Mountain Man Beer Company – Case Analysis
Case Analysis Mountain Man Brewing Company: Bringing the Brand to Light Mountain Man Brewing Company (MMBC) was founded by Guntar Prangel in 1925. He reformulated an old family brew with quality ingredients, resulting in a flavorful bitter tasting beer which was launched as the Mountain Man Lager. The brand grew to claim a respectable market share for an independent-family-owned-brewery, in whole of the East Central United States by 1960. Even today, after 80 years, the lager is a legacy brew, awarded as the Best Beer in West Virginia for many years in a row.
MMBC is still a single product company and generates over $50 million in revenue and selling over 520,000 barrels of Mountain Man Lager. All has been well thus far but now the market trends are changing rapidly. Problem Statement For the first time in the 80+ years MMBC has experienced a 2 percent decline in revenue, relative to the prior fiscal year. Is this a one-time occurrence or a signal shift in the overall marketplace? Businesses must act in a certain manner in order to maximize profits or run the risk of losing their place in the marketplace.
Chris Prangel, son of the President and owner of MMBC, Oscar Prangel, is to inherit the business in only five years. With differing management styles and thoughts on the direction the organization should take, this uncertainty could be potentially crippling over time. The question of whether or not MMBC should move ahead with Chris’s plan to introduce a light beer product is the one that is most pertinent to the overall direction the company will take. The ever changing marketing environment with respect to demographic, socio-cultural, and political cenario will influence management’s decision on which path to take. SWOT Analysis: Strengths Mountain Man Lager has established a brand with a strong loyal blue –collar clientele. This high quality lager is known for its dark color, distinct bitter taste and slightly higher alcohol content. It boasts an unaided response rate of 67% from the adult population of WV and is known to be the best regional beer. In 2005, Mountain Man Lager won “Best Beer in West Virginia” for its eighth straight year. It also won “Best Beer in Indiana” and was selected as “America’s Championship Lager” at the American Beer Championship.
Research has shown blue-collar males purchase 60% of the beer they drink from off-premise locations. Currently MMBC sells 70% of its beer at off-premise locations which is quiet consistent with the industry wide sales. The lager is affordably priced for the middle-to-lower income “working man”, at $2. 25 for a 12-ounce serving of draft beer in a bar and selling for $4. 99 for a six-pack in a local convenience store. Market research shows, Mountain Man’s position as an independent, family owned brewery provides a sense of “authenticity” with “anti-big-business” core drinkers.
The brand is as recognizable in the East Central region as Chevrolet and John Deere. MMBC has proven to be successful in grass-root marketing with a sales force which is known to not just push the brand but influence customers to embrace Mountain Man and promote the brand by word of mouth. Weaknesses: MMBC is well known for their bitter tasting product. This has given them great success in the past, however with the changing market they need to conform to the new way of doing business if they wish to continue to succeed in the future.
Having only one main beer that is sold in the East Central region of the United States makes it hard to maintain profits. MMBC has been experiencing a decline in their sales by nearly 2%. MMBC has a very small demographic to which the lager appeals to. As such they are losing their influence over the younger market, as well as the women drinkers. The attractiveness of a bitter tasting lager doesn’t quite win over the younger generation. Studies have shown they prefer a light beer, something MMBC is considering developing. MMBC needs to consider the cost associated with launching the new line.
They would sell the MMLight at the same price as the regular beer; however it costs considerably more to produce. Advertising would also add to the burden of MMLight. Advertising alone would cost over $750K for a six month campaign to reach brand awareness of 60%. As they still would only be able to sell the new product at the same price that their competitors are selling theirs, the cost might outweigh the rewards. Opportunities: Looking externally one can see that MMBC has many possible avenues they could take advantage of, in the changing U.
S. demographic and beverage market. MMBC is known for their traditional high quality lager with the potential to expand into several fast growing markets such as light beer and super-premium beer. By entering a growing market MMBC could gain drinkers from different demographics which they currently lack, for instance women and those in their twenties new to drinking. By implementing these changes it could offset the market share loss MMBC lager is currently facing. MMBC could restructure how they market their beer, looking at new avenues.
The internet is one possibility, capitalizing on the younger generation and their anti-big-business-sentiment as a marketing tool. MMBC could try to increase sales in ‘on-premise’ locations. MMBC should also look to expand their distribution range to acquire more states in the U. S. focusing on their core grass root marketing strategies to grow their market share. Threats: The “threats” portion of a SWOT analysis is best described as an analysis of external environmental threats to the business itself.
