Key Problem or Challenge
RRBC stands for Russian River Brewing Company, which is known as a craft brewery and brewpub
based in Santa Rosa, CA., and is owned by Natalie Cilurzo and her husband, Vinnie Cilurzo. Under their
business, Pliny the Younger was the flagship of RRBC and best-known beer brand. It exclusively
produced and released on Friday every two weeks and for sale on a promise. As a reaction to the great
demand of beer market, Natalie thought that “if their company had built a stable platform that would
permit consideration of a second, larger brewery and facilities to accommodate with more tourists”
(NACRA, 2016, p.1). However, the concerns incurred in the meanwhile. Natalie and Vinnie concerned
whether there had a new phase of expansion of RRBC or not, and if so, how they could handle pressures
and uncertainties from the expansion.
External Analysis
As the case reading material told us that the founding father in the original states was either brewer or
had connections with breweries, they owned small breweries to serve small communities. However, the
number of local breweries kept decreasing because advanced conservation technologies such as
refrigerator, and dry laws that are adopted by several states until the late 1970s. In 1976, a change in
regulations to let small breweries produce beer again. Then, some craft beer increased in the following
century. For craft breweries, the most shared similar ingredients. Therefore, to let them stand out in the
market, they often focus on enhancing customer experiences. Craft breweries got brand awareness and
increased demand in-store by providing beer tasting, tours, food, music, and competitions. The craft
breweries would gain more profit margin if customers bought craft beer directly from them. “According
to a statistic from 2013-2015(NACRA, 2016, p.2),” the sales growth rate of craft beer would have
positive grow average rate 4.4% in the future six years, which gave a good new to the owners of craft
breweries for business expectations. However, as the case cited data from California Craft Beer
Association said in 2016, California already been a brewing capital of the U.S., and it would let the craft
beer market be more aggressive. If one craft brewery wanted to stand out or make expansion, it needed
to make more effort than other craft breweries in California.
Internal Analysis
In 2004, Mr. Cilurzo took over RRBC from Gary Korbel who launched the RRBC brand first and
opened a brewpub with his passion and experiences for making beer. In 2006, RRBC got unexpected
success from national recognition. The craft beers named Pliny the Elder and Blind Pig as the best beer
in their class be acknowledged in both the Great American Beer Festival and World Beer Cup. These
recognitions gave their brand a chance to let wider audiences know it. After that, the RRBC got its first
expansion, they leased a brewery facility near the brewpub. The profit definitely decent, but it had a lot
of work as Natalie said. With this good momentum, RRBC released Pliny the Younger in 2009, and it
was evaluated as one of the best beers in the world by Beer Advocate and RateBeer. Therefore,
thousands of people came for tasting that beer, Vinnie used an entire extra trunk to produce Pliny the
Younger and it sold out within in eight hours. Vinnie explained that he needed a lot of expensive
ingredients and tones of time to produce Pliny the Younger, he did so much only get 166 barrels per
year, which resulted in Pliny the Younger as limited edition to be released every Friday in two weeks. As
Vinnie said, the core competitiveness of RRBC is hardworking and innovations. In 2013, Matt Pope, a
financial controller hired by the Cilurzo for day to day financial operating, a new accounting software
introduced by Matt named EKS&H made streamline accounting across RRBC. In this way, the RRBC
Case Analysis #1-Russian River Brewing Company
became the top five largest craft breweries companies in the Sonoma county. Nevertheless, according to
Vinnie said, the biggest problem that RRBC faced was that customer could not be able to buy the
amount of beer that they wanted to buy because of limited supply. Moreover, a black market for RRBC
recently appeared. The Cilurzo would like to produce more beer with quality, but some ingredients
shortage because of industry pollution made this problem hard to be fixed.
Mutually Exclusive Alternatives
Based on the problem I found in the case reading material, I knew that the origin led to this kind of
situation because of the limited supply form RRBC, customers could buy the amount of beer they want.
At that time, the supply shortage occurred. For RRBC, it absolutely has an opportunity to expand its
business. However, to fix the uncertainties from this expansion, I would like to provide two choices for
the Cilurzo, besides, borrowing 40 million dollars from a local commercial bank to build another
brewery facility. First, to call on industries owners to decide to reduce industrial pollution, which lead to
a shortage of hops, one of the crucial intergrading for producing the beer. This idea seems ridiculous, but
it’s the best way to solve the problem from its source. The less industrial pollution there has, the more
hops it got to produce beers. The second advice is that if the Cilurzos could limit the number of their
customers and increase the price of beer. To maintain the quality of the beer, RRBC could not choose
other less expensive ingredients to produce their beer. Therefore, to make customers be satisfied in their
brewery, the only thing they can do is limiting the daily number of their customers based on the number
of beers. In this way, all customers who came into RRBC would be satisfied. Moreover, the higher price
of their beer would let some number of customers stop their step. To be luxury stuff is not a bad thing to
some extent.
Recommended Chosen alternative Course of Action and Justification
From my perspective, selecting the latter one is better than the former advice in term of pragmatism.
To set limited customer and increase price are easy for RRBC, they merely operate these things on the
internal side. However, if the Cilurzos decide that the output must be increased, it would be hard to
operate for a brewery. There are only two ways in front of them. One is finding the substitute
ingredients; another is as same as what I said above to fix the problem from its source. Both of them are
wasting time, money, and human resource. They need to spend time and money on researching,
negotiating. Moreover, if they hire the specialists to research the substitute or to negotiate, the extra
costs from them either could not be decided exactly.
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