1,Potential problem from client's of view? 2,CREST analysis?

In the fall of 2020, partners Jennie O'Keefe and Chris Johnson contemplated the future of their newly opened craft brewery, Rough Waters Brewing Company (RWBC), in Deer Lake, Newfoundland and Labrador. The business had lived up to its name since the sale of its first pint a year earlier, and was certainly was not in the position the owners had expected after their first year of operation. To say that 2020 had been an eventful year did not nearly capture the degree of uncertainty and sense of urgency the entrepreneurs now felt in facing some critical decisions about the future of their brewery. RWBC had launched in November 2019. By March 2020, the global COVID-19 pandemic had arrived at the doorstep of the Canadian province of Newfoundland and Labrador, resulting in a temporary but complete closure of non-essential businesses and a shutdown of the free movement of people into the province. 'While pandemic-related restrictions had eased somewhat through the warmer months of June, July, and August, September saw new challenges that impacted RWBC's sales and distribution plans and the way the business engaged with the public. According to O'Keefe, it was getting more difficult to grow sales in key markets, the business was highly seasonal, and the workdays were often over twelve hours long. Add to that a struggling provincial economy, and suddenly the dream of owning and operating a craft brewery was feeling much more overwhelming and complicated than it had seemed at the start. The entrepreneurs were eager to identify the best way to achieve stronger growth and market positioning for RWBC. They felt there was no time to lose in identifying a business focus that would enable RWBC to iterate and chart a smooth course. While they could identify severalpossibilities, O'Keefe and Johnson recognized that they did not have the time, money, expertise, or information to address or explore all of them at once. They had to determine the best possible courses of action, figure out how to evaluate the possibilities, and identify the most strategic way forward for business growth. A COMPLEX ENVIRONMENT The Provincial Craft Brewing Industry Craft beer referred to any "beer made by a brewer that is small, independent, and traditional." With eighteen craft breweries on the island of Newfoundland and a single brewery on the mainland of Labrador, the craft brewing industry employed approximately 300 people in the province. 3 Between 2016 and 2019 , a "cratt beer boom" had seen twelve breweries open to service the province's market of roughly half a million people." RWBC was among the newest additions to the scene 5 (see Exhibit 1 for a comparison of the province's microbreweries on several different variables). Many provincial craft breweries had taken a community-based approach to their marketing and engagement. For instance, Dildo Brewing Company and Museum was opened in the museum in the town of Dildo in part to permit the museum to remain open and maintain historical and cultural connections important to its community; other breweries had also chosen to locate in restored historic spaces to give them a new purpose. 6 Most brewery owners acknowledged the signifitant support they had experienced from their own communities in opening and operating their businesses.? Supporting social causes was also relatively common throughout the provincial craft brewing scene, as in the case of the Port Rexton Brewery Company, which promoted support for the lesbian, gay, bisexual, transgender, queer, and others (LGBTQ + ) community by hosting the Port Rexton Pride festival in 20183 Breweries were also stepping up on the environmental front. Like RWBC's own efforts to minimize any negative environmental impact, Boomstick Brewing Company aimed to reduce its own footprint by replacing carbon dioxide with nitrogen? Unique Connections Throughout the province, craft breweries provided a high degree of support to each other and worked collectively to strengthen and promote the broader craft beer industry.: The sense shared by many brewers Was that they were not actually competitors, but rather people who shared a love for the craft brewing industry and the province, and a desire to help sustain rural communities by creating jobs and attracting tourists. "O Keefe and Johnson had spoken of this same experience with "competitors." As O' Keefe said of their own recent experience, "Honestly, we truly are all friends ... We were waiting on our grain order last week and we called [another brewery in the area] and they were like, "Yeah, you can borrow this and then when your order comes in then just replace it.' Right? Perfectl So, we honestly do work together." The way O Keefe saw the industry was that the small brewers did not want to compete against one another over such a tiny share of the overall beer market. As she put it, "Breweries don't want to fight over 2 per cent of the market. If you want to fight, you know, fight [big beer corporations] with the 98 per cent of the market, because we'll all die if we fight over the 2 per cent." That said, RIVBC's owners acknowledged that the The Newioundland Labrador Liquor Corporation The Newfoumdland Labrador Liquor Corporation (NLC) was the provincial retail and regulating body for the sale of alcohol throughout the province. It featured all categories of beer, wine, and spirits and operated two major lines of business related to the sale of craft beer: retail sales and wholesale distribution. R.WBC's brews were available through several retail locations owned and managed by the NLC. Through its thirty-one corporately owned retail stores, NLC sales totalled CA $262.413 in 2019 , making it the largest purchaser and retailer of beer in the province. 14 With its wholesale business supplying 146 Liquor Express locations and over 1,400 licengees, these two types of distribution accounted for 29 per cent and 6 per cent of NLC's sales, respectively. 