Harvard Business Case Study on Mountain Man Brewing CompanySankalp Agarwal
This is a case study and analysis conducted on one of the Harvard Business School Cases - Mountain Man Brewing Company: Bringing The Brand To Light.
Chris Prangel, a recent MBA graduate, has returned home to West Virginia to manage the marketing operations of the Mountain Man Beer Company, a family-owned business he stands to inherit in five years. Mountain Man brews just one beer, Mountain Man Lager, also known as "West Virginia's beer" and popular among blue-collar workers. Due to changes in beer drinkers' taste preferences, the company is now experiencing declining sales for the first time in its history. In response, Chris wants to launch Mountain Man Light, a "light beer" formulation of Mountain Man Lager, in the hope of attracting younger drinkers to the brand. However, he encounters resistance from senior managers. Mountain Man Lager's brand equity is a key asset for Mountain Man Brewing Company. The question is whether Mountain Man Light will enhance it, detract from it, or irreversibly damage it.
Harvard Business Case Study on Mountain Man Brewing CompanySankalp Agarwal
This is a case study and analysis conducted on one of the Harvard Business School Cases - Mountain Man Brewing Company: Bringing The Brand To Light.
Chris Prangel, a recent MBA graduate, has returned home to West Virginia to manage the marketing operations of the Mountain Man Beer Company, a family-owned business he stands to inherit in five years. Mountain Man brews just one beer, Mountain Man Lager, also known as "West Virginia's beer" and popular among blue-collar workers. Due to changes in beer drinkers' taste preferences, the company is now experiencing declining sales for the first time in its history. In response, Chris wants to launch Mountain Man Light, a "light beer" formulation of Mountain Man Lager, in the hope of attracting younger drinkers to the brand. However, he encounters resistance from senior managers. Mountain Man Lager's brand equity is a key asset for Mountain Man Brewing Company. The question is whether Mountain Man Light will enhance it, detract from it, or irreversibly damage it.
Mountain Man Brewing Company : Bringing the Brand to Light HBR Case StudyKanishka Yadav
PowerPoint Presentation discussing the marketing case study of Mountain Man Brewing Company: Bringing the Brand to Light. From Harvard business review.
Harvard Business School Case Study on Mountain Man Brewing Company by Shashank Srivastava, IET Lucknow under the guidance of Prof. Sameer Mathur, IIM Lucknow.
Mountain Man Brewing Company : Bringing the Brand to Light HBR Case StudyKanishka Yadav
PowerPoint Presentation discussing the marketing case study of Mountain Man Brewing Company: Bringing the Brand to Light. From Harvard business review.
Harvard Business School Case Study on Mountain Man Brewing Company by Shashank Srivastava, IET Lucknow under the guidance of Prof. Sameer Mathur, IIM Lucknow.
C128CASESCASE 20THE BOSTON BEER COMPANYThe Bost.docxRAHUL126667
C128
CASES
CASE 20
THE BOSTON BEER COMPANY*
The Boston Beer Company, known for its Samuel Adams brand, is the largest craft brewery in the United States, holding
a 1 percent stake in the overall beer market.1 It faces growing competitive threats from other breweries, both large and
small. In the past several years, the beer industry as a whole has been on a decline, while sales of wines and spirits have
increased. The Boston Beer Company competes within the premium beer industry, which includes craft beer and
premium imported beers like Heineken and Corona. Although the beer industry has been on a decline, the premium beer
industry has seen a small amount of growth, and the craft beer industry has seen a surge in popularity. Because of this
success of the craft breweries in particular the major breweries have taken notice and many new craft breweries have
sprung up.
Anheuser-Busch Inbev and MillerCoors, LLC, account for over 80 percent of the beer market in the United States.2
They have caught on to the current trend in the beer industry toward higher quality beers and have started releasing their
own higher quality beers. For example, Anheuser-Busch Inbev has released Bud Light Wheat and Bud Light Platinum in
an effort to provide quality beers to their loyal customers. MillerCoors makes Blue Moon beer, which is the most popular
craft beer in the United States. Anheuser-Busch Inbev released ShockTop to combat the popularity of Blue Moon. These
companies have also begun to purchase smaller craft breweries, whose products have been rising in popularity.
