgettable for people who experience its products once.

Initially black fly started in a historic bank building in the London downtown, the heart of the city. Over the years the business expanded and in May 2008, exactly three years from beginning the black fly beverage company moved its operations to a new and larger location at the state of the art production facility in the city’s industrial quarter. And since then black fly has continued serving Canadian markets with ultra premium beverages. Black fly also started to export their products in Hong Kong and Greenland. Capabilities:

Currently black fly has 10 full time and 20 part time employees. The production unit currently runs in two shifts. PRODUCTION PROCESS: (STATASTICS AND LOCAL DEMAND) * Mixing process: 14 hrs * Bottling process: 16 hrs * Per week capacity: 84000 bottles * Regular demand: 1200 cases (28800 bottles-per month) * Seasonal demand: 3600 cases (86400 bottles) (ref 1) The Organizational Structure: * Controller- Rose Schmit * Director of Sales- Mike Pearce * Territory Manager- Maura Hanratty * Production Manager- Mike Nisker * Regional Manager- Chelsie Buch * C0-founder- Cathy Siskind Kelly Co-founder- Rob Kelly * Production Supervisor- Kevin Carpenter * Accounting- Anya Tursa * Production Supervisor- Keith Newman (Organizational structure is retrieved from the presentation on 16 th January by the owners of Black Fly team. ) The research and development team at the black fly has been really innovative. They have come up with new products time to time. Their recent up comings are the tequila based drinks –the tequila sunrise and tequila margarita. Products: Vodka base| Tequila base| Cocktails| Vodka Cranberry| Tequila Margarita| Black Fly Martini|

Vodka Blueberry| Tequila Sunrise| Black Fly Lime Margarita| | | Black Fly Punch| | | Black Fly Mimosa| Expertise: The company’s expertise is the uniqueness of the products. The distinct flavor that they developed has been their identification mark in the market. The products are 60% less sweet than the present competitors in the market. Black fly products do not contain any food coloring and they use cane sugar rather than high fructose corn syrup. Their packaging is also very thoughtful. The bottle has a wide mouth-big enough to put ice cubes . The plastic caps are reusable.

Black fly uses PET packagings, there are many advantages like they are eco friendly, less risky, more flexible in transporting. Product Strengths: * The flavors are different. * Coolers more like a cocktail. * They are less sweet as compare to typical coolers (come on the 4 -5 range of LCBO sugar scale) * Juices used are pure. * Having a year around appeal. * New test and innovative product Nature of Business: Black fly beverages deals with the business of alcoholic beverages . There are certain rules and regulations around this type of business. The company has to follow all rules put up by federal and state government policies.

The chemical terminology used for alcohol is ethanol or ethyl alcohol, and it is the result of a natural process of fermentation of fruits, grains, vegetables, plant matter, and even dairy products. Its three main classifications are wine, beer and distilled spirits other classifications are often related to culture, content of alcohol, production method and legality. The relationship between alcoholic beverages and public health in general has been studied for more than a century, and is still an interest to governments and public health professionals, the public at large, as well as a central issue for the beverage industry.

Indeed over past two decades, major international beverage alcohol producers have taken a broader look at the way in which they respond to issues related to alcohol. With attention to corporate social responsibility they actively incorporate concern for health related aspects of alcohol issues such as underage drinking or alcohol impaired driving Management and Human resource: The LCBO honored Black Fly at the 17th annual ELSIE AWARDS in the small supplier category as the small supplier/agent of the year, and also for the commitment towards environment with its Environmental Responsibility and Ongoing Green Initiatives Award.

The green Initiatives by Black fly: Black fly uses PET-1 bottles for packaging, the most recyclable plastic currently used in the industry from a local Ontario manufacturer. These plastic bottles weigh only 40 grams when empty compared to a similar sized glass bottle weighing 260 grams. Ultimately the transportation results in less green house gas. Also the OXO-Biodegradable pallet wrap film greatly reduces the amount of waste plastic entering the landfills. Black fly has a deposit program with the retailers to encourage empty bottle returns. Innovation: Black fly beverages actual strength is its product characteristics.

