Fehruary 20, 2019, Brian was standing in front of his newly opened winery and restaurant in Kelowna, Canada: Sandalwood Winery (Sandals). The business was a dream come true for him, and Brian reflected on the journey he had taken since laying the foundations for Sandals. He had put a great deal of hard work, time, and money into this venture; over the past two years, Sandals had required an investment of $ 10 million. Brian had not only built a world-class winery overlooking Kelowna Lake, but also a terrific woodfire pizza and Italian restaurant. He also hired the best possible team to run Sandals. This team comprised a highly experienced general manager, 10 specialty chefs, three front desk managers, and 20 service staff. The quality of wine and food served in Sandals is of the highest class, boasting high-quality ingredients, perfect flavours, and innovative presentation (see Exhibits 1 and 2). Sandals has an on-site vineyard capable of producing seven types of wine. With seating for 140 customers, the restaurant had a lively ambience with a state-of-the-art music system and a wide collection of albums. Sandals is situated in Kelowna where there is a large tourism business base with Lakes, Mountain Resorts, Waterparks and malls. In fact, Sandals is situated right in the middle downtown Kelowna, beachside overlooking Okanagan Lake. Upon opening Sandals, Brian had expected to recover his initial capital investment within five years. However, within only nine months of the restaurant's opening, he had to revise this estimate to eight years. He pondered the business environment changes since he had first started working on this venture. The growth of sales had been slower than he had anticipated. In light of the changing external environment, Brian wondered about various strategic options. Should he alter Sandals' product offerings, or increase the price of the menu items? Should be increase the focus on corporate customers by undertaking exclusive corporate events, or should be increase Sandals' social marketing efforts to attract more local customers? Brian had only two weeks to act before the situation became critical THE WINE INDUSTRY IN CANADA Senadywa.hage, testibileer Barnlandes.Agluhift af E.PONUKLEP:Wes below.ads, 488.0f2ed to United States 25 litres per capita. The US had seen strong growth in wine consumption since 1995, but Canada had not seen much growth in this area. Wine consumption in Canada lagged behind the same in the US for two reasons, politics and government regulation. Various political groups have formed causing riots and working to change laws discouraging alcohol consumption. Further, for political reasons, some cities and provinces have had government intervention and have imposed an alcohol ban. Government had also imposed restrictions on the consumption of alcohol within public spaces, limiting alcohol consumption to private residences or restaurants Despite these inhibiting factors, Canada's large youth population still presented an opportunity in the wine market. As per one estimate, Canada's wine market was nearly doubling every three years: 200 million bottles of wine were sold in Canada in 2015, and 400 million were sold in 2018. These figures clearly indicated a high-growth pattern. If Canada's per capita consumption grew by one litre, wineries producing 1 million hectolitres would be required to meet this demand. Thus, Canada's largely untapped potential made it a choice location for wineries. Kelowna and the BC Interior Region have a significant number of wineries, 49. Of those 49 wineries, only three are situated in similar setups with a restaurant attached. The three wineries are: Two Sisters, Red Dog Blue Cat, and the Silverlinings. Two Sisters had more than 50 per cent of the market share, followed by Red Dog Blue Cat and then Silverlinings. Other large wineries in Canada included Over The Ridge, Shooting Star, Cool Nights, and Barrels Galore. The Winery Industry Over the past few years, Canada's winery industry had changed rapidly because of the introduction of micro-wineries and in-home wineries. In Canada, a micro-winery was defined as a winery that produced three type of wine, typically consumed on its own premises and only did tastings and sales; there was no on-site restaurant. Micro-wineries were known for their quality, treshness, and having limited quantities. In 2019, entrepreneur Shania Twain stated, "The following around micro-wineries is growing. Once you have had this (specialty wine), you will never have that mass produced stuff again." Since is inception in Canada 1990, the micro-winery industry has witnessed unprecedented growth. Prior to 2009, only a few Canadian provinces allowed licensing for micro-wineries, but the lucrative opportunity presented by the bigh-growth ecosystem and increased tax revenue for the government, led many to revisit their policies. While many cities endorsed the micro-winery industry with favourable policies, cities such as Red Deer, Fort St. John, and Glasgow imposed bans on production and on alcohol sales despite the trend. At the same time, Canada was witnessing the "Millennials generational rise of weekend parties and cating out. In