Anheuser-Busch Inbev purchased Goose Island Brewing Company in March 2011. MillerCoors has started a group
within the company titled Tenth and Blake Beer Company for the purpose of creating and purchasing craft breweries.
According to MillerCoors CEO Tom Lang, the plan is to grow Tenth and Blake Beer Company by 60 percent within the
next three years.3 The two major companies plan to use their massive marketing budgets to tell people about their craft
beers.
According to the Brewers Association, 1,940 craft breweries and 1,989 total breweries operated in the United States
for some or all of 2011. While craft breweries account for over 97 percent of all the breweries in the United States, they
only produce approximately 25 percent of all beer sold.4 However, with the rise in popularity of premium beers, the craft
breweries will continue to grab more of the market. As the country’s largest craft brewery, the Boston Beer Company
had revenue of over $500 million in 2011 and sold over 2 million barrels of beer. Other large craft breweries include
New Belgium Brewing Company and Sierra Nevada Brewing Company, which sold over 580,000 and 720,000 barrels of
beer in 2011, respectively.5 In addition, some smaller breweries have been merging to take advantage of economies of
scale and enhance their competitive position.
According to the Boston Beer Company, there are approximat ...
2. Mountain Man brewing company: Case Study Analysis
2
ABSTRACT
The purpose of this project was to work in teams on the Mountain Man Brewing
Company’s case study for which link is provided below. Our team worked on analyzing the case
study and prepared a team analysis.
Case Study link
https://hbr.org/product/mountain-man-brewing-co-bringing-the-brand-to-ligh/an/2069-PDF-
ENG?referral=01597
EXECUTIVE SUMMARY
Mountain Man Brewing Company’s biggest problem is deciding whether to launch a
light beer based on market conditions and branding recognition. There is a possibility that
Mountain Man Brewing Company will launch the new beer and not be able to make their money
back in a timely fashion and/or cannibalize their current lager sales.
Light beer sales have grown by four percent annually while traditional sales have
declined by four percent annually, due to changes in drinking preference. This is a threat to
Mountain Man as they only produce a dark lager at the current time. The younger generation,
under age 45, are not being targeted by Mountain Man, decreasing potential sales. Lager has a
low purchasing preference for the younger generation as well. Unless a light line is introduced by
Mountain Man they will potentially be phased out or become an even smaller percent of the beer
market over the long-term.
MMBC will not be able to break even in two years, but will have a NPV over $8,000,000
in five years, leading us to recommend that Mountain Man introduce a line of light beer. Not
only will the introduction of the new beer increase revenues over time, it will also increase
MMBC’s market share. Looking at the base and best case scenarios for market share and
cannibalism rates, MMBC will see a profit if they introduce a light beer.
The worst case scenario shows a profit loss, but also has highly unrealistic numbers for
market share and cannibalism rates for a product that is popular and growing with the younger
generations. Due to the fact that the light beer would be introduced under a different name, the
cannibalism rate should stay lower than the worst case scenario of 20%. MMBC introducing a
3. Mountain Man brewing company: Case Study Analysis
3
light beer under a different name will keep current customers happy and continuing to purchase
the lager they know and love while MMBC can discover new profits in their light beer without
upsetting current buyers.
MMBC should also consider offering an incentive to its current customers to help spread
the word about their new beer. This might come in the form of bundling the existing Mountain
Man beer with samples of the lighter lager. Another way to offer current customers incentives
could be through the use of coupons for free samples. With this approach current customers can
either use the coupons themselves or pass them onto someone they know who may be younger
and who prefers light beer.
For advertising, MMBC could begin by selling the light beer in cities known for having a
younger demographic, or by putting the light beer in stores near colleges. This would help
market the lighter beer to a younger age group by word-of-mouth sales.
PROBLEM IDENTIFICATION
The major problem that MMBC is facing is deciding if they should launch Mountain Man
Light?
Declining Sales: The problem arises because of declining sales for companies’
traditional beer and changing beer preferences. By the 1960s, Mountain Man Lagers had become
a reputable beer throughout the East Central Region and by 2005, it was generating over $50
million in revenue. Since the annual sales of traditional beer was decreasing by 4% and light beer
sales were increasing annually by 4%, MMBC was also experiencing decrease in sales in 2005.
