Transcript
Chris Prangel
Legacy brew with a strong brandPremium segment market leader in West Virginia for almost 50 yearsKnown as West Virginia’s beer
Family owned business
Popular among blue collar working men
MMBC
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
Anheuser Bush, Miller
brewing Co. 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
Competition
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
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
Option 1
Introduce light beer under Mountain Man brand
name
Pros
• Increase in revenue• Low advertisement costs• Cater untapped market
Cons
• 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
CostsSG&A costs : $900,000 annually
Advertising : $750,000 for intensive six month advertising
Variable cost per barrel of Mountain Man Lager : $66.93
Variable cost per barrel of new light beer : $66.93 + $4.69 = $71.62
Market price per barrel of new light beer : $97
Revenue
Market price per barrel of new light beer : $97
Revenue per barrel : $97 - $ 71.62 = $25.38
Total investment : $1.65 million
Break even volume = 1,650,000/25.38 = 65,012 barrels
Capture 0.25% market share every year
YearProjected Light Beer
Sales(in barrels)
Expected New Product Sales
(in barrels)2005 18744303 -
2006 19494075 48,735
2007 20273838 101,369
2008 21084791 158,135
2009 21928183 219,281
2010 22805310 285,066
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
These slides were created by Sharang Agarwal, IIT Kharagpur as part of an internship done under the guidance of Prof. Sameer Mathur, IIM Lucknow (www.IIMInternship.com)
Disclaimer
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