Case-3

Black Fly Beverage Company Inc.

Case Questions:
1) Identify Black Fly’s customer groups, and perform the necessary task analyses.

Rob Kelly originally intended to open a small brewery in London. However, he later
discovered that beer sales in Ontario were declining. Then he focused on the spirit cooler
market. According to Market Research, cooler sales had increased by 300 percent in the
span of two years. He abandoned his first vision of a craft brewery in favour of a Micro
Distillery. Finally, he obtained a federal licence and established the Black Fly Beverage
Company as Ontario's first micro distillery.
Unlike other manufacturers, he chose a primitive bank building in a high traffic location
rather an industrial region. He renovated a structure that was smaller than a usual
warehouse, with only 140 square metres of production space. Though it was more
expensive to lease, the position provided maximum exposure to the public and a
significant presence in the community.
Because of the heavy competition from other brands such as Mike's Hard Lemonade and
Smirnoff Ice, Kelly concentrated on building a premium product that differentiated itself
on multiple fronts from other vodka coolers available in Ontario. His first recipe was
created for consumers looking for a new alternative to the conventional mainstream
vodka cooler. The ingredients used in the recipe were fresh and authentically Canadian.
It had natural cranberry and blueberry juices with no artificial sweeteners. As a result, it
tasted less sweet in comparison to others that were four to five times sweeter. Black
Fly's cooler was sold in packages of four 400ml for $9.95. Wide mouth plastic,
resealable, ultra-durable bottles prevailed out over standard 330ml glass bottles.
Following the approval of Kelly's Black Fly product proposal, the LCBO permitted
restricted delivery of the cooler to six London-area retailers. Furthermore, the initial
order's manufacturing run was marred by issues, culminating in the revelation that the
new bottle-labelling machine was incompatible with the other equipment on the
production line. By November, it was available in nearly 200 LCBO locations as well as
select taverns and restaurants in South-western Ontario. The Kelly’s were nearing
completion of an agreement with Budweiser Gardens to open a Black Fly-branded
lounge inside the arena.

By- Mahalingeshwer Koti Managerial Economics

PES1202102892
 Case-3
Black Fly Beverage Company Inc.

2) What is Black Fly’s monthly theoretical capacity for the vodka cooler and for Spiked
Ice?
The full production process, including cleaning and setting up each tank, might take up to 26
hours. Three 1,600-litre tanks were filled with a mixture of juice, flavouring, and ethanol.
To get the correct taste, colour, and consistency, the final mixture was churned for up to 1.5
hours.
The Ontario Liquor Control Board's (LCBO) bottling operation manufactured vodka in three
tanks. Overall, the bottling machine could fill 12,000 bottles in 12 hours while draining all
three tanks, resulting in a total run time of 26 hours. However, production was occasionally
halted due to delays that occurred during the process. The production and bottling
procedures were normally scheduled for consecutive day and evening shifts, five days a
week. The LCBO's average monthly regular order was 1,200 cases, however orders were
frequently erratic and may increase during the summer season.
Rising sales, rising consumer demand, greater distribution to LCBO outlets, and positive
reviews from the media and the LCBO prompted Kelly's to consider expanding. The Kelly’s
were unsure whether a second cooler flavour would have the same broad appeal as the
popular cranberry and blueberry brand.
The Kelly’s believed that their current production technique had adequate capacity to
develop a second flavour at current demand levels. The only associated cost would be a
$30,000 product development and merchandising fee. In addition, the new cooler would
benefit from guaranteed shelf space in LCBO stores across the province.

The Kelly’s created a ready-to-freeze vodka cooler concept dubbed "Spiked Ice's." Spiked
Ice, like the summer frozen delicacy known as a "Freezee," would come in a multi-pack of
nine 100-millilitre foil-packaged units with three vodkas cooler flavours each box. The
Kelly’s desired that Spiked Ice be self-sustaining and not reliant on an ongoing LCBO
commitment. Launching a new product is analogous to beginning a new business. The
majority of the equipment, materials, and procedures would be product-specific.
The LCBO is very excited about the Spiked Ice concept and has made a commitment for the
summer months for 200 of the top-selling stores across Ontario at a retail selling price of
$8.75 per box. The Kelly’s were aware that they would need to be prepared for a three-week
seasonal order. The Kelly’s knew they would have to be ready for a seasonal order that was
three times that size.

By- Mahalingeshwer Koti Managerial Economics

PES1202102892