Case study on Mountain man beer company

Harvard Business School Case

Mountain Man Brewing Company : Bringing the Brand to Light

What is Mountain Man Beer Company (MMBC) ?

Who is Chris Prangel ?

Chris Prangel

Legacy brew with a strong brandPremium segment market leader in West Virginia for almost 50 yearsKnown as West Virginia’s beer

Family owned business

Popular among blue collar working men

MMBC

Recent MBA graduate stood to inherit MMBC in 5 years

Present situation

High brand equity in premium segment

Mostly sold at off-premise location

2% decline in revenue

4% growth in light beer segment due to youth preference

Anheuser Bush, Miller

brewing Co. and Adolf

Coors possessing 74% market share of the

overall brewing market

These companies have

84% market share in the light

beer market

They rely heavily on broadcasting market as well

product diversification to create barriers of

entry for other brands

Competition

Competitive market shares

Market research study findings

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

Beer drinker profiles

Consumption by type of Beer

Objectives of study

How to capture light beer market segment

Its effect on brand value and current product

Investment and returns on the new product

What to do?

Option 1

Introduce light beer under Mountain Man brand

name

Pros

• Increase in revenue• Low advertisement costs• Cater untapped market

Cons

• Product cannibalization• Brand erosion• Loss of core customers

Option 2

Introduce light beer under different brand name

Pros

• Increase in revenue• Cater untapped market• No brand dilution

Cons

• High advertising costs• Difficult to build new

brand name• Light beer already has a

strong presence

Chris’ Estimate

CostsSG&A costs : $900,000 annually

Advertising : $750,000 for intensive six month advertising

Variable cost per barrel of Mountain Man Lager : $66.93

Variable cost per barrel of new light beer : $66.93 + $4.69 = $71.62

Market price per barrel of new light beer : $97

Revenue

Market price per barrel of new light beer : $97

Revenue per barrel : $97 - $ 71.62 = $25.38

Total investment : $1.65 million

Break even volume = 1,650,000/25.38 = 65,012 barrels

Capture 0.25% market share every year

YearProjected Light Beer

Sales(in barrels)

Expected New Product Sales

(in barrels)2005 18744303 -

2006 19494075 48,735

2007 20273838 101,369

2008 21084791 158,135

2009 21928183 219,281

2010 22805310 285,066

New product can get lost in the sea of new product introductions by big companies

The projections may be overly optimistic

Advertising cannot be as aggressive as big companies

Analysis

The product is expected to cover all its investment costs and become profitable past 2007

Launching Mountain Man Light can also increase awareness and uplift the brand value

Conclusion

Chris Prangel should go ahead and launch Mountain Man Light

These slides were created by Sharang Agarwal, IIT Kharagpur as part of an internship done under the guidance of Prof. Sameer Mathur, IIM Lucknow (www.IIMInternship.com)

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