MUSANZE BARS
Growth strategy
Retail
High difficulty
Candidate-led case
This case focuses on how to return a chain of bars to growth. It is candidate-led and requires strong
structuring skills to drive its resolution. It tests a broad set of skills, but in particular, requires good
Pr
Co (vic ivat
py to e c
an r.g op
d rol y o
Sh et f
ar @ vic
in po to
g ly r
Pr te g
oh c ro
ib hn let
ite iq
d. ue.
ed
u)
judgment and a strong ability to interpret exhibits.
Problem definition
Your client is a group of investors behind a chain of bars in Kenya. The bars are positioned as midmarket locations for young professionals to drink and socialize, and are typically based in popular
locations in major urban centres.
The founder of the chain launched the first bar in Nairobi two decades ago, and subsequently expanded
to other major cities in Kenya. While the bar chain experienced strong growth in the first 15 years, growth
has subsequently slowed down. The investors ultimately want to continue funding and growing the chain.
However, they only have appetite to do so if they believe the chain has long-term prospects.
The investors do not have a firm grasp on what is holding the chain back, and hear differing opinions
from the founders and senior managers in the client team. They want to understand what is causing the
issue, and whether the business has long-term prospects such that they should continue investing.
They’ve asked you to diagnose what is causing the growth challenge, and to provide insight on how they
should move forward.
What is causing slow growth for Musanze Bars, and should the investors commit further funds
towards trying to expand the chain?
Relevant information
If asked at this stage or later, please share the below:
●
Musanze is a chain of 10 bars. Four of the bars are based in Nairobi, and the remainder are based
in other major cities across Kenya
●
The bars are positioned as mid-market, and provide a selection of beers, wines, spirits, and some
basic cocktails. The bars offer a mix of domestic and international brands
●
Revenue growth has slowed gradually from ~5% per bar, per annum five years ago to 1% today
●
To commit further funds, investors want to see potential for Musanze to return to comparable growth
rates per bar to those seen five years ago
The existing bars are never at full occupancy, and so are not held back by being “at maximum
u)
capacity”
Pr
Co (vic ivat
py to e c
an r.g op
d rol y o
Sh et f
ar @ vic
in po to
g ly r
Pr te g
oh c ro
ib hn let
ite iq
d. ue.
ed
●
Structuring
Guidance for interviewer
Given the nature of this case, a diagnostic structure is appropriate. The client team wants to identify the
cause of their challenge, and the structure must enable a candidate to do this quickly.
Possible answer
a. Lack of high-potential locations (e.g. due to demographic factors)
u)
1. Is Musanze failing to open new bars? (Driver 1)
Pr
Co (vic ivat
py to e c
an r.g op
d rol y o
Sh et f
ar @ vic
in po to
g ly r
Pr te g
oh c ro
ib hn let
ite iq
d. ue.
ed
b. Lack of resources to open new bars (e.g. due to financial capital, capable staff and managers)
2. Is the low growth driven by low same-store sales growth?
a. Is the market sufficiently attractive to sustain the client’s growth ambition? (Driver 2)
●
Market share (e.g., competitors)
●
Market growth rate and future prospects:
˗
˗
Scale and growth in alcoholic beverage consumption among addressable population
Change in drinking preferences for alcoholic consumption (e.g. bar vs at home, price points
of beverages)
b. Does Musanze have a winning proposition to succeed in this market? (Driver 3)
●
Branding
●
Price positioning
●
Locations
●
Product assortment:
˗
˗
c.
Selection of drink types to offer (e.g. beer, wine, cocktails)
Position of drink types on offer (e.g. premium beer versus mass market beer)
Does Musanze have the operational capability to implement its proposition effectively? (Driver 4)
●
●
Reach new customers:
˗
Bar location and appearance (to convert passive traffic)
˗
Marketing & PR effectiveness (to actively drive customers to the bar)
Provide an experience that retains and grows the value of its customers:
˗
Venue: ambience & décor
˗
Service: staff training & capacity
˗
Products: implementation of product assortment strategy (e.g. specific drinks and brands on
offer within pre-defined assortment categories)
Driver 1: Is the client failing to open enough new bars?