metropolitan cities, large numbers of people preferred to eat out during weekends, and even during the workweek. The culture around wine consumption was also changing many Page 3 men began showing an inclination towards wine and social drinking. Wine was considered safe to drink among younger demographics, and micro-wine was gaining popularity as a favourite drink, especially if someone was trying to leave a good impression. The wide availability and implementation of micro-winery technologies led many restaurants to install in-home winery kits, and as a result, the market witnessed intensified competition. "The wine market is the fastest-growing alcohol segment in Canada by consumption and revenue change, especially with the drastic demand and push of micro-wineries about ten years ago, and micro-wineries' growth is a result of the easy availability of technology from Europe," said Brian in one local newspaper interview. The following factors may have accounted for the fast growth in micro-wineries across Canada the product was freshly made with excellent taste, and was considered less harmful to health than other alcoholic products; the culture around wine was growing, as many young people enjoyed it and Canadian consumers were experiencing an increase in disposable income. The Micro-winery Industry: Outlook and Challenges While the micro-winery industry was growing micro-wineries still faced many operational and external environmental challenges. Wine in Canada was highly taxed, and each province had a complicated tax structure. Additionally, there were stringent provincial liquor laws, licensing difficulties, high real estate costs, and a lack of skilled labour for the highly technical job of winemaking (vintner) only three schools throughout Canada provided a degree in winemaking technology. Training even one oenologist student in winemaking techniques took two years. Further, because of the high ingredient costs, micro-winery and in-home kits was more expensive to make per bottle than at a winery. Demographically, metropolitan cities in Canada, such as Vancouver and Toronto, were best suited for the industry, as these cities were home to many young professionals with higher disposable incomes. According to estimates, Canada's wine market was expected to reach $95 million in 2019. The Micro-winery Process Most consumers saw micro-wine as an all-natural product that was made using four ingredients: grapes, sugar, yeast, and water. Large wineries add in other ingredients along with enzymes and preservatives, which some argued made it less healthy. Micro-wine was also unfiltered, which left it with a higher protein content. Each type and style of micro-wine had its own unique character. Kelly, Vintner at Sandals, explained, "There are five primary factors for judging the profile of a wine: appearance (colour), aroma, balance, depth, and finish. One that is perfectly balanced and has all these characteristics is a wine you will enjoy drinking." Micro-winemaking involved eight 2 63% + 0 steps (see Exhibit 3). Though these steps were typically used in most micro-wineries, it was said that winemaking was an art rather than a technique. Micromaking Unit Set-up:Licensing in Canada Sort Canadian provinces had allowed licensing for micro-wineries: British Columbia, Alberta, Ontario, New Brunswick, and The North West Territories. The excise commissioner of the Government of Ontario, Jodi Livingston stated, "We had allowed in-home winery setups at the airport a couple of years ago, but the concept didn't take off. With the increase in disposable income and lifestyle changes, we have now extended the facility in Alberta where there are quite a few restaurants and pubs. There were two types of licensing options; one was for on-site sales by the micro-winery, and the other additionally allowed the bottling of wine. Yet by 2019, only the BC and ON governments had allowed the bottling licence. SANDALS WINERY Sandals opened in Fehruary of 2019 on Beach Avenue in Kelown. The restaurant's location was ideal, as it was situated on the beach that was located in the central downtown core of Kelowna Among young consumers, Sandals was known as a good place for food and drinks. The restaurant offered seven micro wine options: Chardonnery, Sauvignon Blanc, Viognier, Pinot Gris, Prosecco, Rose, and Pinot Noir (see Exhibit 1) The restaurant offered a relaxing fine dining experience that emphasized entertainment and a family atmosphere. Guests could spend a cheerful evening socializing, enjoying wine and delicious food, and listening to live band. Sandals camed 525 revenue per customer (which was more revenue than its competitors earned), and each customer spent an average of 535 on wine and $5 on food and Snacks (see Exhibits 4, 5, and 6). Kelowna had a population of about 1 million people in 2011, and was one of the fastest-growing corporate cities in BC, Canada. Many Fortune Global 500 companies were headquartered in Kelown, and owing to high employment rates, income levels were increasing. Beach Avenue, Main Street, 101 Ave, and Dalmation Drive were all key destinations in Kelowna for food and entertainment Marketing Strategy Sandals had hired