Mountain Man Brewing Company : Bringing the Brand to Light

Harvard Business School Case

What is Mountain Man Brewing Company?

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History

1 A family-owned business which brewing bitter-tasting beer.

2 Brewed one beer–Mountain Man Lager, also known as West Virginia’s beer.

3 Top market position in premium segment in East Central America. Popular for over 50 years.

4 Popular among blue-collar workers.

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Situation in Mountain Man Chris Prangel has returned home to manage the marketing operations of Mountain Man Brewing Company (MMBC)Experiencing declining sales for the first time in its history.

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2% decline in revenue

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New Market of light beers was experiencing growth of 4% annually

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Rising popularity of Light beer among young people 4

Competition

MAJOR DOMESTIC PRODUCERS

Anheuser Busch, Miller Brewing Company

74%

2005 2005 2005 2005

SECOND-TIER DOMESTIC

PRODUCERS

Pabst Brewing Company, Genessee

12.5%

IMPORT BEER COMPANIES

Beck’s, Heineken, Molson

12%

CRAFT BEER INDUSTRY

Sam Adams , Harpoon

1.5%

Competitive Market Shares

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Who drinks Mountain Man Lager?

Title Goes here There are many variations of the me

30%

Authenticity, quality, and a unique West Virginia “toughness”

were core attributes of the brand.

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MMBC Customers value the beer’s authenticity.

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The beer is a representation of themselves-tough , rugged and blue collar.

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MMBC Customers are primarily low-income men over age 45.

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Just a try for the

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Beer Drinker Profiles

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What has made MMBC Successful?

Title Goes here There are many variations of the me

30%

Manufacture an exceptional beer with a great brand name , consistency of taste and quality

1

Mountain Man was as recognizable a “brand among working-class males” in the

East Central region

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Never lost sight of their core customer

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Never been seduced by the other guy’s market

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Just a Try fo ht

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Objectives Of Study

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2

3

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Benefits of a product line extension.

To Capture the light beer market segment.

Its effect on brand value and current product

Investment and returns on the new product

Just a tru fot he

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Should Mountain Man Brewing Company Introduce a Light Beer?

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27% of total beer consumption & spending twice as much per capita on alcoholic beverages than consumers over 35 years of age.

The light beer category accounted for 50.4% of volume sales in 2005, compared with 29.8% in 2001.

To grab a potential 0.25% market share annually from the regional light beer market.

The projected regional revenue growth is at 4% annually.

Yes, targeted to young consumers (21-27)

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Pros & Cons

Con

Pros

Expand consumer market by attracting younger drinkers

between ages 21-27

Diversify brand portfolio

Appeal to female drinkers

Leveraging the core brand by creating a new beer

Increases revenues, growth in light beer products at 4% annually

Increases cost of production and advertising

Create brand implications

Distracting focus away from current lager

Alienate the current customer base

Competing against deep pocketed competitors

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Revenue Variable cost of Mountain Lager = $66.93

Variable cost of Mountain Man Light = $71.62 ($66.93 + $4.69)

Price per barrel = $97 ($50,440,000/520,000)

2005 Sales revenue = $50,440,000 2005 Sales volume = 520,000 barrels

Net Profit Margin = $25.38 ($97-$71.62)

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Costs (2006-2007)

Initial Advertising campaign cost = $750,000 Annual Incremental SG&A cost (2006) = $900,000 Annual Incremental SG&A cost (2007) = $900,000

Total Fixed Cost = $2,550,000

Total Breakeven Volume = Fixed Costs / Net Profit Margin = $2,550,000/ $25.38

= 100,473 barrels

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Is Mountain Man Light Feasible for MMBC?

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Total Revenue (2006-2007)

Total Breakeven Revenue = Total Breakeven Volume * Price Per Barrel = $100,473 * $97

= $9,745,881

Estimated revenues for Mountain Man Light Beer 2006 Revenues = $4,727,295 2007 Revenues = $9,832,793

Total revenues at the end of 2007 = $14,560,088

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Revenue forecast for Mountain Man Light beer

Year 2005 2006 2007 2008 2009

Light beer consumption in barrels

18,744,303 19,494,075 20,273,838 21,084,792 21,928,184

Estimated growth rate

0.25% 0.5% 0.75% 1.0%

Estimated sales in barrels

48,735 101,369 158,136 219,282

Estimated revenue ( $97/barrel)

$4,727,295 $9,832,793 $15,339,192 $21,270,338

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Is the budget appropriate for launch? A 0.5% market share by the end of 2007 seems possible for Mountain Man Brewing Company given the reputation and current market position.

With an assumption as seen earlier , Mountain Man brewing company can still meet its budget constraints within two years.

The product is expected to cover all its investment costs and become profitable past 2007.

Launching Mountain Man Light can also increase awareness and uplift the brand value.

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Yes , Mountain Man Brewing Company should enter into the light beer market and create

“Mountain Man Light”

ULTIMATE DECISION

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Just a try

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DISCLAIMER

These slides were created by Ashwin C, NIT Trichy as part of an internship done under the guidance of Prof. Sameer Mathur, IIM

Lucknow.