Their innovative approach in terms of taste and quality brought those loyal customers and a status of being truly Canadian company. Corporate social responsibilities: Black Fly in actual is implementing the concept of CSR by working closely with its trade partners, supporting several regional and national charities and by participating in sponsoring teams and events for people of drinking age. Company is also getting inclined towards green marketing by using bottles that are made of most recyclable plastic named PET and by using biodegradable shrink wrap and cups.

This initiative of Black Fly has led people get into positive word of mouth communication about company. AREAS TO BE DEVELOPED (GAPS) Mass media Advertisements: Despite being in the market for over six year, Black fly is still unable to afford mass media advertising. Due to this the company is lacking in building brand awareness with consumers specially compared to the international competitors. When the company was starting up, black fly attracted the attention of the national CBC broadcaster, who followed the company’s start up on its popular venture business show.

This helped Black Fly to create a nationwide appeal. While launching the product in US, similar advertisement or exposure to media can help to create brand awareness Production capacity: The company currently runs with 10 full time and 20 part time employees with two shifts running their production capacity is 3500 cases per month. If there is a very high demand in the US market than the company has to run a full extra shift and might as well need to think of outsourcing to meet the demands and avoid delays and gaps in the US market.

In order to be ready for situations like this the company should start looking forward to taking trainee employees to add an extra shift and also start to skim up the outsourcing options available locally and in the US market. Marketing strategies and attaining presence: Black Fly follows unique market niche and national growth plan. It distributes free samples at local LCBOs and maintains public relations by posting testimonials and by responding customers’ queries over their website.

These strategies can be carried over for the US and also the company should keep looking forward to the food and beverage exhibitions and trade fairs . this can give them exposure to the consumers and also can bring up importers and local companies who might be interested in exchanging some business. Access to more capital and knowledge (partnerships or strategic alliances) If there is a steady growth in the US market than the company can think of having a partnership or strategic alliance with some local companies who are similar in size.

By doing this the company can have access to more capital and importantly the knowledge, accordingly the products could be modified or developed specially for the us market and the ‘ Truly American’ appeal can be generated. Target market and Environmental Scan: For scanning target market: Georgia (U. S) we have used the 4 P’s of marketing Product: CLASSIFICATION OF BEVERAGES: See chart 1 in Appendices Under the classification of beverages the coolers or alcopops can be categorized as micesselenious and the applicable rules will be same as beers. Labeling Regulation of U.

S: Label must include the following: * Brand name of product * Class or type of products * Alcohol content expressed as percent by volume * Name and address of bottler or packer and importer, if applicable * Net contents * Country of Origin for any imported products Wine specific: * Percentage of foreign wine if label indicates addition of foreign wine Spirit Specific: * Presence of coloring materials * Treatment with wood, if applicable Commodity statement * Statement of age, if required(by type of spirits) * State of distillation for any u. s produced whiskey

Required disclosures and declarations: * FD&C yellow no. 5: used for food coloring * Saccharin * Sulfites * Aspartame (malt beverages only) * Limited Carbohydrate and calorie listings * “ Low Carbohydrate “ designation is based on the serving size. As per the TTB (Alcohol and Tobacco Tax and Trade Bureau ) ruling 2004-1 –TTB will approve the use of the term “ low carbohydrate” (or “ low crab”)on labels and in Advertisements where a statement of average analysis is present, and standard serving size for the product (12 fl . oz. for malt beverages, 5 fl. oz. or wines and 1. 5 fl. oz. for distilled spirits) Contains no more than 7 gm of carbohydrates. So, for black fly coolers it is necessary to mention Brand name of product, Class or type of products Alcohol content expressed as percent by volume, Name and address of bottler or packer and importer, country of origin, Food colors, other ingredients and carbohydrate and calorie to mention on label. Packaging regulations: The bottle size for alcoholic beverages are regulated by the TTB. Further the revenue code of 1986 authorizes regulations on the kind and size of istilled spirits. The purpose of establishing uniform standards of fill for alcoholic beverages is to prevent proliferation of bottle sizes and shapes which would inevitably result in consumer confusion and deception with regard to the quantity and net contents of the alcohol beverage package. Uniformity in the bottle size also facilitates proper calculation of Federal excise tax. Recycling laws: Campaign for recycling is dedicated to expanding recycling in the US through the development of state based recycling incentives.