Relevant information
If asked at this stage or later, please share the below:
●
Musanze has not opened a new bar in over two years
●
The client team have already identified at least 20 appropriate sites on which to open new bars. The
volume of locations is likely to grow as Kenya continues to urbanize
●
Musanze has sufficient access to talent to open new bars: competent bar staff and managers can
The firm’s suppliers have additional capacity. While in some potential locations Musanze would have
Pr
Co (vic ivat
py to e c
an r.g op
d rol y o
Sh et f
ar @ vic
in po to
g ly r
Pr te g
oh c ro
ib hn let
ite iq
d. ue.
ed
●
u)
easily be hired, and the central management team can also scale up relatively easily
to find new suppliers, the firm does not see this as a major challenge
●
Musanze does not have sufficient cash on its own to open new bars, and would rely on its investors
●
The investors have sufficient capital available to pursue new launches, but are currently holding
back from doing so. After Musanze’s growth stalled 2 - 3 years ago, and in particular after some new
bar launches failed to grow quickly, the investors have refrained from funding new venues. They
want to better understand the client’s challenge and likely prospects before investing further
Guidance for interviewer
If a candidate seeks to explore the topic of new launches, encourage them to brainstorm why Musanze
might be holding back from opening new bars. Once the candidate hits on the point about funding, share
the investors’ rationale for holding back funding.
Possible answer
Growth for this business ultimately relies on two things: growing sales per bar, and opening new bars.
It’s possible the client has simply failed to open enough new bars in recent years. There are plenty of good
reasons why they might do so: for example, they may lack available new locations, have a constrained or
inflexible supplier base, or simply lack the requisite capital to fund new launches.
[Interviewer and candidate discuss potential reasons.]
Based on what we’ve discussed, the client is indeed failing to open bars. But this is not the core challenge:
growth in existing bars has stalled, and this is holding the investors back from new launches. Let’s move now
to explore what could be holding back the client’s sales per bar.
Driver 2: Is the market sufficiently attractive to sustain the client’s growth ambition?
Relevant information
If asked at this stage or later, please share the below:
The overall market size is $600m
●
The market is fragmented, with many small competitors and no dominant players
●
The client’s bars tend to be mid-sized, and can sit 40 patrons on average
●
Our client’s opening hours are:
Monday – Thursday: 5pm – midnight
−
Friday & Saturday: 5pm – 2am
−
Sunday: Closed
Pr
Co (vic ivat
py to e c
an r.g op
d rol y o
Sh et f
ar @ vic
in po to
g ly r
Pr te g
oh c ro
ib hn let
ite iq
d. ue.
ed
●
−
u)
●
The bars’ peak demand is from 7pm onwards on Friday and Saturday. Most other times of the week
are relatively quiet
●
Demand is assumed to be very low outside of these hours, and the client does not anticipate it would
break-even if it were to open at other times
●
Clients buy 1.25 drinks on average per hour, during both peak and non-peak periods
●
Average drink prices are $2.5
●
In terms of product positioning:
−
Alcopops and lagers are particularly popular among low income customers
−
Wines, ales, and spirits are popular among lower-middle-class customers
−
Cocktails and sparkling wines are seen as premium products
Guidance for interviewer
At some point in the case, the candidate should explore whether the market itself is holding the client
back.
Candidates exploring this section are likely to test two things: whether the market is big and fragmented
enough to provide further growth opportunity, and whether it is growing at a fast enough rate to support
the client’s aspirations.
When a candidate touches on the first topic, share with them the market size, and ask them to estimate
the client’s revenues for comparison. If a candidate doesn’t do so proactively, encourage them to take an
approach that separates out peak and non-peak opening periods.
The candidate should find that there’s plenty of room left to grow in this market. In addition, the market is
highly fragmented with no dominant players to contend with.
When a candidate asks about growth rates in the market, share Exhibits 1 and 2. Perceptive candidates
will notice not only the overall growth rate, but the fact that growth is strongest among the high- and lowend products in the market.
Possible answer
The market itself is a key consideration: perhaps the market is too small to support fast growth at the client’s
Pr
Co (vic ivat
py to e c
an r.g op
d rol y o
Sh et f
ar @ vic
in po to
g ly r
Pr te g
oh c ro
ib hn let
ite iq
d. ue.
ed
We know the market size for urban bars in Kenya is $600m.
u)
scale, or, more likely, perhaps the rate of growth itself has slowed down at a market level.
