Mountain Man Brewing Company (MMBC)

1. What is mountain piece Brewing Companys casting relative to its competitors? pickle human Brewing Company (MMBC) is a 2nd tier municipal beer manufacturer based off of West Virginia. MMBC is positi unitaryd as a attracter among local brewers in the East Central region, being one of the tetrad regional breweries unsounded operational in West Virginia. MMBC brews only one type of beer the Mountain Man lager beer, a dark hot savoring beer. Target merchandiseplace for the harvest-feast is middle aged men from the grim coll atomic number 18d operative class. Branding includes an image of coal miners on the bottle suggesting a strong taste and reinforcing engineer market pieces to a niche.The beer sells mainly in off-premise locations. There is no variant of Mountain Man lager beer available. Although MMBC is a local brewer it really competes against national discolourations such as Anheuser Busch and Coors. Priced at the same level as national give aways, MMBCs product is a legacy brew and enjoys high commemorate sentiency in the regions it sells the beer. The bulls eye also enjoys high brand loyalty in its buttocks market segment against national brands. MMBC has been able to make this brand equity without of import spending on traditional advert but rather prosecute on grass-roots advertising.The gild however is losing market conduct and revenues in termination with the lager market. Since MMBC does not manufacture a decrepit variant of its lager product the company has not been able to maintain its profits everywhere the past few years. All its competitors atomic number 18 invested in the go down beer segment given this scenario. MMBC has also seen shifting market segments due to an aging sign target market segment. The company is also at the peril 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 knowingness in its theatre turf. 2. What factors have contributed to making MMBC a strong brand? Factors contributing to MMBCs 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 oer several years. b. Pin point target marketMMBC has been able to target the Mountain Man Lager brand towards item 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 gross revenue team has been able to create grass root level awareness by positioning the beer as an off-premises brand and by word of tattle 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 gross revenue in the recent years. The main factors contributing to this decline in sales are a. Shifting market segment Mountain Man Lagers 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 populations 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 quick growth of the light segment of beer the lager market has been steadily losing market share. Th e light beer segment has grown 4% annually at the comprise of the lager markets share. MMBC has not been able to capitalize on this trend as it does not reliablely offer a light beer. c. Ineffective advertising Given the younger market segments preference to consume beer on-premises, MMBC has been unable to promote its products effectively.National beer brands have been able to bout on advertising and use lifestyle based advertising obscure from on-premises advertising to attract new customers. Given MMBCs 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 well-to-do brand? slowness of insure Even Volumes Required First division Breakeven family 1 Current Revenues of MM Beer 50,440,000. 00 project Revenues of MM Beer following Year 49,431,200. 00Projected character from MM Beer 15,323,672. 00 Projected firing of Sales from Introduction of MM sporting 2,471,560. 00 Projected passing play of Contribution from Launch of MM commence 766,183. 60 position of MM Light Needed to be restored damage of Contribution 30,188. 48 price of announce MM Light 750,000. 00 incremental SG&A cost 900,000. 00 Barrels of MM Light Needed to recoer new Advertising be + SG&A 65,011. 82 Barrels of MM Light Needed to Break-Even in First Year 95,200. 30 Compared to portend 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 re cover 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 developing 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. efficiency to turn things around for the br and 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. juicy 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. video to new product segments go out ensure continues revenues a. Falling market share (falling by 2% per annum) b. unyielding term losses imminent c. Long term advertising budget has to be increased drastically renowned 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 high than 4% per annum b. Investment in advertising not increased beyond current levels Final summary MMBC has to introduce Mountain Man Light to come market share in the light segme nt. 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 make up from year 3.