1 Page 3 W27802 Loeal beer sales throughout Newfoundland and Labrador had been steady over the preceding five years, averaging 3.5 million litres per year.. It would be difficult to ignore such high sales volumes and not consider the potential implications for a small craft brewery: retailing in NLC locations could provide unparalleled market reach. It had to be noted, however, that the province's eraft beers fell into NLC's category of local beer, a eategory that also included all other Canadian-produced beer (both craft and noncraft). While the NLC provided impressive access to the market for the brewers who were successful in gaining access to the retailer, once you were in the NLC, it ivas an even greater challenge to stand out against the sea of competing beer products on the shelves. Government Taxes and Price Setting The. NLC also regulated takes on the sale of alcohol m the province. According to many of the small brewers throughout Newfoundland and Labrador, the provincial govemment had strict and outdated tax rates and regulations for craft breweries. Govermment Taxes and Price Setting The NLC also regulated taxes on the sale of alcohol in the province. According to many of the small brewers throughout Newfoundland and Labrador, the provincial government had strict and outdated tax rates and regulations for craft breweries. In the fall of 2020 , the Government of Newfoundland and Labrador reduced tax rates for these breweries. 17 Previously, a microbrewery like RWBC that produced under 100,000 litres per year would have received $2.70 after taxes for a can of beer selling for $4.00 retail; the reduction in tak rates meant that the amount a brewer would keep after taxes had grown to $3.15. The increased margin came from a $0.45 cut in the NLC taxes. Although the slightly reduced tax rate was a welcome signal from the provincial government, according to O'Keefe and Johnson, the tax rate in Newfoundland and Labrador was still much higher than in the rest of Canada. 18 Of course, it remained unknown if margins for brewers would increase in the future. Price setting was also an issue. Businesses worked with the NLC to set a single price for their products. Once set, regardless of where the beer was purchased-a NLC retail location or directly from a taproomconsumers would pay the same price for a beer." O'Keefe explained: "So our beer is $5.50 - it is at our shop, as well as NLC locations, as well as convenience stores. Depending on where you get it, we have to pay more fees for that beer [e.g., to account for distribution costs], so we make less money if it's at a convenience store or the NLC, and we get more profit if we sell it in-house., Because the breweries could not charge a higher price to consumers to offset the additional costs associated with selling through the NLC distribution channels, this cut into their already narrow profit margin. O'Keefe continued, "[This] really cuts into us being able to grow, because obviously we would really love to have our beer at every single NLC [location] across the province because there should be more craft beer and local options available to everyone no matter where you are. But to do that is actually really expensive for craft breweries and especially small breweries like us ... and I don't think people necessarily realize that. M1 An Uncertain Economic Outlook Despite experiencing a degree of early business success and local support for RWBC, the business owmers could not ignore the state of Newfoundland and Labrador's overall economy; many key indicators painted a mixed and troubled picture. "2 The province's pepulation was 521,364 and declining. 23 Unemployment had risen from 12.3 per cent to 14.1 per cent from 2019 to 2020, and Newfoundland and Labrador consistently had the highest level of debt per capita-3t 529,326 in 2019 -of any Canadian province. There were some positive indicators: between 2007 and 201 7, the average household income increased by 18 per cent from 569,300 to 581,500 ; retail sales in food and beverage increased by 5.9 per cent in 2020 ; and the average annual household expenditure for alcohol stood at $1,029, compared to $757 for the reat of Canada in 2017-18.: However, any future business decisions made by O' Keefe and Johnson would need to acknowledse the realities of the prorince ; unsettled economic state. The economic effects of the COVID-19 pandemic could not be ignored, but they were still relatively unknown. O'Keefe and Johnson knew they might not have much support from the government because they were still a very small and very new company. On a federal level, for example, although the supports that had been made available to Canadian small businesses on account of the pandemic bad been widely publicized, RWBC did not meet the payroll requirements to access this funding since it had no employees 26 As O'Keefe explained in an interview, "We only opened in December, so we didn't have a payroll! We have good relationships with our local MP [Member of Parliament] and MHA [Member of the House of Assembly] and are hopeful for a resolution soon; otherwise, it's not going to end well for us." Navigating the red tape of business support in this environment was beyond the owners' direct control, but it did pose a challenge to if or how well the brewery could survive through and beyond pandemic times. Rough Waters Brewing Company O'Keefe and Johnson shared a love of craft beer and the unique culture associated with it. After Johnson was laid off from his job in the United States, the two aspiring entrepreneurs decided to take a leap of faith, embrace the uncertainty of being unemployed, and make the most of the opportunity to pursue their dream of opening a brewery of their own in their home province of Newfoundland and Labrador. 