An increase in focus on health concern was another reason for declining sales. The population
was becoming more concerned about their health and cutting down drinking any kind of beer. As
a result, beer consumption in the U.S decreased by 2.3% since 2001.
Brand awareness of beer is associated with its core product, which for MMBC is their Mountain
Man Lager. Although the major problem MMBC faced was the decision of launching Mountain
Man Light, the consequences of launching a light beer is also a challenge to the company.
Core Drinkers: MMBC is rated best beer in West Virginia for eight straight years. It has
a very loyal customer base of middle-aged men. Blue-collar, middle-to-lower income men over
the age of 45 are the core drinkers of the Mountain Man Lager. MMBC has not been catering to
4. Mountain Man brewing company: Case Study Analysis
4
the larger, growing segment of younger consumers and women who prefer light beer. Blue-collar
males purchased 60% of the beer for off-premise purpose and Mountain Man sold 70% of its
beer for off-premise consumption. We can see that the other problem with Mountain Man was
that it was serving a smaller segment of the market. A major reason for MMBC’s survival is that
it served a large enough market in their region with a very strong loyalty of its customers.
However, their revenue had gone down by 2% relative to the prior fiscal year.
Changes in consumer dynamics: It have also played a major role in the declining sales.
Younger consumers prefer light beer and the population of first-time drinkers, ages 21-27 years
old, accounted for the 27% of the total sales and have not developed loyalty to a particular beer.
This younger population has a lower purchasing preference for lager as compared to other beers
in terms of price and taste. This was also the reason Chris Prangel wanted to introduce a light
beer in order to attract the younger and ever increasing population.
Competition: The last reason for declining sales is the competition in their region. Major
domestic producers accounted for 74% of 2005 beer sales in their region. Large national
breweries also put pressure on smaller breweries like Mountain Man. Although this pressure led
to the closing of many independent breweries, MMBC survived it because of their stronger local
market.
INDUSTRY, COMPETITIVE AND ENVIRONMENTAL ASSESSMENT
The driving forces of the company begin with the owner. Mountain Man Brewing
Company is a family company and has strong personal meaning to Chris Prangel, the son and
heir of the current owner. MMB also has a strong connection to its current location in West
Virginia. The Prangel’s connect with the state and the people of the state connect with MMBC.
As far as driving forces for the market, the beer sales speak for themselves. The United
States had over $75 billion in annual sales in 2005. Despite declining sales due to things like
competition from wine and spirits-based drinks, an increase in the federal excise tax, initiatives
encouraging moderation and personal responsibility, and increasing health concerns, the
percentage drop only amounts to 2.3%. Clearly beer is still a dominant industry and one that
MMBC can still do well in, as long as they can continue to expand their customer base.
5. Mountain Man brewing company: Case Study Analysis
5
Even though MMBC has ambition, they still need to be aware of external factors that
may affect their market position. They have competition from four different categories, major
domestic products, second-tier domestic producers, import beer companies, and specialty
brewers; in which the last category is further split into brewpubs, microbreweries, contract
breweries, and regional craft breweries.
Eight fellow beer distributors prove a challenge for MMBC to make a name for itself and
have nationwide to international recognition. Further, the major domestics accounted for 74% of
beer shipments, the second-tier domestics 12.5%, the imports 12%, Brewpubs with 10% of the
craft brew volume, microbreweries accounted for 12% of the craft beer volume, contract
breweries with 16% of the craft beer volume, and regional craft brewers for 62% of the market.
Simply put, the major domestics market, which consists of arguably the three largest and
most recognized beer companies, and regional craft brewers, 50 companies all over the nation,
are the biggest competition for MMBC and they need to innovate products that are comparable
in order to gain a share of the market. The craft brewers in the East Central region, where
MMBC operates, owned 1.5% of the beer market; a small number considering the amount of
companies that are producing beer for that area.
Government regulations did not favor MMBC as West Virginia had recently repealed
arcane laws that had sharply limited the promotion of beer in retail establishments, and as a
result, retail stores began selling beer at deep discounts. Less small brands were carried and those
that were faced great pressure from the large brands that had no problem staying on the shelf.
