CASE STUDY : Mountain Man Brewing Company - Bringing the Brand To Light

An introduction on Mountain Man Beer Company What is its background?

• Founded by Guntar Prangel in 1925.• Family Owned Business• Legacy brew • Reputed as West Virginia’s Beer• Strong brand and Premium segment market leader

for almost 50 years • Popular among blue collar working men

Who are the players?

• Chris Prangel – Marketing Head, to inherit MMBC

• Oscar Prangel – President and Owner of MMBC

(to retire in another 5 years)

Current Situation

MMBC :• High Brand Equity in Premium

Segment• Mostly sold at Off Premise

locations• Decline in revenue by 2%

Overall :• Growth in light beer segment by

4%

2% decline in revenue

Rising popularity of light beer

among youth

So What to Do next?

Chris Prangel thought : How to boost revenue?

1. By attracting young drinkers via a light beer category.

2. Encourage loyal consumer base to consume more or expand in the same domain.

But the blue collar customers already accounted for a large percentage of sales, which meant near saturation in that segment.

So what are our options ?

1. Introduce light beer under brand name

2. Don’t introduce light beer, focus on core brand

3. Introduce light beer under different brand name

Let us look at some market and demographic statistics to support our arguments for and against these options.

Competitive Market Shares

Beer Drinker Profiles

Option 1 :Introduce light beer under brand name

Pros : New target segment Increase in revenue Lower advertisement cost than new

brand Leverage from existing brand name

Option 1 :Introduce light beer under brand name

Cons: Brand dilution Capture shelf space of Lager Loss of core customers Traditional advertising needed unlike

typical grassroots method.

Option 2:Don’t introduce light beer

Pros: No reduction in brand equity Core customers stay satisfied No additional costs

Cons: Invite imminent danger to firm in future Leave a high potential market segment

untapped

Option 3:Introduce Light Beer under different brand name

Pros: New target segment Increase in revenue No brand dilution

Cons: High advertising and operation cost Need to build new brand Many other light beer competitors in

market

What is Chris’s Estimate?

Assuming Option 1 as plan of action :

• 750,000 in intensive six month advertising

900,000 in annual SG&A that is, about 1.6 million in advertising cost Lesser than normal advertising costs for a new product.

• Variable cost per barrel for Mountain Man Lager is $66.93

For Mountain Man Light it is $71.62 So, contribution margin is lesser for Light Beer at same selling price.

• From the Mountain Man Income Statement, gross margin is $15,636,400

Lager SP = + Variable cost

(15,636,400/520,000)+66.93 = 97

So, the selling price of Mountain Man Light is $97

• Revenue per barrel = 97- 71.62 = $ 25.38

• Breakeven number of units =

= 65,012 barrels

Some future predictions Chris arrives at after considering revenue and net profit projections :

• Expected profit for firm would occur from 2007, when the new product sales would cross breakeven and cover investment costs.

Assuming Mountain Man Light captures 0.25% of market share every year.

• Growth rate in Mountain Man Light in market share annually might not be fulfilled

• Competition is heavy amidst multiple light beer brands and product extensions of big brands

• Young drinkers’ ‘anti big- business’ mentality and other factors might not create same loyalty as blue-collar workers.

What about the alternatives …..

Not introducing Light Beer might lead to crucial decline of the company in future years.

Introducing Light Beer under a separate brand name would lead to additional costs, and effort to create a new brand.

Conclusion :

Introduce Mountain Man Light Beer

DISCLAIMER

Created by Sara Jacob, NIT Trichy during a marketing internship under Prof.Sameer Mathur, IIM Lucknow