Mountain Man Case

Problem Statement
Due to changes in beer drinkers’ preferences, Mountain Man Brewing Company’s sales have declined by 2% from 2004 to 2005. The company is now struggling to maintain its market share in the premium beer category.

Situation Analysis
Customers
* Blue collar workers in their mid forty’s and with an income in the middle to lower range.
* They buy beer mainly at liquor storesand supermarkets (off-premises locations).
* They do not consume as much alcohol as the group in between 21 and 27 years of age.
* Strong aging demographic tendency.

Competition
The US beer market is segmented into 4 categories:
a) Major domestic producers (74% of 2005 beer shipments in East Central Region)
* Larger in scalability, distribution and advertising. (Anheuser Busch, Miller, andCoors Company)
b) Second-tier domestic producers (12.5% of beer shipments during 2005)
* Medium sized companies like Pabst Brewing Company and Genessee that distribute nationally and other smaller companies that distribute regionally. Mountain Man has 1.4% share in this market.
c) Import beer companies (12% of the region’s market)
* Target sophisticated beer drinkers (Heineken, Molson,Corona and Beck’s).
* The costs of distribution and shipping reduce the margin of these companies compared to domestic competitors.
d) Craft Beer (1.5% of the region’s beer market)
* Independently owned, includes: brewpubs, microbreweries, contract, and regional craft breweries.

Company
* Mountain Man Brewing Company is an independently family owned company in Virginia.
* The company isfocused only in the lager market and has a very good reputation in the East region of the United States.
* MMBC was generating revenues of over 50 million dollars by 2005 and had a respectable market share in the region (1.4%).
* The company owns its own sales force
* Mountain Man is not appealing for everyone but has very high awareness.

Collaborators
The distributors in the region aremore interested in working with the major domestic beer producers in order to increase their revenues. They are dropping brands with less power.

Context
* Consumption of premium beer is declining at 4% annually but light beer sales are growing by the same amount.
* The annual consumption of beer per capita has declined by 2.3% since 2001. This event is explained by the increase in consumptionof wine and other alcohol drinks, the increase in federal tax and the health concern issues.
* Younger drinkers that have not yet established loyalty with a brand, account for more than 27% of the total beer consumption. They also spend twice as much per capita on alcohol beverages than people over the age of 35.
* Laws are limiting promotion of beer in public establishments.


Alternatives1) Introduce a light beer using the Mountain Man Brand
Advantages:
* Potential increase in revenues, due to growth in the light beer market.
* Leverage on brand equity and opportunity to reaching the most profitable target.
* Less cost in development and advertising than using two brands.
* Disadvantages
* Possible disappointment of old customers because of identification with brand.
* Newlight beer could not be appealing to the young population.
* Any negative outcomes could affect the mother brand.
* Probable cannibalization between the light and regular product
2) Focus on Mountain Man and not enter the Light Beer market
Advantages
* No investment in a new product is required; therefore, this option is less risky.
* No cannibalization to the core lager product.
* Thecompany will not affect their base customers.
* Resources could be used to expand their product distribution to other regions.
* Disadvantages
* The premium beer market is declining annually and the amount decline could increase.
* The company will still be in risk of losing more of its market share.

Recommendation:
After evaluating the future net incomes of Mountain Man Brewing Company my...