What is Mountain Man Brewing Company`s positioning relative to its competitors?

Mountain Man Brewing Company brewed a beer called 'Mountain Man Lager beer.
'Mountain Man Lager held the top market position among lagers in West Virginia Ior
almost 50 years. It was also known as 'West Virginia`s Beer. It was a legacy brew in the
mature beer brewing business and had managed to maintain a respectable market position
in most oI the states where the beer was distributed.

'Mountain Man Lager was a dark colored beer, priced similar to premium domestic
brands such as Miller and Budweiser. Its core audience was blue collar, middle-to-lower
income men over the age oI 45. It was categorized as a second tier domestic producer that
had very high brand popularity and brand awareness. 'Mountain Man Lager was known
Ior its quality (smoothness, percent oI water content and drinkability) and brand loyalty
and sold most (70) oI its beer Ior oII-premise consumption. Blue-collar males, who
liked 'Mountain Man Lagers bitter Ilavor and slightly higher-than-average alcohol
content, Iormed its main customer base.

What factors have contributed to making MMBC a strong brand?
brand can be deIined as a 'name or any other Ieature (trademark) that identiIies a
seller's good or service as distinct Irom those oI other sellers. Mountain Man Brewing
Company had, over more than 50 years, managed to build a very strong and successIul
brand in the brewing Industry.

Below are the Iactors that contributed to making MMBC a strong brand:
a) Target udience: MMBC had identiIied a target audience- Blue-collar males Irom the
middle and lower income classes.
The logo oI Mountain Man Lager was its 1925 design oI a crew oI miners printed on the
Iront.
b) Built a Perception: MMBC had built a perception that its beer was strong. Its dark color,
bitter Ilavor and slightly higher-than-average alcohol content gave prooI that it lived up
to its perception.
c) wareness: Over the years, MMBC had built an amazing air oI awareness. It was not the
most selling brand, but it had won multiple awards Ior best beer. nd even though its
sales were down, it had still maintained a very high level oI awareness among the beer
drinking community.
d) Built brand loyalty: By providing quality, maintaining its authenticity and keeping true to
its single exclusive brew, MMBC had built a strong brand Loyalty, which was the Best
among all the brewing companies.

What factors have contributed to the decline of MMBC?
ata Irom the past Iew years (2001 to 2005) clearly shows that newer trends have begun to
emerge. In this period, MMBC has continued to sell its Ilagship product 'Mountain Man Lager;
however the newer trends have Iinally started to catch up and MMBC Iinds its sales are started
going down by 2 each year. Even though the proIit margin is the same, there is a huge concern
about the sales going down.

The reasons Ior decline in sales are:
a) There has been a surge in the popularity oI the Light beer brands. Light beer sales are
expected to increase by 4 each year, whereas the traditional beer sales are expected to
decline by 4.
b) 'Mountain Man Lager is perceived to be a 'working man`s drink and the younger
generation is not able to identiIy with this brand. MMBC is considered as authentic brand
that their parents and grand parents drink, which is strong.
c) lthough the Mountain Man Brewing Company had the traditional stronghold in the East
central region, the craIt and import beer brands were also gaining a hold in this area.
d) Various states had also removed old laws that limited the promotion oI beer in retail
establishments. Thus retail stores started storing beers. The Big brewing companies
started adding pressure on MMBC by advertising and reducing costs.
e) The MMBC customer base (45 males) was aging and their market share was shrinking.
ThereIore, MMBC struggled to maintain a steady share oI the market segment.
X The younger generation, even though a lesser share in numbers (13), spent more on
beers (27 ) and MMBC did not have a product to cater to them.
Y The 'light beer category had seen signiIicant growth in sales. It accounted Ior 50.4 oI
the total volume sales, and was seen to be growing steadily. MMBC did not compete in
this category at all.
The younger generation, mainly purchased beer at pubs and bars. MMBC had not been
successIul in targeting these markets Ior distribution and sales.

