Mountain Man Brewery is experiencing declining sales for the first time in the company’s history 1) Age Demographics • Mountain Man’s beer drinker’s are getting older and decreasing their frequency of purchases • As Mountain Man’s beer drinker’s are aging the children of Proof a Mountain Man drinker are not choosing Mountain Man beer asCentral East 2004 2005 2006E their primary choiceRegionMarket Size 38,678,720 37,191,077 35,703,434overall 2) Increased presence • Distributors supporting beerMarket Size 4,718,618 4,648,885 4,462,929 of large multi-national brands on basis of turnover andMM brands in Mountain margins; dropping brands thatCompetes in do not contribute to bottom line Man’s distribution areaMM share 530,400 520,000 509,600 (Case Fact) • Large brands maintain(Barrels) economies of scale in brewing,Profit $ $4,887,636 $4,791,800 $4,695,964 transportation and marketing; Increased pressure • Mountain Man is not a 3) Distributors not popular customer to willing to help build distributors because of small Mountain Man market share presents brand awareness • Small shipments of under 600,000 barrels annually.
Mountain Man provides a high quality beer that hard working men enjoy Loyal – Hard Working - Deserving Legacy – American – Gold Standard A Mountain Man beer drinker Mountain Man Brewing Company • Blue Collar •Legacy Beer • Middle to low income men over age •High quality 45 •Rich and bold flavour • Purchase beer at off premise •Mouth watering beer location (liquor stores) •Drinkability • Working man (trades) (large • Mountain Man is authentic population of workers) • Best beer in West Virginia • Since 1925 Oscar has had the same • America’s championship lager customers, rugged, middle age men • Family owned from the coal miners union. • Strong brand image in East Central Region •Brand loyalty rate of 53% • Small sales force (focus- getting off premise locations) • Old management transitioning to younger managementA small amount of MMBC’s blue • Unaided response rate of 67%, men incollar customers accounted for the East Central Region know this beer!a large percentage of sales “We manufacture an exceptional beer with a great brand name, we’ve never lost sight of our core customers, and we’ve never been seduced by the other guy’s market”
Mountain Man Brewery competes on similar dimensions as other beer companies Beers Price (6-pack)~ Taste (customer’s perception) Mountain Man is fulfilling the need of customers that want a Anheuser-Busch $5.00 Typical high quality beer at a reasonable price. Miller $5.10 Typical 2nd tier domestic $3.99-$4.99 Mid • This places Mountain Man as a regional Craft Brewer and in direct Imports $6.00+ Mid competition with brewers like Sam Adams, Harpoon and the 50 other Coors $4.99 Typical regional craft brewers. Mountain Man $4.99 Bold Craft Brewers $4.99+ Bold •The Advantage of being a regional craft brewer is: 1) Known for quality and taste Price High 2) Distribution channels are already set up in most states 3) Customers of a Craft beer are always loyal • The Disadvantage of a Craft Bold Flavours Brewery: Typical 1) High competition (980 Flavours brewpubs, 380 microbreweries and 50 regional brewers) 2) Low barrel production, therefore distributors hesitate to build brand image Price Low
Mountain Man needs alternatives to fit three core dimensions Must reverse declining sales trend and turn a profit within two years of investment • Mountain Man is able to invest approximately $1.3 million dollars • It is expected to achieve a 12% return within two years of the investment or $156,000 • The strategy needs to make financial sense for the long term sustainability of Mountain Man All dimensions must be in line for Mountain Man to be successful The strategy can not alienate Mountain Fit with the Mountain Man brandMan’s Core customers • Mountain Man brews high quality beer and is• The core of Mountain Man’s business relies known for its drinkability and bold tasteon their relationships with their customers • The Mountain Man brand is a man’s brand• These customers need not feel like Mountain with rich heritage in the USAMan’s commitment to them is in jeopardy • The beer is packaged with a label that says to• The strategy must hold on to current loyal the man drinking it, that you deserve a goodcustomers, while producing increased profits beer
Launching a light beer is not for Mountain Man 1) Negative profits for at least the first two years Mountain Man 2005 2006 2007 • Very high cost to build new light beer brand • Negative profits for at least the first two years after launch Mountain Man Lager $3,087,396 $3,028,674 $2,971,127 • Does not raise MMBC’s bottom line • Does not increase chances of distributors building brand Mountain Man Light - $1,452,395 $1,450,530 • Cost of goods is increase by nearly $5 per barrel • Very difficult to compete in light beer because all other Mountain Man Profit $3,087,396 $1,576,280 $1,520,597 brands are developing light beer as well • Light beer will take away facings in off premise locations from regular Mountain Man lager, decreasing sales 2) Extremely high competition, Mountain Man is lagging Light Beer 2005 Market Share Mountain Man will not be able to steal market share from any of the competitors: Anheuser- 54% • 90% of the light beer category is owned by the three largest beer companies in Busch the United States • larger advertising budget Miller 24% • Greater pull with distributors • Increase the bottom line of off premise stores and where beer is sold Coors 11% • Stronger brand image across the United States • Pull strategy marketing (people know about these light beers) Other Brands 8% Imports 2% 3) Light beer does not fit the Mountain Man Culture •Mountain Man is a beer for the hardworking man, and has always been a beer for the hard working man, light beer drinkers tend to be younger college students • Mountain Man is a company that focuses on building a relationship with their customers, this is not the case with a light beer drinker • Mountain Man beer is pushed onto consumers, building brand awareness of Mountain Man Light will cause MMBC to switch to a pull strategy where major brands will over power them.
