MOUNTAIN MAN

BREWING COMPANY

CASE ANALYSIS BY
GROUP 12 SECTION A
Akash Vashishtha

FT161009

Amal Goswami

FT161012

Ankush Ballal

FT161019

Utkarsh Sethi

FT161099

Vineet Khandelwal

FT161105

Background
Founded in 1925 by Guntar Prangle.
A brand as famous as John Deere among
working-class male.
Presence in West Virginia, Illinois, Ohio,
Michigan and Indiana.
By 2005, revenue generated was just
over $50 million and selling over 520,000
barrels.
Observing declining sales in recent year.

Success Factors
People associate authenticity as it is
family owned.
Well reputed among blue collar
personnel.
Bitter flavor.
Famous for its rugged image.
Higher than average alcohol content.
Packaging in brown bottle with the image
of coal miners.

Awards & Recognition

Stayed as the Best Lager in West
Virginia for over 50 years.
Voted as the Best Beer for 8 years
straight in West Virginia.
Elected as Best Beer in Indiana in 2005.
Younger beer drinkers were well aware of
the brand.
Sole brand loyalty of 53% - higher than
any competitor.

Decline in Sales
Shift in preference of beer from Strong to Light.
The market for Light Beer was estimated to grow
at 4% CAGR for the next 6 years.
2% Decline in sales revenue.
Increase in federal taxes.
Growing health consciousness among consumers.
Younger generation of beer drinkers preferred
light over strong as they considered strong beer
as corporate.
Light Beer comprised of 50.4% of market share of
Beers.

Impact of the Launch

CON
S
Cannibalization
of
Lager
Move away fro
m
core values
Competing aga
ins
competitors wit t
h
deep pockets

PRO
S
Increase reven
ue
at 4% CAGR an
d
leverage core
brand name.
Diversifcation
of
the portfolio
Appreciation fr
om
young drinkers
aged 21 - 27
Appeal to Fem
ale
Drinkers

Numbers
Calculating Cost of Each Barrel
Revenue in 2005 by selling lager =
$50,440,000
Number of Barrels sold = 520,000
Price of each barrel = $97
($50,440,000/520,000)
Price of Premium beer = Price of light
beer
Cost per barrel of light beer = $97

Numbers (Contd)
Revenue Estimation of Mountain Man Light.
2005

2006

2007

2008

2009

18,744,303

19,494,075

20,273,838

21,084,792

21,928,183

CAGR

4%

4%

4%

4%

Estimated market
share of Mountain
Man Light

0.25%

0.50%

0.75%

1.00%

Estimated barrel
sales of Mountain
Man

48,735

101,369

158,136

219,282

Revenue (@
$97/Barrel)

$4,727,313

$9,832,811

$15,339,186

$21,270,338

Light Beer Sales in

Barrels

Numbers (Contd)
Contribution Margin per barrel
Price per barrel
= $97
Variable cost per barrel
= ($66.93)
Additional cost per barrel = ($4.69)
Contribution Margin
= $25.38

Numbers (Contd)
Break even Calculations (2006 & 2007)
Scenario 1: No Cannibalization (Best Case)
Initial advertising cost = $750,000
Incremental SG & A (2006) = $900,000
Incremental SG & A (2007) = $900,000
Total fxed cost = $2,550,000
Breakeven Volume = Fixed cost/CM
= $2,550,000/25.38
= 100,473 Barrels
Breakeven Revenue = BEV * Cost
= 100,473*97
= $9,745,881

Numbers (Contd)
Break even Calculations (2006 & 2007)
Scenario 2: Cannibalization (20% )+ 2% decline in
sales
2005

Revenue from Sale

$50,440,000

Contribution (31% from

Exhibit 1)
Cannibalization (Assuming
20%)

2006

2007

2008

2009

$49,431,2 $48,442,5 $47,473,7 $46,524,2

00
76
24
50
$15,323,6 $15,017,1 $14,716,8 $14,422,5
72
99
55
17
$3,064,73 $3,003,44 $2,943,37 $2,884,50
4
0
1
3

Advertising Cost

-$750,000

Incremental SG&A

-$900,000 -$900,000 -$900,000 -$900,000

Total Cost
Contribution from sale of light
beer
Net Change in Contribution

Here as we observe the break

$4,714,73 $3,903,44 $3,843,37 $3,784,50

4
0
1
3
$1,236,89 $2,572,75 $4,013,49 $5,565,37
9
0
0
3
$1,780,86
$3,477,83 $1,330,69 $170,119
5 is slightly
0
even
after 2 9years.

Inferences
In both the scenarios there is a high
possibility that the company achieves
break even point within 2 years.
As the company has good brand image, a
0.25% increase in market share per year
seems plausible.
The launch of MM Light will bring
diversifcation in the offerings of the
company.

Conclusions
Based on the pros and the fnancials, the
company should launch the MM Light Beer.
It should probably launch the beer with a
different brand to avoid deteriorating the
brand image of mountain man.
The main focus should be on the supply
chain, so that the light beer is available in the
strategic locations like restaurants, pubs etc.
Target the marketing to the younger
generation and not much for the elderly.

THANK
YOU