Case Write up #2
Mountain Man Brewing Company
Mountain Man Lagers main customer is an older generation, blue-collar worker, which make up a larger percentage of the sales. In 2005 sales have dropped 2% relative to the prior fiscal year. The cause is from a stiffening competition, a market that is maturing and new products. All of these factors are stealing the customers from the Mountain Man Brewing Company (MMBC). The light beer market is starting to attract younger consumers and along with the female beer drinker. Chris Prangel, with some skepticism, thinks the light beer market is the answer to not losing anymore of the market share that MMBC has now, but he is worried because of his recent survey that his light beer will not sell. His existing customers like the old-time Mountain Man lager and wouldn’t prefer the move into a light beer market. Will this cannibalize the existing lager market share? Alternative #1: Do nothing and see what happens. This plan would not alienate the existing customer and keep costs down for advertising on a new line of beer. Because Chris’s father believes that MMBC would not receive the same loyalty from a younger generation that the lager beer has from the blue collar worker. Survey more of the retail customers in the bars, restaurants, and nightclubs where the beer is sold now, giving a bigger share of what consumers are really looking for in a beer. Pros: This could keep costs down on development of a new beer line, no new advertising costs, without further research. Cons: Could cost MMBC more of the market than they have already lost.
Predicting the loss of sales if using the current rate of decline, the profits for 2005 were 6.2% and if the current rate of decline in the market share that MMBC has in five years their sales will have declined by 10% and reduction in profit margin to 4.7%. Alternative 2: Introduce the light beer call it “Mountain Man Light”. Pros: Light beer consumptions made up 50.4% in 2005 and the compound annual growth rate for six years is a positive 4%. The premium beers and popular beers have been declining at about the same rate over the past years.
MMBC could target the age groups that seem to be the highest for light beer drinkers, 21-24 at 9%, which is a high percentage rate considering that domestic beer only has 8%. This is also true with the 25-34 demographic at 20% that would tie them with the domestic beer drinkers in that age group. The last group would be the 35-44 with 24% of the market being light beer drinkers and only 23% for domestic beers.
The consideration for targeting the younger group of beer drinkers is fitness. More of the younger generations are concerned with health and calories, but still like to have a good time. The light beer markets is getting better because of more people watching their weight, but still occasionally like to have beer or two. Cons: Sales might decline for the Mountain Man Lager, due to the lack of interest from the new target market. There are so many other beers on the market and the introduction of a new beer could cause the company to go out of business. Some of the people surveyed commented that the Mountain Man lager was strong and a working man’s beer, this could give the new beer a brand name before the younger and new populations of beer drinkers have a chance to sample the beer. Recommendation
The recommendation is to execute alternative 2 and to target the younger generation and female consumer. Light beers overall have more appeal to the younger drinker and the female drinker which make up 42% of the domestic light beer consumption. This recommendation is not going to come without some risk, because anytime a new product is introduced there is always the chance for failure, but if MMBC does nothing they are surely asking for disaster. This would be an investment in the future of the brewery and a gateway to possibly introducing more and...