28 Together they headed to the west coast of the island with not much more than a dream to become part of the province's growing craft brewing industry and a willingness to try it. 20 After working to gain the necessary skills, credibility, and relevant industry experience, O'Keefe and Johnson were able to secure outside funding to launch their brewery. In the fall of 2019, RWBC became the seventeenth microbrewery to open in Newfoundland and Labrador. 30 The entrepreneurs aimed to operate RWBC with a socially and environmentally responsible spirit that echoed their personal values and was evidenced in their business' statement of purpose as posted on their website: "Rough Waters Brewing Company ... will produce high quality, unfiltered, artisan beer to Newfoundland and Labrador." 13t The brewery's values were also reflected on its website as "beer with purpose, business for good," with explicit references to being environmentally friendly, made in Canada, and wasting less. Most craft breweries in the province were located on Newfoundland's more populous east coast. O'Keefe and Johnson had taken a risk in establishing their brewery outside that more developed and heavily populated market, choosing Deer Lake, with a population of approximately 4,600 people, as their home. 52 While this choice helped FWBC avoid the more intensely erowded area of the industry, it would also test the entrepreneurs' abilities to market and attract customers to their physical location and their beer. During their brief time in the area, they had happily discovered that the community was "really supportive and thrive[d] on supporting local businesses." It was a great fit. Also to their advantage was the fact that Deer Lake was home to the only major airport on the west coast of the island and was ideally situated at the start of the only highway route that travellers and tourists could take north to the beautiful Gros Mome National Park and the Great Northem Peninsula." Gros Mome was a popular destination, receiving about 233,000 visitors ammually: i4 Deer Lake was also within a thirty-minute drive of the toun of Pasadena and the city of Comer Brook, with populations of 2,800 and 19,500 , respectively: RWBC offered four staple beer styles in specialty 500 -millilitre bottles, the names of which aligned with the maritime themes identified in RWBC's branding: Sou'wester Sour, Selkie Wheat, Scallywag India Pale Ale (IPA), and Signaler Porter. 36 RWBC also brewed several limited-availability beers in other varieties Page 5 W27802 such as fruity sours, a New England IPA, and other pale ales. O'Keefe and Johnson were even able to showcase their lighthearted humour when they offered a limited-run special brew, the Pandemic Double IPA, with the label featuring the province's minister of Health and Community Services. Despite being new to the brewing scene, RWBC had already won industry recognition for its beer from the Down East Brewing Awards, so its beer was of high quality. 37 Packaging For RWBC, packaging decisions involved considering the type of vessel that contained the beer (i.e., bottles or cans) and its label. To avoid being lost in the sea of other craft beer products available, the significance of product packaging could not be understated. O'Keefe and Johnson needed to feel confident that their product design choices were further strengthening RWBC's brand identity and would both appeal to customers and stand out on an increasingly crowded shelf. Many other breweries had already made the shift from glass bottles to cans. 33 Consumers generally preferred cans over bottles because they were easier to handle, more environmentally friendly; and there was no discermible taste difference from bottled beer." Cans also allowed for easier transportation of the product and the ability to stack it for shipping and on retail shelves, and resulted in less overall product loss through damage. Despite the apparent advantages of canning, O'Keefe and Johnson were initially hesitant to make the switch from bottles to cans. First, there was the question of cost-canning machines could cost tens of thousands of dollars, which represented a significant investment for the new business. However, switching to cans could bring added demand from consumers and convenience stores. Second, O'Keefe and Johnson had to consider that this kind of investment could have mixed effects on what they gaw as the brand image of RWBC - their locally designed labels on RWBC's bottles were unique in the market and currently stood out among other local craft beer. O'Keefe and Johnson wrestled with whether changing the product packaging at such an early stage would erode the product identity they had worked hard to build in their first year. The reality of the situation was that greater market penetration through more efficient packaging and distribution choices would likely come with switching to exclusively using cans. Before opening one year previously, the entrepreneurs had demonstrated their resourcefulness in finding a graphic designer for their RWBC beer bottle labels - they had recruited a local tattoo artist who was able to promote the maritime theme in a style similar to how it would have been represented in traditional sailor tattoos. 40 Unique as those labels were, O'Keefe and Johnson could not overlook the fact that several local craft breweries had begun to raise the standards of creative label design to signal the quality of their product. Both Iron Rock Brewing Company in Labrador and Quidi Vidi Brewery in St. John's commissioned Ray Creative Agency in St. John's to design their labels, and Port Rexton Brewing Company's labels were professionally designed and printed at White Cactus Branding and Design, a boutique design company in Ontario, Canada. 