Lagerhead Brewing Company Case Study INSTRUCTIONS: After reading the attached case study regarding Lagerhead Brewing Company, answer the following eight (8) questions in paragraph form (expect for Question2) using complete sentences. Be sure to check for spelling, punctuation, and grammar before uploading your responses. Good luck. 1. Who are the stakeholders of Lagerhead Brewing Company? Explain how each stakeholder is tied to the company. 2. List all ethical dilemmas currently facing Lagerhead Brewing Company. 3. Describe the potential consequences that could be caused by one of the dilemmas listed above and provide at least three alternative solutions for resolving it. 4. Explain in detail which one of the three solutions offered above in Question #3 would you recommend and why? 5. Describe at least two global economic trends that could impact Lagerhead if it wanted to expand product distribution into other countries? 6. List and describe at least three socio-cultural factors or characteristics of Lagerheads' targeted market segment. 7. Identify at least two environmental sustainability issues that are facing the company. Explain not only what they are, but also what the company is doing to address them. 8. Explain how the global economic, socio-cultural, and sustainability opportunities you identified in the previous three questions are linked to the external threats currently faced by Lagerhead Brewing Company. Lagerhead Brewing: Ethical and Environmental Responsibility Although most of the companies frequently cited as examples of ethical and socially responsible firms are large corporations, it is the social responsibility initiatives of small businesses that often have the greatest impact on local communities and neighborhoods. These businesses create jobs and provide goods and services for customers in smaller markets that larger corporations often are not interested in serving. Moreover, they also contribute money, resources, and volunteer time to local causes. Their owners often serve as community and neighborhood leaders, and many choose to apply their skills and some of the fruits of their success to tackling local problems and issues that benefit everyone in the community. Managers and employees become role models for ethical and socially responsible actions. One such small business is the Lagerhead Brewing Company, Inc. History of the Lagerhead Brewing Company The idea for the Lagerhead Brewing Company began with a bicycling trip through Europe, home of some of the world's finest ales. As James Besch, an American electrical engineer, cruised around, he wondered if he could produce such high-quality beers back home in the U.S. After acquiring the special strain of yeast used to brew Belgian-style ales, Besch returned home and began to experiment in his basement. When his beers earned thumbs up from friends, Besch decided to market them. The Lagerhead Brewing Company (LBC) opened for business in 1991 as a tiny basement operation in Besch's home. His wife, Kim, became the firm's marketing director. They named their first brew Black Cat Amber Ale in honor of a cat they met on a road in Belgium while cycling. Lagerhead beers quickly developed a small but devoted customer base, first in town and then throughout the state. The brewery 1 soon outgrew the couple's basement and moved into an old railroad depot before settling into its present custom-built facility in 1995. The brewery includes an automated brewhouse, two quality assurance labs, and numerous technological innovations for which Lagerhead has become nationally recognized as a \"paradigm of environmental efficiencies.\" Today, Lagerhead Brewing Company offers a variety of permanent and seasonal ales and pilsners. The company's standard line includes Sunset Wheat, Blue Dog Pilsner, Abbey Road Belgian Style Ale, Midnight Black Ale, and the original Black Cat Amber, still the firm's bestseller. Some customers even refer to the company as the Black Cat Brewery. They also market a few specialty beers seasonally, such as Lambast Lager, a wood-aged beer. These are sold until the batch runs out. Until 2005, LBC's most effective form of advertising was its customers' word of mouth. For example, before Lagerhead beers were widely distributed throughout the West, a liquor store in Wyoming once offered people gas money if they would stop by and pick up Lagerhead beer on their way through the state. Although Lagerhead is only distributed in one-third of the United States, the brewery receives numerous e-mails and calls every day inquiring when it will be available elsewhere. With expanding distribution, however, the brewery recognized a need to increase its opportunities for reaching its far-flung customers. It consulted with Dr. Paul Hoyle, an Oxford professor and branding expert. After studying the young company, Hoyle, together with newly hired Marketing Director Greg Giacomo, drafted a 70-page \"manifesto\" describing the brand's attributes, character, cultural relevancy, and promise. In particular, Hoyle identified in Lagerhead an ethos of pursuing creative activities simply for the joy of doing them well and in harmony with the natural environment. With the brand thus defined, Lagerhead went in search of an advertising agency to help communicate that brand identity. It soon found an equally young, independent New York advertising agency that created a $10 million advertising campaign targeting high-end beer drinkers (men ages 25 to 44) and highlighting 2 the brewery's down to earth image. The product appears in just five seconds of each ad between the tag lines, \"Follow Your Craving...Ours Is Beer.