1- What is Chris considering doing and what factors will he have to align to be successful? With Mountain Man Beer Company (MMBC) experiencing recent declining sales for the first time in its history representing a 2% loss in revenue the previous year and prospect of continuous decline, Chris is considering launching Mountain Man Light Beer as a brand extension aligned with changes in beer drinkers’ preferences, seeking to maximize market coverage while minimizing brand overlap and at same time avoiding any brand equity damage, as its core consumer segment is quite different from the new targeted consumer segment.
With this plan Chris expects that MMBC regains the beer market leadership in the U. S. East Central Region. Also it is important to keep brands identity well defined but complemented avoiding cannibalism between the core product and the newly introduced product or become diluted in a sea of competitors brands. a. What goal should MMBC (Chris) have? MMBC (Chris) should present a new detailed marketing plan to launch a new product called “Mountain Man Light” using the brand value chain marketing programme where the extension product “light beer” will lift the core product “lager beer” expecting to increase brand equity and revenue which will cover the associated marketing and incremental SG&A expenses within two years after the launch. b. What has made MMBC successful? What distinguishes it from competitors?
Since 1925, this traditional and regional family owned brewery has cultivated its brand loyalty by sticking to its core customer base, offering to them an attractive product and offering them a brand building product with great price, tradition, local authenticity, quality, and a unique taste. MMBC is different from its competitors because of its history, its status as an independent, non-corporate and family owned regional based brewery giving it the originality desired by its core consumers. 2- What is distinctive about MMBC’s product?
Mountain Man Lager beer has a range of qualities that makes it distinct but the smoothness, bitter flavor, slightly higher alcohol content differentiates it from other beers, without forgetting that it has built loyalty among its customers thanks to its strong appeal to its customer base. a. What is distinctive about MMBC’s customers? MMBC’s customers are blue-collar, middle-to-lower income men over age 45 with emotional tendency for traditional and local products. b. How is MMBC’s promotion different and effective?
MMBC’s promotion was different because it focused majority of is marketing efforts in getting its product into off-premise locations. This move was effective because its core customers, the blue-collar males, purchased 60% of their beer from off-premise locations. 3- What about these factors enabled MMBC to create such a strong BRAND? According Kevin Keller’s “Brand Resonance Pyramid” deep brand awareness through of local authenticity as an East Central beer is the salience’s factor presents in consumers’ minds in purchasing situations.
Taste, brand image, both deliver cognitive and emotional reaction to the consumers evaluating price and tradition (Judgment and Feeling factors respectively) creating a resonant brand with high level of brand loyalty and strong relationship with consumers. 4- What has caused MMBC’s decline in spite of its strong brand? Drinkers’ preferences began to change and its main core of consumers was shrinking due to aging. The new generation drinkers preferred light beer. Beer consumption has dropped to its lowest since 2002. a. Describe the market MMBC serves and the beer market in general.
MMBC serves in a regional market in East Central of the US with 18. 3% of total U. S beer share market. In West Virginia where MMBC has held the top market position for almost last 50 years, but currently it is suffering from arcane law which limits beer promotion in retail establishments and consequently beer prices drop with deep discount, reducing revenue margin and pushing small breweries out of retail distribution channels. MMBC is still surviving meanwhile is focused in younger drinker as new potential consumers but their taste is most likely oriented to light beer with a growing market share around 20% from 2001 to 2005. . Describe the competition and MMBC’s threats. •So-called Major domestics producers, especially Anheuser Bush, MMBC’s main competitor, are focused on economies of scale in production and advertisement and spend heavily to maintain their own sales level. They dominate the market with 42% of market share in the East Central Region (Case study – Exhibit 3) •Second-tier domestic producers (12. 5 % market share in ECR, Case study – exhibit 3), medium-size competitors and regional producers, category to which MMBC belongs.
These companies try to follow the major players in their product offering and marketing strategies, but fall short on the financial and marketing capabilities. They constitute MMBC’s main competition. •Import beer companies have a similar market share of 12% and have a common denominator with the regional brewers; their beers tend to have bitter taste. Demands for these beers are on the rise. •Specialty brewers, with a negligible market share of 1. 5% but with a rising demand. c. What is the likely future of competitive brewers? What is MMBC’s market/competitive position?
