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Sierra Nevada Brewing

Co. :
End of Incentives

Harvard Business School Case Mountain Man Brewing Company : Bringing the Brand to Light .

What is Mountain Man Beer Company (MMBC) ? Who is Chris Prangel ? .

MMBC Legacy brew with a strong brand Premium segment market leader in West Virginia for almost 50 years Known as West Virginia’s beer Family owned business Popular among blue collar working men Chris Prangel Recent MBA graduate stood to inherit MMBC in 5 years .

Present situation High brand equity in premium segment Mostly sold at off-premise location 2% decline in revenue 4% growth in light beer segment due to youth preference .

and Adolf Coors possessing  74% market share of the overall brewing market These companies have 84% market share in the light beer market They rely heavily on broadcasting market as well product diversification to create barriers of entry for other brands . Miller brewing Co.Competition Anheuser Bush.

Competitive market shares .

Market research study findings Authenticity. quality. and a unique West Virginia “toughness” were core attributes of the brand Awareness among young people but considered as strong and working man’s beer Grass roots marketing more effective Blue collar customers were very loyal (brand loyalty was 53%)and accounted for a large sales percentage .

Beer drinker profiles .

Consumption by type of Beer .

Objectives of study How to capture light beer market segment Its effect on brand value and current product Investment and returns on the new product .

What to do? .

Option 1 Introduce light beer under Mountain Man brand name Pros Cons • Increase in revenue • Low advertisement costs • Cater untapped market • Product cannibalization • Brand erosion • Loss of core customers .

Option 2 Introduce light beer under different brand name Pros • Increase in revenue • Cater untapped market • No brand dilution Cons • High advertising costs • Difficult to build new brand name • Light beer already has a strong presence .

Chris’ Estimate .

69 = $71.93 + $4.62 Market price per barrel of new light beer : $97 .93 Variable cost per barrel of new light beer : $66.Costs SG&A costs : $900.000 annually Advertising : $750.000 for intensive six month advertising Variable cost per barrel of Mountain Man Lager : $66.

65 million Break even volume = 1.000/25.$ 71.62 = $25.012 barrels .38 Total investment : $1.38 = 65.650.Revenue Market price per barrel of new light beer : $97 Revenue per barrel : $97 .

369 2008 21084791 158.135 2009 21928183 219.735 2007 20273838 101.25% market share every year Year Projected Light Beer Sales (in barrels) Expected New Product Sales (in barrels) 2005 18744303 - 2006 19494075 48.281 2010 22805310 285.066 .Capture 0.

New product can get lost in the sea of new product introductions by big companies The projections may be overly optimistic Advertising cannot be as aggressive as big companies .

Analysis 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 .

Conclusion Chris Prangel should go ahead and launch Mountain Man Light .

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IIMInternship. IIM Lucknow ( www. Sameer Mathur.Disclaimer These slides were created by Sharang Agarwal.com) . IIT Kharagpur as part of an internship done under the guidance of Prof.