While there are many products for which recycling incentives should be expanded. CFR is currently focused primarily on beverage container, plastic bag bans and e waste recycling policies. Georgia does not currently have a bottle bill. Georgia does not currently have an e –waste law. Place: Alcohol Consumption trend in U. S: The national Alcohol Abuse and Alcoholism reports states that the per capita consumption of alcohol by Americans has been dropped. Alcohol consumption may vary by race and ethnicity. Race and ethnicity: Major four minorities in US are: African Americans * Hispanics * Asian Americans * Pacific Islands (AAPIS) * American Indians/Alaska natives (AI/ANS) Different cultures have different drinking pattern and rate. Both AI and ANS are heavy drinkers and pacific islands have lower drinking pattern. So, Black Fly can use this point of you and can select the area where the American Indians are more like place, as per the 2010 statistics there are 5. 2 million Indian Americans and Alaska natives are there in U. S. And in Georgia the population of American Indians is 0. 3%.

Among all age and ethnic group, men are more likely to drink than are women and to consume large quantities in a single sitting. This is a pattern found throughout the world. Status and Role: Married Couples with children and couples with no children spend 30% more than the national household average. 61% percent of all money spent on alcoholic beverages was for alcohol consumed in the home. Abstention in U. s is inversely associated with social status. LOWER THE SOCIAL CLASS –THE HIGHER THE ABSTENTION. Similarly the more the educated they are more likely to drink.

So, a great amount of monthly income is spend on alcohol by U. S people. International comparison: Consumption data of U. S:- Categories| Consumption per capita| World Rank| Total alcohol Consumption| 8. 3 liters per capita| 20| Soft Drinks Consumption| 216 liters | 1| Standard drinks(volume base)| 17. 7 ml| 3| Total Spirit Consumption| 4. 8 liters| 6| So, we can see a great demand of Alcohol Beverages in U. S. Even the trend is changing and people like different test. So, black fly coolers have great access to market Alcohol Industry structure Georgia:

Georgia is the 24th most extensive and 9th most populous of the 50 United States. The Three –Tier system: * Where to buy Alcohol: You can buy spirits in retail package stores while grocery stores and convenience store sell beer and wine. While restaurants and bars can sell alcohol on Sundays, depending on the township, liquor stores are always closed. most restaurants and bars are allowed to serve alcohol from 6 am until midnight. * Legal Age for Drinking/Serving Alcohol: The legal drinking age in Georgia is 21, as it ia in all states, but alcohol can be served in a restaurant or bar at age 18. Open Container Law: Open bottles of alcohol must be transported in a vehicle’s trunk where the driver nor passengers have access to the alcohol See table 1 for top ten counties of Georgia. So, the data give better idea about in which Counties of Georgia Black fly should approach. Data mentioned that Atlanta is the better option as it is the Capital of Georgia and having a great population and can get high retailers for selling the products. Population in Georgia: Groups| Population| Total population| 9, 687, 653| Male| 4, 729, 171| Female| 4, 958, 482| 18 and over| 7, 196, 101| 65 and over| 1, 032, 035|

Median age| 3, 361, 616| More than 75% of Georgian public is above 18 ages and female population is also very high. So, great scope for Black fly to enter in Georgia Market Import Regulations of U. S: FEDERAL level Permission to operate: In U. S TTB Grants authorization to operate alcohol related businesses. Under TTB, INTERNAL REVENUE CODE (IRC) has authority over retail level businesses and Federal Alcohol Administration ACT (FAA act) has authority over all alcohol businesses above retail level. Everyone who wants to do business in U. S must file an application under TTB with all necessary documents.