Let’s now estimate our client’s revenue, for comparison. We’ll do this at a “per bar, per week” level, before
scaling up to our total. We’ll separate out peak and non-peak periods, and assume an 80% and 40%
occupancy level for each period respectively. Our calculation will be as follows:
[Customer-hours during peak + Customer-hours during non-peak] x Drinks bought per hour x Drink price
Customer-hours during peak = [Peak hours x Capacity x Occupancy %]
= 448 [14 x 40 x 0.8]
Customer-hours during non-peak = [Non Peak hours x Capacity x Occupancy %]
= 512 [(4 x 7 + 2 x 2) x 40 x 0.4]
This suggests our client’s weekly revenue per bar is $3,000 [(448 + 512) x 1.25 x 2.5]. Scaling up to our
client’s total size, this reflects ~$1.5m in revenue [$3,000 x 52 x 10].
Clearly there is still plenty of room to grow: our client reflects only around 0.25% of the overall market, and is
competing in a space with many small competitors and no dominant players.
In terms of market growth, Exhibits 1 and 2 show high potential. Over the past five years, both alcohol
consumption and spending have grown by around 15%. While we do not know where this consumption is
occurring, and while it’s possible consumption in bars has gone down (e.g. relative to at home), this doesn’t
seem likely.
Some products are outperforming others – especially those at the premium end of the market. Some
products have also experienced quite material price movements, too: in general more premium products
have risen in price, while lower-end products (e.g. alcopops) have decreased in price. We should review our
client’s drinks proposition to see if it is playing in the product categories that offer highest potential.
Driver 3: Does the client have a winning proposition to succeed in this market?
Relevant information
If asked at this stage or later, please share the below:
●
Musanze recently conducted a review of its brand image, and found that its brand is viewed
positively by potential customers and as a desirable, sophisticated, and aspirational proposition
●
Musanze’s proposition is mid-market: its most popular drinks are lagers, ales, wines, and spirits.
While it has a broad assortment, it does not compete strongly in premium drinks (e.g. cocktails) or in
lower-priced lagers or Alcopops
Musanze’s price point reflects a mid-market positioning, and has remained steady since the chain’s
●
Pr
Co (vic ivat
py to e c
an r.g op
d rol y o
Sh et f
ar @ vic
in po to
g ly r
Pr te g
oh c ro
ib hn let
ite iq
d. ue.
ed
founding
u)
●
The other players in Exhibit 3 are a small but representative sample of competitors in the market
Guidance for interviewer
When a candidate begins to ask about market positioning or performance relative to competitors, share
Exhibit 3. This is a relatively atypical exhibit: a scatterplot with two series separated by time. Strong
candidates should conclude that the market is polarizing: higher-end and lower-end bars are growing
quickly, and the mid market is relatively flat.
If the candidate has previously viewed Exhibits 1 and 2, but has not yet commented on polarization, ask
if they can see any trends to validate what is occurring in Exhibit 3. Candidates should spot that the
more ‘premium’ and ‘low end’ drinks appear to be increasing and decreasing in price respectively, while
growing in volume.
If a candidate doesn’t proactively mention product assortment, ask them what else could drive the trends
in Exhibit 3 beyond different pricing strategies. Perceptive candidates will note that average price in this
market is a function of product selection as well as pricing strategy.
Before moving on, encourage the candidate to suggest where the firm should shift its proposition – and
what doing so would involve.
Possible answer
Musanze doesn’t appear to have a problem with its basic brand image, but its overall position in the market
seems unfavourable.
Exhibit 3 shows that the market is polarizing: bars with high and low average price points are generally
growing quickly, while bars in the middle of the market are underperforming. This may well reflect not only
price but also differences in product assortment: the successful bars may be specializing in more expensive
drink types (e.g. cocktails) or lower-end drink types (e.g. alcopops).
Musanze is in a poor position in this context: it has a sophisticated brand, and was indeed closer to the “high
end” of the market five years ago in relative terms. However, it is now clearly a mid-market player from an
assortment or pricing standpoint.
Musanze must consider shifting its proposition away from mid-market, if it is to be successful. I would
recommend a shift to a higher-end proposition, given that its target customers are young professionals, and
Pr
Co (vic ivat
py to e c
an r.g op
d rol y o
Sh et f
ar @ vic
in po to
g ly r
Pr te g
oh c ro
ib hn let
ite iq
d. ue.
ed
u)
its brand is already viewed with good attributes for this shift (e.g. sophisticated, aspirational).