ssume the company decides to introduce ~Mountain Man Light Conduct a one-year
and two year analysis of the ~Mountain Man Light and Use the information to discuss
breakeven analysis within your options grid

CaIcuIation of Break Even VoIumes Required Year 1 Year 2

CurrenL 8evenues of MM 8eer $50,440,000
Projected Revenues of MM Beer Next Year $49,431,200 $48,442,576
Projected Contribution from MM Beer $15,323,672 $15,017,199
Projected Loss of Sales from ntroduction of MM Light $2,471,560 $2,422,129
Projected Loss of Contribution from Launch of MM Light $766,184 $750,860
# Barrels of MM Light Needed to recover Loss of Contribution 3018848 2938471
Cost of Advertising MM Light $750,000 0.00
ncremental SG&A cost $900,000 $900,000
# Barrels of MM Light Needed to recover new Advertising Costs +
SG&A
65,011.82 35,460.99

# Barrels of MM Light Needed to Break-Even in First Year 95,200.30

Sales Forecast 48,735.19 101,369.19

CaIcuIation of Break Even VoIumes Required - Two Year Breakeven

@o ?ears of LosL ConLrlbuLlon $1,517,044
nitial Advertising Costs (One Time only) $750,000
Two Years of ncremental SG&A $1,800,000
Contribution per Barrel of MM Light $25.38
# Barrels of MM Light Needed to Break-Even in Two Years 160,246.00

Sales Forecast for 2 years 150,104.38

From the above analysis, we see that 'Mountain Man Light, iI introduced, will need to
sell a volume oI 160,246 units to break-even in two years.

The Iorecasted sales will be 150104 units. ThereIore, 'Mountain Man Light, iI
introduced, will not be able to break even in two years.
$hould MMBC introduce Mountain Man Light? Complete an options grid, and include
your recommendation regarding the appropriate course of action Please make sure you
incorporate the numbers from the above breakeven analysis in analyzing the options
Describe whether Mountain Man Brewing Company, given the facts from the case, can
achieve the breakeven volume Under noteworthy risks, highlight the key assumptions
underlying your case analysis and how your decision may be changed if the assumptions
do not hold true
Option 1 Option 2
escription oI
Option
Launch 'Mountain Man Light o not launch 'Mountain Man
Light
Overall
ssessment /
BeneIit oI option
Recommend this option as:
Enter new and growing segment.
Chance to regain market share.
Change perception oI product in
the younger generation.
Improve sales and proIits.
Can be marketed and sold via new
channels, like bars and pubs.
o not recommend this option as:
The segment is on a downward
trend.
Brand has started to lose market
share. Forecasts show the same
trend will continue.
ging customer demographics
Brand not preIerred by the
younger generation
Strategic Fit ot much overhead Ior new
product.
Recognized Ior its Quality.
PerIormed well against the big
brands.
'nti big brand will work to its
advantage.
Continue its rich legacy, with a
product to cater to the masses.
igh brand awareness and loyalty
Competitive price against other
brands
Well-deIined target audience.
Maintains authenticity oI brand.
Financial
ttractiveness
Iter initial losses in the Iirst year,
MM Light has shown a huge rise in
proIits Irom the second year. Even
though it does not breakeven, it is
expected to make huge proIits Irom
year 3 onwards.
lthough the current drop in sales
has not resulted in losses Ior the
company, the trend, iI it continues
Iurther, will result in losses Ior the
company, iI Iorecasted Ior 5 years.
oteworthy
Risks
Cannibalization oI Products
within the Brand is assumed to be
5 , which might be very low.
ssumed that the Light Beer
market will grow each year Ior the
next Iew years.
ssumed market trends to
continue as current.

Loss in sales.
Loss in market share.
Lack oI reach in the newer and
younger market.
Perceived as a working man`s
beer, which may not Iit with the
current market segment.
Pressure Irom big brands has
been increasing.