There is no fee on this by government. The applicant must get the written permits from TTB before engaging in the business. Importing Beverage Alcohol Products into the U. S. : In U. S for importing alcohol one should meet with federal level as well as state level regulations. At federal level:  Each state created its own unique system of alcohol beverage control. . “ License” states, There are 2 general classifications: Control States: There are 18 states in these group, they are the sole wholesalers of distilled spirits, as well as the retailers in various ways in some of these States.

License states: There are 32 states, they do not participate in the sale of alcohol beverages and regulate through the issuance of licenses to industry members that do business within their states. Categories in which Black fly coolers needs permits in U. S: There are different categories for manufacturer below stated is the important permits categories for Black fly coolers. And all these categories for online application for permit is available on official websites of TTB of U. S (http://www. ttb. gov/applications/index. shtml, permits. [email protected] gov) For alcohol producers and manufacturers:

Distilled Spirit plant beverages: A distilled spirits plant (DSP) may be established to produce, bottle, rectify, process or store beverage spirits. Examples of beverage distilled spirits include neutral spirits or alcohol (i. e. vodka or grain spirits), whiskey, gin, brandy, blended applejack, rum, Tequila, cordials and liqueurs. Even manufacturer can submit documents online also. it is beneficial for Black fly coolers if in future They wants to establish a plant in U. S they need to fill the documents in these categories. For alcohol exporter, importer and wholesalers:

Importer (Alcohol): Anyone wishing to become a beverage alcohol importer (IMP), importing into the United States beverage alcohol not for personal use, and subsequently distributing the imported beverage alcohol to wholesalers or retailers, must file to this application category. Wholesaler (Alcohol): Wholesalers, businesses which sell beverage alcohol products at wholesale to other wholesalers or retailers must first obtain a Wholesaler’s Basic Permit. Producers or manufacturers of beverage alcohol products need to apply for a Wholesaler’s Basic Permit only if they want to sell beverage alcohol products which they did not produce.

So, Black fly team can check that the wholesalers they are selecting are having this permit or not. Wholesaler/Importer (Alcohol): Businesses which require a Basic Permit for Importing (to import and distribute foreign beverage alcohol) and Wholesaling (to distribute at wholesale, domestic beverage alcohol) from the same location may reduce the required paperwork by combining the applications. So, with this permit Black fly coolers can get permission of wholesale and retail selling in U. S * The Special Occupational Tax (SOT) on marketers of alcohol beverages was repealed by Section 11125 of Public Law 109-59, effective July 1, 2008. Importers must complete TTB F 5630. 5(d), “ Alcohol Dealer Registration” after having been issued a Basic Permit from TTB and prior to beginning business. * Importers must also file this form with TTB when there is a change in registration information and when discontinuing their business. * The importer must also obtain a TTB-issued Certificate of Label Approval (COLA) for each unique product/label. * To obtain a COLA, the importer must file an “ Application for and Certification/Exemption of Label/Bottle Approval”, on TTB F 5100. 31 with TTB’s Advertising, Labeling and Formulation Division (ALFD).  The importer must also meet all State and local requirements. State and local jurisdictions may have their own importation requirements in addition to Federal requirements. Importers must contact their State alcohol control board and/or local authorities for more information. * The importer must ensure that the producer of the alcohol beverage is registered with the FDA (Food and Drug Authority) and provide FDA with advance notification of an importation. * Importers are responsible for all applicable Federal excise taxes and duties. * The taxes depend on the amount of alcohol percentage in the product. At the federal level there are different tax payers for wines , spirits , and beers . for wines it is considered in gallons , for beers it is barrels, and for distilled spirits it is adjusted according to proof gallons. (proof gallon= 100 proof is 50%alcohol content) See table 2 in Appendices * Here 1 U. S gallon= 3. 78 liters and 1 barrel= 31 gallons * There is NAFTA agreement of free trade between Canada and U. S. So, no such duties or tariffs for import from Canada to U. S. State level regulations: In addition to meeting Federal regulations, individuals and businesses must meet each state’s individual laws and regulations.

