Mountain Man Beer
Mountain Man Beer
Mountain Man Beer
Case Summary
This case talks about the challenges Chris Prangel, inheritor of family business at Mountain Man Brewing Company face on planning to launch a new product Mountain Man Light under the umbrella brand name as an extension to the core product Mountain Man Lager
Continued..
Import Beer Companies: Satisfied the needs of more flavorful and bitter tasting beers. Operated at distinct disadvantage due to high shipping cost, weaker distribution, inability to control freshness. For example Heniken, Corona, etc. The Craft Beer Industry:Divided into four markets1. Brewpubs- restaurants/pubs with more than 25% of the beer products brewed and consumed on site 2. Microbreweries- Operated in limited distribution network 3. Contract Breweries- Breweries manufacturing for client firms 4. Regional Craft Brewers
SWOT ANALYSIS
STRENGHTS Market leader and established brand name Strong brand equity WEAKNESS New brand extension will spread already thin resources of the company MMBC doesnt have the marketing budget to compete in the light beer market
OPPORTUNITIES Younger demographic and increase lifetime customer value Light beer appealed to women
THREAT Risk of canalization of core brand Alienation of core consumer through new brand that might notbe in line with their aspirations ofMMBC
STRENGTHS
Market leader and established brand name Held the top market Position among lagers in West Virginia for over 50 years. Won American Champion Lager Strong Brand Equity
Distinctive bitter flavour and slight higher than average alcohol content uniquely contributed to companys brand equity
WEAKNESS
New Brand extension will spread already thin resources of the company TV advertising estimated $10-$20 million . Likely to suffer Financial Crisis. Company does not have the budget to compete in the light beer advertising market
OPPORTUNITIES
To reach younger demographic
THREATS
Risk of canalization of core brand
Fears that mountain man would not get incremental shelf space by the retailers
Alienation of core customer through new brand that might not be in line with their aspirations of MMBC Alienating core customer base
MARKETING MIX
PRODUCT
Brand name Mountain Man Light Packaged in a green bottle to differentiate from its lager The green bottle also indicated a lower alcohol content
PRICE
Need further market research to determine the optimal pricing
Gender
Male Female Age 21-24 9% 58% 42%
25-34
35-44 45-54 55-64 65+
20%
24% 22% 14% 12% 14% 25% 21% 16%
20%
23% 23% 14% 12% 16% 24% 21% 15%
15%
19% 32% 19% 13% 20% 27% 25% 15%
Household Income
Under $25k $425K-$49.9K $50k-$74.9K $75k-99.9K
$100K+
24%
23%
13%
MMBCs survival was large part due to the fact that it served a large enough market with a very strong brand. They were facing 2% decline in sales but still they were making profits. Key consumer segment was younger drinkers (21-27years of age) who preferred light beer and accounted for more than 27% of total beer consumption. They were called first time drinker demographic that they had not established any loyalty with the brand
Consumer preference changes and shifts in tastes towards light beer. In exhibit 5, light beer category was gaining the large market share and accounted for 50.4% of volume sales in 2005 Mountain beer was the only brand which was having only one product line and other brands were having product extension.
FINDINGS
They engaged a market research to evaluate its single brand product strategy and brand extension opportunities: Mountain Man Lager was known as West Virginias Beer. Young beer drinkers were well aware of the brand, yet percieved the beer as strong beer.
Mountain man had always relied on GRASS ROOTS MARKTING to spread its beer quality and word of mouth. In contrast, National beer brands used lifestyle advertisements. A small percentage of MMBCS Blue Collar Customers accounted for a large percentage of sales and most loyal customers for the company.
Pros:
o Brand image of Mountain Man will help for the sales of light beer. o Easy to convince retailers to stock and promote. o Light could re-invigorate lager & would not harm Lager image because it target segment is completely different. o Light beer sales in the U.S. had been growing data compounded annual rate of 4%, while traditional premium beer sales had declined annually same percentage. o Light beer category accounted for 50.4% of volume sales in 2005 compared with 29.8% in 2001. o It doesnt require major capital expenditures and equipments for possible packaging and labelling efficiency.
Cons:
o Could dilute lager equity. o Potential for cannibalizations of lager brand. o Exceeds the boundary of brand meaning of lager is fullflavoured, authentic, working class, while light is trendy, light, young, modern. o The fact of lager beer is dark, bitter and a higher alcohol content with a product label shows a crew of coal miners is not a fit with the light beer demographic. o Competition from manufactures. existing National Light Beer
o Distributors could become more discriminating about which product would they carry.
CHALLENGES
o Product preferences changing in the market o Light beer showing consistent growth o MMBC can gain share in on premise locations, restaurants and bars o Appealing to young adults and women. o Popularity could change demand in mountain man lager o No requirement for new purchase of plant and machinery for mountain man light due to existing excess capacity in mountain main facility
o Launching mountain man light would alienate the core customer base and ultimately erode and dilute mountain man brand equity. o It will add to cost structure- inventory, packaging, SG&A. o Expensive to launch it on a big scale as it would cost more than a $10 $20 million o To launch it even regionally it would require a $7,50,000 for a six month campaign which would further cost $9,00,000 in annual. Pg 6 o Mountain Man light would cost $4.69 more per barrel as in comparison to mountain man lager because of the contribution margin
o Challenge to convince the senior management team that mountain man light would generate enough funds in2 years
o Mountain man light will never achieve the volume of sales of larger light beer like miller lite or coors light
o Mountain man light would not be able to compete with other big brands but will only be able to replace or able to draw attention from mountain man lager which is not doing well.