44 Promotion Activities In keeping with the approach of many entrepreneurs, RWBC had not invested heavily in formal, traditional advertising and communications to drive sales, opting instead for building an active social media presence on platforms like Instagram and Facebook. Information on products, promotions, events, or any other relevant news were regularly pushed out to RWBC followers through these informal social networks. Page 6 W27802 Based on her own experience, determination, and experimentation, O' Keefe learned all that she could about how these social media platforms operated and how she could develop professional-looking posts herself for little cost. She even managed the social media presence for other local small businesses as RWBC was getting up and running. Sales Channels O'Keefe and Johnson had initially establiahed a clear strategy for their gales chamnela, but new developments in the market suggested a need to revisit that plan. Originally, they had agreed it made the most business sense to bottle beer for outside distribution to establiahed retail locations, so the owners chose a business location that was more suited for production than for establishing a taproom. In hindsight, the decision to concentrate on off-site sales in the early days also mitigated some of the early negative effects of the COVID-19 pandemic, since the brewery relied less on an indoor space for product distribution than some of its competitors. This tumed out not to be a long-standing competitive advantage, however, as many other breweries in the province responded to the imposed COVID-19 restrictions by increasing their canning and off-site distribution capacities. For instance, Crooked Feeder Brewing Company, the closest craft brewery to RWBC, began canning its beer and distributing it to many of the same locations where R WBC brews were being sold. 43 RWBC sold its beer in many popular comer stores throughout the province and in the provincially controlled NLC outlets. RWBC was able to establish a notable presence, especially in stores located in Gros Morne National Park-an area that was out of the way for many of its competitors. RWBC also sold its products at Marie's Mini Mart, a chain of local convenience stores with locations throughout the Avalon Peninsula, the most heavily populated area of the province. While not considered a specialty store, Marie's Mini Mart featured one of the largest selections of local craft beers in the province, so it was a strong strategic choice by the brewery to aim for inclusion in this mix. 44O 'Keefe noted, however, that due to the growing number and sophistication of craft breweries, it had become increasingly difficult to sell beer though these channels as consumers gained more choice. The Taproom Although not part of the initial opening plan due to the associated cost to build, O'Keefe and Johnson had dreamed of adding an on-site taproom to the brewery. Current provincial tax structures were such that taproom sales commanded a higher margin, which was very appealing to brewery operators. Additionally, a taproom space could allow O'Keefe and Johnson to engage directly with their customers and eam extra revenue by hosting various events that would allow them to further engage with their local community. Such an addition to the brewery would go a long way toward building the craft beer culture O'Keefe and Johnson had imagined. In the spring of 2020 , the entrepreneurs once again threw caution to the wind and ran a crowdfunding campaign through Indiegogo to raise money for a taproom, including a tap system, bar, and decor and fumishings that would help to create the character and craft brewing culture they so loved. OKeefeeand Johnson raised enough capital to fund the project and, in true entrepreneurial style, the partners built the taproom themselves. There was little time to sit back and enjoy their success, however. Public health restrictions on occupancy levels in indoor spaces and continued uncertainty around levels of pandemic-restricted tourist traftic to the province were making O'Keefe and Johnson feel umeasy about their brewery dream Added to this was the realization that their investment in the taproom might actually limit RWBC's reach to explore other gales channels, due to the constraints it put on production capacity. They had discovered the reality that, with the taproom now established in the brewery, there was only enough space to either bottle beer for outside distribution or open the taproom for on-site customers. On days when they bottled, the taproom had to close, which presented obvious challenges. The operation of the taproom also prompted the question of on-site food options. O'Keefe was clear that RWBC had no interest in or capacity for offering food services itself, but recognized that customers often looked to pair food with their drink. There were no trendy restaurants or food trucks operating nearby; O'Keefe recognized this as a potential opportunity to create a local partnership, but had no firm plans yet. In addition to these challenges was the uncertainty and seasonality of the tourism industry. The taproom relied heavily on tourist traffic to the area but, pandemic or not, the business saw far fewer tourists visiting in colder months than at warmer times of the year. According to O'Keefe, while the year-round local and tourist traffic the taproom had experienced was sufficient at the time, RWBC was not as busy as the owners had planned, and the seasonal nature of the brewery's target market would surely impact the way the business operated. There seemed to be no clear answers. Community Engagement O'Keefe described her and Johnson's general approach to business as highly informal, but there was also a consistent and clear drive for their brewery to engage with its communities in sustainable, social, and environmentally sound ways. This approach would undoubtedly continue to shape the way the entrepreneurs evaluated the decisions before them As O'Keefe stated in a Canadian Broadcasting Corporation (CBC) interview, "It's the whole people, planet, profit [idea]... Once we started this business, we knew that we wanted to have an additional purpose with it... . It's nice to be able to put that out to your consumers so that they know that, 'Oh, they're really doing what they say they're doing. These business values were easily identifiable, especially for a new company. The brewery's branded merchandise was consciously sourced in Canada, where production conditions and labour standards were regulated and materials were considered sustainable and ethically produced. 