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Aleksandra Algina, Strategic Brand Marketing

Mountain Man Brewing Company Writing Case Analysis


Position Statement:
Mountain Man Brewing Company (here and after referred to as MMBC) is
currently operating in a market segment with declining revenues and sales,
while other segments of the market are growing and MMBC is overlooking a
possibility to introduce a new product offering to serve the growing segment.
MMBC is at turn of undertaking strategic decision of whether to launch a
brand extension initiative and diversify into Mountain Man Light product line
in order to meet the rising market demand in other product categories.
However, in order to evaluate the feasibility of this marketing initiative we
have to address a variety of arguments involved in this decision making
process.
Argument 1. MMBC current financial performance is deteriorating:
The company is facing declining sales of 2% per year due to customers
preferences changes towards lighter brews. This negative trend can be
explained by several factors:

There is a 4% annual decrease of traditional beer market;


The company relies on a single revenue driver (Mountain Man Lager);
This single revenue driver does not make up for customer outflowinflow balance: the targeted audience of 45+ is aging and shrinking

due to natural deaths, increasing health concerns, etc.;


The company is overlooking market opportunity estimated at 50.4%

and represented by the youth;


70% of current revenues are generated off-site, allowing only for 30%

of revenues generated in restaurants and bars;


MMBC is also facing the pressure of competing with local, regional and
national brewers and their brand awareness.

Aleksandra Algina, Strategic Brand Marketing

Given these factors it will be hard for MMBC to sustain its profitability in the
short and long terms with a single revenue driver represented by Mountain
Man Lange.
Argument 2: There is an unmet market demand.
Historically, MMBCs average customer has been a blue collar, lower to
middle income (between $25,000 and $75,000 a year) male over 45 years of
age, who prefer traditionally brewed beer. This customer base typically
purchases

60%

of

their

beer

from

off-premise

locations,

such

as

supermarkets and liquor stores. Mountain Man Lager drinkers are among the
most loyal customers in the market with a brand loyalty rate of 53%.
However, the only non-super-premium domestic type of beer market that has
been increasing is the light beer market, which has seen a 4% CAGR of light
beer sales over the past 6 years due to the consumption by the youth. First
time drinker demographic (21-27 years) represents the most lucrative
market for the beers companies, as this group accounted for 27% total beer
consumption and has yet been growing, but what is more important from the
marketing perspective is that this group does not have an established brand
preference.
Argument 3: Brand extension would undermine the core of existing
brand equity:
MMBC has been renowned for delivering a premium craft beer and embraces
a status of an independent, family-owned brewery. Given its high brand
loyalty rate, there is a considerable risk associated with diversification into a
new brand category that would serve a completely different customer base.

Aleksandra Algina, Strategic Brand Marketing

The current associations with the brand that probably make up for such a
high customer loyalty are traditions-based, dark craft beer, appropriate to
drink after work with your fellows or in front of TV. But in order to serve the
youth the MMBCs marketing message would have to transform into cool,
easy-to-socialize-with, light and more consumable, trendy beer. These, as
can be seen, represent radically different sides of a brand perception that
can create an ambiguity in consumers mind and by doing so can even
alleviate the sales of existing product.

The brand image would have to

equally involve both the 45+ blue-collars and under 25 jeans-and-T-shirt


people.
Given these three major arguments we can start to evaluate the decision of
either MMBC should undertake a marketing initiative to launch Mountain Man
Light or stay true to its core product.
Argument 4: Breakeven Analysis.
In order to execute the BE analysis we have to calculate its components. We
are given that MMBCs revenues for 2005 totaled $50,440,000 and they sold
520,000 barrels that year, which bring us to the price of $97 per barrel of
Lager ($50,440,000/$520,000). Contribution margin from lager beer is
calculated at $97 - $66.93 = $30.07. Contribution margin from the light beer
can be calculated as $97 - $66.93 - $4.69 = $25.38. The fixed costs for the
introduction of Light would comprise $2,400,000 ($750,000 first 6-month
advertising) * 2 for annual projection) + $900,000 in annual, incremental SG
& A costs) for the 1 st year. Now given all the necessary components we can
calculate the breakeven point:
1. BEP in units: $2,400,000/$25.38 = 94,563 barrels

Aleksandra Algina, Strategic Brand Marketing

2. BEP in revenues: 94,563 * $97 = $9,172,576.83


Marketing Initiative Evaluation.
Launching Mountain Man Light represents a range of critical advantages,
such as:

Untapping the 50,4% of the market represented by the youth, thus


extending their customer base by attracting young and frequent
drinkers, which could make up for their existing product declining

sales;
Gaining presence in on-premise locations: extending their distribution
channels over off-premise venues, thus hypothetically increasing the

revenue;
Launching the light beer line does not require initial investment in PPE

due to existing excessive capacity;


Promising market demand trends: 4% CAGR.

However, this marketing opportunity has its disadvantages that are


necessary to look at:

Existing brand equity might be damaged;


There is a viable opportunity of cannibalization of the Lager by Light,
as the vendors would probably allocate the same shelf space for all the

products;
An attractive market is attractive for everyone, including major
established players who enjoy larger financial resources and stronger
brand awareness, so given this there can be an anticipation of
increased competition within large domestic beer brands and regional

breweries;
Increased inventory, SG&A, packaging costs;
Increased advertizing costs;
Constant market releases of light beer brands by large brands;

Aleksandra Algina, Strategic Brand Marketing

Absence of experience in product launch;


Absence of a successful precedent among small or medium companies
to introduce a new product within the beer industry.

Marketing program recommendations.


Having considered all the factors listed above, a recommendation to launch
the Light product line can be devised, as even given the disadvantages of it,
it still represents a lucrative opportunity for brand extension of Mountain
Man. Taken the analysis performed above we can devise a marketing
campaign recommendations.
In terms of target audience I would recommend focusing on younger drinkers
(21-27 year old), males and especially females, without an established brand
loyalty, who are willing to experiment with tastes and brands, and who are
frequent beer buyers in large quantities.
The marketing mix:

Product: in order to reach the youth audience MMBC have to readjust


its bottles packaging to meet the target segment expectations and to

communicate the appropriate brand associations;


Price: to stay competitive in the given segment MMBC have to keep
the prices for Light in a line with the competition so that the company

could enjoy enough of sales volume to breakeven;


Place: MMBC have to focus on the means of media communications
that are the most understandable and reachable for youth and
promoting easy lifestyle, such as printed ads in magazines targeted at
youth, billboard ads and TV ads that would address the Light brand
associations;

Aleksandra Algina, Strategic Brand Marketing

Promotion: MMBC have to focus on heavy coverage of Light


advertising campaign in traditional means of communication listed
above, and additionally can undertake a series of performance street
art advertising campaigns that would invoke an interest in Light among
the youth.