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Mountain Man Beer Company
Mountain Man Beer Company (MMBC) is a family owned brewery with a strong brand known for its premium beers. It has seen declining revenues as younger consumers prefer light beers. Two options to address this are introduced: 1) a light beer under the Mountain Man brand, which risks cannibalizing existing sales and brand erosion, or 2) a light beer under a new name, incurring higher advertising costs without leveraging the strong brand. A feasibility analysis shows introducing a light beer under a new brand name could generate over $15 million in additional revenue by 2007 without damaging the core brand. While this option looks promising, introducing light variations on the Mountain Man name could save on advertising costs while leveraging the brand equity.
Mountain Man Beer Company
- 1. Mountain Man BeerCompany Group 7 Amitajeet Chintan Priyak Rudranil Saurav
- 2. MMBC • Strong Brand •Top market position in premium segment in East Central America. Popular for over 50 years • Popular among Blue collared working men • Family owned independent image
- 3. Issues • 2% declinein revenue • Rising popularity of Light beer among young people
- 4. Projecting Revenues Year Revenue 2006$49,431,200 2007 $48,442,576 2008 $47,473,724 2009 $46,524,250 • Assuming 2% drop in revenues every year
- 5. Projecting Revenues 2007 20082009 Net Revenue $48,442,576 $47,473,724 $46,524,250 COGS $33,425,377 $32,756,870 $32,101,732 Income after tax $2,991,320 $2,931,502 $2,872,872
- 6. Option 1: IntroduceLight beer by Mountain Man brand name • Advantages ▫ Increase in revenue ▫ Low advertising Costs ▫ Cater to a market growing @ 4% CAGR • Disadvantages ▫ Product cannibalization ▫ Brand erosion ▫ May not be perceived well
- 7. Option 2: IntroduceLight beer by some other name • Advantages ▫ Expected increase in revenues ▫ Cater to a market growing @ 4% CAGR ▫ No brand dilution, no cannibalization • Disadvantages ▫ Additional advertising costs ▫ Cannot leverage strong brand name
- 8. Feasibility Analysis ofOption 2
- 9. Feasibility Analysis (cont.) •Net Revenue in 2005 : $50,440,000 • Barrels sold: 520,000 • Therefore, Selling Price per Barrel = $97 • Price of Premium Beer = Price of Light beer • There price of light beer per barrel: $ 97/barrel
- 10. Feasibility Analysis (cont.) •Chris’ estimate: To capture 0.25% market share every year. • Light beer market share in 2005 = 18,744,303 barrels • At 4% CAGR, in 2007 market size = 20,273,838 • Selling 0.25% of this market @ $97/barrel will generate a revenue of $4,916,405
- 11. Feasibility Analysis (cont.) •Continuing with 4% CAGR and MMBC increasing its market share at 0.25%/year, we get the projected revenue from light beer: Year Revenue from Light Beer 2005 $4,916,405 2006 $10,226,123 2007 $15,952,753
- 12. Projecting new revenues 20072008 2009 Net Revenue $53,358,952 $57,699,848 $62,477,003 COGS $37,063,518 $40,324,202 $43,906,770 Income after tax $2,669,810 $3,908,543 $4,724,656
- 13. Comparing YoY Year 20062007 2008 2009 Revenue before $3,040,677 $2,991,320 $2,931,502 $2,872,872 Revenue after $3,040,677 $2,669,810 $3,908,543 $4,724,656
- 15. Conclusion • Significant growthin revenue by introducing light beer with different name • Caters to a market growing @ 4% CAGR • Caters to a market that does not have a brand loyalty • May develop brand loyalty over the years with a segment of this target segment
- 16. Food for thought,Option 3,4 etc… • What if, With the same packing, Mountain Man introduces a light beer named ▫ Mountain Boy ▫ Plateau Man • To save on its advertising expenses by • Leveraging its brand equity
- 17.