Mountain man brewing company case analysis

A detailed case-analysis during an internship under Prof. Sameer Mathur

1. Mountain Man Brewing Company: Bringing the Brand to Light Harvard Business School Case Analysis

2. Company Overview Mountain Man Brew Company(MMBC ) was founded by Guntar Prangel in 1925 Established as a family owned business Reputation grew throughout East Central region of the US Quality beer Utilized a set of unique ingredients to bring a distinct taste

3. Distribution By 2005, Mountain Man Beer Company was generating $50 million in revenue and selling over 52,000 barrels Mainly in Illinois, Ohio, Indiana, Michigan, and of course, West Virginia Employed a low cost strategy for speciality Beers Priced similarly to domestic beers such as Miller and Budweiser Cheaper than that of speciality beers such as Sam Adams

4. What are MMBC’S core components ..?

5. Curre n t Di s tinctiv e P ro d uct Family Owned Brewery Mountain Man Lager Original- West Virginia’s Beer 1925 design with a crew of coal miners printed on front Distinctive bitter flavor with higher level of alcohol content Current Distinctive Customers Males Working Class/Blue Collar Older Generations Baby Boomers “The Hardworking Man ”

6. Key Personalities Guntur Prangel- Founder of MMBC Oscar Prangel- Owner & President of MMBC John Fader- V.P. of Sales Chris Prangel- MBA graduate, stood to inherit MMBC in 5 years

7. What are MMBC’S current Marketing strategies ..?

8. Working class target market Old Family Brew/Old School Character Grass roots marketing – Different tact, not “In Your Face” like other beer advertising Leveraging the emotional pride of Mountain Man Spreading Awareness of the Beer’s quality by word of mouth Reaching out to the potential customers locally or in a personal way

9. STRENGTHS 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 C ustomers Stronger brand image Expanding distribution and sales channels THREATS Ageing target market Increase federal taxes Deep pocketed competitors Changing customer preferences and dynamics Decline in revenue SWOT Analysis Brand awareness(West Virginia’s beer) Loyal customers Authenticity, quality and uniqueness Strong presence at off premise locations

10. Anh e use r - Busch Adolf Coors Miller Craft Sam Adam’s Sierra Nevada Second tier Pabst Brewing Co. Genessee Import C o r o na M ols o n Beck’s Major Competitors Major Domestic

11. Competitive market shares

12. Beer drinker profiles

13. Then, What’s the problem ..?

14. Situation in 2005:Declining Beer Sales For the first time, the company was facing 2% decline in sales Cause for MMBC Decline MMBC’S core customer was getting older and not purchasing enough beer. Segment represented 13% of adult population in 2005 but accounted for 27% of total beer consumption. MMBC Lager was not a preferred product in this segment. Growth in lite beer category accounting for 50.4% of volume sales in 2005 Increase in Federal Excise Tax(upto 43% of COGS) Increasing health concerns of consumers. Competition from alternative beverages- wine & spirits

15. Declining Beer Sales: What to do ? Look at what’s trending? Beer Drinker Preferences Perhaps a LIGHT Beer? How can we target market to younger generations? Perhaps to more females ?

16. Authenticity, quality, and a unique West Virginia “toughness” were core attributes of the brand Awareness among young people but considered as strong and working man’s beer Grass roots marketing more effective Blue collar customers were very loyal ( brand loyalty was 53 %) and accounted for a large sales percentage Market Research Findings

17. Consumption by type of Beer

18. Costs

19. Chris ’ s Analysis

20. Analysis Analysis 1 Advertising $7,50,000 2 SG&A Costs $9,00,000 3 Market price of Mountain Man Lager (Per Barrel) $97.00 4 Cost price of Mountain Man Lager (Per Barrel) $66.93 5 Profit earned- Lager $97.00-$66.93= $30.07 6 Market price of New Light Beer (Per Barrel) $97.00 7 Cost price of New Light Beer (Per Barrel) $71.62 8 Profit earned-Light Beer (Revenue per barrel) $97.00-$71.62= $25.38 9 Total Investment $1.65 Million 10 Break-even Volume 1,650,000/25.4= 65012 barrels *Break even volume = Total cost / Profit earned (Light Beer )

21. From the above analysis, MMBC would receive the same price per barrel for both the products. Contribution of MM Light ($25.38) would be lower compared to Lager($30.07). The brand was required to achieve more than $1,650,000 revenue and target of selling around 65012 barrels of light beer to start making profits in this segment.

22. Year Projected Light Beer Sales (in barrels) Expected New Product Sales (in barrels) 2 05 1 8 744303 - 2 06 194 9 4075 48,735 2 07 2 273838 101,369 2 08 21084791 158,135 2 09 219281 8 3 219,281 2 10 22805310 285,066 E xpected M arket S hare

23. Options ?

24. PROS CONS No brand dilution Light beer already has a strong presence Cater untapped market Difficult to build new brand name I ncrease in revenue High advertising costs Option 1 I n t roduc e light bee r under Mountain Man brand name

25. PROS CONS Increase in revenue Product cannibalization Low advertisement costs Brand erosion Cater untapped market Loss of core customers Option 2 Introduce light beer under different b rand name

26. Analysis The product is expected to cover all its investment costs and become profitable past 2007. Conclusion Chris Prangel should go ahead and launch Mountain Man Light Beer.

27. Changes in marketing strategies to launch light beer .

28. 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 The appropriate 4P mix to be followed Marketing Strategy

29. P L ACE 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 Continue sales of MM lager at off premise locations. Sell MM Light through on premise locations to reach younger demographic and women.

30. Conclusion A s 0.5% capture of market share is possible by 2007 with the given market situation considering cannibalization of shares. MMBC should launch the light beer under the different brand name, to diversify its portfolio and to ensure continued growth of its family-owned brewery . 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.

31. These slides were created by Abhishek Yadav , MITS Gwalior , as part of an internship done under the guidance of Prof. Sameer Mathur , IIM Lucknow . D isclaimer