Mountain Man Brewing Company (MMBC)
1. What is Mountain Man Brewing Company’s positioning relative to its competitors? Mountain Man Brewing Company (MMBC) is a 2nd tier domestic beer manufacturer based out of West Virginia. MMBC is positioned as a leader among local brewers in the East Central region, being one of the four regional breweries still operational in West Virginia. MMBC brews only one type of beer – the Mountain Man Lager, a dark bitter tasting beer. Target market for the product is middle aged men from the blue collared working class. Branding includes an image of coal miners on the bottle suggesting a strong taste and reinforcing target market segments to a niche.
The beer sells mainly in off-premise locations. There is no variant of Mountain Man Lager available. Although MMBC is a local brewer it really competes against national brands such as Anheuser Busch and Coors. Priced at the same level as national brands, MMBC’s product is a legacy brew and enjoys high brand awareness in the regions it sells the beer. The brand also enjoys high brand loyalty in its target market segment against national brands. MMBC has been able to achieve this brand equity without significant spending on traditional advertising but rather pursuing on grass-roots advertising.
The company however is losing market share and revenues in line with the lager market. Since MMBC does not manufacture a light variant of its lager product the company has not been able to maintain its profits over the past few years. All its competitors are invested in the light beer segment given this scenario. MMBC has also seen shifting market segments due to an aging initial target market segment. The company is also at the risk of losing distributor loyalty thanks to increasing pressure on distributor margins.
Summing it up, MMBC is losing market share due to changes in market dynamics while still seeing significant brand loyalty and awareness in its home turf. 2. What factors have contributed to making MMBC a strong brand? Factors contributing to MMBC’s strong brand image are as follows a. Brand awareness and loyalty Mountain Man lager has a high level of awareness among consumers in its target segments. Being positioned as a strong, bitter tasting beer it resonates with the values of hard working blue collar workers. The brand has seen high consumer loyalty over several years. b. Pin point target market
MMBC has been able to target the Mountain Man Lager brand towards specific market segments and been successful at it. Targeted towards middle aged, low to medium income working men, the brand has been able to deliver value to its consumers. c. Grass-roots marketing MMBC has been able to achieve the brand awareness without spending less than 3% of its revenues on advertising. The sales team has been able to create grass root level awareness by positioning the beer as an off-premises brand and by word of mouth advertising as opposed to traditional advertising. This has enabled MMBC to reap greater brand commitment from its consumers. . What factors have contributed to the decline of MMBC? Although successful, MMBC has seen a decline in sales in the recent years. The main factors contributing to this decline in sales are a. Shifting market segment Mountain Man Lager’s market segment has started to age and new market segments are beginning to form, especially a younger market segment. This has allowed other brands to target the new younger population with “light” variants of beers which MMBC has not. Mountain Man Lager does not resonate with the younger population’s tastes as it is a strong, dark beer. . Emerging product segmentation The lager segment has been on the decline for a few years, mostly losing to the “light beer” segment. Given the rapid growth of the light segment of beer the lager market has been steadily losing market share. The light beer segment has grown 4% annually at the cost of the lager market’s share. MMBC has not been able to capitalize on this trend as it does not currently offer a light beer. c. Ineffective advertising Given the younger market segment’s preference to consume beer on-premises, MMBC has been unable to promote its products effectively.
National beer brands have been able to splurge on advertising and use lifestyle based advertising apart from on-premises advertising to attract new customers. Given MMBC’s small advertising budget it is an uphill task to promote their brand to newer consumer segments. 4. Assuming the company introduces Mountain Man light. Conduct a 1 year and 2 year analysis for the Mountain Man Light brand? Calculation of Break Even Volumes Required – First Year Breakeven| | Year 1| Current Revenues of MM Beer| 50,440,000. 00| Projected Revenues of MM Beer Next Year| 49,431,200. 00|
Projected Contribution from MM Beer| 15,323,672. 00| Projected Loss of Sales from Introduction of MM Light| 2,471,560. 00| Projected Loss of Contribution from Launch of MM Light| 766,183. 60| # Barrels of MM Light Needed to recover Loss of Contribution | 30,188. 48| Cost of Advertising MM Light| 750,000. 00| Incremental SG&A cost| 900,000. 00| # Barrels of MM Light Needed to recover new Advertising Costs + SG&A| 65,011. 82| | | # Barrels of MM Light Needed to Break-Even in First Year| 95,200. 30| | | Compared to forecast sales in the first year of | 48,735. 19| | |
Calculation of Year 2 Volumes (Needed to Calculate the 2-year Breakeven| | | Year 2| | | Projected Revenues of MM Beer Next Year| 48,442,576. 00| Projected Contribution from MM Beer| 15,017,198. 56| Projected Loss of Sales from Introduction of MM Light| 2,422,128. 80| Projected Loss of Contribution from Launch of MM Light| 750,859. 93| # Barrels of MM Light Needed to recover Loss of Contribution | 29,584. 71| Cost of Advertising MM Light| 0. 00| Incremental SG&A cost| 900,000. 00| # Barrels of MM Light Needed to recover new Advertising Costs + SG&A| 35,460. 99| | | Forecast Sales in Year 2| 101,369. 19| | Calculation of Break Even Volumes Required – Two Year Breakeven| | | Two Years of Lost Contribution | 1,517,043. 53| Initial Advertising Costs (One Time only)| 750,000. 00| Two Years of Incremental SG&A| 1,800,000. 00| Contribution per Barrel of MM Light| 25. 38| # Barrels of MM Light Needed to Break-Even in Two Years| 160,246. 00| | | Compared to forecast sales over the first two years of | 150,104. 38| | | | | 5. Should MMBC introduce Mountain Man Light? Options Grid| | Option 1| Option 2| Description of Option| Launch Mountain Man Light| Do not launch Mountain Man Light| Benefits of Option| a.
Tap into a growing market b. Introduce brand to new market segments c. Retain current distribution network| a. Maintain brand image of Mountain Man Lager b. Risk losing market share further c. Lose out on shelf space in distributor network| Strategic Fit| a. Better long term strategic fit b. Ability to turn things around for the brand c. Will help brand position itself among younger consumer segments d. May induce lower brand alienation in the short term| a. No changes to current fit b. Slowing revenues from product segment c.
High brand loyalty| Financial Attractive ness| a. Break even in just over 2 years b. High contribution margins (51%) over the long term compared to main brand c. Exposure to new product segments will ensure continues revenues| a. Falling market share (falling by 2% per annum) b. Long term losses imminent c. Long term advertising budget has to be increased drastically| Noteworthy Risks| a. Revenues fall at 2% per annum for the Mountain Man Lager brand b. No significant changes in market dynamics b. Cannibalization is at 5% c. Growth in market share is at 0. 25% for light brand a. Fall in market share not higher than 4% per annum b. Investment in advertising not increased beyond current levels| Final summary MMBC has to introduce Mountain Man Light to capture market share in the light segment. Without doing that the company runs the risk of losing market share almost in a guaranteed manner over a period of time if not in an accelerated fashion. MMBC has to capture market share by using traditional advertising although it will lose money over 2 years. However since the contribution margins are larger for the Light brand the losses can be made up from year 3.