Competitive brewers will introduce newer styles of beers to meet beer drinkers’ new preferences, more specifically lighter beers. However, both styles will be kept under the same brand family. They are willing to leverage core brand name obtaining more shelf-space among distributors and retailers. MMBC has a large market with very strong brand image based on product attribute, a clear defined consumer segment and also potential consumers appreciate brand’s association with an independent brewery. 5- Should MMBC introduce a light beer?
Yes, based on a) market trend predicted by industry observers, current company trend of 2% lost of annual revenue; and b) increase of the light beer sales over the past 6 years at an annual compound rate of 4%; it seems that Mountain Man Light beer launch is the right way to go way to go. Nevertheless there are marketing tools like brand tracking which provide visibility of brand equity and brand performances in a day-to-day basis facilitating decision-making during the execution of the marketing programme. a. What are the pros and cons for doing so? Pros: Access to younger drinkers’ segment where there isn’t an established loyalty to any particular brand of beer, and are bigger consumer (twice as much as the 35+years old)
•Access to female beer drinkers, in the younger and other age demographics segments. •Brand extension will leverage the core brand by getting more shelf space with distributors and retailers and eventually improving sales. •The product life cycle seems to be transitioning from a maturity to saturation and declining stage, hence the necessity to introduce new products while the brand is still strong and can be leveraged. (See http://en. ikipedia. org/wiki/Product_life_cycle_management_%28marketing%29). Cons: •Certain cannibalism will happen between Mountain Man Lager and Light beers due to distributors may sacrifice some of the old lager when purchasing the lighter version to fit both in the same shelf space. •Besides that, any dilution because of loss of customers due to brand stretch into new segment. If brand extension is not properly planned providing clear brand identity, there could be the risk destroying the brand image and brands could be diluted, hence losing the core customers. 6. Is Mountain Man Light feasible for MMBC?
Yes, according to Chris’s financial projections, there will be $107000 profit within two years from Light beer share market. (Please see excel sheet in Appendix1 for more details) 6a. What is required for Mountain Man Light to break even in two years? It is required to sell in two years enough Mountain Man Light barrels (50000 approx. ) to cover both the associated launch marketing ($750000) and incremental SG&A ($900000/year) expenses. (Please see excel sheet in Appendix1 for more details). 6b. What market share will Mountain Man Light have to obtain to break even in two years? Nothing lower than 0. 4% of Light beer market share according calculating in Appendix1, otherwise there will be no profit in two years distance as expected. 6c. What cannibalization rate is reasonable? There could be certain risk of cannibalization, not for the core consumers as they are loyal, but because of distributors. MMBC sells 70% of their products to liquor stores, and there may be a risk they would buy the same volume from MMBC, just distributed differently, hence leading to self-cannibalization. However, this type of product line expansion had helped competitors secure more shelf-space, so cannibalization may be minimal and negligible.
Any possible cannibalization rate is depending on execution of light beer positioning and campaign execution. 6d. Is the budget appropriate for the launch? Can it be reduced? According calculation with current budget of $750000+($900000/year) within two years profit will be $107000. So that means we could invest $107000 more in advertising creating a brand awareness higher than current 60% of the region. (Please see excel sheet in Appendix1 for further calculations details). Any budget reduction will directly impact in brand awareness or brand management activities.
Even if product launch doesn’t require any extra capital expenditures in extra plant or equipment as it can share the same operation chain, there is always a need of new manager and sales staffs to take care of this new brand extension. 7. Should MMBC launch Mountain Man Light? Yes, the market is currently trending towards light beers and if MMBC does not yield to this signal, it will be left in the past as its market share and gross margins keep on shrinking. 7a. What other strategic options for growth does Chris have if Mountain Man Light is not launched or is unsuccessful?
There is a good chance for MMBC, using their current brand image of old family brew recipe, to move in Super-premium yield (craft and high-end domestics beer) which hold 1. 5% of East Central Region and growth was 9% in last 6 years. Going nationwide and eventually global, MMBC should attempt marketing to the same core customers but at a national level, this way they still stick to their core, not compromising the product but widen the customer base. However they may need to make significant investment in manufacturing location and equipment, or they could start by outsourcing some production to contract breweries.
They should also penetrate more the on-premise location, where distinct flavors are valued, i. e. at restaurants, brew-bars, etc. They could also focus on the “retro-cool” trend to try to reach new customers’ segments described by young woman in the case’s text. They could also choose to leverage their brand equity through co-branding, licensing and franchising. Others thinking out of the box could be line extension to others products segments like bourbon or Scott whisky which are linked to the image of craft and high quality products. This move should be easier for MMBC using branding.