dedicated marketing manager to create demand and promote its unique selling point. The company relied on social media as its main marketing platform, and it had received positive reviews on various review websites. Still, Sandals was unable to secure the required foot traffic to make the operation profitable. Operation Sandals had installed its micro-winery in an area to be side of the restaurant, protected by a glass window so that customers could see the winemaking process in action. On the opposite side of the restaurant was a bar, and a seating area filled the middle Sandals also had space for private parties of up to 50 people 63% + Page 5 Overall, the company's operations were divided into five parts: (1) wine production was managed by the operation manager, and the key responsibility of this department was to ensure the quality and production of the wine (including the vineyard); (2) the cooking department was responsible for cooking various dishes served in the restaurant; (3) the purchasing department was responsible for buying all raw materials (4) the marketing department was responsible for increasing foot traffic, and (5) the service department, which had the most employees, was responsible for handling customer interactions, and taking and delivering orders (see Exhibit 7). Leadership Team Sandals was founded by four partners: Brian, Donald, Logan, and John. Brian, the founder and chief executive officer of Sandals, had 15 years of experience in the hotel industry. The other founders were not actively involved in the business. Brian had worked with several top hotel brands, such as the Grand Hyall, Hotel Vancouver, Shangri-La, and Westin Hotels. He had immense experience in managing restaurants, and his passion for quality and innovation was evident at Sandals. Brian had initiated the new concept of tuming the restaurant into a games night pub on Saturdays. Lise is Sandals' general manager and a very experienced professional. She has 12 years of hospitality industry experience, and has worked at renowned hotels in Vancouver and Toronto. Lisa described Sandals appeal: "We have some regular customers who have a preference for our wine and some of the specialty food we serve. We also have a very relaxing environment here to ensure that customers feel relaxed after a full day of work." COMPETITION The micro-winery Swirl and Swig was launched by two graduates of the Institute of Marketing & Management who had pioneered the micro-winery concept in Canada in 2009 and worked hard to lobby regulators to allow micro-wineries to operate in the country. After running a micro-winery in Vancouver, they opened two Swirl and Swig outlets in Toronto and Edmonton Calgary and Kelowna were the fastest growing locations in Canada for micro-wineries. In 2015, Kelown had 7 micro-wineries, by 2017, this number had grown to 12 Out of these, three micro-wineries were located in the downtown Kelowna city centre. Beach Avenue was quickly becoming the top business destination in Kelowna because of the large availability of corporate space and corporate entertainment opportunities. Kelowna had three main areas for food and dining: Dalmation Drive, Main Street, and Beach Avenue. Beach Avenue, in particular, had many top micro-wineries and restaurants, including the following firms, which posed significant competition for Sandals Too Lit Wine Located at Sunny Mall on Main Street, Too Lat Wine (Too Lit) was the 8th micro-winery in Kelowna i was a popular destination in Kelowna for wine lovers. Too Lit had a focus on Prosecco and offered three types of wine. Sunny Mall contained a Bowling Alley, Games Entertainment Centre and restaurants that attracted good footfi traffic, and Too Lit offered discounts and commercial tie-ups to further increase foot traffic 63% + Page 6 There was increased foot traffic from younger customers on weekends because, according to the restaurant's manager, they enjoyed the specialized wine. Too Lit also had a bunch in Calgary, Alberta. Pour Away Pour Away was another popular micro-winery on Beach Avenue in Kelowna. It had five branches across Canada, and the Beach Avenue branch was located at Hillside Business Park, one of the corporate huts there. The company was especially popular among families because of its high- quality food. The micro-winery sold it's own made wine, but also offered winemaking classes for customers to create their own branded bottle of wine. At times, Pour Away offered live music. They had positive reviews on social media. Pour Away's manager said, "People come to Pour Away to let go and enjoy good-quality food and music." Soul Soul was a five-star hotel situated on Beach Avenue. Due to the popularity of micro-wine, the hotel had installed a micro-winery in its hotel caft so that it could serve fresh wine its guests. The cafe was known for its weekend offerings. Its marketing strategy focused on attracting families. WHAT NEXT? In light of all of its competitors, Sandals was facing an uphill battle. Brian was exploring various strategic options to increase Sandals' foot traffic in order to beat the competition and achieve a return on his investment within his original meline of three years. He had asked Lisa to presenta detailed growth plan within the next two weeks. WHAT YOU NEED TO DO Choose to complete two of the following three analyses: 1) SWOT 2) PESTEL 3) Porter's Five Forces Each Analysis is 24 marks. Prepare your analysis based on two marks per point. Please make sure you have enough points for 24 marks. SWOT - you need a minimum of 3 per S/WIO/T PESTEL - you need a minimum of 2 per P/E/S/TIE/L Porter's Five Forces - you need a minimum of 2 per force + 2 additional points. 