to turn on the HOT DOUGHNUTS NOW sign whenever fresh doughnuts came off the
to hire a new human relations vice-president to oversee all of the company’s operations
to modify the doughnut mix recipe so that less expensive ingredients can be used
D.G. Yuengling & Son
With beer sales dropping around the world, you should be ecstatic that sales of Yuengling (pronounced
Ying-Ling) beer are up 225 percent in the last six years. But as you walk through the caves and tunnels
of Yuengling’s Eagle Brewery, carved into Sharp Mountain in 1831 to maintain a perfect 50-degree
temperature for storing beer, you see not only the history of America’s oldest brewery everywhere you
turn, but also chipped paint, rusting pipes, and an aging plant that can’t keep up with the growing
demand for Yuengling beer. So far, thanks to hard work, dedicated workers, and some luck, you’ve
doubled your production capacity from 250,000 to 500,000 barrels of beer a year, but if you push for
more, the old brewery will break.
Yet with sales up so dramatically, the company faces a problem. Says CEO and owner Dick
Yuengling, “We are sold out of beer. We run the risk of losing our customer base because we don’t
have any product on the shelves.” Shortages are so bad that the advertising
budget has been cut from $3 to $2 a barrel. Yuengling explains, “You can’t fuel the fire when we can’t
get them beer anyway.” With production stuck at 500,000 barrels a year, Yuengling beer has become
harder to find even as it has become more popular. Sales representative Diane Adams said, “It was a
little hairy. People were up in arms.” So, rather than sacrifice sales in its home market of Pennsylvania,
where Yuengling has its largest market share (10 percent), the company has temporarily stopped
shipping beer to distributors in Maine, Massachusetts, and Rhode Island. Since that strategy won’t help
Yuengling grow outside Pennsylvania, you still face the question of how to permanently increase beer
production to meet the growing demand.
You’ve identified five options. The first is to add new storage and finishing tanks to Eagle
Brewery to increase production capacity by 10 percent to 550,000 barrels a year. Though doable, this
is only a short-term solution. Second, you could outsource production to another company. This would
be more cost-effective, but would Yuengling beer produced in non-Yuengling factories taste different?
For a specialty beer, this could be a substantial risk. Still, outsourcing would be affordable, and
Yuengling has done it before, outsourcing production of its Black and Tan beer to Pabst Blue Ribbon’s
brewery in Lehigh, Pennsylvania, until Pabst closed that facility four years ago. The third option is to
buy another brewery, but there aren’t many for sale and those that are would be expensive and require
significant upgrades. For example, it would cost $13 million to buy and $5 million to fix Stroh’s 1.5
million-barrel brewery in Tampa, Florida, which is far from Yuengling’s northeastern markets.
A fourth option is to build a new factory capable of producing 1.2 million barrels per year, but
that would cost $50 million and take three years. The fifth and final option is simply to do nothing.
The company is already very profitable, has low overhead costs, and is very efficient. In other words,
by doing nothing the company could still make a lot of money without incurring the risks inherent in
the other options. And risk is a real consideration because everyone in the company remembers that
Yuengling was losing money just a few years ago.
75. Refer to Yuengling. In the first stage of the planning process for Yuengling, it should have ____.
developed an effective action plan that would satisfy all of its customers
identified its problem as the fact that demand for its beer exceeds its ability to supply it
developed several alternative methods for supply its beer to customers
developed goal commitment to customer satisfaction