Case Study:3 to 4 pages:24 hours

Mystic Mmmk ffimffee

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As Father Daniel Mary, the prior of the Carmel- ite Order of monks in Clark, Wyoming, walked to chapel to preside over Mass, he noticed the sun glistening across the four-inch snowfall from the previous evening. Snow in june was not unheard of in Wyoming, but the late snow- fall and the bright glow of the rising sun made him consider the opposing forces accompany- ing change and how he might best prepare his monastery to achieve his vision of creating a new Mount Carmel in the Rocky Mountains. His vision of transforming the small brother- hood of 13 monks living in a small home used as makeshift rectory into a 500-acre monas- tery that would include accommodations for 30 monks, a Gothic church, a convent for Carmelite nuns/ a retreat center for lay visitors, and a hermitage presented a formidable challenge. However, as a former high school football player, boxer, bull rider, and man of great faith, Father Prior Daniel Mary was unac- customed to shrinking from a challenge.

Father Prior had identified a nearby ranch for sale that met the requirements of his vision per- fectly, but its current listing price of $8.9 million presented a financial obstacle to creating a place of prayer, worship, and solitude in the Rockies. The Carmelites had received a $250,000 dona- tion that could be used toward the purchase, and the monastery had earned nearly $75,000 during the first year of its Mystic Monk coffee- roasting operations, but more money would be needed. The coffee roaster used to produce packaged coffee sold to Catholic consumers

at the Mystic Monk Coffee website was reach- ing its capacity, but a larger roaster could be purchased for $35,000. Also, local Cody, Wyo- ming, business owners had begr-rn a founda- tion for those wishing to donate to the monks' cause. Faiher Prior Daniel Mary did not have a great deal of experience in business matters but considered to what extent the monastery could rely on its Mystic Monk Coffee operations to fund the purchase of the ranch. If Mystic Monk Coffee was capable of making the vision a real- ity, what were the next steps in turning the cof- fee into land?

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tlii ijt' rl r. il"t i t t flil Carmelites are a religious order of the Catholic Church that was formed by men who traveled to the Holy Land as pilgrims and crusaders and had chosen to remain near jerusalem to seek God. The men established their hermitage at Mount Carmel because of its beauty, seclusion, and biblical importance as the site where Eliiah stood against King Ahab and the false proph- ets of Jezebel to prove Jehovah to be the one true God. The Carmelites led a life of solitude, silence, and prayer at Mount Carmel before eventually returning to Europe and becom- ing a recognized order of the Catholic Church. The size of the Carmelite Order varied widely

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244 Part 2 Cases in Crafting and Executing Strategy

throughout the centuries with its peak in the 1600s and stood at approximately 2,200 friars living on all inhabited continents at the begin- ning of the 21st century.

The Wyoming Carmelite monastery was founded by Father Daniel Mary, who lived as a Carmelite hermit in Minnesota before moving to Clark, Wyoming, to establish the new monastery. The Wyoming Carmelites were a cioistered order and were allowed to leave the monastery only by permission of the bishop for medical needs or the death of a family member. The Wyoming monastery's abbey bore little resemblance to the great stone cathedrals and monasteries of Europe and was confined to a rectory that had once been a four-bedroom ranch-style home and an adjoining 42 acres of land that had been donated to the monastery.

There were 13 monks dedicated to a life of prayer and worship in the Wyoming Carmelite monastery. Since the founding of the monastery six years ago, there had been more than 500 inquiries from young men considering becom- ing a Wyoming Carmelite. Father Prior Daniel Mary wished to eventually have 30 monks who would join the brotherhood at age 19 to 30 and live out their lives in the monastery. How- ever, the selection criteria for acceptance into the monastery were rigorous, with the monks making certain that applicants understood the reality of the vows of obedience, chastity, and poverty and the sacrifices associated with liv- ing a cloistered religious life.

The Daily Activities of a Carmelite Monk The Carmelite monks' day began at 4:10 a.m., when they arose and went to chapel for wor- ship wearing traditional brown habits and handmade sandals. At about 6:00 a.m., the monks rested and contemplated in silence for one hour before Father Prior began morning Mass. After Mass, the monks went about their manual labors. In performing their labors, each brother had a special set of skills that enabled the monastery to independently maintain its

operations. Brother ]oseph Marie was an excel- lent mechanic, Brother Paul was a carpenter, Brother Peter Joseph (Brother Cook) worked in the kitchen, and five-foot, four-inch Brother Simon Mary (Little Monk) was the secretary to Father Daniel Mary. Brother Elias, affection- ately known as Brotherlava, was Mystic Monk Coffee's master roaster, although he was not a coffee drinker.

Each monk worked up to six hours per day; however, the monks'primary focus was spiri- tual, with eight hours of each day spent in prayer. At 11:40 a.m., the monks stopped work and went to Chapel. Afterward they had lunch, cleaned the dishes, and went back to work. At 3:00 p.m., the hour that Jesus was believed to have died on the cross, work stopped again for prayer and worship. The monks then returned to work until the bell was rung for Vespers (eve- ning prayer). After Vespers, the monks had an hour of silent contemplation, an evening meal, and more prayers before bedtime.