63% + Chardonnary, Sauvignon Blanc, Viognier, Pinot Gris, Prosecco, Rone, and Pinot Noir Page 7 EXHIBIT 1: SANDALS WINE MENU Sandals Wine Types Chardonnay, Sauvignon Blanc, Viognier, and Pinot Gris A popular green grape wines Glass (602) Glass (902) 11 1/2 Utre 28 1 Utre 52 Prosecco Light-bodied, wibrant, highly aromatic and crips wine with hints of honeysuckle and cream GLASS (602) 13 L Glass (oz) 18 112 Utre 33 1 Utre 60 Pinot Noir Light bodied with silicy tannins with hints of cherty and vanilla, aged in french oak 10 Glass (602) L Glass (oz) 14 1/2 Utre 1 Utre 29 53 Page 8 EXHIBIT 2: SANDALS MENU (SELECT ITEMS) Appetizers: Edamame Flatbread (Seasonal topppings) Hummus and pita with mixed olives Mount view nachos, crispy nachos, cheese, pico de gallo, salsa 15 22 28 28 Woodfire Pizza 30 33 33 Margarita Four Winds cheese Pepperoni Bring the heat Vegetarian Your The Chef 35 35 a Page 9 EXHIBIT 3: THE MICRO-ANINE PROCESS The Harvest Harvesting or picking is certainly the first step in the actual wine making process. Without fruit there would be no wine, and no fruit other than grapes can produce annually a reliable amount of sugar to yield sufficient alcohol to preserve the resulting beverage, nor have other fruits the requisite acids, esters and tannins to make natural, stable wine on a consistent basis. Crushing Crushing the whole clusters of fresh ripe grapes is traditionally the next step in the wine making process. Mechanical pressing has improved the quality and longevity of wine, while reducing the winemaker's need for preservatives. Fermentation Fermentation is indeed the magic at play in the making of wine. if left to its own devices must or juice will begin fermenting naturally within 6-12 hours with the aid of wild yeasts in the air. Clarification Once fermentation is completed, the clarification process begins. Winemakers have the option of racking or siphoning their wines from one tank or barrel to the next in the hope of leaving the precipitates and solids. called pomace in the bottom of the fermenting tank. Filtering and fining may also be done at this stage. Filtration can be done with everything from a course filter that catches only large solids to a sterile filter pad that strips wine of all life. Fining occurs when substances are added to a wine to clarify them. Bottling The final stage of the wine making process involves the aging and bottling of wine. After clarification, the winemaker has the choice of bottling a wine immediately EXHIBIT 4: SANDALS SALES (REVENUE) 100,000 80,000 80,761 79,776 78,776 47,776 74,791 60,000 67,313 49,851 40,000 32,388 20,000 14,925 10,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Source: Company documents. EXHIBIT 5: SANDALS COST DETAILS Cost $ Cost Detail Fixed Costs (one time) Micro-winery Equipment Kitchen Equipment Air Conditioners Licensing Costs Music System and Televisions Furniture Operational Expenses (per year) Staffing Rent and Electricity Licence Renewal Fee (every second year) Maintenance 410,448 186,567 29,851 7,463 29,851 74,627 179,104 74,627 7.463 8,955 Source: Company documents 12 74% + Page 11 EXHIBIT 6: PROFITS AND LOSSES S Jan 14.925 5,970 Feb 22,388 Apr 37,313 May 44,776 20,896 Jun 41,791 Jul 44,776 29,851 13.433 Sep 47.761 25373 10,448 44.776 23,881 16,418 19,403 22,388 8.955 11,940 16,418 20,895 23,881 22,388 22.388 20,89 22,388 Month Sales Raw Mater Costs Variable Gross Margi Operation Costs Gross Margin Interest Costs Eaming ter Interest 21,891 21.091 21,891 21,891 21.091 21,891 24,91 21,191 21,891 498 -12.935 -9.950 -5,473 -995 490 6,157 6,157 6,157 6,157 6,157 6,157 - 16,107 -11,829 6,157 -995 6,157 -7,152 4.157 5,659 - 19,092 -7.152 -4,167 -5,659 -5,659 Source: Company documents, EXHIBIT 7: SANDALS ORGANIZATIONAL CHART Founder and Chief Executive Officer General Manager Marketing Manager Service Manager Production Manager Head Chef Procurement Manager Source: Company documents Page 12 EXHIBIT 8: ANALYSIS OF SANDALS AND ITS COMPETITORS Sandals Pour Away Too Lit Soul Food Quality/Cuisine Very good family Very good, Very good food, Very good style and Italian known for its known for its intercontinental food. pub food. European food. delicacies. Very good, 7 Prosecco, three typesVery good, four Good types types 140 100 100 120 Quality Types Seating Capacity Ambience uer Social Media Presence Music Marketing Strategy Very good Excellent (inside a Excellent (inside Very good corporate hub) a shopping mall! Excellent Good Very good Good Excellent Excellent Good Mild Social marketing Word of mouth Offer to nearby Social marketing condominium residents Excellent, five-star Good Good Excellent hotel Professional Attitude Source: Created by the