Mountain Man Beer Company

Group 7 Amitajeet Chintan Priyak Rudranil Saurav

MMBC
Strong Brand Top market position in premium segment in East Central America. Popular for over 50 years Popular among Blue collared working men Family owned independent image

Issues
2% decline in revenue Rising popularity of Light beer among young people

Projecting Revenues
Assuming 2% drop in revenues every year

Year 2006 2007 2008 2009

Revenue $49,431,200 $48,442,576 $47,473,724 $46,524,250

Projecting Revenues
2007 $48,442,576 $33,425,377 $2,991,320 2008 $47,473,724 $32,756,870 $2,931,502 2009 $46,524,250 $32,101,732 $2,872,872

Net Revenue COGS Income after tax

Option 1: Introduce Light beer by Mountain Man brand name

Advantages
Increase in revenue Low advertising Costs Cater to a market growing @ 4% CAGR

Disadvantages
Product cannibalization Brand erosion May not be perceived well

Option 2: Introduce Light beer by some other name

Advantages
Expected increase in revenues Cater to a market growing @ 4% CAGR No brand dilution, no cannibalization

Disadvantages
Additional advertising costs Cannot leverage strong brand name

Feasibility Analysis of Option 2

RnD cost $18,000 Advertising Cost $75,000 SG&A $900,000 Annually Variable Cost @ $71.62 ($66.93 + $4.69)

Feasibility Analysis (cont.)

Net Revenue in 2005 : $50,440,000 Barrels sold: 520,000 Therefore, Selling Price per Barrel = $97 Price of Premium Beer = Price of Light beer There price of light beer per barrel: $ 97/barrel

Feasibility Analysis (cont.)

Chris estimate: To capture 0.25% market share every year. Light beer market share in 2005 = 18,744,303 barrels At 4% CAGR, in 2007 market size = 20,273,838 Selling 0.25% of this market @ $97/barrel will generate a revenue of $4,916,405

Feasibility Analysis (cont.)

Continuing with 4% CAGR and MMBC increasing its market share at 0.25%/year, we get the projected revenue from light beer:
Year 2005 2006 2007 Revenue from Light Beer $4,916,405 $10,226,123 $15,952,753

Projecting new revenues

2007 $53,358,952 $37,063,518 $2,669,810 2008 $57,699,848 $40,324,202 $3,908,543 2009 $62,477,003 $43,906,770 $4,724,656

Net Revenue COGS Income after tax

Comparing YoY
Year Revenue before Revenue after 2006 2007 2008 2009 $3,040,677 $2,991,320 $2,931,502 $2,872,872 $3,040,677 $2,669,810 $3,908,543 $4,724,656

5000000 4500000 4000000 3500000 3000000 2500000 2000000 1500000 1000000 500000 0 2006 2007 2008 2009 Year Revenue before Revenue after

Conclusion
Significant growth in revenue by introducing light beer with different name Caters to a market growing @ 4% CAGR Caters to a market that does not have a brand loyalty May develop brand loyalty over the years with a segment of this target segment

Food for thought, Option 3,4 etc

What if, With the same packing, Mountain Man introduces a light beer named
Mountain Boy Plateau Man

To save on its advertising expenses by Leveraging its brand equity

Thank You