Problem Statement Statement While mountain Man Brewing Co. generates over $ 50 Million in sales, it is experiencing a decrease in revenue by 2% per year and traditional premium beer overall sales is declining by 4% annually. Situation Analysis 1) Customer y
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The beer industry in the United States generates $ 75 Bi llion in annual sales. Customers base their choice on t aste, price,
occasion, perceived quality, brand image, tradition, local and authenticity. Comment [??1]: Whether its a local beer? in annual sales out of the $ 75 billion of the Total Comment [??2]: Meaning 17.3 % addressable market (TAM). Comment [??3]: Maybe add a footnote on Mountain Man lager has a specific target market: market: blue-collar male workers. While their target customer brings them the focus what this is. and loyalty needed to build brand awareness awareness and equity, Mountain Man lager is no t taking into consideration other market segments such as the white-collar class and other pot ential niches. Comment [??4]: Are you sure it is 64% of Mountain Man drinkers are 45+ years old while the TAM for that age category repr esents 49% of the domestic premium awareness? beer market in the Eastern Central. It is worth mentioning that drinkers within the age bracket of 21-27 years old represent 27% of total beer consumers, and spend twice per perso n on alcoholic beverages than consumers over 35 years old. From a gender perspective, Mountain Man counts with 81% male drinkers, thus neglecting the F emale market segment which represents 32% of the TAM of domestic premium beer. $1 3 billion The Eastern Central region of the United States represents $13
2) Competition The main competitors for Mountain Man are Anheuser Bush, Miller brewing Co. and Adolf
Coors possessing 74% 74% market share Comment [??5]: What is Mountain Mans market share? of the overall brewing market. It is worth mentioning that those 3 companies have 84% market share in the light beer market. These companies rely heavily on broadcasting market as well product diversification to cr eate barriers of entry for other Comment [??6]: What is this? brands. 3) Company
With Revenues of over $ 50 Million, Mo untain Man Brewing Company was founded in 1925 by Guntar Prangel who established itself as a premium domestic quality beer, known for its flavor and bitter taste. With ti me Mountain Man Lager became the beer of pride in the Eastern Central region of the United States. Oscar Pragnel retired president and owner and the business stayed focused on maintaining the quality and serving a specific market niche building br and equity among blue-collar, middle-income and below workers. 4) Collaborators
Off-premise locations, such as liquor stores and super mar kets, is Mountain Mans main sales channel as it sells 70% of itsComment [??7]: Is that what they are production at these locations. The main reason for this r esult is that 60% of blue-collar workers buy their beer through thecalled? off premise locations. Another channel are local distributors; however, one big disadvantage is that distributors favor brands that provide more product variety which eventually helps helps them ensure a higher sale turnover for the brands they are distributing. It is worth mentioning that Mountain Man did not have any significant presence in restaurants and bars. 5) Context The beer industry has witnessed an increase in federal excise tax, campaigns and movements encouraging moderation and
careful consumption of alcohol. In certain states such as West Virginia laws were passed to limit the promo tion of beer sales in retail stores. The whole industry has been facing per capita decrease in consumption due to fierce c ompetition from Wine and other spirit products.
Alternatives
First alternative is to co ntinue without any changes in the business model: continue manufacturing only premium beer. The
pros of this choice would be (1) maintain brand image and equity and (2) i ncur no additional costs. However, the cons would be: (1) continuous decrease in revenues (2) dismiss the opportunity to tap into new niches and capture potential customers such as female drinkers or the population aged in the 21 to 2 7 year-old bracket. Another major con would be losing ground with the distributors due to the lack of product variety.
Second alternative would be to sell the company to o ne of the major players in the market. The pros of this alternative is eliminating the possible risks of b ad investments and playing it safe. The con of this alternative is dissolving a legacy business that has survived for a very lo ng time based on strong brand equity and custo mer focus.
Recommendation My recommendation would be to produce light beer in the Eastern Central region of the U.S in the coming 6 months. The first advantage of this decision is tapping into a potential market of almost $38 Billion of sales annually. Second advantage is meeting the growing demands of the younger generation representing almost 28% of the beer drinking market. Third advantage is meeting the needs of the distributors who seek pro duct variety to ensure shelf space with their customers and tapping into the restaurant and pub business where Mountain Man had no significant presence before. The first disadvantage of this decision is the potential brand image damage resulting from a change in brand perc eption that has been linked for a very long period of time to the average blue-collar male worker with middle to low inco me thus risking a repercussion on current sales. Another disadvantage would be the potential risk in investments due to the rise in expenses such as marketing $750,000 and other SG&A expenses estimated at $900,000 which could drain the company financially. Last disadvantage to consider is the nature of the beer market which is characterized by an intense marketing spending and where the competition has much more capabilities to spend compared to Mo untain Mans capabilities.
Implementation Plan Price Based on the Projected estimate for 200 6 ( Exhibit 1) Mountain Man will gain a 3% market share of light beer in the first year which is estimated to be 562000 barrels while maintaining the 7% market share in the Premium beer at 520000 barrels. The selling price per barrel w ill remain the same at $ 97. According to the breakeven analysis (Exhibit 2) Mountain Man will need to sell 456531 barrels, that is, $44,283,547 worth, in order to break even. This will result in a net profit of $11,318,913 for the year 200 6.
Product Mountain Man will introduce a new product called Mountain Light. While maintaining the high quality characteristic of Mountain Man premium lager, the company will introduce a similar q uality product to the market. The product will target the younger generation, male and female as well as white-collar workers who seek light beer.
Promotion Mountain Man will spend an additional $750000 on marketing & advertising in the form o f TV campaigns and in popular youth magazines such as GQ and Cosmopolitan. Sponsoring events such as the Super Bowl and major artistic concerts and events. The branding will focus on the younger generation within the age bracket of 21-35 years old. Additional sales incentives will be provided to the distributors in or der for them to buy the Mountain Man light beer based on challenging sales targets.
Place Mountain Man will capitalize on its existing sales fo rce to promote the brand within the distributors. The sales force will penetrate the restaurant and bar channels of the Eastern Central region building on the existing reputation of Mountain Man beer company. MMBC will also inc rease its product shelf space at the existing off premises locations such as the supermarkets and major liquor stores while providing them with sales incentives based on challenging targets.
Exhibit
1
Exhibit 2