If Musanze does this, its growth prospects appear quite positive. Bars in the premium end of the market are
growing 4% – 6%. If Musanze can achieve this too, it will return to its previous growth rate.
The key shift for Musanze will be enhancing its brand attributes to target this segment, and most importantly
changing its assortment: the firm should place a greater emphasis on cocktails, sparkling wines, and other
high-end drinks. The client should adjust its price positioning accordingly.
Puzzled by some case interview charts?
Practice on your own with the Exhibit Drills in the
Interview Prep Course
Driver 4: Does the client have the operational capability to implement its proposition effectively?
Relevant information
If asked at this stage or later, please share the below:
●
Musanze has good marketing capabilities, and is able to drive new customers to bars for relatively
low cost
●
Musanze’s hiring and training practices are strong. The firm can also forecast demand quite well,
and staff their bars accordingly
The client has good interior design partners, who help ensure the bar’s décor and ambience is
Pr
Co (vic ivat
py to e c
an r.g op
d rol y o
Sh et f
ar @ vic
in po to
g ly r
Pr te g
oh c ro
ib hn let
ite iq
d. ue.
ed
appealing
u)
●
Guidance for interviewer
In this section, encourage the candidate to think creatively about what could be limiting Musanze when it
comes to operational execution. If the candidate has by this stage already identified a priority to shift to
the premium end of the market, ask them to think about what would be required to execute on this
effectively.
Possible answer
There are several areas the client should review, in order to execute on its proposition effectively. These
include the following.
On attracting customers:
●
Marketing material. Musanze should ensure that it markets itself effectively to win and retain customers,
with an emphasis on its new premium offering in marketing materials
●
Location. Now that we’re targeting a more premium market, we should ensure new launches are in
appropriate locations for this clientele
On retaining customers:
●
Product selection. Knowing which product categories to emphasize is not enough on its own; Musanze
must ensure it selects appealing products within each category (e.g. specific types of cocktail to appeal
to customers). The client could experiment and amend its menu in response to feedback, in order to pick
winners
●
Venue design. Musanze must ensure the right ambience, décor, and music to match the customers it
now aims to attract
●
Staff. Musanze should take care to ensure its staff’s skills reflect its needs. For example, perhaps more
in-depth knowledge of drinks will appeal to customers on the more premium end of the market
Conclusion: What’s your overall recommendation to the client?
Possible answer
We were asked to find the cause behind slow growth for Musanze and to provide a view on whether it can
return to sufficient growth to satisfy its investors.
We’ve found that the slowdown in growth has been caused by a mismatch between market trends and
Musanze’s proposition. The drinks market in Kenya has polarized: low-end bars as well as premium bars are
u)
thriving. However, Musanze’s “mid market” proposition has lost its appeal.
Pr
Co (vic ivat
py to e c
an r.g op
d rol y o
Sh et f
ar @ vic
in po to
g ly r
Pr te g
oh c ro
ib hn let
ite iq
d. ue.
ed
I recommend that Musanze shift its proposition toward a more premium offering, and re-plan its drinks
assortment to focus on higher-end products, such as cocktails. If Musanze does this effectively, it is likely to
return to high levels of revenue growth per bar, which will encourage its investors to fund further expansion.
Muzance has plenty of room to grow – its maker share is only 25% and the market is still very fragmented.
As a next step, I recommend that Musanze conduct further research to identify the target product set and
price points for its re-positioning in the market.
u)
Pr
Co (vic ivat
py to e c
an r.g op
d rol y o
Sh et f
ar @ vic
in po to
g ly r
Pr te g
oh c ro
ib hn let
ite iq
d. ue.
ed
Exhibits
Exhibit 1: Kenyan annual alcohol consumption by drink (litres per capita)
u)
Pr
Co (vic ivat
py to e c
an r.g op
d rol y o
Sh et f
ar @ vic
in po to
g ly r
Pr te g
oh c ro
ib hn let
ite iq
d. ue.
ed
Exhibit 2: Kenyan annual alcohol spend by drink (ksh per capita)
Pr
Co (vic ivat
py to e c
an r.g op
d rol y o
Sh et f
ar @ vic
in po to
g ly r
Pr te g
oh c ro
ib hn let
ite iq
d. ue.
ed
u)
Exhibit 3: Bar growth and average price point (Musanze vs competitors)
* Growth rate reflects growth per average bar