The New Mount Carmel Soon after arriving in Wyoming, Father Daniel Mary had formed the vision of acquiring a large parcel of land-a new Mount Carmel- and building a monastery with accommoda- tions for 30 monks, a retreat center for lay visitors, a Gothic church, a convent for Carmel- ite nuns, and a hermitage. In a letter to support- ers posted on the monastery's website, Father Daniel Mary succinctly stated his vision: "We beg your prayers, your friendship and your support that this vision, our vision may come to be that Mouat Carmel may be refounded in Wyoming's Rockies for the glory of God."

The brothers located a 496-acre ranch for sale that would satisfy all of the requirements to create a new Mount Carmel. The Irma Lake Ranch was located about 21 miles outside Cody, Wyoming, and included a remodeled 17,800-square-foot residence, a 1,700-square- foot caretaker house, a 2,950-sqrare-foot guest- house, a hunting cabin, a dairy and horse barn, and forested land. The ranch was at the end of a seven-mile-long private gravel road and

was bordered on one side by the private Hoo- doo Ranch (100,000 acres) and on the other by the Shoshone National Park (2.4 million acres). Although the asking price was $8.9 million, the monks believed they would be able to acquire the property through donations and the profits generated by the monastery's Mystic Monk Cof- fee operations. The $250,000 donation they had received from an individual wishing to support the Carmelites could be applied toward what- ever purpose the monks chose. Additionally, a group of Cody business owners had formed the New Mount Carmel Foundation to help the monks raise funds.

Overview of the Coffee lnd ustry About 150 million consumers in the United States drank coffee, with 89 percent of U.S. cof- fee drinkers brewing their own coffee at home rather than purchasing ready-to-drink coffee at coffee shops and restaurants such as Starbucks, Dunkin' Donuts, or McDonald's. Packaged coffee for home brewing was easy to find in any grocery store and typically carried a retail price of $4 to $6 for a 12-ounce package. About 30 million coffee drinkers in the United States preferred premium-quality specialty coffees that soid for $7 to $10 per 12-ounce package. Specialty coffees are made from high-quality Arabica beans instead of the mix of low-quality Arabica beans and bitter, less flavorful Robusta beans that makers of value brands use. The wholesaie price of Robusta coffee beans aver- aged $1.15 per pound, while mild Colombian Arabica wholesale prices averaged $1.43 per pound.

Prior to the 1990s, the market for premium- quality specialty coffees barely existed in the United States, but Howard Schultz's vision for Starbucks of bringing the Italian espresso bar experience to America helped specialty coffees become a large and thriving segment of the industry. The company's pursuit of its mission "To inspire and nurture the human spirit-one persory one cup, and one neighborhood at a

Case 1 Mystic Monk Coffee 245

time" had allowed Starbucks to become an iconic brand in most parts of the world. The company's success had given rise to a num- ber of competing specialty coffee shops and premium brands of packaged specialty cof- fee, including Seattle's Best, Millstone, Green Mountain Coffee Roasters, and First Colony Coffee and Tea. Some producers such as First Colony had difficulty gaining shelf space in supermarkets and concentrated on private- label roasting and packaging for fine depart- ment stores and other retailers wishing to have a proprietary brand of coffee.

Specialty coffees sold under premium brands might be made from shade-grown or organically grown coffee beans, or have been purchased from a grower belonging to a World Fair Trade Organization (WFTO) cooperative. WFTO cooperative growers were paid above- market prices to better support the cost of operating their farms-for example, \AIFTO- certified organic wholesale prices averaged $1.55 per pound. Many consumers who pur- chased specialty coffees were willing to pay a higher price for organic, shade-grown, or fair trade coffee because of their personal health or social concerns-organic coffees are grown without the use of synthetic fertilizers or pes- ticides, shade-grown coffee plants are allowed to grow beneath the canopies of larger indig- enous trees, and fair trade pricing makes it easier for farmers in developing countries to pay workers a living wage. The specialty coffee segment of the retail coffee industry had grown dramatically in the United States, with retail sales increasing from $8.3 billion to S13.5 billion during the last seven years. The retail sales of organic coffee accounted for about $1 billion of industry sales and had grown at an annual rate of 32 percent for each of the last seven years.

Mystic Monk Coffee Mystic Monk Coffee was produced using high- quality fair trade Arabica and fair trade / organic Arabica beans. The monks produced whole- bean and ground caffeinated and decaffeinated

246 Parl? Cases in Crafting and Executing Strategy

varieties in dark, medium, and light roasts and in differeni flavors. The most popular Mystic Monk flavors were Mystical Chants of Carmel, Cowboy Blend, Royal Rum Pecan, and Mystic Monk Blend. With the exception of sample bags, which carried a retail price ol $2.99, all varieties of Mystic Monk Coffee were sold via the monastery's website (www. mysticmonkcoffee.com) in 12-ounce bags at a price of $9.95. All purchases from the web- site were delivered by United Parcel Service (UPS) or the U.S. Postal Service. Frequent customers were given the option of joining a "coffee club," which offered monthly delivery of one to six bags of preselected coffee. Pur- chases of three or more bags qualified for free shipping. The Mystic Monk Coffee website also featured T-shirts, gift cards, CDs featur- ing the monastery's Gregorian chants, and coffee mugs.

