You are on page 1of 21

Mountain Man

Brewing
Company
BRINGING THE BRAND TO LIGHT

Group C
Pankaj
Rahul
Robin
Saisha
Shifali

MMBC - INTRODUCTION

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

SWOT
STRENGTH

WEAKNESS

Loyal base of customers

Strong brand image in region

Independent image

Significant support from middle aged


blue-collar men

Well-recognized and significantly


awarded in the field of lager

Loss of sales due to increase in


popularity of light beer

Strong presence in off-premise


locations like liquor stores

Lack of a diverse product line

Perceived as low-income, blue collar


beer

Lack of resources to compete

Weak presence in bars, pubs,


restaurants etc

SWOT
OPPORTUNITY

Entering the light beer market to


increase revenue

Target younger age group

Target female customers

Generate more loyal customer base

Growing market for light beer

THREATS

Brand dilution and change in brand


perception leading to loss of loyal
customers

Competition from market heavyweights


with more resources may drown out the
new product

Getting lost in the sea of competing


products

Cannibalization of core product

Market Scenario

Annual sales of Beer Industry in USA: $75 Billion

Since 2001, decline in per-capita consumption of


Beer by 2.3% year-on-year

18.3% of Beer sales in USA were from Eastern


Central Region

Excessive competition from Major Domestic


Producers such as Anheuser Busch, Adolf Coors
etc.

Major Issues

Decline in sales of Mountain Man brewing company by


2% in 2005

Mountain Man mainly catered to blue-collared, middleto-lower income men over age 45

MM Strong brand logo features coal miners-emotionally


connects to them

Speculation over success of Light version of the Beer

Scenario 1: Maintain Status Quo


Pros:

Retain loyal customer base in East Central Region

Cons:

Losing revenue continuously-challenged by national


players

Beer consumption increasing among younger


demographic. Left out of this market

Left out of on-premise market-bars and pubs

Loyal base is aging and shrinking. Revenue will drop. No


upturn in sight.

Financial Projection

Projected revenues upto 2010:

Assumption:

1. MM Lager will lose 2% revenue annually


2. Expenses besides COGS remain same:

SG&A: Rs. 9,583,600

Other Operating Expenses: Rs. 1,412,320

Other income: (Rs. 151,320)

Total other expenses: $ 10,844,600

Scenario 2: Launch with name


Mountain Man Light
Pros:

Reverse declining profits-tap into youth market,


who spend the most on beer

Women generally prefer beer in bars &


restaurants (on-premise); cater to this segment

Light beer market growing at CAGR of 4%

Cons

Seen as a beer for old, blue-collar men

Upwardly-mobile youth, women especially, stay


away from brand Mountain Man (like Old Spice
case)

Repositioning brand to appeal to young a challenge

Could damage brand equity with older, loyal


customer base

Cannibalisation of MM Lager sales

Net Revenue 2005 : $50,440,000

Barrels sold: 520,000

Hence, Selling Price per Barrel = $97

Price of Premium Beer = Price of Light beer

So, price of light beer per barrel: $ 97

Light beer market in ECR


Assumption: Light beer
market growing at 4%
annually, beer price
constant.
Mountain Man market
share started at 0.25% in
2006, grows by 0.25
percentage points
annually

Expenses for launching MM Light

Advertising campaign: $750,000 (first year expense)

SGA expenses: $900,000 annually

Variable cost per barrel of Light: $ (66.93+4.69)=71.62

Assumption: consider drop in Mountain Man Lager sales


due to Lights entry (cannibalisation) : 15%

Net income on MM Light=Revenue-(variable


cost+SGA)

Add advertising cost for first year

Comparison of profits
Year

2005

2006

2007

Status
quo

4,791,80
0

4,479,07
2

4,172,59 3,872,25 3,577,91 3,289,46


9
4
8
7

3,394,11
1

5,219,45 6,404,90 7,706,60 9,131,03 31,856,11


9
6
3
2
1

Introdu ce MM
Light

2008

2009

2010

Total

Over two years (2006 & 07), not more profitable than status
quo but highly profitable further down the line

Scenario 3: Launch it as
Light Beer
by Mountain Man

PROs

Damage to brand equity will be minimal-core


customers wont be put off

Youth-women will try it out; will gain market share


quicker

CONs

Advertising expense much more substantial

Assumptions for Calculations:

Cannibalisation minimal, hence ignored

Market share captured in debut year is 0.25% &

grows at 0.25% annually

Advertisement expense will be $5 m over one year.

Other expenses such as SGA of $ 900,000 annually,


variable cost of $71.62 per barrel will apply

Yea
r

Light
Revenue
($)

Light net
income

200
5

MM Strong
net income

Total
net
income
for the
year ($)

4,791,800

200
6

4,727,313

200
7

9,832,811

4,479,072
-4,663,101

-184,029
4,172,599

1,672,750

5,845,349

200
8

15,339,18
3,872,254
6
3,113,490
6,985,744
200 21,270,33
3,577,918
SGA 9& variable
costs
will be higher than8,243,291
assumed
8
4,665,373
Profit201
will 27,651,44
be even lower
3,289,467
0
0
6,334,985
9,624,452
30,514,80
Total

OPTION 4 : Launching two brands of light beer


STRATEGY

Launch a new light beer line of product with different


naming and packaging

In the east central region (including West Virginia) launch it


with a with a new name

In the other parts of the country launch it as Mountain Man


Light

PROs

Not diluting the existing segment of people and their


perceptions towards Mountain Man Lager

Capitalize on the new and fast growing light beer market


segment

No additional cost of set up

Reduced cannibalization

Outside the east central region , capitalize on brand


awareness

Reduced spending's on advertisement

Cons

Cannibalization although reduced would still exist

Increased advertisement expenditure within the


east central region