Goa institute of management

Ribander, Goa-403006

Mountain

Bringing the Brand to light

Man

Brewing

Company-

January 10 2010

This Document is a case analysis of the case of Mountain Man Brewing Company. The document is about dilemma of Mountain Man Management, option available and strategies that are suggested for resolving the dilemma.

Submitted byDr.Chetan Kabra (2009016)

Mountain Man Brewing Company- Bringing the Brand to light

T

urn around Management is not a very simple thing to do. It needs different Intellect,

powerful Strategies, Great insights, and above these Successful Implementation of all the decisions & strategy. American Beer Industry itself is a symbol of oligopoly where few brand with their different variants trying to capture new market as well as on the same time retaining the older ones. Mountain Man Brewing Company (MMBC) also known as “West Virginia’s Beer, a symbol of toughness, Authenticity, quality and uniqueness. First time ever in the history, Company is facing drop in sell which makes the management sweat a bit. The reason is the changing taste and preferences of the American customers. This Industry is going for Lager to light demand shift as strong beer consumers are vanishing with time whereas young generation segment is increasing and their choice is Light. The case is very interesting where company is finding itself in a junction from where they have to take a decision which is very critical for the survival in this rapid changing hypercompetitive marketing. Companies like Mountain Man Lager which has a strong association with blue collar, Middle to Lower Income men over age 35. These are the core drinker for MMBC which are very much loyal over the long period. They are loyal for such a strong drink due to many reasons like taste, toughness and availability. Now company is worried about Brand Equity if they will go for a growing beer sector which is Light. These dilemma points are to be covered under these brief headings: Market changes:  Changes in beer drinkers preferences  Declining sales of Mountain Man due to reduction in population above 35 by 4% every year in-spite of being a good brand  Economies of scale of large national brewers  Key consumer segment was younger drinkers (13%) who preferred light beer and accounted for 27% consumption. Chris considerations:  Ways to cater to declining sales revenue of Mountain Man.  Introducing a new product line to cater to younger generation.  Launching of Mountain Man light.  Under utilization of plant capacity
Marketing Management II Case Analysis Chetan Hariprasad Kabra 2009016 Section A 2

Mountain Man Brewing Company- Bringing the Brand to light
      Costs for launching new product, its sustainability w.r.t. competitors. Positioning of Mountain man light to avoid cannibalization with existing product. Creating brand awareness of Mountain Man Light. Analyze the competition. Advertising and promotion expenses of the new product. To analyze the target market share so as to break-even in two years.

Distinguishing factors of MMBC against competitors: 1) Family owned product 2) Packed in brown bottle according to the positioned image to match identity 3) Known for last 40 years for non dilution of brand 4) Stand on perception of quality to cater brand loyal blue collared customers 5) Independent identity Reasons for decline:  State had recently repealed arcane laws.  Aging demographic and shrinking premium segment of the beer market.  Light beer category - 50.4% of sales volume in 2005, - 29.8% of sales volume in 2001.  Younger beer drinkers perceived the beer as strong and a working man‘s beer .  Never made any changes in the product line. Break even and feasibility analysis:  No. of barrels = COGS/66.93 = 5,20,000  SP = Revenue/520000 = $97  Cost of light beer = 66.93 + 4.69 = $71.62  CM(%) of light beer = (97 – 71.62)/(97) = 26.16%  Break even sales = 25,50,000/.2616 = $ 97,47,707 in two years  Break even quantity = $ 97,47,707/97 = 100,492 in two years  Break even quantity to be attained in a year= 100492/2= 50246  Expected gain in market share in a year: 50246/19494075.12 = 0.257% The delimma: a) Whether to go or not for Light segment beer where growth is at a very fast pace? b) If yes then with the same name Mountain Man (Umbrella Branding)/New Name (Private labeling, New Product with new communication)? a) YES- I think change is the only thing that is permanent. Everything moves from manufacturer to Consumer end. So it’s important that only those things will be produced which are needed by the consumer. We are not saying to just close down the production of its current operations and go for a new light version. We are saying company needs a
Marketing Management II Case Analysis Chetan Hariprasad Kabra 2009016 Section A 3

Mountain Man Brewing Company- Bringing the Brand to light
gradual change from lager to Light over the period of time. Because its need of the hour. When we can see the four percent compound growth in this new segment and on the same time we can see the same decline in lager consumption. It is time to take the necessary steps. Because either you have to change with changing needs of customer or you will be thrown out of the market. More over capacity of their plant is under-utilized. A significant trend was growth in the ―light beer category which had been steadily gaining in market share and accounted for 50.4% of volume sales in 2005, compared with 29.8% in 2001. Assuming Chris is able to assume the break even market share. b) The Main Dilemma starts with the question if yes then with what name. There are two options, one is going by a Brand Extension Mountain Man Light or other is going by a name XYZ or Private Labeling. Brand extension by using Umbrella branding is generally a very good option for reaping the benefit from your brand equity provided it doesn’t create brand confusion and brand conflict. Now let’s try to know pros and con if we use Brand extension (umbrella Branding) for a successful Product. Advantages a. Identify logical new product possibilities. b. Capitalize on the paid-for equity in established brand names. c. Enable a company to enter new categories at significantly lower cost. d. Reduce the risk of failure given the already established awareness and trust. e. Create a positive synergistic effect with the efficiencies of umbrella branding and advertising. f. Reinforce the consumers’ perceptions of the parent brand name. g. Bring news to existing brands when there is otherwise nothing new to say about them. Risk - In reality, if a brand extension is so off target or lacks fit and or leverage, it likely will fail and do little damage. Most of these misfires die in limited test market anyway. There can be real damage to the parent brand, however, when too many unrelated brand extensions are launched. Names like Betty Crocker, General Electric and Kraft have been extended profusely. While they have not lost their awareness as household words, the strong associations they once had to specific products and related qualities (e.g. cake mix, light bulbs and cheese) may be diluted. This is especially dangerous when a brand is used synonymously with a specific product. Brands that are not legally generic but are used that way such as Kleenex, Scotch (Tape), and Band-Aid should not be extended broadly or they risk losing this valuable quality.

Marketing Management II Case Analysis Chetan Hariprasad Kabra 2009016

Section A 4

Mountain Man Brewing Company- Bringing the Brand to light
As we know Mountain man is a symbol of toughness which is dearer to the Blue collar workers if company comes with a name like mountain man light then it will have two consequences. a) Loyal customer will think something is changed now. It can create an image that company has not only diluted the beer but also diluted the image of toughness and strength. We have a very good example of coca cola. Beverage industry is almost same people get associated with the brand not the taste. So if company will go with the same name, there is a huge possibility that it will dilute the brand as well as give a setback to all MMBC brand loyal customers. b) Young Generation people know what mountain man is? But they don’t want to make it a part of their buying behavior due to two reasons. Firstly, they want their separate identity, separate drink, different from what their father and grandfather drink. They don’t want to get associated with a brand which is associated with blue collar, middle to lower income with age of 45 and above and secondly according to them it’s too tough to handle that beer which can create problem of swings while work to the fresh drinkers. So my suggestion is going with a different or slightly modified name or going with a private labeling can be a good option in this case when you don’t want to put your present in ultimate risk. Investment for future can only be done by stable revenue in present. So putting your core competency in risk is something which is not acceptable. You can improve or develop new competency with time but that is never suggested to kill your competency and ditch your brand loyal customers.

Marketing Management II Case Analysis Chetan Hariprasad Kabra 2009016

Section A 5

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