Mountain M
Some salient facts:
People
Chris Prangel (recent MBA graduate, son, marketing operations manager)
Oscar Prangel (father, president and owner, retired)
Guntar Prangel
Company
Founded in 1925, located in New River coal region of West Virginia
The decision to be taken in 2006
Chris Prangel was going to inherit the company in 2011
Brewed one beer-Mountain Man Lager since 1925 by reformulating an old family brew recipe
The beer (Mountain Man Lager)
Flavourful, bitter-tasting beer
Had a reputation as a quality beer throughout the East Central region of the US
Known as West Virginia's beer
Core drinkers were blue collar, middle-to-lower income men aged over 45
History, status as a family owned brewery; aura of authenticity, bitter flavour and slightly higher
alcohol content all contributed to the acceptance of the brand.
Sole brand loyalty rate was 53%
Sales
Just over $50 million by 2005
Over 520, 000 barrels in Ohio, Indiana, Michigan, Illinois and West Virginia
$97 per barrel
70% of the sales was for off-premise consumption
Mountain Man Brewing Company Case
Current situation
Declining sales for the first time in the company's history
Revenue down by 2% compared to previous year
Light beer sales growing in the US at 4% annual rate
Traditional premium beer sales reducing at 4%
Per capita beer consumption had declined by 2.4% since 2001
Problem: Should Mountain Man Beer Company launch a light beer fo
Objectives: To secure the company's future (improve revenue, maintai
Alternatives a. Launch Mountain Main Light
b. Do not launch Mountain Man Light and stick with Mounta
Criteria Financial implication
Maintaining brand equity
Expanding customer base
Costs (for Mountain Man Light) in $
Advertising campaign
Incremental SG&A per year
cost per barrel
Selling price per barrel
Profit margin per barrel
Projected revenue from Mountain Man Light:
mpany launch a light beer formulation?
Light beer consumption in East Central region
(considering a 4% compound annual growth rate)
Mountain Man Light projected market share
(considering 0.25% opening maket share with 0.25%
(improve revenue, maintain the brand equity) growth each year)
Revenue from projected market share (selling at $97
per barrel)
Light and stick with Mountain Man Lager
Mountain Man Lager Revenue and net profit projections assuming
Net revenues
Net income (after taxes) 6.175% of net revenues
Net income as percentage of net revenues
Projection of additional costs on Mountain Man Light for 2 years (2
Initial advertising campaign
Incremental SG&A per year 2006
Incremental SG&A per year 2007
If 5% revenue from MM Larger was lost:
Potential loss in 2006
Potential loss in 2007
Potential losses plus launch cost and SG&A
Total projected revenue from MM Light
If 20% revenue loss
Potential loss in 2006
Potential loss in 2007
Potential losses plus launch cost and SG&A
Total projected revenue from MM Light
Break even analysis
Fixed cost/(Sales price per unit-Variable cost per unit)
Costs for Mountain Man Lager
750000 0
900000 0
71.62 66.93
97 97
25.38 30.07
2005 2006 2007 2008 2009
18,744,303.00 19,494,075.12 20,273,838.12 21,084,791.65 21,928,183.32
48,735.19 101,369.19 158,135.94 219,281.83
4,727,313.22 9,832,811.49 15,339,185.93 21,270,337.82
fit projections assuming 2% revenue loss annualy
2005 2006 2007 2008 2009
50,440,000.00 49,431,200.00 48,442,576.00 47,473,724.48 46,524,249.99
3,114,670.00 3,052,376.60 2,991,329.07 2,931,502.49 2,872,872.44
6%
Man Light for 2 years (2006 and 2007)
750,000.00
900,000.00
900,000.00
2,550,000.00
2,471,560.00
2,422,128.80
4,893,688.80
7,443,688.80
14,560,124.71
9,886,240.00
9,688,515.20
19,574,755.20
22,124,755.20
14,560,124.71
If no loss of
revenue from MM
Lager
100,472.81
2010
22,805,310.65
285,066.38
27,651,439.16 $52,185,455.45
2010
45,593,764.99 $171,982,113.04
2,815,414.99
