Bringing the brand to light

What was the Mountain Man

Brewing Company?

Who were the key

characters?

Key Players:• CHRIS PRANGEL - Recent

MBA graduate soon to inherit MMBC.

• OSCAR PRANGEL - owner and president of MMBC

ABOUT THE COMPANY•Founded in 1925 by Gunther Prangel.

• Core customers - blue collared men over age 45.

•Known as “WEST VIRGINIA’S BEER”

•Had a strong brand image with various accolades to its name.

•Generated revenue of over $50 million and sold 520,000 barrel^2 of Mountain Man Lager in 2005.

•Price $2.25 for 12 ounce beer in bars and $4.99 for a pack at stores.

•Family owned business.

•Targeted Blue collared workers in the premium segment over the age of 45.

•Sold at off premise locations.

•Followed grassroots marketing to create brand awareness.

•Core attributes of brand- Authenticity ,quality and unique West Virginia toughness.

•Distinct bitter flavor of beer and greater alcohol content.

•Effective bottling and packaging.

Why is it a success?

Situation Analysis•Revenues were down by 2% relative to 2004.

•Arcane laws were repealed ,leading to decreasing shelf space

•Competition from larger national brewery brands giving out deep discounts.

•Change in beer drinker preferences.

•Growth in “ light beer category”, almost doubling volume sales to 50% in 2005 as compared to 29.8 % in 2001.

•Change in consumer dynamics - Younger people were occupying greater segment of beer drinkers.

Main CompetitorsMain Competitors include Anheuser Busch, Miller Late who have a strong brand portfolio and great financial resources to fund their marketing and advertising campaigns .

Objectives of the caseHow to secure company’s future with changing customer preferences?

How to market the newer product?

STRENGTHS

Brand awareness(West Virginia’s beer)Loyal customers

Authenticity, quality and uniqueness

Strong presence at off premise locations.

WEAKNESS Single revenue product

Shrinking target customers

Lack of financial resources.

Weak presence at on premise locations.

OPPORTUNITIES

Brand extension in light beer market

Tap potential younger age customers

Stronger brand image Expanding distribution

and sales channels

THREATSAgeing target marketIncrease federal taxes

Deep pocketed competitors

Changing customer preferences and

dynamicsDecline in revenue

OPTIONS FOR CHRIS PRANGEL?

Mountain Man Light

Mountain Man

Lager

Pros• Expand market

share• Diversify brand

portfolio• Enhance core brand value and

image• Deliver greater customer value • Attract health

conscious customers and

women

Cons• Alienate core

customers• Brand dilution• Cannibalize sales

of MM lager.• Target market shared by larger

breweries• Increased

production cost

Pros• Maintain their loyal customer

base• Stick to their

brand image• Maintain top

position in premium beer

segment•No cannibalization

risk

Cons• Might force

company out of business.• Ageing

demographic in shrinking

premium beer segment

• Cannot compete against deep

pocketed competitors

MM LIGHT MM LAGER

Light Beer Sales Evaluation

Year 2005 2006 2007 2008 2009Light Beer

Consumption

18,744,303 19,494,075 20,273,838 21,084,792 21,928,184

CAGR 4% 4% 4% 4%

Estimated growth(0.25

)

0.25 0.5 0.75 1.0

Estimated sales in barrels

48,735 101,369 158,136 219,282

Estimated revenue($9

7/barrel)

$4,727,295 $9,832,793 $15,339,192 $21,270,338

Mountain Man LightBreakeven analysis for Mountain Light

beer(2006-2007)Variable Cost Calculations• Variable cost of MM lager = $66.93• Variable cost of MM light = $ 66.93+ $ 4.69 =

$71.62• Price /barrel = $ 97• Net profit margin = $ 25.38 ($ 97- 71.62)

Mountain Man LightFixed cost calculations(without cannibalization)Initial advertising campaign cost = $750,000Incremental SG&A cost (2006-07) = $900,000*2= $18,00,000Total fixed cost = $2,550,000

Fixed cost calculations(with 20% cannibalization+

2% loss)Cost from cannibalization( 22% for 2 years) =$437,226 +

$341,036 = $778,262TFC(with cannibalization) = $3,328,262

Mountain Man lightTo breakeven(without cannibalization)• Total Breakeven volume = Fixed costs/Net profit margin

=$2550000/$25.38 = 100,473 barrels• Total breakeven revenue = Total Breakeven volume *

price/barrel = $ 100,473 *$97 = $9,74,581 To breakeven (with cannibalization)• Total breakeven volume = Fixed costs/ net profit margin = $ 3328262/$25.38 = 131,137 barrels• Total Breakeven revenue = Total breakeven volume

*price/barrel = $131,137*$97 = $12, 720,308

Mountain Man LightMountain Man Light beer will break even in bothscenarios by end of 2007• Revenue needed to breakeven (with cannibalization) = $9,745,881• Revenue needed to breakeven(without cannibalization)

= $12,720,308Estimated revenues for Mountain Man Light beer• For 2006 = $ 4,727,295• For 2007 = $9,832,793• Total revenues at the end of 2007 = $ 14,560,088

Launch Light beer under a new brand name

PROS•Attract potential customers•Greater revenue•No brand dilution•Lesser core product erosion

CONS•Increased advertisement expenditure•Difficult to market newer brands •New strategy for packaging, labeling, divisions etc.•Compete with already established brands in light beer category

Launch Light beer under the same brand name

PROS•Low advertisement and production cost•Greater revenue•Greater brand recognition by consumers

CONS•Brand dilution•Core product cannibalization•Loss of core customers

Marketing StrategyThe appropriate 4P mix to be followed.

PRODUCT•Attractive product design• Separate labeling and demarcation of lager and light bottles.•Trendy name and slogan for both products.•Maintain same quality as Lager PRICE

•Use appropriate pricing strategy for 12 ounce beer and 6 packs considering market price trends•Same price at all on premise locations.•Offer retailers incentives by giving supplier discounts to increase shelf space.

PLACE •Continue sales of MM lager at off premise locations.•Sell MM Light through on premise locations to reach younger demographic and women

Promotions•Continue grassroots marketing for Lager.•Extensive advertising campaigns both online and offline.•Employ youth icons to endorse Light.•Use communication channels like concerts as well as radio/tv.•Use offers and promotions to increase customer product trial.

Conclusion• A 0.5% capture of market share is

possible by 2007 with the given market situation considering cannibalization of shares.

• Therefore, Chris should go ahead with his decision to launch Mountain Man Light under the same brand name.

• He should devise an effective marketing strategy using the 4P mix to enhance brand image and provide value to newer as well as core customers.

DISCLAIMER

Created by Shruti Sinha, DTU DELHI, during a marketing internship by Prof. Sameer Mathur, IIM Lucknow.