authors, Fehruary 20, 2019, Brian was standing in front of his newly opened winery and restaurant in Kelowna, Canada: Sandalwood Winery (Sandals). The business was a dream come true for him, and Brian reflected on the journey he had taken since laying the foundations for Sandals. He had put a great deal of hard work, time, and money into this venture; over the past two years, Sandals had required an investment of $ 10 million. Brian had not only built a world-class winery overlooking Kelowna Lake, but also a terrific woodfire pizza and Italian restaurant. He also hired the best possible team to run Sandals. This team comprised a highly experienced general manager, 10 specialty chefs, three front desk managers, and 20 service staff. The quality of wine and food served in Sandals is of the highest class, boasting high-quality ingredients, perfect flavours, and innovative presentation (see Exhibits 1 and 2). Sandals has an on-site vineyard capable of producing seven types of wine. With seating for 140 customers, the restaurant had a lively ambience with a state-of-the-art music system and a wide collection of albums. Sandals is situated in Kelowna where there is a large tourism business base with Lakes, Mountain Resorts, Waterparks and malls. In fact, Sandals is situated right in the middle downtown Kelowna, beachside overlooking Okanagan Lake. Upon opening Sandals, Brian had expected to recover his initial capital investment within five years. However, within only nine months of the restaurant's opening, he had to revise this estimate to eight years. He pondered the business environment changes since he had first started working on this venture. The growth of sales had been slower than he had anticipated. In light of the changing external environment, Brian wondered about various strategic options. Should he alter Sandals' product offerings, or increase the price of the menu items? Should be increase the focus on corporate customers by undertaking exclusive corporate events, or should be increase Sandals' social marketing efforts to attract more local customers? Brian had only two weeks to act before the situation became critical THE WINE INDUSTRY IN CANADA Senadywa.hage, testibileer Barnlandes.Agluhift af E.PONUKLEP:Wes below.ads, 488.0f2ed to United States 25 litres per capita. The US had seen strong growth in wine consumption since 1995, but Canada had not seen much growth in this area. Wine consumption in Canada lagged behind the same in the US for two reasons, politics and government regulation. Various political groups have formed causing riots and working to change laws discouraging alcohol consumption. Further, for political reasons, some cities and provinces have had government intervention and have imposed an alcohol ban. Government had also imposed restrictions on the consumption of alcohol within public spaces, limiting alcohol consumption to private residences or restaurants Despite these inhibiting factors, Canada's large youth population still presented an opportunity in the wine market. As per one estimate, Canada's wine market was nearly doubling every three years: 200 million bottles of wine were sold in Canada in 2015, and 400 million were sold in 2018. These figures clearly indicated a high-growth pattern. If Canada's per capita consumption grew by one litre, wineries producing 1 million hectolitres would be required to meet this demand. Thus, Canada's largely untapped potential made it a choice location for wineries. Kelowna and the BC Interior Region have a significant number of wineries, 49. Of those 49 wineries, only three are situated in similar setups with a restaurant attached. The three wineries are: Two Sisters, Red Dog Blue Cat, and the Silverlinings. Two Sisters had more than 50 per cent of the market share, followed by Red Dog Blue Cat and then Silverlinings. Other large wineries in Canada included Over The Ridge, Shooting Star, Cool Nights, and Barrels Galore. The Winery Industry Over the past few years, Canada's winery industry had changed rapidly because of the introduction of micro-wineries and in-home wineries. In Canada, a micro-winery was defined as a winery that produced three type of wine, typically consumed on its own premises and only did tastings and sales; there was no on-site restaurant. Micro-wineries were known for their quality, treshness, and having limited quantities. In 2019, entrepreneur Shania Twain stated, "The following around micro-wineries is growing. Once you have had this (specialty wine), you will never have that mass produced stuff again." Since is inception in Canada 1990, the micro-winery industry has witnessed unprecedented growth. Prior to 2009, only a few Canadian provinces allowed licensing for micro-wineries, but the lucrative opportunity presented by the bigh-growth ecosystem and increased tax revenue for the government, led many to revisit their policies. While many cities endorsed the micro-winery industry with favourable policies, cities such as Red Deer, Fort St. John, and Glasgow imposed bans on production and on alcohol sales despite the trend. At the same time, Canada was witnessing the "Millennials generational rise of weekend parties and cating out. In