Introduction Mountain Man Brewing Company is a family owned business.

Chris Prangel, a recent MBA graduate has returned home to manage the marketing operations of MMBC which he stands to inherit in 5 years when his father Oscar Prangel retires. Till date MMBC brewed only one beer Mountain Man Lager . Due to changes in drinking preferences and decline sales of the company, Chris wants to launch a beer Mountain Man Light in hope of attracting the young drinkers to the brand. However others on the MMBC management team are apprehensive of Chris enthusiasm for launching Mountain Man Light. Even Chris father reminded him that other regional breweries and giants in the business have vanished because of fatal decision that irreversibly damaged the brand. Chris now has to decide whether to go ahead with the launch of the Mountain Man Light beer without affecting its existing Mountain Man Lager beer. Success of MMBC MMBC manufactured an exceptional, high quality bitter-tasting beer by the name of Mountain Man Lager and focused all their marketing spend on this single product line while its competitors lost in the sea of new-product introduction. Reasons behind success of the family owned brewing business of MMBC can be attributed to the following: Positioning the brand in a perfectly fitting target market segment Since beer purchasing decisions are solely guided by the brand, MMBC stressed on its aura of authenticity to position the beer with its core drinkers and perfectly identified them to be the blue collar, middle-to-lower income men over 45 years of age. High Brand awareness among blue-collar consumers Some of the key points of differentiation in the strategy that MMBC used to build brand awareness were: Distribution MMBC had its own small sales force which simply did not just push the brand but sold it to off-premise locations 60% of blue-collar males targeted (70% of its revenue). Grass root marketing: Unlike its competitors, MMBC relied on grass root marketing to build brand awareness by spreading its beer quality message by word of mouth. Brand perception The Mountain Man was perceived as a high quality brand on the basis of its unique bitter-flavor and slightly higher-than-average alcohol content key USPs than contributed to its brand equity. Brand Loyalty The blue-collar customer segment that MMBC targeted perceived the Mountain Man as a strong, working mans beer and was thus extremely loyal to this brand. Brand loyalty rate: 53% (higher than those of its competitor products) a very low churn rate thus accounted for as a key success factor for MMBC. Key Strategy was to grab just quarter of market share MMBC believed that since retailers would not give in more facings, rather than replacing existing ones with new-product extensions, they could simply focus on one.Serving a large enough market with a very strong brand thus helped them survive competition from national players such as Anheuser Busch and thus made MMBC a success.

Competitors MMBC faced competition from 4 competitor segments: - Major domestic players, second tier domestic producers, import beer companies and craft beer industry. Major competition of MMBC was faced from the large domestic producers that accounted for 74% of the sales in Eastern central region in 2005. MMBCs Point of Differentiations from its competitors Major domestic producers basically competed on the economies of scale and advertising while the MMBC always relied on grass root marketing to spread its beer quality message by word of mouth. Second tier domestic producers consisted of medium sized producers and small sized producers Medium sized producers basically sold their beers nationally while small sized producers sold their beer to regional distributors and retailers while MMBC largely concentrated on Eastern central region to increase its sales. Import beer companies served the needs of sophisticated beer drinkers while MMBC mainly concentrated on blue collar workers. Apart, import beer companies had a disadvantage of weaker distribution networks, margin reduction and an inability to control product freshness. Craft beer industry was divided into four markets: Brewpubs, microbreweries, contract breweries, craft breweries. Craft beer industry basically brewed using traditional malt ingredients while the Mountain Man Lager was reformulated using an old family recipe using a meticulous selection of rare, Bavarian hops and unusual strains of barley.

Due to changing consumer behavior, MMBC also faced competition from other substitutes of beer i.e. wine and spirits based drinks. Core Values of Brand Mountain Man The various attributes which can be associated with brand Mountain Man are: Authenticity: Established in 1925, it is a family owned business which has had a reputation throughout the East Central Region of the USA. With over $50 million in revenues and selling over 520,000 barrels per year, it was an established brand and held a respectable market share among Lagers for 50 years. Quality: MMBC had its own old family brewed recipe and used a meticulous selection of rare Bavarian hops and unusual strains of barley to produce Mountain Man Lager. Uniqueness: Mountain Man Lager has distinctively bitter flavors and slightly higher than average alcohol content uniquely contributed to the companys brand equity. Toughness: It has been labeled as strong and a working mans beer. Even MMBC considered its core drinkers as the blue collared, middle to lower income man over age 45. The profiles of beer drinkers show that 81% of them were males and only 19% were females (Exhibit-2). Distribution: to serve its core customers, MMBC concentrated more on off-premise locations like super markets and liquor shops to sell Mountain Man Lager beer.

