Mountain Man Brewing Company : Bringing Brand To Light

Made by : Deepika Shokeen-20/007 Megha Sharma-20/025 Saloni Sharma-20/080 Saurabh Kumar-20/084

Mountain Man Brewing Company

Founded by Guntar Prangel in 1925 Reformulation of old family brew recipe using bavarian hops and unusual strains of barley By 2005 revenues moved just over $50 million selling over 520000 barrels of Mountain Man Lager Held a top market position in west virginia for more than 50 years Priced similarly to premium domestic brands such as Miller and Budweiser and below speciality brands

Company Background : Continued

Several Factors in selecting a beer are: taste, price, the occasion celebrated, perceived quality, brand image, tradition and local authenticity Unaided response rate of 67% among adults Awarded as Best Beer in West Virginia in 2005, also was selected as American Championship Lager Distinctive bitter flavor and slightly higher alcohol content 60% of the Blue collar males drank at off-premise locations

Case Summary
This case talks about the challenges Chris Prangel, inheritor of family business at Mountain Man Brewing Company face on planning to launch a new product Mountain Man Light under the umbrella brand name as an extension to the core product Mountain Man Lager

Mountain Mans Competition

The competition in the U.S Beer Market fell into four CategoriesMajor Domestic producers: Handful, competed on the basis of economies of scale. For example Anheuser Busch, Miller and Adolf Coors Company Second Tier Domestic Producers: Medium sized, operated at all national, regional levels. Followed the same marketing and product strategy as major domestic producers, but lacked by financial and marketing resources

Continued..
Import Beer Companies: Satisfied the needs of more flavorful and bitter tasting beers. Operated at distinct disadvantage due to high shipping cost, weaker distribution, inability to control freshness. For example Heniken, Corona, etc. The Craft Beer Industry:Divided into four markets1. Brewpubs- restaurants/pubs with more than 25% of the beer products brewed and consumed on site 2. Microbreweries- Operated in limited distribution network 3. Contract Breweries- Breweries manufacturing for client firms 4. Regional Craft Brewers

SWOT ANALYSIS
STRENGHTS Market leader and established brand name Strong brand equity WEAKNESS New brand extension will spread already thin resources of the company MMBC doesnt have the marketing budget to compete in the light beer market

OPPORTUNITIES Younger demographic and increase lifetime customer value Light beer appealed to women

THREAT Risk of canalization of core brand Alienation of core consumer through new brand that might notbe in line with their aspirations ofMMBC

STRENGTHS
Market leader and established brand name Held the top market Position among lagers in West Virginia for over 50 years. Won American Champion Lager Strong Brand Equity

Distinctive bitter flavour and slight higher than average alcohol content uniquely contributed to companys brand equity

WEAKNESS
New Brand extension will spread already thin resources of the company TV advertising estimated $10-$20 million . Likely to suffer Financial Crisis. Company does not have the budget to compete in the light beer advertising market

OPPORTUNITIES
To reach younger demographic

Increase lifetime customer value

Light beer category is only category showing consistent growth as over the six years , light beer sales in the USA had been growing at a annual rate of 4%

THREATS
Risk of canalization of core brand

Fears that mountain man would not get incremental shelf space by the retailers
Alienation of core customer through new brand that might not be in line with their aspirations of MMBC Alienating core customer base

MARKETING MIX
PRODUCT
Brand name Mountain Man Light Packaged in a green bottle to differentiate from its lager The green bottle also indicated a lower alcohol content

PRICE
Need further market research to determine the optimal pricing

PROMOTION Grass-roots marketing by word of mouth

PLACE

On-premise locations: restaurants and bars

Domestic Light Beer

Domestic Premium Beer 68% 32% 8%

Mountain Man largerGender 81% 19% 2%

Gender
Male Female Age 21-24 9% 58% 42%

25-34
35-44 45-54 55-64 65+

20%
24% 22% 14% 12% 14% 25% 21% 16%

20%
23% 23% 14% 12% 16% 24% 21% 15%

15%
19% 32% 19% 13% 20% 27% 25% 15%

Household Income
Under $25k $425K-$49.9K $50k-$74.9K $75k-99.9K

$100K+

24%

23%

13%

THE SITUATIONS AT MOUNTAIN MAIN IN 2005

U.S was the largest Beer consuming market in the world. Since 2001, U.S per capita beer consumption had declined by 2.3%. Due to the competition from Wine and Spirit based drinks. The state had recently repealed arcane laws that had sharply limited the promotion of beer and retail stores began selling beer at deep discounts and also started dropping small brands.