The following is a discussion of the most pertinent potential external influencers facing MMBC. Over the past four years per capita beer consumption in the US has declined by 2. 3% due in some part to competition from wine and spirit based drinks but also due to changing cultural mores encouraging moderation and personal responsibility. If this trend continues MMBC will be competing for an ever shrinking piece of the market. The potential economic and marketing response from the major brewery competitors is daunting to a company the size of Mountain Man.
With economies of scale in brewing, transportation and marketing, the Budweisers of the world are formidable rivals to say the least. They could respond in such a way as to make doing business very difficult moving forward. Governmental involvement in the beer industry is another issue at hand. The Federal Government has already raised the excise tax and with laws changing how beer can be promoted in a retail setting newly passed in WV could other states in the East Central region be too far behind? The biggest potential threat is the shift in beer consumers taste to light beer and away from the premium beers overall.
Light beer sales account for over 50% of all beer sales and are growing at a compound rate of 4% per year. One of the most troubling aspects of the surge in light beers popularity is the demographic that is driving it. Young, first time, beer buyers / drinkers are at the crux of the demographic and marketers understand that if you can capture a customer young enough you have them as a customer for life. Financials: A look at the market analysis show alarming trends. In 2005 MMBC’s revenue was down relative to the prior fiscal year.
Changes in beer consumption are being driven by changing consumer segments. Light beer sales are increasing while Premium beer sales are decreasing in the east central region as seen in Exhibit 5 in the MMBC case. Super-premium beer sales increased the most by well over 9% in the past 6 years. This shows beer drinkers’ tastes are shifting significantly causing sales to reflect this trend. Exhibit 5 shows light beer has a much greater volume than premium beer; signifying even small market penetration can mean significant volumes.
Looking at Exhibit 6 part A, the other brands have 14% of the light beer market beating out Coors coming in at 11%. This could imply that the light beer market is easily penetrated by a new product. Exhibit 2 examines the beer drinker demographics in 2005, MMLager has 19% of the female demographic which is only a small portion, while domestic light beer boasts of 42% of the female beer drinking demographic. MMLager is the preferred beer of only 2% people in the 21-24 yr age bracket. In the 25-34 yr age group, 15% people prefer the lager and in 19% prefer the lager in the 35-44 yr age bracket.
These numbers are significantly less than those drinking domestic light beer and domestic premium beer. MMLager is losing the younger generation hands down. A large segment of the light beer drinkers (24%) make over $100 thousand dollars a year, so introducing a newer light beer at a slightly higher cost will hit a new income demographic that is not as worried about pricing. Recommendations: 1. Do nothing – MMBC customers base drinking lager is a shrinking market. The rate at which MMBC can make new customers can only replace a fraction of existing ones.
Assuming the 2% annual sales decline, by 2010, sales would have declined by 10%, the profit margin would be drastically shrunk, and with fixed costs remaining the same the company might be out of business in a matter of years. Keeping in mind the demographics, there is quiet a possibility that the rate of declining sales might accelerate due to the aging customer base. The senior management at MMBC is reluctant to launch the new product and site the examples of over 40 breweries those have closed down. But this does not, in anyway, provide any solid evidence that MMBC will fall in those same footsteps if they are to launch the new line.
According to research, product line extensions “helped brewers obtain greater shelf space of products” and “created greater product focus among distributers and retailers”. Suggesting that MMBC do nothing would be a very short-sighted decision and classic mistake of “marketing myopia”. MMBC should do something soon in order to keep up with the changing market. 2. Launching Mountain Man light – The research suggests that where the brand equity drives the sales of lager; the same strategy would not work for light beer as the association of stronger, bitter flavor is not going to capture the light beer segment.
MMBC needs to distance itself from the blue-collar beer image in order to attract the younger generation. 3. Launching light beer with a new name – Data suggests that light beer should not be marketed to the existing customer base, as they are simply loyal to the original lager. As such, they should still incorporate the Mountain Man brand but name it something like “Mountain Light”. Having an affiliation with the brand will allow the same grass-root marketing strategy to be applied for marketing the light beer to the younger segment. Exhibits [pic] [pic] [pic]
