Mountain Man Brewing Company

A1.

● Shrinking and highly competitive market in the sector of premium beers

● Growth in new market of light beers, shift in consumer’s taste

● Highly concentrated customer base

● Increased health awareness promoting responsibility and restraint

A2.

● General decline of beer consumption since 2001 (by 2.3%)

● Growth in new market of light beers, shift in consumer’s taste (sales increase form 2001: 29.8% to 2005: 50.4%)

● Aging society (current consumers); MMBC’s clients were low-income men, +45 years old. Now people aged 21-27 become key consumers

● Increased health awareness

● Pressure from large national breweries, and competition in spirits and wine

● Increase in federal taxes

A3.

o collapse just as tens of other during the crisis, dominated by large companies

o Implement changes in the current MM Lager product

o Will enter the expanding market of light beers addressing the new target segment (21-27 year olds), building new brad image and enter new locations: restaurants, bars.

B1. Appendix 1

Contribution per barrel MM Lager: $15,636,400/520,000 or $97 - $66.93 = $30.07

Contribution per barrel MM Light: $30.07 - $4.69 = $25.38

B2.

2005 2006 2007

Contribution from MM Lager $15,636,400 $15,323,672 $15,017,199

Cannibalization 5% $781,820 $766,183.6 $750,859.9

Cannibalization 20% $3,127,280 $3,064,734.4 $3,003,439.8

Cannibalization 5% = $766,184 + $750,860 = $1,517,044

Cannibalization 20% = $3,064,734 + $3,003,440 = $6,068,174

B3. Appendix 2 & Appendix 3

Total fixed costs = Initial advertising costs + SG&A2006 + SG&A2007

Fixed cost 2006 = $750,000 + $900,000 + $766,183.6 = 2,416,184

B/E 2006 5% = 2,416,184/25.38 = 95,200

B/E 2007 5% = $0 + $900,000 + $750,860 = 1,650,860 /25.38 = 65,046

Cannibalization 5%= 95,200+ 65,046 = 160,246 units

B/E 2006 20% = $750,000 + $900,000 + $3,064,734.4 = 4,714,734 /25.38 = 185,766

B/E 2007 20% = $0 + $900,000 + $3,003,440 = $3,903,440/25.38 = 153,780

Cannibalization 20% = 185,766 + 153,780 = 339,566 units

C1.

2005 2006 2007

Market total 37,191,077 36,447,255 35,718,310

Light Beer market 18,744,303 19,494,075.12 20,273,838.12

In relation to total market share: (decreasing by 2% annually)

BEMS 2006 5%= (95,200/36,447,255)*100%= 0.26%

BEMS 2007 5%= (65,046/35,718,310)*100%=0.18%

BEMS 2006 20% = (185,766/36,447,255)*100%= 0.51%

BEMS 2007 20% = (153,780/35,718,310)*100% = 0.43%

In relation to light beer market only: (increasing 4% annually)

BEMS 2006 5%= (95,200/19,494,075)*100% = 0.49%

BEMS 2007 5%= (65,046/20,273,838)*100% = 0.32%

BEMS 2006 20% = (185,766/19,494,075)*100% = 0.95%

BEMS 2007 20% = (153,780/20,273,838)*100%

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