\" The ads helped position the growing brand as whimsical, thoughtful, and reflective. In addition to the ad campaign, the company maintained its strategy of promotion through event sponsorships. Lagerhead Ethical Culture According to Giacomo, beyond a basic desire for advertising and promotion ethics there is a fundamental focus on the ethical culture of the brand. Although consumer suspicion of business is on fully raised eyebrow, those in good standing- as opposed to those trading on hypeare eyed with iconic-like adoration. From this off polarization comes a new paradigm in which businesses that fully embrace citizenship in the community they serve can forge enduring bonds with customers. Meanwhile, these are precarious times for businesses that choose to ignore consumer's looking at brands from an ethical perspective. More than ever before, what the brand says and what the company does must be synchronized. LBC believes the mandate for corporate social responsibility gains momentum beyond the courtroom to the far more powerful marketplace, any current and future manager of business must realize that business ethics are not so much about the installation of compliance codes and standards as they are about the spirit in which they are integrated. Thus, the modern-day brand steward- usually the most externally focused member of the business management team- must prepare to be the internal champion of the bottom line necessity for ethical, values-driven company behavior. At Lagerhead, a synergy of brand and values occurred naturally as the firms ethical culture- in the form of core values and beliefs- and was in place long before LBC had a marketing department. Back in early 1991, Lagerhead was just a home-brew of an electrical engineer and his social worker wife. Before they signed any business paperwork, the two took a hike through Yellowstone National Park. Armed with a pen, and a 3 notebook they took their first stab at what the fledgling company's core purpose would be. What were their aspirations beyond profitability? What was the real root cause of their dream? What they wrote down that spring day, give or take a little wordsmithing, was the core values and beliefs you can read on the LBC website today. More important, ask just about any Lagerhead worker, and she or he can list for you many, if not all, these shared values and can inform you which are the most personally poignant. For LBC branding strategies are as rooted in their company values as they are in other business practices. Lagerhead's Purpose and Core Beliefs Lagerhead's dedication to quality, the environment, and its employees and customers is expressed in its mission statement: \"To operate a profitable brewery which makes our love and talent manifest.\" The company's stated core values and beliefs about its role as an environmentally concerned and socially responsible brewer include: Producing world-class beers; Promoting beer culture and the responsible enjoyment of beer; Continuous, innovative quality and efficiency improvements; Transcending customers' expectations; Environmental stewardship, minimizing resource consumption, maximizing energy efficiency; Kindling social, cultural, and environmental change as a business role model; Cultivating potential through learning, participative management, and the pursuit of opportunities; Balancing the myriad needs of the company, staff, and their families; Committing ourselves to authentic relationships, communications, and promises; Having fun. Employees believe that these statements help communicate to customers and other stakeholders what Lagerhead, as a company, is about. These simple values developed 15 years ago are just as meaningful to the company and its customers today even though there has been much growth. 4 Employee Concerns Recognizing employees' role in the company's success, Lagerhead provides many generous benefits. In addition to the usual paid health and dental insurance and retirement plans, employees get a free lunch every other week as well as a free massage once a year, and they can bring their children and dogs to work. Employees who stay with the company for five years earn an all-expenses paid trip to Belgium to \"study beer culture.