Elements of the brand Mountain Man that are transferable in the event of an extension The following attributes should be transferred to Mountain Man Light beer: Authenticity: The Light beer which MMBC is planning to launch would require an active brand recognition among its customers. The young beer drinkers which the product wishes to target is well aware of the brand Mountain Man Lager and hence this will serve as a platform for introducing Mountain Man Light.

Quality: Since MMBC produces quality beer for its existing consumers, this will help the company to penetrate the new market by introducing quality beer for its new consumers.

Some attributes which should not be transferred are: Toughness: Although there is brand awareness, it is perceived as a strong and working mans beer which does not go well with the youth. The packaging of the beer in a brown bottle also adds to its tough image. So the brand should lose its toughness and become more associated with smoothness and drinkability. Distribution: Mountain Mans core customers do not have a brand preference in bars and restaurants and hence the distribution is more concentrated on purchasing the product from liquor stores or super markets (off-premise location). Light beers appealed to younger drinkers and to women, who tend to make frequent visits to bars and restaurants (on-premise locations). Hence MMBC should also change its distribution strategy if it wishes to gain a share in on-premise locations by introducing the Light beer. Economics of the light beer If the company is to produce Mountain Man lager beer only, we assume that the sales remain constant at $50,000,000 for the consecutive years.
Table 1: Total revenues earned due to introduction of light beer

Year 2005 2006 2007 2008 2009 2010 Total Demand of Light Beer(in 18,744,303.00 19,494,075.12 20,273,838.12 21,084,791.65 21,928,183.32 22,805,310.65 barrels) Market Share (Base of .25% and subsequently 0.25% 0.500% 0.750% 1.000% 1.250% increment of .25%) Light Beer Demand to be 48,735.19 101,369.19 158,135.94 219,281.83 285,066.38 met by Mountain Man revenue from 4,727,313.22 9,832,811.49 15,339,185.93 21,270,337.82 27,651,439.16 light beer-in $ Erosion in the sales of Mountain Man Lager due to introduction of Light beer Scenario 1:- at 5% in 2006 & subsequently 2% -in barrels revenue after erosion due to light beer in $ Scenario 2:- at 20% in 2006 & subsequently 2%-in barrels

520,000.00

494,000.00

484,120.00

474,437.60

464,948.85

455,649.87

49,998,000.00

47,498,100.00 46,548,138.00 45,617,175.24 44,704,831.74

43,810,735.10

520,000.00

416,000.00

407,680.00

399,526.40

391,535.87

383,705.15

revenue after erosion due to 39,998,400.00 39,198,432.00 38,414,463.36 37,646,174.09 light beer-in $ Total revenue from Mountain Man Light beer and Lager(in $) Scenario 1 Total revenue for scenario 1 Scenario 2 Total revenue for scenario 2 difference in revenues( after launch of light beerscenario1)* difference in revenues( after launch of light beerscenario2)* 542,735.19 585,489.19 632,573.54 684,230.68

36,893,250.61

740,716.25 71,462,174.26 668,771.54 64,544,689.77

52,225,413.22 56,380,949.49 60,956,361.17 65,975,169.55 464,735.19 509,049.19 557,662.34 610,817.71

44,725,713.22 49,031,243.49 53,753,649.29 58,916,511.91

2,227,413.22

6,382,949.49

10,958,361.17 15,977,169.55

21,464,174.26

-5,272,286.78

-966,756.51

3,755,649.29

8,918,511.91

14,546,689.77

*Assuming sales of Mountain Man Lager is 5, 20, 000 barrels from 2006 to 2010 Table 2: Breakeven analysis of light beer product

Fixed Cost ( in $/barrel)($.75 M + $.9M) Selling Price( in $/barrel) Variable Cost ( in $/barrel)(66.93+4.69) Contribution( in $/ barrel) Break Even Units( in barrels) Scenario-1

1,650,000 96.15 71.62 24.53 67,264.57

In case we enter the light beer product category, the total revenue earned from light beer and lager is greater than the individual revenue earned from Lager, hence it is profitable to enter light beer product market. Scenario-2 We find that for the first two years the total revenue earned from light beer and lager is less than the individual revenue earned from Lager. However, after 2 years, the revenue from light beer and lager. Thus even in the worst case scenario in the long run, we will be able to achieve higher sales from the introduction of Light beer. Conclusion The sales of Mountain Man Lager were expected to decrease in future primarily due to changing product preferences in the beer market. Consumers were now shifting to light beer, wines and light beer was a new, fast growing product category and the only product category demonstrating consistent growth. However, all the competitors were entering into the light beer category, thus, it was a challenge to compete against the deep pocketed competitors. On further analysis (as shown above) and the growing light beer demand, it will be a profitable proposition to enter the light beer product category.