 MMBCs survival was large part due to the fact that it served a large enough market with a very strong brand. They were facing 2% decline in sales but still they were making profits. Key consumer segment was younger drinkers (21-27years of age) who preferred light beer and accounted for more than 27% of total beer consumption. They were called first time drinker demographic that they had not established any loyalty with the brand

 Consumer preference changes and shifts in tastes towards light beer. In exhibit 5, light beer category was gaining the large market share and accounted for 50.4% of volume sales in 2005 Mountain beer was the only brand which was having only one product line and other brands were having product extension.

FINDINGS
They engaged a market research to evaluate its single brand product strategy and brand extension opportunities: Mountain Man Lager was known as West Virginias Beer. Young beer drinkers were well aware of the brand, yet percieved the beer as strong beer.

 Mountain man had always relied on GRASS ROOTS MARKTING to spread its beer quality and word of mouth. In contrast, National beer brands used lifestyle advertisements. A small percentage of MMBCS Blue Collar Customers accounted for a large percentage of sales and most loyal customers for the company.

Should Mountain Man Brewing Company Introduce Mountain Man Light?

 Pros:
o Brand image of Mountain Man will help for the sales of light beer. o Easy to convince retailers to stock and promote. o Light could re-invigorate lager & would not harm Lager image because it target segment is completely different. o Light beer sales in the U.S. had been growing data compounded annual rate of 4%, while traditional premium beer sales had declined annually same percentage. o Light beer category accounted for 50.4% of volume sales in 2005 compared with 29.8% in 2001. o It doesnt require major capital expenditures and equipments for possible packaging and labelling efficiency.

Cons:
o Could dilute lager equity. o Potential for cannibalizations of lager brand. o Exceeds the boundary of brand meaning of lager is fullflavoured, authentic, working class, while light is trendy, light, young, modern. o The fact of lager beer is dark, bitter and a higher alcohol content with a product label shows a crew of coal miners is not a fit with the light beer demographic. o Competition from manufactures. existing National Light Beer

o Distributors could become more discriminating about which product would they carry.

CHALLENGES
o Product preferences changing in the market o Light beer showing consistent growth o MMBC can gain share in on premise locations, restaurants and bars o Appealing to young adults and women. o Popularity could change demand in mountain man lager o No requirement for new purchase of plant and machinery for mountain man light due to existing excess capacity in mountain main facility

o Launching mountain man light would alienate the core customer base and ultimately erode and dilute mountain man brand equity. o It will add to cost structure- inventory, packaging, SG&A. o Expensive to launch it on a big scale as it would cost more than a $10 $20 million o To launch it even regionally it would require a $7,50,000 for a six month campaign which would further cost $9,00,000 in annual. Pg 6 o Mountain Man light would cost $4.69 more per barrel as in comparison to mountain man lager because of the contribution margin

o Challenge to convince the senior management team that mountain man light would generate enough funds in2 years

o Mountain man light will never achieve the volume of sales of larger light beer like miller lite or coors light
o Mountain man light would not be able to compete with other big brands but will only be able to replace or able to draw attention from mountain man lager which is not doing well.

Break even and feasibility analysis

o No. of barrels = COGS/66.93 = 5,20,000
o SP = Revenue/520000 = $97 o Cost of light beer = 66.93 + 4.69 = $71.62 o CM(%) of light beer = (97 -71.62)/(97) = 26.16%

o Break even sales = 25,50,000/.2616 = $ 97,47,707 in two years

o Break even quantity = $ 97,47,707/97 = 100,492 in two years

o Break even quantity to be attained in a year= 100492/2= 50246 o Expected gain in market share in a year: 50246/19494075.12 = 0.257%

Chriss Decision(2 options)

First Decision was to launch Mountain Man Light Financial projections showed regional revenue growth of the beer at 4% and steadily growing at 0.25% market share Other decision tying a knot in chriss stomach is to continue focusing on the core product Mountain Man Lager