Mountain Man Brewing Company Case Study

Executive Summary:

As premium beer sales decreased by 2.3% nationally, Mountain Man Brewing Company has experienced a decrease in revenue due to an aging demographic and decreasing premium beer market segment. This report contains detailed analysis to examine the impact of Mountain Man Brewing Company expanding its product line into the light beer market response to this trend.

The analysis reveals that keeping the current strategy of a single line product, MMBC will continue to lose revenue as sales continue to decline. Light beer sales which are increasing in consumption by 4% annually, represent 50.4% beer volume sales nationally. An introduction of MM light beer, with a slighter higher variable cost than lager will still turn a profit in 2 years. This combined with the cannibalization effect of MM Lager MMBC will see an increase its revenue between 15-20m over 5 years.

Furthermore, as MMBC expands its line, it will open a new market segment which appeals to a younger demographic than its core customer, effort will also be placed to increase sales for onsite premises where this segment gathers while minimalizing impact to its core consumer.

It is recommended that MMBC take immediate measures to launch MM Light leveraging the brand equity of MM Lager, that a new line manager is engaged with a competent sales team and that the product is released to market for the fourth of July celebrations.

Situational Analysis:

Overview:

Mountain Man Brewing Company (MMBC) was founded by Oscar Prangel in 1925, it is a family owned business who prides itself on being singularly focused on Mountain Man Lager. Using a unique family recipe, Prangel has grown this product to the top market position in the eastern central US with steady growth and selling over 520,000 barrels and revenue of over 50m annually. However in 2005 for the first time in company’s history it has experienced a decline in revenue by 2%.

The beer industry is highly competitive, the top producers (Anheuser-Busch, Miller and Coors) maintain a 74% market share in regular beer and 84% market share in light beer which has increased in consumption by 4% annually. MMBC which focuses its sales to Illinois, Indiana, Kentucky, Michigan, Ohio, West Virginia and Wisconsin holds the top accolades for best beer.

Mountain Man Lager is a dark bitter beer with strong customer loyalty and brand equity. It is a working man’s beer with its typical consumer being a blue collar male, low to middle income aged 45+. It has occupied the top market position in West Virginia for 50 years and is in the mature phase of a product life cycle.

Marketing Mix of Mountain Man Lager:

Product:

• Dark bitter beer
• Unique family recipe
• High alcohol content compared to other lagers
• Brown bottle/label

Price:

• Similar to domestic brands
• Lower than craft beers

Promotion

• Word of mouth advertising
• Grass roots, traditional advertising unsuccessful

Placement:

• Liquor stores and grocery 70%
• Bars/restaurants
• Convenience stores

Mountain Man Lager has in all accounts been a success and has outlived other rivals by keeping a focus on a single product to a target consumer. However with alcohol consumption trends changing, decreasing revenues, can MMBC leverage its brand equity and produce a quality light beer attractive to a younger demographic and woman with minimal cannibalizing of lager sales or loss of customer loyalty? With Chris Prangel in position to inherit leadership, he must make decisions that can expand its customer base while maintaining its core customer or at least reduce their alienation by affectively appealing to these 2 different market segments.

Porters Five Forces:

Rivalry: High

• Competition of both larger and comparable strength for market share
• There are Limited buyers
• Producers have high fixed costs
• Relatively low switching costs
• Products not strongly differentiated
• High exit barriers- owners personal stake in business

Threat of New Entrants: low-moderate

• Mountain and others have strong brand awareness
• High economies of scale
• High capital requirements
• Those in industry have years of experience and cost advantages

Supplier Power: Low

• Low switching costs
• High competition, large quantity of suppliers
• Undifferentiated materials

Buyer Power: Low

• Low switching cost  
• Undifferentiated product offerings

Threat of Substitutes: moderate to high

• Good Substitutes are readily available such as Wine, spirits ciders and other ready to drink products

SWOT:

Strengths

• Customer Loyalty, traditional image which appeals to Eastern consumers
• Strong company, family business since
• Brand reputation, top market position in West Virginia
• Emerging young leadership with Chris Prangel

Weaknesses

• Majority of Company leadership loyal to past business processes
• Limited finances to compete with major beer producers
• Revenues dependent on single product
• Lagers and strong beer not attractive to younger market or female consumers
• Lager at maturity stage of product life cycle

Opportunities:

• Marketing to women
• Marketing to younger demographic, 1st time drinkers 21-27 yrs
• Leverage brand recognition to develop and promote new light beer

Threats:

• Beer consumption on decline nationally
• Increase in cottage/craft beer industry offerings, more competition
• Price wars and competition with large distributors with high economies of scale

PEST Analysis

Political:

• Government and FDA health safety standards.
• Taxation levies on alcohol
• Consumption laws (age and location)
• Restrictions on promotions and advertising/recent repealing of arcane laws
• EPA standards for manufacturing process
• Interstate alcohol policies and regulations

Economic:

• Inflation rates, will determine spending patterns
• Consumer confidence in economic conditions

Social:

• Decline in premium beer consumer
• Lager demographic aging
• Increase demand for light beer among young adults and women
• Increase socially minded consumers, drink responsibly
• 1st time drinker demographic 21-27yrs, segment growing and high consumption rate

Technological:

• R&D – effectiveness and efficiency-
• Patent Laws

Problem Statement:

With sales and revenue on a decline in the lager market and an aging target consumer, should MMBC leverage the brand equity and launch a light beer which would appeal to women and a younger market and increase revenue. Furthermore could a light beer generate a profit in 2 years?

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