Increase Mountain Man market share in East Central Region 1) Increase facings: Currently: • Increase facings within the off premise channels by • MMBC holds less than 0.5% share in East targeting selected chain stores that fit with the modus Central Region operandi of the Mountain Man lager customer •MMBC currently sells 70% of their beer to off premise locations (liquor stores, supermarkets) Will have to work hand in hand to be • MMBC holds top market position among successful lagers in West Virginia • 60% of their beer purchase is by blue collar 2) Increase awareness: workers or $1.8 million in profit • leveraging the unaided brand awareness of Mountain Man to 75% instead of 67% • ROI = $664,925 (approximately) • Warning- this may cost MMBC more than $1.3million The Problems Value of Investment: No differentiating factors from competition: •Strategy will return profit in due time • MMBC will still keep the same market position • It took MMBC to build an unaided brand and will be competing against brands on price awareness rate of 67% over 50 years and taste • It will be very difficult to gain a new loyal • Mountain Man Lager will never have pull with customer quickly off premise locations to have the facings they • The cost of advertising and trade promotions want to increase growth exponentially will probably be more than what MMBC is • due to greater pull from larger brands willing to spend • High risk, Mid to low reward Position stays the same, difficult to compete with larger brands on facings
Enter new markets in close proximity will increase lead generation • West Virginia is a central hub for distribution channels •Located in the East Central Region, but situated better to serve in the surrounding states to the south and the east • Virginia, Pennsylvania, Tennessee, North Carolina, Maryland, New Jersey 2005 Population (in 2005 Population (in Millions) Millions) Tennessee 5.9 West Virginia 1.8 Virginia 7.5 Ohio 11.4 N.Carolina 8.6 Illinois 12.6 Maryland 5.8 Indiana 6.2 New Jersey 8.6 Michigan 10.0 Pennsylvania 12.4 •By Entering these six other states MMBC’s population of potential users increases by 48.8 million people and approximately 24.4 million males • These states are easily accessible via major highways running through West Virginia • Strong presents of hard working men that fit MMBC target customers
Mountain Man Brewing Company heard the call from hard working American men for a beer that isaccessible and of award winning stature, which is why Mountain Man Brewing Company is expandingtheir distribution network 2005 Price High Anheuser –Busch Miller Bold Flavours Coors Typical Flavours Second Tier Domestic Mountain Man Imports Craft Price Low High 2006 Quality•Mountain Man is competing in war that they can not win, Small Largewith dimensions of price and flavour Distributi Distribution• By changing the dimensions that they compete on, MMBC on Network Networkcan now create a competitive advantage for themselvesamong Craft brewers • By positioning themselves as a high quality beer with Low a relatively large distribution network, it decreases Quality competition for MMBC and makes their award winning lager accessible to hard working men • Mountain Man is heavily reliant on their current customers, by increasing their distribution network MMBC will gain new brand loyal customers
Enter new markets in close proximity will increase sales and build the Mountain Man brand Entering new markets will lead to stronger relationships 2006E 2007E with distributors • Increased sales Investment $1.3MM $1.3MM • Giving the distributors more work will increase their bottom line and return a greater profit Revenue $4.3 MM $7.2MM • They will be more helpful building MMBC’s brand in Profit $282, 315 $451,704 the states that Mountain Man distributes too • MMBC will have a stronger presence on the east Barrel 16,500 33,000 coast which can lead to future distribution nationally Increased amount of awareness among target age Process: • MMBC will be able to target a larger broader base of 40+ • Enter one new state every year starting with year olds Pennsylvania • Greater chance to build brand awareness through gaining • Keep same amount of facings and focus on access to a larger population off premise locations (70% of distribution) • As sales increase and overall profit increases there is • Leverage relationships with distributors and use them as a collaborator opportunity to build brand loyalty amongst target • Increase sales force in new states to push customers the product • Penetrate pricing strategy to show value and Do what MMBC does well maintain customer loyalty with current • Brewing a high quality lager should be shared with customer all surrounding states • MMBC will gain recognition for their award winning lager on a larger national presence • MMBC will be one of few Craft brewers to have a large scale presence in the United States