Internal opposition also acts as a barrier for MMBC. The Vice President of Sales was
quoted as saying; “Mountain Man Light will never achieve the volume of larger light beer brands
like Miller Lite or Coors Light; those brewers sustain distribution and support advertising in
ways we can’t. What’s more, the big companies are constantly throwing new products bearing
the established brand name.” When the employees are not willing to fight for a place in a desired
market there is even less chance of long term success, or success at any length, for MMBC.
QUANTITATIVE ANALYSIS
Figure 1
6. Mountain Man brewing company: Case Study Analysis
6
Financial Ratios
Current Ratio 4.3956
Return on Equity 0.0507
Return on Assets 0.05
Gross Profit Margin 0.31
Operating Profit Margin 0.092
Net Profit Margin 0.0618
Total Asset Turnover 0.8097
Debt Ratio 0.3244
Debt-equity Ratio 0.329
Earnings Per Share 0.9584
Price Earnings 16.3613
Market to Book 1.2109
Figure 1 lists various financial ratios calculated for the current state of Mountain Man
Brewing Company. Mountain Men’s current ratio of around 4.40 reveals that the company is
more than able to pay off its obligations. Return on equity and return on investment are best
analyzed when compared to similar companies, but are low at around 5% for each. Other, large
beer companies in the United States see ratios of nearly 30%. The profit margin ratios show how
much a company actually keeps in its earnings from each sale. The net profit margin on 6.18%
means that for every dollar the company makes in revenues, 6.18% of it is actual income. The
Total Asset Turnover of .81 for Mountain Man is actually higher than some of the bigger
companies, but this may be due to the fact that those companies have much more in assets
invested in their company. Mountain Men’s debt and debt-to-equity ratios are both around .32
and show that the company is not highly leveraged and the company is at a low risk. The
earnings per share ratio for Mountain Men’s stock was around 1, meaning for each share,
Mountain Man earned $1 in income. With this, their P/E ratio looks to be pretty average for a
small brewing company at around $16. Because the market to book value of the stock is greater
than 1, Mountain Men’s assets are being overestimated.
Figures 2 & 3
7. Mountain Man brewing company: Case Study Analysis
7
Book Value of Debt & Equity
Bond 1 $15,000,000 Shares Outstanding 3,250,000
Bond 2 $4,500,000 Book Value per Share $12.95
Total BV of Debt $19,500,500 Total BV of Equity $42,087,500
Weight of Debt 0.32 Weight of Equity 0.68
Market Value of Equity
Bond 1 Bond 2 Shares Outstanding 3,250,000
Last Price $978.50 $1,023.50 Market Value of Stock $15.68
Total Issued $15,000,000 $4,500,000 Market Value of Equity $50,960,000
Par Value $1,000 $1,000 Weight of Equity 0.73
Market Value $14,677,500 $4,605,750
Weight of Debt 0.27
In figures 2 and 3, the values of debt and equity are shown depending on whether you use
their market values or their book values. There was a significant enough difference between the
two that a decision was needed to be made as to whether the discount rate would be based on
market or book value. Regardless, Mountain Men’s equity (stock) carries significantly more
weight than their Debt (bonds).
Figure 4
Cost of Debt & Equity
Bond 1 Bond 2 Risk Free Rate 5.56%
Total Issue $15,000,000 $4,500,000 Market Return 12.24%
Total Bonds Issued $19,500,000 $19,500,000 Beta 1.43
Weight 0.769230769 0.230769231
Interest Rate 7.16% 6.90%
Cost of Equity 15.11%
Cost of Debt 7.10%
(after tax) 4.62%
Here the cost of Mountain Men’s debt and equity are shown. Cost of equity ended up
being nearly twice as much as the cost of debt. Specifically for the company’s cost of debt, Bond
1 carries three times as much weight as Bond 1. Because the company only issued common
stock, no weighted calculations needed to be made for the cost of equity.
8. Mountain Man brewing company: Case Study Analysis
8
Figure 5
Weighted Average Cost of Capital
Book Value 11.79%
Market Value 12.23%
AVG 12.01%
This shows the two different Weighted Average Costs of Capital for MMBC based on
book value or market value. Because the two values were pretty close, an average of the two
seemed to be the best option. Also, an average creates a safer assumption on the discount rate
when forecasting and calculating expected values for NPV and payback periods. Based on this
value of WACC, MMBC should expect to pay 12.01% to all its security holders to finance its
assets.
