Mountain Man Brewing Company Mountain Man [MM] Brewing Company also known as “West Virginia’s Beer, is a symbol symbol of toughness, toughness, authenticity authenticity,, quality quality and uniqueness uniqueness.. Mountain Mountain Man Man Lage Lagerr is perc percei eive ved d as a work workin ing g man’ man’s s beer beer and and link linked ed with with baby baby boomers and blue collar consumption due to its bitter flavor, higher than average alcohol content and product availability availability at off-premise locations. Page | 1
Established in 1925, by Guntar Prangel, the Mountain Man [MM] brand is still owned and operated by his family and commands among the highest brand loyalty rates of any beer brand. At 53%, it is nearly 10% higher than other brands such as Anheiser-Busch Anheiser-Busch and Miller. Miller. But its brand strength strength may very very well be its downfall downfall.. The company company is facing a continual continual drop in sales sales which the management feels is due to the changing taste and preferences of the American customers. In addition the U.S., beer consumption has declined by 2.3%, since 2001, mainly due to competition from wine and spirits-based drinks, an increase in the federal excise tax, social initiatives encouraging moderation, and increasing health concerns. The major challenges that MM Brewing Company is facing include: •
Social changes
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Changes in beer drinkers preferences
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Declining sales of MM due to reduction in MM target population
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Growth of younger drinking consumers (13%) who preferred light beer and accounted for 27% consumption Economies of scale of large national brewers
Despite these pressures, the one opportunity for MM in this mature industry is the growth of consumption of light beers, whose sales volume grew by 20.6% 20.6% between between 2001 and 2005. 2005. The typical typical consumer consumer of light beer is the younger generation (21-27 year olds). This category of Light beer drinkers has grown to 50.4% of sales volume in 2005, from 29.8% of sales volume in 2001. This growth of the Light beer segment is an opportunity because MM does not have any product catering to this market. Chris needs to determine whether or not to launch a Light version of their core product for increasing revenues by targeting segments that haven’t been served by their original Lager product.
Mountain Man Brewing Company The options available for MM Brewing Company are the following: (1.) Expand into the light beer category with a Mountain Man Light product, (2.) Expand into the light beer category utilizing a new name or (3.) Try to expand market share and revenue with only the core brand by aggressively advertising and targeting the existing core target market. Page | 2
Looking at the light beer market sales that have grown 20.6% in the period between 2001 and 2005, one can assume that the increase in light beer consumption among this segment is mostly due to the growing number of younger drinkers. So, by introducing a Light beer, there is an opportunity to capture more market share by expanding the brand and create loyalty among new drinkers. Also the current target market segment of 35 years and older consumers are showing a reducing trend of consumption, and if MM do nothing, there will be a continuous reduction in their sales of their core Lager brand and an eventual loss of profitability. However If a new Light Beer is launched, Chris must minimize the concern raised by some executives in the firm and some of their core loyal drinkers in a focus groups study, who were worried about the dilution of the existing brand and cannibalization of sales of their existing line of lager. I believe that MM Brewing Company needs to eventually change from lager market to the light beer market over the period of time. The 4% percent growth in the new Light Beer segment and at the same time a similar continual decline in Lager consumption makes a statement for change for MM. The dilemma for Chris therefore must only be regarding utilizing Brand Extension to maximize the brand power of MM or create a Private Label with its own branding to solve the problem of cannibalization of the existing Lager sales. Brand extension using Umbrella branding is a good strategy for capitalizing on existing brand equity and some of its advantages are: •
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Benefitting through an established brand name Enabling a company introduce new products at significantly reduced costs Reducing the risk of failure by taking advantage of established awareness and trust
Mountain Man Brewing Company •
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Creating a positive synergistic effect with advertising Reinforcing and renewing the consumers’ perceptions of the parent brand name.
The Disadvantage of this strategy can be: •
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Lack of fit with the original product will lead to failure of the new product Damage or dilution to the parent brand, especially if the brand is identical with a specific product
The market study that the MM management had authorized yielded the following three key findings: 1) Youth respond to the independent nature of the brewery but still associate the brand to older “working men.” 2) Grass-roots marketing can be more effective in building brand awareness with younger clientele. 3) Only a small percentage of Mountain Man’s blue collar customers account for the larger percentage of sales Utilizing the above findings, my decision will be to ask MM Brewing Company to launch a Light MM beer. The MM sales force must work with distributors, retailers and off-premise locations to enable the maintenance of the Lager brand and introduce the Light Beer as a supporting brand. The Lager market will be loyal as long as their brand is not diluted, which can be taken care of by proper brand positioning. The advertisement and branding for the new Light Beer must ensure that there is no impact on the perception of quality of the Lager brand. The Light beer market has high recall for their brand and strong brand equity for MM and this will enable them to expand the brand to a new demographic market.
