Mountain Man Brewing

Company: Brining the Brand to

Light
Group Case Analysis
20 Marks
 Yes, the company should introduce Mountain Man Light in the market
• This move would expand the consumer market and the Mountain Man brand can be leveraged to enter into the light beer market which has been growing at a significant
rate.
• The present players of the light beer market wouldn’t have much competitive edge over Mountain Man as the consumers do not have brand loyalty or preferences as such.
• The problem of cannibalization of Mountain Man Lager by Mountain Man Light can be minimized by distributing Mountain Man Light in on premise locations like bars and
restaurants.
• The ad-campaigns can be targeted based on the idea of “Lager for the man and Light for the youth” as Light beer was preferred mainly by women and young adults.
• It will help to diversify its brand portfolio and the new product meets the demand of young drinkers and females.

Analysis
Light beer consumption in East Central Region in 2005: 18,744,303; Accounting for a 4% increase year-on-year, and an increase of 0.25% of Mountain Man’s market share in
light beer market year-on-year.
Year 2005 2006 2007 2008 2009
Pricing Light beer market 18,744,303 19,494,074 20,273,840 21,084,793 21,928,183
Mountain Man 0.25% 0.5% 0.75% 1%
market share
In 2005,
Estimated sales 48,736 101,370 158,140 219,280
Revenue of Mountain Man Lager sales – 50,440,000
Estimated 4,727,392 9,832,890 15,339,192 21,270,354
COGS – 34,803,600
revenues(97 per
Variable cost per unit – 66.93
unit)
Hence units sold – 520,000
Total revenues 4,727,392 14,560,282 29,899,474 51,169,828
Price of a Mountain Man Lager – (50,440,000/520,000) = $97
To make the price competitive, it is advisable to keep the price of This shows that Mountain Man Light will start making profits from 2008 onwards
Mountain Man Light at $97 despite higher variable costs. even after accounting for a 20% cannibalization of Mountain Man Lager
In 2007
Variable cost of Light – 71.62*(48,736+101,370) = 10,750,592 Promotion
Fixed costs
Ad campaign – 750,000
SG&A – 900,000 * 2 = 1,800,000 • Launch light beer under the same brand name to save on excess advertising costs, utilise the brand awareness
Cannibalization of 20% of Mountain Man Lager margins amongst the young people(currently consider MM as strong and working man's beer)
2006 – 15,636,400* 0.98 * 0.2 = 3,064,735 [Assuming 2% drop in • It relies on brand loyalty and word of mouth grassroots advertising the new product is preferred by young
sales of Lager annually and 20% cannibalisation) drinkers and females, WOM will help in this situation.
2007 – 15,636,400*0.98*0.98*0.2 = 3,003,440 • The brand-loyal customers (Blue collar) still have the option of strong beer as they encounter brand in a
Hence, total costs – 19,368,767 (Maximum cannibalization) consistent way
Total Revenue by 2007 (from Light) - 19,287,674 • Promote the beer as authentic, smooth and as the same quality of the Mountain Man