*Figures 6-12*
Because these figures include forecasting or expected value calculations, there are some
scenarios and assumptions that need to be assessed. Cannibalism rates and market growth values
were given best, base, and worst case scenarios with the introduction of a Mountain Man Light
beer.
Cannibalism:
• Worst Case: Mountain Man Light cannibalizes 20% of Mountain Man Lager sales
• Base Case: Mountain Man Light cannibalizes 5% of Mountain Man Lager sales
• Best Case: Mountain Man light cannibalizes -5% of Mountain Man Lager sales, meaning
the light beer actually increases the original lager’s market share
Market Share Growth:
• Worst Case: Mountain Man Light sees a .1% increase in market share annually
• Base Case: Mountain Man Light sees a .25% increase in market share annually
9. Mountain Man brewing company: Case Study Analysis
9
• Best Case: Mountain Man Light sees a .5% increase in market share annually
Figure 6
Break Even Points
Market Share Growth Cannibalism Rate Expected
-5% 5% 20%
0.10% 0.98 3.7 6.68 3.48
0.25% 1.18 2.19 4.12 2.273
0.50% 1.3 1.8 3.55 2
Expected
Weighted
AVG
2.4325
In this table, break even points were calculated based on the 9 different scenarios. They
ranged from under 1 year to more than 6 years. These break even points show exactly when
Mountain Man would see their profits break even with their costs of introducing and maintaining
production of the light beer. The average of 2.43 is appropriate as it takes time for new products
to find their place in the market and begin to become profitable in the long term.
Figure 7
Change in Company Value
Market Share Growth Cannibalism Rate Expected
-5% 5% 20%
0.10% $30,261,934 $15,751,988 ($6,012,932) $15,751,987.80
0.25% $58,133,993 $43,624,046 $21,859,127 $43,624,046.30
0.50% $104,587,424 $90,077,478 $68,312,558 $90,077,477.80
Expected
Weighted AVG
$51,985,664
Here changes to company value are compared. Obviously with the introduction of a new
product line, the company will increase in value. The values here really depend on whether or
not this increase in company value is worth the profit or loss during the given forecasted period.
10. Mountain Man brewing company: Case Study Analysis
10
Figure 8
Barrels of MM Light to Break Even vs Forecasted Sales (One Year)
Cannibalism Rate Expected
-5% 5% 20%
13,912 -46,465.00 -137,391.00 -46,537.10
*(Forecasted Sales in Year One) - (Sales Needed
to Break Even)
This table shows whether or not MMBC will sell enough MM Light in the first year of
production to break even. If there is enough the number is positive, if the company will turn a
loss, the value is negative. A positive number represents how many excess barrels of MM Light
will be sold and a negative number represents how many barrels of MM Light short MMBC is
from breaking even. With the expected value being negative, this shows that MMBC will not
likely break even during year one from the introduction of MM Light.
Figure 9
Barrels of MM Light to Break Even vs Forecasted Sales (Through Year Two)
Market Share Growth Cannibalism Rate Expected
-5% 5% 20%
0.10% 78,994 -40,552 -219,872 -40,552
0.25% 109,404 -10,142 -189,462 -10,142
0.50% 160,089 40,543 -138,777 40,543
Expected
Weighted
AVG
-1018.7
*(Forecasted Sales
in Year One) -
11. Mountain Man brewing company: Case Study Analysis
11
(Sales Needed to
Break Even)
This table is similar to Figure 8, but instead is through the second year. The values all
signify the same as in figure 8, but because it is through a second year, the market growth rates
need to be accounted for. Even through the second year, MMBC still looks like it will not sell
enough MM Light to break even, but the number short is much less than in figure 8. It is clear
from this data that MMBC will sell enough MM Light in year three to turn a profit.
