The Mountain Man Beer Company (MMBC) was founded in 1925 and the family launched as Mountain Man Lager. By the 1960s, Mountain Man Lager’s reputation as a quality beer was well entrenched throughout the East Central region of the United States. MMLC’s single brand product strategy and brand extension market research evaluation: 1. The Mountain Man Lager brand rated as the best known regional beer and won ‘Best Beer in West Virginia’ for its eight year straight.
, it also won ‘Best Beer in Indiana’ and was selected as America’s Championship Lager’.Younger beer drinkers were well aware about of the brand. 2.
Mountain Man had always relied on grass-roots marketing, quality message by word of mouth. 3. A small percentage MMBC’s blue collar customer accounted for a large percentage of sales (53%).
Challenges in 2005: Mountain Man’s competition: U. S. beer market fell into four categories. 1. Major domestic producers: Companies competed on the basic of economies of scale in production and advertising. The market was dominated by three companies (together 74%).2. Second-tier domestic producers: Medium sized competitor sold their beers nationally to distributors and retailers accounted for 12.
5% of beer shipment in East Central region. 3. Importer beer companies: Controlled about 12% of the region’s market.
4. The craft beer industry is divided in to four markets: brewpubs (25%), microbreweries (12%), contract breweries (16%) and regional craft breweries (62%). Since 2001-2005, US per capita beer consumption declined by 2. 3%. Of total U. S. beer sales, 18. 3% took place in the East Central Region.
Changes in Beer volume were driven primarily by changes in consumer segment and not by the economic downturns. The consumer segment ‘first time drinker demographic’ (age 21-27). The segment represents 13% of the adult population in 2005, but accounted for more than 27% of the total beer consumption and was growing. 1. Light beer was a newer, fast growing and the only beer category demonstrating consistent growth in on premise locations: restaurants and bars. Light beers appealed to younger drinkers overall, and women, both groups that frequented these locations.Chirrs Prangel MMBC management believed Mountain Man’s recognition could translate into a meaningful share of the light beer market and hoped that in turn, Mountain Man Light’s popularity could boost the sales of Mountain Man Lager.
2. Other management team was concerned that launching Mountain Man Light would alienate the core worried that MM Light might cannibalize the sales of MM Lager because of a retailers would not grant Mountain Man incremental shelf space and would substitute cases of light product for the larger product.3. Launching a MM Light new product an expensive endeavor for a small company. TV advertising it self could cost between 10M to 20M to lunch product in regional level, for brand awareness in East Central area would cost at least $750,000 for six months. This would be on top of the $900,000 in annual, incremental SG&A costs. The MMBC’s variable cost was $66. 93 per barrel and it would cost $4.
69 more to manufacture Mountain Man Light, profit margin per barrel will be lower. 4. Vice President: MM light will never achieve the volume of larger beer brands.Our won’t give additional facing for MM Light would just replace facing we have earned for Mountain Man Lager. Light beer market is very competitive, per 2005 East Central Region market share 73% (49+24) acquired by leading nationwide brewers. Demographics, 2005: MML male loyal drinker is 81% and Female 19%, Domestic light beer male 58% and female 42%. Age group 35-44 are 19%, 45-54 are 32% and 55-64 are 19%.
Core drinker-blue collar, middle-to-lower income men over age 40. Beer consumption by is maintains about same barrels from 2000 to 2005.Competitive Market shares in barrels by brewers of 65% (42+23) shared by first two firms.
Consumption by type of Beer in East Central Region (6-year CAGR): Light beer 50. 4% (+4%), Super premium (craft and high-end domestics) 6. % (+9%). Consumption by origin/packing East Central Region: Domestic-Packaged 79.
6% and Draught 8. 4%. Recommendation: MMBC dominating(32%) in 45-54 male segment, and doing fairly good with 35-44 instead of launching a new brand widen the age group market and establish good retail net work then sample light product can be tried at small region before it go for full East Central region launch.