mountain man brewing company : harvard case analysis
TRANSCRIPT
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Mountain Man Beer Company
(MMBC)
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Who are its key people?
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• Guntar Prangel
founder of MMBC ( 1995)
• Oscar Prangel
Owner/president of MMBC
• Chris Prangel
Marketing Operations Head of MMBC
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What is Company’s Present Situation?
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Declining sales due to change in beer drinker’s preference
Traditional beer less preferred by young drinkers.
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Light beer sale to lure young drinkers to the brand
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Why study this
case?
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To see if the company can reposition the brand to drive sale of its light beer, Mountain Man Light to young people without eroding the core brand equity of Mountain Man Larger.
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Pricing Policy of MMBC
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Similar to premium domestic brands
$2.25 for a 12-ounce serving of draft beer in a bar
$4.49 for a sin pack in a local convenience store.
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MMBC’S Income Statement
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Net RevenuesCOGS
$50,440,00034,803,600
100%69%
Gross MarginSG&AOther operating expenses
15,636,4009,583,6009,583,600
31%19%2.8%
Operating MarginOther income
4,640,480151,320
9.2%0.3%
Net income before taxesProvision for income taxes
4, 791800
1,677,130
9.2%
3.3%
Net income after taxes
$3,114,670 6.2%
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Mountain Man Beer Company
Best Known Regional Beer
Best Beer in West Virgina
Best Beer in Indiana
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Average MMBC’S consumers than profiles of premium beer
drinkers
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Domesticlight beer
Domestic premium beer
Mountain man lager
Gender
MaleFemale
58%42%
68%32%
81%19%
Age21-2425-3435-4445-5455-6465+
9%20%24%22%14%12%
8%20%23%23%14%12%
2%15%19%32%19%13%
Household income
Under 25k$25k-49.9k$50k-74.9k$75k-99.9k$100+
14%25%21%16%24%
16%24%21%15%23%
20%27%25%15%13%
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MMBC’S competition in US Beer Market
Major domestic Product
Second Tier Domestic Product
Import Beer Companies
Craft Beer Industry
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Advantage of MMBCover its competitors
• Brand awareness
• Brand Loyalty among the blue collars
• Quality and Smoothness
• Distinctive bitter flavor
• Higher average alcohol content
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Why declining Sales for Beer Companies?
• Competition from wine and spirit based drinks.
• Federal excise tax
• Health concerns
• Initiatives encouraging moderation
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Growth in Light Beer Category
• 2001 : 29.8% of volume sales
• 2005 : 50.4% of volume sales
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Light Beer Competitive Market Shares
East Central Region 2005 Market Share
Anheuser-Busch 49%
Miller 24%
Coors 11%
Other brands 14%
Imports 2%
Total Light Beer 100%
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Leading Domestic Light Beer Brands
East Central Region 2005 Market Share Bud Light 32.9% Miller lite 17.8% Natural Light 9.8%Coors light 14.7% Busch light 6.4% Michelob Ultra 5.6% Milwaukee’s Best Light 3.4% Other domestic brands 9.4%
TOTAL 100%
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Leading Imported Light Beer Brands
Brand 2005 Market Share
Corona Light 57%
Amstel Light 26%
Labatt Blue Light 15%
Other Imported Brands 2%
TOTAL 100%
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Division of Consumer Segment
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Consumption by type of beer
East Central Region % Total
6-yearCAGR
Light Beer 18,744,303 50.4% +4%
Premium Beer 7,326,642 19.7% (4%)
Popular 4,351,356 11.7% (5%)
Imported Premium
4,462,929 12.0% +6%
Superpremium 2,305,847 6.2% +9%
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Consumption By Origin
East Central Region % Total
Imported 4,462,929 12%
Domestic-Packaged 29,618,974 79.6%
Domestic-Draught 3,109,174 8.4%
TOTAL BARRELS 37,191,077 100%
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Finding About MMBC
Not famous with young beer drinkers
No appreciation for brand’s association with independentbrewery
Relied on mouth publicity and not lifestyle advertisements to reach young drinkers
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Advertising Expenditure in U.S Beer Market
Medium 2005
Network television $382.3
Cable television 72.1
Spot television 144.3
Spot Radio 22.4
Network Radio 1.2
TOTAL BROADCAST $627.8
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What can MMBC do to attain growth and profit in the long run?
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Light beer strategically
important• Newer
• Fast growing
• Consistent
• Preferred by both men and women
• Growth in bars and restaurants
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“ This is our chance to play in light beer sandbox but stay true to Mountain Man Brand
by playing on strengths of our products. ”
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Problems Associated
• Adding to cost structure
• More inventory
• More packaging cost
• Losing the core value and brand
loyalty
• Higher variable cost
• Huge expenditure on advertising to create brand awareness
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Final Decision
By Chris Prangel
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• To retain the core business and its core customers with independent brewery.