Figure 10
2 Year NPV Predictions
Market Share Growth Cannibalism Rate Expected
Best Case (-5%) Base Case (5%)
Worst Case
(20%)
0.10% $1,625,955 ($931,619) ($4,767,981) ($931,619)
0.25% $2,238,708 ($318,866) ($4,155,228) ($318,866)
0.50% $3,259,963 $702,389 ($3,133,972.64) $702,388.86
Expected
Weighted
Average
($135,040.24)
Calculations for the two-year net present value of the launch effect are presented here.
Just as seen in break even points and in forecasted sales of MM Light, MMBC’s two year net
present value of the launch effect will most likely be negative. Although the value is negative, it
does not necessarily mean the introduction of the light year is a bad corporate decision. In 4 out
of the 9 situations, two year NPV was positive.
Figure 11
5 Year NPV Predictions
Market Share Growth Cannibalism Rate Expected
12. Mountain Man brewing company: Case Study Analysis
12
Best Case (-5%)
Base Case
(5%)
Worst Case
(20%)
0.10% $7,034,020 $1,732,640 ($6,219,430) $1,732,640
0.25% $12,311,146 $7,009,767 ($942,303) $7,009,767
0.50% $21,106,357 $15,804,977 $7,852,908 $15,804,977
Expected
Weighted
Average
$8,592,904.58
Calculations for the 5 year net present value of the launch effect are presented here. From
these forecasts, the reward from launching the light beer is finally seen. In 9 out 11 scenarios,
NPV was positive. In fact the expected NPV was around $8.5 million. It appears that only in
worst case scenarios for cannibalism rate could MMBC see long term losses from the
introduction of MM Light.
Figure 12
Payback Period Predictions
Market Share Growth Cannibalism Rate Expected
Best Case (-5%) Base Case (5%) Worst Case (20%)
0.10% 0.715 1.622 2.399 1.5053
0.25% 0.715 1.458 2.263 1.3961
0.50% 0.712 1.306 2.007 1.268
Expected
Weighted
Average
1.37951
13. Mountain Man brewing company: Case Study Analysis
13
The time it takes for MMBC to make enough profit to pay off their initial investment in
launching MM Light are presented here. From this data, it looks like the initial investment would
definitely be paid off at the worst within 2.5 years, with some cases being within the first year.
On average, the payback period would most like be around 1.5 years.
Exhibit 3 shows that even in West Virginia, the place MMB associates with the most, the larger
beer brands still hold the largest portion of the market in the East Central Region. However,
Exhibit 4 shows a growth in beer consumption in the same region, despite falling numbers for
the nation as a whole. Although MMB faces fierce competition there is still a growing number of
buyers to sell all kinds of lager and beer to.
14. Mountain Man brewing company: Case Study Analysis
14
ALTERNATIVES
If MMBC wants to compete with other companies, it needs to introduce a light beer and
appeal to a larger demographic, specifically 21-35 year olds. Light beer sales have gone up by
4% and will only continue to increase. Introducing a light beer could make up for the 4% decline
in sales of traditional lagers.
According to Chris Prangel, introducing a new beer with the name of Mountain Man
Light would solve the problem of declining sales that the company is experiencing with their
competition and other products in the market like light beer, which accounted for 50.4% of the
volume of sales in 2005.
Introduce light beer under different name: However, according to our analysis, the
best alternative for MMBC is to introduce a light beer with a different name. In one of the focus
sessions of Mountain Man, one of the middle-aged men said, “Mountain Man Light? Come on,
I’m not interested in Light beer. Just don’t mess with Mountain Man Lager.” It is apparent that
the current customers are not happy with the decision of launching a line of light beer. By
introducing light beer under a different name, it would prevent brand erosion and
cannibalization, and in return it would increase their combined market sale with the core product
and new product that is gaining popularity in the market. MMBC would also prevent the risk of
losing their reputation of being a unique and good product with a secret recipe.
MMBC could use the already established reputation of the company to market the
product; however, it would need to do so by branding the light beer separately from the original
Mountain Man Lager. This means naming the light beer something clever that sounds appealing
to the younger demographic, but does not take any attention away from its already established
beer, thus not affecting its current customer base who is not excited by adding a light line.
