PBM - Mountain Man Brewing
PBM - Mountain Man Brewing
PBM - Mountain Man Brewing
Group 10
1. Viswas Handa 200103182
2. Arnav Yadav 200103041
3. Preeti Jain 200103115
4. Abhijith U 200101002
5. Jebin James 200101073
ABOUT THE CASE
• Mountain Man Brewing Company (MMBC) has
produced a high-quality, great tasting premium lager
for the people of East Central region of America since
Guntar Prangel brewed his first batch of beer using a
family recipe in 1925.
• MMBC’s average customer is a blue collar, middle to
lower income male over 45 years of age, while 70% of
their beer is sold to off premise locations, such as
supermarkets and liquor stores.
• By 2005, MMBC was generating over 50 million in
revenue and was selling over 520,000 barrels.
Problem
• Recently, MMBC has experienced a 2% decline in
revenue in the company's history for the first time
due to the aging demographics of their drinkers and
the increase in light beer sales. Chris Prangel,
Guntar’s grandson and future head of MMBC, is
planning to introduce new product line of light beer
of Mountain Man.
• Gunter Prangal, the founder of the company feels
that the company should not introduce a new line as
it will hamper the brand equity and company may
end up shutting down.
Pros of launching Mountain Man Light
• The Light beer category is a growing
category with 50% volume sale in 2005
as compared to 29% in 2001
• The target segment is the age group 21-
27 who spend twice per capita on
alcoholic beverage and is a growing
segment
• Can help Mountain Man to gain market
share on premise, i.e restaurants and
bars
• The core customers of the original
Mountain Man Langer are mostly
blue- collar customers who doesn't
prefer restaurants and bars
Cons of launching Mountain Man Light
• Can Cause dilution of brand especially for its core
customers who value it's for its authenticity and
specific taste.
• If Mountain Man Light is launched to off premises it
would lead to less Shelf Space for the Original
Mountain Man Langer thus causing cannibalization.
• More cost due to increased inventory and
Packaging.
• High Cost of advertising the new product.
• The light beer category is a highly competitive
category with many competitors, and it won't be
easy to gain market share.
• Resource and attention needs to be moved away
from Mountain Man Langer
Financial Analysis launching Mountain Man Light
Two scenarios
• To a new customer base, thus ensuring no
cannibalization
• To the general beer drinker, with worst possible
cannibalization rate at 20%
Revenue forecast
Without Cannibalization
In 2005,
• Sales Revenue = $5,04,40,000
• Sales Volume = 5,20,000
• Net profit Margin = $25.38 ($97-$71.62)
Break Even Analysis for Mountain Man Light
Optimistic view:
Fixed Cost calculations Without
cannibalization
Optimistic view:
To breakeven without cannibalization
Total breakeven volume = fixed cost/net profit
margin
=$2,550,000/$25.38
=100,473 barrels
Total breakeven Revenue = total breakeven
volume*price per barrel
= 100,473*97
=$9,745,881
Break Even Analysis for Mountain Man Light
Pessimistic view:
Fixed cost calculation with cannibalization rate
at 22% and 2% revenue lost annually
• Ad campaign = $7,50,000
• SG&A cost (2006) = $9,00,000
• SG&A cost (2007) = $9,00,000
• Cannibalized loss (2006) = $4,37,226
• Cannibalized loss (2007) = $3,14,036
• Total fixed cost = $33,28,262
Break Even Analysis for Mountain Man Light
Pessimistic view:
To breakeven with 22% cannibalization and 2% loss
of revenue base annually