These state laws and regulations, which vary widely from state to state, may be more restrictive than Federal regulations and must be met in addition to Federal requirements unless the Federal law pre-empts the State law wherein they desire to do business. Georgia comes under license states and having state regulations for alcohol beverages. Georgia Department of Revenue takes care of alcohol industry. License Requirements: License to import distilled spirits, malt beverages, and/or wine: Required Forms: (1) State Tax Registration Application ………….. (Form CRF-002) (2) Application or Wholesaler / Importer / Broker / Manufacturer / Foreign Importer and Foreign Producer……………… (Form ATT-6) (3) Application for Brand & Label Registration & Designation of Sales Territory…………….. (Form ATT-104) (4) Application for Alcohol Permit (Form ATT-15) (5) State Beverage Alcohol Personnel Statement …………….. (Form ATT-17) (6) Malt Beverage Bond – Performance and Tax Liability…………. (Form ATT-52) (7) Wine Bond – Performance & Tax Liability Bond …………….. (Form ATT-108) (8) Liquor Importer Bond ………….. (Form ATT-204) Additional Required Documentation: 1) Copy of the Local Jurisdiction Alcohol License (2) Copy of Federal Basic Permit (3) License Fee(s): a) Liquor ($1000. 00) b) Malt Beverages ($500. 00) c) Wine ($500. 00) d) Investigation Fee (non-refundable) ($100. 00) (4) Certificate of Authority (5) Warehouse Lease / Deed (6) Copy of Federal Label Approvals Price: From Wholesale to Retail – Calculation Estimate| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Markup %| Vodka Citrus| Tequila Margarita| 3rd Model| | | | | | Selling units | | 4 pks| 4 pks| 4 pks| | | | | | Selling units per case| | 6| 6| 6|  | | | | | |  | | | | | | | Cost of Producing Product per case| | $ 17. 00 | $ 16. 50 | $ 16. 00 | | | | | Additional costs to be covered| |  | | | | | | | | Freight est. (per case)| | $ 2. 50 | $ 2. 00 | $ 1. 50 | | | | | | Marketing est. (per case)| | $ 2. 00 | $ 1. 50 | $ 1. 00 | | | | | | | |  | | | | | | | | Cost per case including Freight/Mktg| | $ 21. 50 | $ 20. 00 | $ 18. 50 | | | | | | | |  | | | | | | |

Black Fly Markup required| 40%| $ 8. 60 | $ 8. 00 | $ 7. 40 | | | | | | | |  | | | | | | | | Selling Price to IMPORTER| | $ 30. 10 | $ 28. 00 | $ 25. 90 |  | | | | | | |  | | | | | | | IMPORTER Markup required| 33%| $ 9. 93 | $ 9. 24 | $ 8. 55 | | | | | | | |  | | | | | | | | | | $ 40. 03 | $ 37. 24 | $ 34. 45 | | | | | | | |  | | | | | | | WHOLESALER Markup required| 25%| $ 10. 1 | $ 9. 31 | $ 8. 61 | | | | | | | |  | | | | | | | | | | $ 50. 04 | $ 46. 55 | $ 43. 06 | | | | | | | |  | | | | | | | RETAILER Markup required| 25%| $ 12. 51 | $ 11. 64 | $ 10. 76 | | | | | | | |  | | | | | | | | | | $ 62. 55 | $ 58. 19 | $ 53. 82 | | | | | | | |  | | | | | | | | | |  | | | | | | | Estimated Retail price per selling unit| | $ 10. 43 | $ 9. 70 | $ 8. 97 |  | | | | The prices for Black fly are lower compared to its traditional competitors. The distinctive taste adds value to the product. The markup for wholesaler and retailer may vary from 20% to 30%.. Promotion: Black fly needs a great marketing fund for promotion activity in U. S and that fund can be raise by the grate partnership with U. S manufacturers or import Distributors . There are many large scale importers in Georgia and some of their list is given in appendix. Even strong distribution Channel is needed by Black Fly coolers. Even for Internationalization Uppsala model will be the best.

