Case Study: “PureBrew’s Next Step”
PureBrew Ltd is a medium-sized, family-run beverage company based in Wellington, New Zealand. Established in 2005, the firm produces premium organic teas and cold-brew coffees sold across New Zealand and Australia. With annual revenues of NZD 25 million and 120 employees, PureBrew has built a strong brand around sustainability and ethical sourcing. However, growth in the organic beverage market has plateaued as new competitors enter the market, squeezing profit margins.
CEO and founder Emma Chard believes the company must diversify to sustain long-term growth. After extensive market research, she has proposed launching a new line of plant-based energy drinks aimed at health-conscious young professionals. This would involve significant R&D, marketing, and production costs.
The firm’s CFO, James Porter, supports funding the expansion through a bank loan. He argues that borrowing NZD 5 million would preserve control and allow shareholders to retain future profits. However, the company already has outstanding loans, and rising interest rates make repayments risky.
In contrast, COO, Ava Chen, favors raising finance by selling a 20% equity stake to a venture capital firm that specializes in sustainable consumer brands. While this would reduce financial risk and bring valuable marketing expertise, it could dilute ownership and influence over strategic decisions—something Emma is wary of.
The board meeting next week will determine PureBrew’s future direction. Emma must decide which funding option aligns best with the company’s growth objectives and ethical values.
10-Mark IB Business Management Question
Recommend which source of finance PureBrew Ltd should use to fund its diversification strategy. Justify your answer using appropriate business management tools and concepts.