\" Perhaps most importantly, employees can also earn stock in the privately held corporation, which grants them a vote in company decisions. Lagerhead's employees now own one-third of the growing brewery. Open book management lets employees see the financial costs and performance. Environmental Concerns Lagerhead's marketing strategy involves linking the quality of its products, as well as their brand, with the company's philosophy toward affecting the planet. From leading- edge environmental gadgets and high-tech industry advancements to employee- ownership programs and a strong belief in giving back to the community, Lagerhead demonstrates its desire to create a living, learning community. LBC strives for cost-efficient energy-saving alternatives to conducting its business and reducing its impact on the environment. In staying true to the company's core values and beliefs, the brewery's employeeowners unanimously agreed to invest in a wind turbine, making Lagerhead the first fully wind-powered brewery in the United States. Since the switch from coal power, Lagerhead has been able to reduce its CO2 emissions by 1,800 metric tons per year. The company further reduces its energy use by employing a steam condenser that captures and reuses the hot water that boils the barley and hops in the production process to start the next brew. The steam is redirected to heat the floor tiles and de-ice the loading docks in cold weather. Another way that LBC conserves energy is by using \"sun tubes,\" which provide natural daytime lighting throughout the brew house all year long. 5 Lagerhead also takes pride in reducing waste through recycling and creative reuse strategies. The company strives to recycle as many supplies as possible, including cardboard boxes, keg caps, office materials, and the amber glass used in bottling. The brewery also stores spent barley and hop grains in an on-premise silo and invites local farmers to pick up the grains, free of charge, to feed their pigs. LBC even encourages its employees to reduce air pollution by using alternative transportation. LBC gives its employees \"cruiser bikes\" after a year of employment and encourages them to ride to work. Lagerhead has been a long-time participant in green building techniques. With each expansion of the facility they have incorporated new technologies and learned a few lessons along the way. In 2002, LBC agreed to participate in the United States Green Building Council's Leadership in Energy and Environment Design for Existing Buildings (LEED-EB) pilot program. From sun tubes and day lighting throughout the facility to reusing heat in the brewhouse, they continue to search for new ways to close loops and conserve resources. Reduce, Reuse, Recycle- the three 'R's of being an environmental steward. The reuse program includes heat for the brewing process, cleaning chemicals, water and much more. Recycling at Lagerhead takes on many forms, from turning \"waste\" products into something new and useful (like spent grain to cattle feed), to supporting the recycling market in creative ways (like turning their keg caps into table surfaces). They also buy recycled whenever they can, from paper to office furniture. Reduction surrounds them - from motion sensors on the lights throughout the building to induction fans that pull in cool winter air to chill their beer - offsetting their energy needs is the cornerstone to being environmentally efficient. Social Concerns Beyond its use of environment-friendly technologies and innovations, Lagerhead Brewing Company strives to improve communities and enhance people's lives through corporate giving, event sponsorship, and 6 philanthropic involvement. Since its inception, LBC has donated more than 1.6 million dollars to organizations in the communities in which they do business. For every barrel of beer sold the prior year, LBC donates $1 to philanthropic causes within their distribution territory. The donations are divided between states in proportion to their percentage of overall sales. This is their way of staying local and giving back to the communities who support and purchase LBC products. In 2006, Arkansas, Arizona, California, Colorado, Idaho, Kansas, Missouri, Montana, Nebraska, Nevada, New Mexico, Oregon, Texas, Washington and Wyoming each received funding. Funding decisions are made by the LBC Philanthropy committee, which is made of employees throughout the brewery, from owners to production workers. They look for non-profit organizations that demonstrate creativity, diversity, community involvement, and innovation in their mission and objectives. LBC also maintains a community bulletin board in its facility where it posts an array of community involvement activities and proposals. This community board allows tourists and employees to see the different ways they can help out the community, and it gives nonprofit organizations a chance to make their needs known. Organizations can even apply for grants through the Lagerhead Brewing Company Web site, which