BRIEF HISTORY OF MMBC
- Founded in 1925 by Prangel, Mountain Man Beer Company (MMBC) is a family-owned business that brews a bitter-tasting beer .
- Mountain Man brewed one beer, Mountain Man Lager, also known as “West Virginia’s beer.
- It had held the top market position among lagers in West Virginia for almost 50 years and had respectable market share for an old school, regional brewery in most of the states where the beer was distributed
- The sole brand loyalty rate for Mountain Man Lager was 53%, which was higher than the rates of competitive product
- Mountain Man Lager’s distinctively bitter flavour and slightly higher than- average alcohol content that uniquely contributed to the company’s brand equity.
- Brand awareness was one cornerstone of the brand’s success with blue-collar consumers.
- Traditional advertising was not as effective as grass-roots marketing3 in building beer brand awareness in certain states in the East Central region, such as West Virginia and Kentucky.
- Mountain Man had always relied on grass-roots marketing to spread its beer quality message by word of mouth.
- Research showed that Mountain Man was as recognizable a brand among working-class males in the East Central region as Chevrolet and John Deere.
- The other cornerstones were the perception of quality in Mountain Man Lager and the brand loyalty it cultivated.
- In a recent study in West Virginia, this audience had rated Mountain Man Lager as the best-known regional beer, with an unaided response rate of 67% from the state’s adult population.
- It had Intense competition in some states including west Virginia
- Due to changes in beer drinkers’ preferences, the company was now experiencing declining sales for the first time in the company’s history of 2%
- Since 2001, U.S. per capita beer consumption had declined by 2.3%, largely due to competition from wine and spirits-based drinks, an increase in the federal excise tax, initiatives encouraging moderation and personal responsibility, and increasing health concerns.
- Changes in volume were driven primarily by changes in consumer segments. Most industry observers agreed that the key consumer segment for beer companies was younger drinkers, 21–27 years of age. This age demographic have low as a purchasing preference for lagers and fuller-flavour brews.
For the first time in the company’s history, it experienced a 2% decline in revenue as a result of an aging demographic. Chris Prangel needs to decide whether to launch Mountain man Light (MMI) or not.
To sustain the MMBC business
- To launch Light beer
- To not launch Light beer
- Impact on MMBC brand
- Impact on MMBC revenue
- MMBC Net Profit Margin
- Pay back Period
IMPACT ON MMBC BRAND
MMBC has a good equity due to its loyalty from its customers. Launching Mountain man light will not affect the brand equity negatively.
IMPACT ON MMBC REVENUE AND NET PROFIT
Revenue is increased but net profit is down at the first year of the launch. However, this situation changes in the second year.
|INITIAL EXPENSES OF $1,782,365|
|YEAR||INFLOWS||CUMMULATIVE CASH OUTFLOW|
|PAYBACK PERIOD||1.2 YEARS|
- The reliability of Chris projections of revenue and net profit projections to 2010. He could be overly optimistic
- Competition against deep-pocketed competitors of the segment or those with more economies of scale.
- There could be options that can be considered.
- Seek more professional view on Chris’ revenue and income projections
- Leverage on the MMBC’s core brand name for product focus among distributors and retailers
- Maintain the core attributes of authenticity, quality and unique toughness of Mountain Man Lager beer
- There may be need to include the use of traditional advertising for Mountain Man Lager beer.
Launch Mountain Man Light beer.