metropolitan cities, large numbers of people preferred to eat out during weekends, and even during the workweek. The culture around wine consumption was also changing many Page 3 men began showing an inclination towards wine and social drinking. Wine was considered safe to drink among younger demographics, and micro-wine was gaining popularity as a favourite drink, especially if someone was trying to leave a good impression. The wide availability and implementation of micro-winery technologies led many restaurants to install in-home winery kits, and as a result, the market witnessed intensified competition. "The wine market is the fastest-growing alcohol segment in Canada by consumption and revenue change, especially with the drastic demand and push of micro-wineries about ten years ago, and micro-wineries' growth is a result of the easy availability of technology from Europe," said Brian in one local newspaper interview. The following factors may have accounted for the fast growth in micro-wineries across Canada the product was freshly made with excellent taste, and was considered less harmful to health than other alcoholic products; the culture around wine was growing, as many young people enjoyed it and Canadian consumers were experiencing an increase in disposable income. The Micro-winery Industry: Outlook and Challenges While the micro-winery industry was growing micro-wineries still faced many operational and external environmental challenges. Wine in Canada was highly taxed, and each province had a complicated tax structure. Additionally, there were stringent provincial liquor laws, licensing difficulties, high real estate costs, and a lack of skilled labour for the highly technical job of winemaking (vintner) only three schools throughout Canada provided a degree in winemaking technology. Training even one oenologist student in winemaking techniques took two years. Further, because of the high ingredient costs, micro-winery and in-home kits was more expensive to make per bottle than at a winery. Demographically, metropolitan cities in Canada, such as Vancouver and Toronto, were best suited for the industry, as these cities were home to many young professionals with higher disposable incomes. According to estimates, Canada's wine market was expected to reach $95 million in 2019. The Micro-winery Process Most consumers saw micro-wine as an all-natural product that was made using four ingredients: grapes, sugar, yeast, and water. Large wineries add in other ingredients along with enzymes and preservatives, which some argued made it less healthy. Micro-wine was also unfiltered, which left it with a higher protein content. Each type and style of micro-wine had its own unique character. Kelly, Vintner at Sandals, explained, "There are five primary factors for judging the profile of a wine: appearance (colour), aroma, balance, depth, and finish. One that is perfectly balanced and has all these characteristics is a wine you will enjoy drinking." Micro-winemaking involved eight 2 63% + 0 steps (see Exhibit 3). Though these steps were typically used in most micro-wineries, it was said that winemaking was an art rather than a technique. Micromaking Unit Set-up:Licensing in Canada Sort Canadian provinces had allowed licensing for micro-wineries: British Columbia, Alberta, Ontario, New Brunswick, and The North West Territories. The excise commissioner of the Government of Ontario, Jodi Livingston stated, "We had allowed in-home winery setups at the airport a couple of years ago, but the concept didn't take off. With the increase in disposable income and lifestyle changes, we have now extended the facility in Alberta where there are quite a few restaurants and pubs. There were two types of licensing options; one was for on-site sales by the micro-winery, and the other additionally allowed the bottling of wine. Yet by 2019, only the BC and ON governments had allowed the bottling licence. SANDALS WINERY Sandals opened in Fehruary of 2019 on Beach Avenue in Kelown. The restaurant's location was ideal, as it was situated on the beach that was located in the central downtown core of Kelowna Among young consumers, Sandals was known as a good place for food and drinks. The restaurant offered seven micro wine options: Chardonnery, Sauvignon Blanc, Viognier, Pinot Gris, Prosecco, Rose, and Pinot Noir (see Exhibit 1) The restaurant offered a relaxing fine dining experience that emphasized entertainment and a family atmosphere. Guests could spend a cheerful evening socializing, enjoying wine and delicious food, and listening to live band. Sandals camed 525 revenue per customer (which was more revenue than its competitors earned), and each customer spent an average of 535 on wine and $5 on food and Snacks (see Exhibits 4, 5, and 6). Kelowna had a population of about 1 million people in 2011, and was one of the fastest-growing corporate cities in BC, Canada. Many Fortune Global 500 companies were headquartered in Kelown, and owing to high employment rates, income levels were increasing. Beach Avenue, Main Street, 101 Ave, and Dalmation Drive were all key destinations in Kelowna for food and entertainment Marketing Strategy Sandals had hired