has a link designated for this purpose. LBC also sponsors a number of events that involve \"human-powered\" sports that cause minimal damage to the natural environment. Through event sponsorships, such as the Tour de Cat, LBC supports various environmental, social, and cycling nonprofit organizations. They sponsor the MS 150 \"Best Damn Bike Tour,\" from which all proceeds benefit more than five thousand local people with multiple sclerosis. LBC also sponsored the Ride-to-Help bike tour, which donated the proceeds from beer sales to local non-profit groups. The money raised from annual events funds local projects, such as improving parks and bike trails. In the course of one year, Lagerhead can be found anywhere from 150 to 200 festivals and events, across all fifteen western states. 7 Long-Term Organizational Success Lagerhead Brewing Company's efforts to live up to its own high standards have paid off with numerous awards and a very loyal following. It was one of three winners of Business Ethics magazine's Business Ethics Awards for its \"dedication to environmental excellence in every part of its innovative brewing process.\" The Better Business Bureau's Torch Awards recognized it for Outstanding Marketplace Ethics. LBC's owners received the Entrepreneur of the Year Award for regional manufacturing. The company also captured the award for best mid-sized brewing company of the year and best mid-sized brewmaster at the Great American Beer Festival. In addition, Lagerhead took home medals for three different brews, Abbey Road Belgian Style Ale, Blue Dog Pilsner, and Lambast Lager specialty ale. There have been discussions among some of the employee-owners to expand the brand to overseas markets. However, brewers have witnessed stagnant or declining volume sales at the global level over the last several years as a result of the financial predicaments experienced by several major beer producing and consuming countries. Beer affordability for low-income consumers is a key barrier for volume expansion in emerging beer markets. Further, some members of society do not believe that a company whose major product is alcohol can be socially responsible; Lagerhead has set out to prove that for those who make a choice to drink responsibly, the company can do everything possible to contribute to society. According to Daniel Medgar, director of the Institute for Brewing Studies, \"They've created a very positive image for their company in the beerconsuming public with smart decision-making.\" Its efforts to promote beer culture and the connoisseurship of beer has even led it to design a special \"Worthy Glass,\" the shape of which is intended to retain foam, show off color, enhance the visual presentation, and release aroma. Lagerhead Brewing Company also promotes the responsible appreciation of beer through its participation in and support 8 of the culinary arts. For instance, it frequently hosts Lagerhead Beer Dinners, in which every course of the meal is served with a complementary culinary treat. According to LBC Marketing Director Greg Giacomo, although the Black Cat brand has a bloodline straight from the enterprise's ethical beliefs and practices, the firm's work is not done. They must continually re-examine ethical, social and environmental responsibilities. Several years ago, Lagerhead received the Environmental Protection Agency's regional Environmental Achievement Award. It was both an honor and a motivator not to rest on naturally raised laurels. There are still many ways for LBC to improve as a corporate citizen. For example, they still don't produce any organic beers. The manufacturing process is a fair distance from being zero waste or emission free. There will always be a need for more public dialogue on avoiding alcohol abuse. Practically speaking, they have a never-ending to-do list. LBC also must acknowledge that as their annual sales increase, the challenges for the brand to remain on a human scale and culturally authentic will increase too. How to boldly grow the brand while maintaining its humble feel has always been a challenge. Every six-pack of Lagerhead Beer displays the phrase, \"We are proud of what is in this box. We feel incredibly lucky to be creating something fine that has the ability to enrich people's lives.\" Although its founder has \"semi-retired\" from the company, the owners of Lagerhead hope this statement still captures the spirit of the company. According to employee Dave Kemp, LBC's environmental concern and social responsibility give it a competitive advantage because consumers want to believe in and feel good about the products they purchase. LBC's most important asset is its imagea corporate brand that stands for quality, responsibility, and concern for society. Defining itself as more than just a beer company, the brewer also sees itself as a caring organization that is concerned with all stakeholders, including the community, the environment, and employees. 9