Mountain Man Brewing Company, founded in 1925 by Guntar Prangel in West Virginia, faces declining sales and seeks to tap into the growing light beer market amidst a 2% revenue drop. Chris Prangel, a recent MBA graduate, must evaluate the potential risks and benefits of launching Mountain Man Light, balancing production costs against projected revenues. Despite initial losses in 2006, the product is expected to become profitable by 2007 and enhance brand awareness.

1. MOUNTAIN MAN BREWING COMPANY:
BRINGINGTHE BRANDTO LIGHT
Harvard business school case

2. What is Mountain Man
Brewing Company?
Who is Chris Prangel?

3. Mountain Man Brewing Company
 Founded by Guntar Prangel in 1925.
 Located in New River Coal Region in WestVirginia.
 Launched MOUNTAIN MAN LAGER by reformulating
an old family brew recipe.
 By 2005,mountain man beer company was generating
$50 million in revenue and selling over 520,000 barrels.
 Known asWestVirginia’s beer.
 Popular among blue collar working men.

4. Chris Prangel
 Recent MBA graduate.
 Stood to inherit Mountain Man Beer Company in
five years.
 Taken the responsibility to manage the marketing
operations of Mountain Man Beer Company
(MMBC).

5. Why is MMBC a success?
 Family owned
 History
 Authenticity
 Reputation
 Bitter flavor
 Bottling
 Higher than average alcohol content

6. Promotion
 Promoted mostly in retail
stores located in the east
central US. “Heartland” states.
 Relies heavily on brand loyalty
and word of mouth
“grassroots” advertising.
 Packaged in old style brown
bottle, original 1925 label
featuring coal miners.

7. What is the
present
situation?

8. Situation analysis (1/4)
Company experience declining
sales for the first time.
2% drop in revenue relative
to prior fiscal year.
4% annual growth in light beer
segment due to youth preference.
US per capita beer consumption
had declined by 2.3% since 2001.

9. Situation analysis (2/4)
Competitive Market Shares in Barrels by Brewer:

10. Situation analysis (3/4)
Consumption byType of Beer and by Origin/Packaging, 2005:

11. Situational analysis (4/4)
Light beer competitive market shares:

12. Why study
this case?

13. Objective of this case (1/3)
The MMBC wants to
know if they should
branch out and tap into
this light beer market.

14. Objective of this case (2/3)
Evaluating the effect of light
beer on brand value and
current product (Mountain
Man Lager).

15. Objective of this case (3/3)
Investments and return
on the new product
In how many years the company
will break even after launching
Mountain man Light Beer?

16. Mountain Man Light Launch: PROS
Diversify brand
portfolio
Appeal to female
drinkers
Leveraging the core brand
name by creating a new
beer
Increased
revenues
Expand consumer
market by attracting
younger drinkers
between ages 21-27

17. Mountain Man Light Launch: CONS
Increased cost of
production and
advertising
Create brand
implications
Distracting
focus away from
current lager
Alienate the
current customer
base
Competing against
deep pocketed
competitors

18. Mountain Man Light
Revenue Forecast for Mountain Man Light Beer:
Year 2005 2006 2007 2008 2009
Light beer consumption in
barrels (East Central
Region)
18,744,303 19,494,075 20,273,838 21,084,792 21,928,184
CAGR (compound annual
growth rate)
4% 4% 4% 4%
Mountain man light
estimated growth year on
year (0.25% of base market
share)
0.25% 0.50% 0.75% 1.00%
Mountain man light
estimated sales in barrels
48,735 101,369 159,136 219,282
Mountain man light
estimated revenues (@$97
per barrel)
$4,727,295 $9,832,793 $15,339,192 $21,270,338

19. Mountain Man Light
Breakeven analysis for mountain man light beer (2006-2007):
Variable cost calculations:
Variable cost for mountain man lager = $66.93
Variable cost for mountain man light = $71.62 ($66.93+$4.69)
Price per barrel = $97($50,440,000/520,000)
2005 Sales Revenue = $50,440,000
2005 SalesVolume = 520,000
Net profit margin = $25.38 ($97-$71.62)

20. Mountain man light
Breakeven analysis for mountain man light beer(2006-2007)
(Contd..)
Best case scenario-
Fixed cost calculation (without cannibalization):
Initial advertising cost = $750,000
Annual incremental SG&A cost(2006) = $900,000
Annual incremental SG&A cost(2007) = $900,000
Total fixed cost = $2,550,000
(without cannibalization)

21. Mountain man light
Breakeven analysis for mountain man light beer(2006-2007)
(Contd..)
To breakeven without cannibalization:
Total breakeven volume = fixed cost/net profit margin
= $2,550,000/$25.38
= 100,473 barrels
Total breakeven revenue = total breakeven volume*price per barrel
= 100,473*$97
= $9,745,881
Best case scenario-

22. Mountain man light
Breakeven analysis for mountain man light beer(2006-2007)
(Contd..)
Worst case scenario-
Fixed cost calculation(with 20% cannibalization plus 2% lost revenue base annually):
Initial advertising campaign cost = $750,000
Annual incremental SG&A cost(2006) = $900,000
Annual incremental SG&A cost(2007) = $900,000
Cost from cannibalization(2006) = $437,226
(22% from 2005 net revenues)
Cost from cannibalization(2007) =$314,036
(22% from 2006 net revenues)
Total fixed cost =$3,328,262
(with cannibalization)

23. Mountain man light
Breakeven analysis for mountain man light beer(2006-2007)
(Contd..)
Worst case scenario-
To breakeven (with 20% cannibalization plus the 2% lost revenue base
annually):
Total breakeven volume = fixed cost/net profit margin
= $3,328,262/$25.38
= 131,137 barrels
Total breakeven revenue = total breakeven volume*price per barrel
= 131,137*97
= $12,720,308

24. Mountain man light
Breakeven analysis for mountain man light beer(2006-2007)
(Contd..)
Mountain man light beer will breakeven in both scenarios by the end of
2007:
Revenue needed to breakeven(best case scenario) = $9,745,881
Revenue needed to breakeven(worst case scenario)= $12,720,308
Estimated revenue for mountain man light beer:
2006 revenues= $4,727,295
2007 revenues= $9,832,793
Total revenues at the end of 2007= $14,560,088
We would take a loss in 2006 but
our 2007 projections put us at
$1,839,780 net revenues for the two
years even in worst case scenario.

25. Analysis
 The product is expected to
cover all its investment cost
and become profitable past
2007.
 Launching mountain man light
beer can also increase
awareness and uplift the brand
value.

26. Conclusion
Yes, Chris Prangel should go ahead and launch
Mountain Man Light.

28. Created by Shashank Srivastava, IET Lucknow,during a marketing
internship under the guidance of Prof. Sameer Mathur,IIM Lucknow.