Applying Uppsala Model: Black fly coolers are now in the first stage for getting access to the U. S market Bibliography (n. d. ). Retrieved Feb 17, 2012, from http://www. nationmaster. com/index. php (n. d. ). Retrieved feb 19, 2012, from http://www. lexisnexis. com/hottopics/gacode/Default. asp Alcohol Beverage Control Boards. (n. d. ). Retrieved feb 19, 2012, from http://www. ttb. gov/wine/state-ABC. shtml Alcohol problems and solutions. (n. d. ). Retrieved feb 16, 2012, from http://www2. potsdam. edu/hansondj/Controversies/1116895242. html America’s industry. (n. d. ).

Retrieved feb 20, 2012, from http://www. macraesbluebook. com/search/product_company_list. cfm? prod_code= 9000838; region= Georgia-GA%1C Beverage industry statistics. (n. d. ). Retrieved feb 19, 2012, from http://www. reportlinker. com/ci02013/Beverage. html/coverage/Asia: Georgia Black fly beverage company. (n. d. ). Retrieved feb 20, 2012, from http://www. oppapers. com/essays/Black-Fly-Beverage-Company-Inc/905020 CBP. gov(Duty). (n. d. ). Retrieved feb 19, 2012, from http://www. cbp. gov/xp/cgov/trade/trade_programs/duty_rates/ Compaign for recycling. (n. d. ). Retrieved feb 20, 2012, from http://www. ampaignforrecycling. org/states/georgia Economy watch. (n. d. ). Retrieved Feb 20, 2012, from http://www. economywatch. com/economic-statistics/year/2012/ georgia Code. (n. d. ). Retrieved Feb 19, 2012, from http://www. lexisnexis. com/hottopics/gacode/Default. asp Georgia. gov. (n. d. ). Retrieved Feb 19, 2012, from http://gov. georgia. gov/00/exec_orders/0, 2747, 78006749_166488823, 00. html Infoplease . (n. d. ). Retrieved Feb 19, 2012, from http://www. infoplease. com/ipa/A0108201. htm North Georgia beverage. (n. d. ). Retrieved Feb 19, 2012, from http://blairsville. georgiastatemap. et/c-294958. htm packaging law. (n. d. ). Retrieved Feb 18, 2012, from http://www. packaginglaw. com/2639_. shtml Permission to operate. (n. d. ). Retrieved feb 18, 2012, from http://www. ttb. gov/tax_audit/permits. shtml pop Vs. Soda statistics. (n. d. ). Retrieved feb 19, 2012, from http://www. popvssoda. com/stats/GA. html Structure of beverage industry. (n. d. ). Retrieved Feb 19, 2012, from http://www. icap. org/LinkClick. aspx? fileticket= DZ9ittvJ%2FZs%3D; tabid= 75 Top 10 Tequila Cocktails To Try. (n. d. ). Retrieved Feb 17, 2012, from www. cocktails. about. com: http://cocktails. bout. com/od/tequilarecipes/tp/Top-10-Tequila-Cocktails-To-Try. htm TTB ruling. (n. d. ). Retrieved Feb 18, 2012, from http://www. ttb. gov/rulings/2004-1. pdf United states International Trade commission. (n. d. ). Retrieved Feb 19, 2012, from http://www. usitc. gov/tata/hts/ Chart 1: TABLE : 1 Top 10 County of Georgia: According to one survey on United States (2010): County| Population| Atlanta| 420, 003| Augusta| 195, 844| Columbus| 189, 885| Savannah| 136, 286| Athens| 115, 452| Sandy Springs| 93, 853| Macon| 91, 351| Roswell| 88, 346| Albany| 77, 434| Johns Creek| 76, 728|

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