Introducing the light beer under a new name will come with additional costs, such as
advertising costs and packaging costs. At first, MMBC may not see immediate increase in sales
by introducing the new beer, however, over time, with the right advertising campaign and eye-
catching packaging; new consumers will be drawn to trying the new beer. Thus, increasing the
likelihood that the younger demographic will enjoy drinking the new beer. With this approach,
rather than experiencing product cannibalization, the company will experience growth through
the expansion of its product line.
15. Mountain Man brewing company: Case Study Analysis
15
Advantages of introducing the light beer under a different name include diversification
of product, catering to the needs of a bigger market and saving on additional cost of advertising.
Also, adding a beer under a different name would not require them to invest in all the equipment
and it would save them this cost.
Marketing the existing product: MMBC can market the existing product to increase its
sales at both on premise and off-premise locations. Consumers do not have much preference for
beer at the on premise locations. By expanding the sales of lager to on premise locations, MMBC
can improve its sales. A women in the focus session said that “Mountain Man is kind of ‘retro
cool’. I like light beer and Miller light is so passé. I would definitely try Mountain Man Light.”
Clearly there is interest from some consumers for an alternative line of beer besides Mountain
Man’s dark lager.
We can conclude from the comments of the focus group and our analysis that the loyal
customers of Mountain Man Lager, i.e. middle-aged men, would not prefer to see Mountain Man
Light and women would prefer to see light beer by Mountain Man. The only possible way to
serve both of them is to introduce a light beer under a different name.
MMBC could introduce the new, light beer using its already established name; for
example, Mountain Man Light. That, however, comes with the disadvantage of a possible
decline in sales due to the loss of customers who already drink Mountain Man Lager and know it
for its fullness and as a “man’s beer.” Product cannibalization may occur because with the
introduction of its new beer, current customers may like the new beer better, which will take
away from current sales, or they may not like it at all and will be disappointed that MMBC
would even think of introducing a new beer, thus also taking away from current sales of MMBC
beer. Advantages to introducing the lighter beer under the MMBC name would be the already
established reputation of MMBC that many people know and love. Using the MMBC name
would also help keep costs down as the company would have lower advertising costs for the new
beer.
RECOMMENDATIONS
Although the company won’t break even for two years, in fact, it will be losing money,
the NPV for MMBC after five years will amount to over $8,000,000, reinforcing that Mountain
Man should indeed introduce a line of light beer. This alternative, compared to simply having
16. Mountain Man brewing company: Case Study Analysis
16
one beer, can increase revenue over time. Not only will the introduction of the new beer increase
revenues over time, it will also increase MMBC’s market share. The company cannot expect to
make profits right away with the introduction of the light beer. There will be additional
advertising and packaging costs. With this alternative however, MMBC will save money by not
having to reestablish its reputation in the beer market. MMBC should also consider offering an
incentive to its current customers to help share the new beer. This might come in the form of
bundling the existing Mountain Man beer with samples of the lighter lager. Another way to offer
current customers incentives could be through the use of coupons for free samples. With this
approach current customers can either use the coupons themselves or pass them onto someone
they know who may be younger and prefers light beer. For the advertising, MMBC could begin
by selling the light beer in cities known for having a younger demographic, or by putting the
light beer in stores near colleges. This would help market the lighter beer to a younger age group
by word-of-mouth sales. If the newly exposed group of people like the beer, nine times out of
ten, they will go and tell a friend about the beer.
DEFENSE OF POSITION
Mountain Man Brewing Company should introduce a light beer under a different name
because it promises the most success for the company financially. Although a breakeven point
will not be achieved within the owner’s preferred time limit of two years it will happen within
two and a half years assuming worst case scenario. An NPV after five years surmounting
$8,000,000 is enough to take a chance with introducing the new line, based on best and base case
scenarios. MMBC will only see a loss if their cannibalism rate is 20% and their market growth
rate is below 25%. Due to the fact that the light beer would be introduced under a different name,
the cannibalism rate should stay lower than the worst case scenario of 20%. A light beer under
the Mountain Man name would encourage those who are loyal to the Mountain Man Lager to
switch to the lighter option. This risk is nullified by the alternative suggested here. Also, both
worst case numbers are slightly unrealistic, especially the market growth rate. A new product
line being introduced into a current and growing market ensures that the growth rate will
increase and MMBC will in fact see a profit over time.