48 Wherever possible, brewing supplies and ingredients for RWBC were also sourced from one of the few suppliers in Canada (e.g., malt and grain from Country Malt Group). 40 Also related to the brewing process, post-production waste was diverted from landfills and redirected to local farms where the spent grains were utilized as animal feed. In the same spirit, bottle labels were printed on Forest Stewardship Council certified products, ensuring that RWBC labels came from trees that were sustainably har:ested-the owners even supplied wooden bottle openers made by a local craftsperson using locally sourced wood.: Over the past year, RWBC had consistently supported local charities to build a sense of connection with the surrounding communities. Before COVID-19, the brewery had organized an on-site market where a local coffee producer donated coffee to attendees of the fair and to the eight to ten vendors who set up to sell their crafts and local foods. In lieu of table fees for the event, RWBC collected donations and passed them on to new causes each rieak. This complemented its Pint of the Week program, an initiative that saw a dollar from every pint sold during a particular week go to a Beer for Good Fund, which supported various community groups in their own local community projects. :2 Not every program like this was successful; in some instances, even though beer sales were linked to social causes, sales could still be slow: The Pursuit of B Corp Certification In a departure from their self-professed informal style of operation, O'Keefe and Johnson were also considering the pursuit of B Corp Certification for the brewery as a way to formally recognize their efforts to achieve something meaningful through their business. To be awarded the "B" ("beneficial") label, a company's overall societal and environmental performance relating to how its operations impacted its workers, community, environment, and customers was closely examined, evaluated, and assured. 53 The certification process itself could be lengthy, requiring considerable time and effort on the part of the business to document specific values, commitment, and behaviours, and to gather other required documentation. 34 In addition to the time and effort the process demanded, the direct financial cost to cover certification fees for a business the size of RWBC was about $1,100 per year. The administrative requirements of the certification process did not appear to disconcert O 'Keefe and Johnson, who had already successfully manoeuvred the significant red tape associated with the start-up of the brewery. Although they had much to leam as a new company, they felt equipped with the skills necessary to navigate the process itself and to manage the potential costs and effort required to secure and maintain the certification. 36 Before committing to the process, however, the RWBC owners had to consider whether it was worth the overall investment. O'Keefe was confident that the certification aligned perfectly with their personal values and the business's goals, but whether RWBC's customers would be aware of the certification and what impact B Corp status might have on consumers' perception of RWBC-and saleswas entirely unknown. Where to Next? During the first year of operations, RWBC had found a way to survive based on O'Keefe and Johnson's abilities to manage with what they had at hand and to quickly recognize and act on opportumities. Even with the operating restrictions that came with the COVID-19 pandemic, OKeefe and Johroon viewed the summer of 2020 as a relative success for RWBC due simply to its ability to stay in business at such an early stage of the company's existence. However, the pressures and uncertainties the owners faced in the fall of 2020 were testing the limits of the largely improvised approach to decision-making they had relied on up to then. There was clearly pressure to improve marketing to ensure the brewery stood out in the growing marketplace, identify opportumities to expand their distribution and also have an attractive on-site experience. O'Keefe and Johnson were at a crossroads: Which course of action should they take to support the growth of their business? Would a more formal and professional mamagement of their brand coupled with B Corp Certification make RWBC stand out from competitors? Expanding distribution would require a canning machine and improved labels, but would this investment translate into the sales they were hoping for? Alternatriely, would this growth be achieved by creating a better taproom and packaging area to attract more foot traffic? The entrepreneurs knew they lacked the necessary information, resources, and time to eaplore all the options, and needed a more disciplined decision-making approach that required a better understanding of the incertainties in their environment. Imparfect knowledge of competitor and consumer behaviours was further compounded by a deeply challenged provincial economy and a global pandemie. Despite their reality. O Keafe and Johnson remained optimistic and confident they could keep their heads above water for now: "The name Rough Waters is meant to represent the resilience and perseverance of those who eall Nenfoundland and Labrador home... That has t been more relevant than it is right now! We 11 get through this like we aluays have and be better than ewer on the other side