dedicated marketing manager to create demand and promote its unique selling point. The company relied on social media as its main marketing platform, and it had received positive reviews on various review websites. Still, Sandals was unable to secure the required foot traffic to make the operation profitable. Operation Sandals had installed its micro-winery in an area to be side of the restaurant, protected by a glass window so that customers could see the winemaking process in action. On the opposite side of the restaurant was a bar, and a seating area filled the middle Sandals also had space for private parties of up to 50 people 63% + Page 5 Overall, the company's operations were divided into five parts: (1) wine production was managed by the operation manager, and the key responsibility of this department was to ensure the quality and production of the wine (including the vineyard); (2) the cooking department was responsible for cooking various dishes served in the restaurant; (3) the purchasing department was responsible for buying all raw materials (4) the marketing department was responsible for increasing foot traffic, and (5) the service department, which had the most employees, was responsible for handling customer interactions, and taking and delivering orders (see Exhibit 7). Leadership Team Sandals was founded by four partners: Brian, Donald, Logan, and John. Brian, the founder and chief executive officer of Sandals, had 15 years of experience in the hotel industry. The other founders were not actively involved in the business. Brian had worked with several top hotel brands, such as the Grand Hyall, Hotel Vancouver, Shangri-La, and Westin Hotels. He had immense experience in managing restaurants, and his passion for quality and innovation was evident at Sandals. Brian had initiated the new concept of tuming the restaurant into a games night pub on Saturdays. Lise is Sandals' general manager and a very experienced professional. She has 12 years of hospitality industry experience, and has worked at renowned hotels in Vancouver and Toronto. Lisa described Sandals appeal: "We have some regular customers who have a preference for our wine and some of the specialty food we serve. We also have a very relaxing environment here to ensure that customers feel relaxed after a full day of work." COMPETITION The micro-winery Swirl and Swig was launched by two graduates of the Institute of Marketing & Management who had pioneered the micro-winery concept in Canada in 2009 and worked hard to lobby regulators to allow micro-wineries to operate in the country. After running a micro-winery in Vancouver, they opened two Swirl and Swig outlets in Toronto and Edmonton Calgary and Kelowna were the fastest growing locations in Canada for micro-wineries. In 2015, Kelown had 7 micro-wineries, by 2017, this number had grown to 12 Out of these, three micro-wineries were located in the downtown Kelowna city centre. Beach Avenue was quickly becoming the top business destination in Kelowna because of the large availability of corporate space and corporate entertainment opportunities. Kelowna had three main areas for food and dining: Dalmation Drive, Main Street, and Beach Avenue. Beach Avenue, in particular, had many top micro-wineries and restaurants, including the following firms, which posed significant competition for Sandals Too Lit Wine Located at Sunny Mall on Main Street, Too Lat Wine (Too Lit) was the 8th micro-winery in Kelowna i was a popular destination in Kelowna for wine lovers. Too Lit had a focus on Prosecco and offered three types of wine. Sunny Mall contained a Bowling Alley, Games Entertainment Centre and restaurants that attracted good footfi traffic, and Too Lit offered discounts and commercial tie-ups to further increase foot traffic 63% + Page 6 There was increased foot traffic from younger customers on weekends because, according to the restaurant's manager, they enjoyed the specialized wine. Too Lit also had a bunch in Calgary, Alberta. Pour Away Pour Away was another popular micro-winery on Beach Avenue in Kelowna. It had five branches across Canada, and the Beach Avenue branch was located at Hillside Business Park, one of the corporate huts there. The company was especially popular among families because of its high- quality food. The micro-winery sold it's own made wine, but also offered winemaking classes for customers to create their own branded bottle of wine. At times, Pour Away offered live music. They had positive reviews on social media. Pour Away's manager said, "People come to Pour Away to let go and enjoy good-quality food and music." Soul Soul was a five-star hotel situated on Beach Avenue. Due to the popularity of micro-wine, the hotel had installed a micro-winery in its hotel caft so that it could serve fresh wine its guests. The cafe was known for its weekend offerings. Its marketing strategy focused on attracting families. WHAT NEXT? In light of all of its competitors, Sandals was facing an uphill battle. Brian was exploring various strategic options to increase Sandals' foot traffic in order to beat the competition and achieve a return on his investment within his original meline of three years. He had asked Lisa to presenta detailed growth plan within the next two weeks. WHAT YOU NEED TO DO Choose to complete two of the following three analyses: 1) SWOT 2) PESTEL 3) Porter's Five Forces Each Analysis is 24 marks. Prepare your analysis based on two marks per point. Please make sure you have enough points for 24 marks. SWOT - you need a minimum of 3 per S/WIO/T PESTEL - you need a minimum of 2 per P/E/S/TIE/L Porter's Five Forces - you need a minimum of 2 per force + 2 additional points. 