Mountain Man Brewing Company_complied

Group CPankajRahulRobin

SaishaShifali

Mountain Man Brewing CompanyBRINGING THE BRAND TO LIGHT

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 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

Strong presence in off-premise locations like liquor stores

WEAKNESS Loss of sales due to increase in

popularity of light beer

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

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.

Market Scenario

Major Issues

Decline in sales of Mountain Man brewing company by 2% in 2005

Mountain Man mainly catered to blue-collared, middle-to-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

Pro’s: Retain loyal customer base in East Central Region

Con’s: 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.

Scenario 1: Maintain Status Quo

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

Pro’s: 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%

Scenario 2: Launch with name Mountain Man Light

Con’s 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

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

Light beer market in ECR

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 Light’s entry (cannibalisation) : 15%

Net income on MM Light=Revenue-(variable cost+SGA)

Add advertising cost for first year

Expenses for launching MM Light

Comparison of profits

Year 2005 2006 2007 2008 2009 2010 Total

Status quo

4,791,800

4,479,072

4,172,599

3,872,254

3,577,918

3,289,467

Introduce MM Light

- 3,394,111

5,219,459

6,404,906

7,706,603

9,131,032

31,856,111

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 won’t 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

Year

Light Revenue ($)

Light net income

MM Strong net income

Total net income for the year ($)

2005

4,791,800

2006

4,727,313-4,663,101

4,479,072-184,029

2007

9,832,8111,672,750

4,172,5995,845,349

2008

15,339,186 3,113,490

3,872,2546,985,744

2009

21,270,338 4,665,373

3,577,9188,243,291

2010

27,651,440 6,334,985

3,289,4679,624,452

Total 30,514,807

SGA & variable costs will be higher than assumed . Profit will be even lower

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”

PRO’s 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