Mystic Monk Coffee's target market was the segment of the U.S. Catholic population who drank coffee and wished to support the monastery's mission. More than 69 million Americans were members of the Catholic Church-making it four times larger than the second-largest Christian denomination in the United States. An appeal to Catholics to "use their Catholic coffee dollar for Christ and his Catholic church" was published on the Mystic Monk Coffee website.

Mystic Mon k Coffee-Roasti n g Operations After the mornilg religious services and break- fast, Brother ]ava roasted the green coffee beans delivered each week from a coffee broker in Seattle, Washington. The monks paid the Seat- tle broker the prevailing wholesale price per pound, which fluctuated daily with global sup- ply and demand. The capacity of Mystic Monk Coffee's roaster limited production to 540 pounds per day; production was also limited by time devoted lo prayer, silent meditation, and worship. Demand for Mystic Monk Cof- fee had not yet exceeded the roaster's capacity,

but the monastery planned to purchase alarger, L30-pound-per-hour-roaster when demand fur- ther approached the current roaster's capacity. The monks had received a quote of $35,000 for the new larger roaster.

Marketing and Website Operations Mystic Monk Coffee was promoted primarily by word of mouth among loyal customers in Catholic parishes across the United States. The majority of Mystic Monk's sales were made through its website, but on occasion telephone orders were placed with the monks' secretary, who worked outside the cloistered part of the monastery. Mystic Monk also offered secular website operators commissions on its sales through its Mystic Monk Coffee Affiliate Pro- gram, which placed banner ads and text ads on participating websites. Affiliate sites earned an 18 percent commission on sales made to customers who were directed to the Mystic Monk site from their site. The affiliate pro- gram's ShareASale participation level allowed affiliates to refer new affiliates to Mystic Monk and earn 56 percent of the new affiliate's com- mission. The monks had also just recently expanded Mystic Monk's business model to include wholesale sales to churches and local coffee shops.

Mystic Monk's Financial Performance At the conclusion of Mystic Monk Coffee's first year in operation, its sales of coffee and coffee accessories averaged about $56,500 per month. Its cost of sales averaged about 30 percent of revenues, inbound shipping costs accounted for 19 percent of revenues, and broker fees were 3 percent of revenues-for a total cost of goods sold of 52 percent. Operating expenses such as utilities, supplies, telephone, and web- site maintenance averaged 37 percent of rev- enues. Thus, Mystic Monk's net profit margin averaged 11 percent of revenues.

Gase 1 Mystic Monk Coffee

cloistered monastic environment offered unique challenges to operating a business enterprise, but it also provided opportunities that were not available to secular businesses. He resolved to develop an execution plan that would enable Mystic Monk Coffee to mini- mize the effect of its cloistered monastic con- straints, maximize the potential of monastic opportunities, and realize his vision of buying the Irma Lake Ranch.

Realizing the Yision During a welcome period of solitude before his evening meal, Father Prior Daniel Mary again contemplated the purchase of the Irma Lake Ranch. He rcalized that his vision of purchasing the ranch would require care- ful planning and execution. For the Wyo- ming Carmelites, coffee sales were a means of support from the outside world that might provide the financial resources to purchase the land. Father Prior understood that the

Case Assignment for BUS 124 Directions.doc

Case Assignment for BUS 124, Fall 2015

1. Read the Mystic Monk Coffee case posted in Moodle and watch these two videos:

a. https://youtu.be/0yD_9eZd6YE

b. https://youtu.be/ejzoet71jSg

2. Prepare a written report addressing the following:

a. Evaluate the monastery’s mission, its vision for Mystic Monk Coffee, objectives for the monastery and the coffee operations, and MMC’s strategy and business model. (20%)

b. Make recommendations to improve Mystic Monk Coffee’s vision, objectives, strategy, business model, and strategy. (30%)

c. How should the proposed improved strategy be executed? (20%)

3. Your report should be typed and either printed out and brought to class on Friday, October 9, or submitted to Moodle. No late papers will be accepted.

4. It is expected that your report will be 750-1,000 words (3-4 pages). Please double-space and use Times or Times New Roman font. Please put your name on the paper. Use headings; at a minimum, each question should be a separate section.

5. Your report should be in APA or MLA style and should include at least 3 references other than the case itself or the associated videos. These references can be from our textbooks, assigned readings, or other outside research. Note that this is a real company, so research from their website would be appropriate.

Grading:

Answers to questions in #2 above: 70%

Spelling/grammar/punctuation and clarity of writing: 20%

Correct formatting as instructed: 10%