63% + Chardonnary, Sauvignon Blanc, Viognier, Pinot Gris, Prosecco, Rone, and Pinot Noir Page 7 EXHIBIT 1: SANDALS WINE MENU Sandals Wine Types Chardonnay, Sauvignon Blanc, Viognier, and Pinot Gris A popular green grape wines Glass (602) Glass (902) 11 1/2 Utre 28 1 Utre 52 Prosecco Light-bodied, wibrant, highly aromatic and crips wine with hints of honeysuckle and cream GLASS (602) 13 L Glass (oz) 18 112 Utre 33 1 Utre 60 Pinot Noir Light bodied with silicy tannins with hints of cherty and vanilla, aged in french oak 10 Glass (602) L Glass (oz) 14 1/2 Utre 1 Utre 29 53 Page 8 EXHIBIT 2: SANDALS MENU (SELECT ITEMS) Appetizers: Edamame Flatbread (Seasonal topppings) Hummus and pita with mixed olives Mount view nachos, crispy nachos, cheese, pico de gallo, salsa 15 22 28 28 Woodfire Pizza 30 33 33 Margarita Four Winds cheese Pepperoni Bring the heat Vegetarian Your The Chef 35 35 a Page 9 EXHIBIT 3: THE MICRO-ANINE PROCESS The Harvest Harvesting or picking is certainly the first step in the actual wine making process. Without fruit there would be no wine, and no fruit other than grapes can produce annually a reliable amount of sugar to yield sufficient alcohol to preserve the resulting beverage, nor have other fruits the requisite acids, esters and tannins to make natural, stable wine on a consistent basis. Crushing Crushing the whole clusters of fresh ripe grapes is traditionally the next step in the wine making process. Mechanical pressing has improved the quality and longevity of wine, while reducing the winemaker's need for preservatives. Fermentation Fermentation is indeed the magic at play in the making of wine. if left to its own devices must or juice will begin fermenting naturally within 6-12 hours with the aid of wild yeasts in the air. Clarification Once fermentation is completed, the clarification process begins. Winemakers have the option of racking or siphoning their wines from one tank or barrel to the next in the hope of leaving the precipitates and solids. called pomace in the bottom of the fermenting tank. Filtering and fining may also be done at this stage. Filtration can be done with everything from a course filter that catches only large solids to a sterile filter pad that strips wine of all life. Fining occurs when substances are added to a wine to clarify them. Bottling The final stage of the wine making process involves the aging and bottling of wine. After clarification, the winemaker has the choice of bottling a wine immediately EXHIBIT 4: SANDALS SALES (REVENUE) 100,000 80,000 80,761 79,776 78,776 47,776 74,791 60,000 67,313 49,851 40,000 32,388 20,000 14,925 10,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Source: Company documents. EXHIBIT 5: SANDALS COST DETAILS Cost $ Cost Detail Fixed Costs (one time) Micro-winery Equipment Kitchen Equipment Air Conditioners Licensing Costs Music System and Televisions Furniture Operational Expenses (per year) Staffing Rent and Electricity Licence Renewal Fee (every second year) Maintenance 410,448 186,567 29,851 7,463 29,851 74,627 179,104 74,627 7.463 8,955 Source: Company documents 12 74% + Page 11 EXHIBIT 6: PROFITS AND LOSSES S Jan 14.925 5,970 Feb 22,388 Apr 37,313 May 44,776 20,896 Jun 41,791 Jul 44,776 29,851 13.433 Sep 47.761 25373 10,448 44.776 23,881 16,418 19,403 22,388 8.955 11,940 16,418 20,895 23,881 22,388 22.388 20,89 22,388 Month Sales Raw Mater Costs Variable Gross Margi Operation Costs Gross Margin Interest Costs Eaming ter Interest 21,891 21.091 21,891 21,891 21.091 21,891 24,91 21,191 21,891 498 -12.935 -9.950 -5,473 -995 490 6,157 6,157 6,157 6,157 6,157 6,157 - 16,107 -11,829 6,157 -995 6,157 -7,152 4.157 5,659 - 19,092 -7.152 -4,167 -5,659 -5,659 Source: Company documents, EXHIBIT 7: SANDALS ORGANIZATIONAL CHART Founder and Chief Executive Officer General Manager Marketing Manager Service Manager Production Manager Head Chef Procurement Manager Source: Company documents Page 12 EXHIBIT 8: ANALYSIS OF SANDALS AND ITS COMPETITORS Sandals Pour Away Too Lit Soul Food Quality/Cuisine Very good family Very good, Very good food, Very good style and Italian known for its known for its intercontinental food. pub food. European food. delicacies. Very good, 7 Prosecco, three typesVery good, four Good types types 140 100 100 120 Quality Types Seating Capacity Ambience uer Social Media Presence Music Marketing Strategy Very good Excellent (inside a Excellent (inside Very good corporate hub) a shopping mall! Excellent Good Very good Good Excellent Excellent Good Mild Social marketing Word of mouth Offer to nearby Social marketing condominium residents Excellent, five-star Good Good Excellent hotel Professional Attitude Source: Created by the authors