Mountain Man Brewing Company: Bringing The Brand To Light: Harvard Business School Case

MOUNTAIN MAN BREWING COMPANY:
BRINGING THE BRAND TO LIGHT
Harvard business school case

What is mountain man
beer company?
Who is Chris Prangel?

Mountain Man Brewing Company
 Founded by Guntar Prangel in 1925.

 Located in New River Coal Region in West Virginia.
 Launched MOUNTAIN MAN LAGER by
reformulating an old family brew recipe.
 By 2005, mountain man beer company was
generating $50 million in revenue and selling over
520,000 barrels.
 Known as West Virginia’s beer.
 Popular among blue collar working men.
Chris Prangel
 Recent MBA graduate.
 Stood to inherit Mountain Man Beer Company
in five years.
 Taken the responsibility to manage the
marketing operations of Mountain Man Beer
Company (MMBC).
Why is MMBC a success?
 Family owned
 History
 Authenticity
 Reputation
 Bitter flavor
 Bottling
 Higher than average alcohol
content
Promotion
 Promoted mostly in retail
stores located in the east
central US. “Heartland”
states.
 Relies heavily on brand
loyalty and word of mouth
“grassroots” advertising.
 Packaged in old style brown
bottle, original 1925 label
featuring coal miners.
What is
the
present
Situation analysis (1/4)
US per capita beer
consumption had declined by
2.3% since 2001.
Company experience
declining sales for the first
time.
2% drop in revenue relative
to prior fiscal year.
4% annual growth in light beer
segment due to youth
preference.
Competitive Market Shares in Barrels by Brewer:
Consumption by Type of Beer and by Origin/Packaging, 2005:
Situational analysis (4/4)
Light beer competitive market shares:

Why study
this case?
Objective of this case (1/3)
The MMBC wants to

know if they should
branch out and tap
into this light beer
market.
Evaluating the effect of

light beer on brand value
and current product
(Mountain Man Lager).
Investments and
return on the new
product
In how many years the

company will break even after
launching Mountain man Light
Beer?
Mountain Man Light Launch: PROS
Diversify brand Appeal to Increased

portfolio female drinkers revenues
Expand consumer
Leveraging the core
market by attracting
brand name by creating
younger drinkers
a new beer
between ages 21-27
Mountain Man Light Launch: CONS
Distracting
Increased cost of
Create brand focus away
production and
implications from current
advertising
lager
Alienate the Competing against

current customer deep pocketed
base competitors
Mountain Man Light
Revenue Forecast for Mountain Man Light Beer:
Year 2005 2006 2007 2008 2009
Light beer consumption 18,744,303 19,494,075 20,273,838 21,084,792 21,928,184
in barrels (East Central
Region)
CAGR (compound annual 4% 4% 4% 4%
growth rate)
Mountain man light 0.25% 0.50% 0.75% 1.00%
estimated growth year on
year (0.25% of base
market share)
Mountain man light 48,735 101,369 159,136 219,282
estimated sales in barrels
Mountain man light $4,727,295 $9,832,793 $15,339,192 $21,270,338
estimated revenues
(@$97 per barrel)
Mountain Man Light
Breakeven analysis for mountain man light beer (2006-2007):
Variable cost calculations:

Variable cost for mountain man lager = $66.93
Variable cost for mountain man light = $71.62
($66.93+$4.69)
Price per barrel = $97($50,440,000/520,000)
2005 Sales Revenue =
$50,440,000
2005 Sales Volume = 520,000
Net profit margin = $25.38 ($97-$71.62)
Mountain man light
Breakeven analysis for mountain man light beer(2006-2007)
(Contd..)
Best case scenario-
Fixed cost calculation (without cannibalization):
Initial advertising cost = $750,000

Annual incremental SG&A cost(2006) = $900,000
Total fixed cost = $2,550,000

(without cannibalization)
Mountain man light
(Contd..)
Best case scenario-
To breakeven without cannibalization:
Total breakeven volume = fixed cost/net profit margin

= $2,550,000/$25.38
= 100,473 barrels
Total breakeven revenue = total breakeven volume*price per
barrel
= 100,473*$97
Mountain man light
(Contd..)
Worst case scenario-
Fixed cost calculation(with 20% cannibalization plus 2% lost revenue base annually):
Initial advertising campaign cost = $750,000
Cost from cannibalization(2006) = $437,226
(22% from 2005 net revenues)
Cost from cannibalization(2007) =$314,036
(22% from 2006 net revenues)
Total fixed cost =$3,328,262

(with cannibalization)
Mountain man light
(Contd..)
Worst case scenario-
To breakeven (with 20% cannibalization plus the 2% lost revenue
base annually):
Total breakeven volume = fixed cost/net profit margin
= $3,328,262/$25.38
= 131,137 barrels
Total breakeven revenue = total breakeven volume*price per
barrel
= 131,137*97
= $12,720,308
Mountain man light
(Contd..)
Mountain man light beer will breakeven in both scenarios by the
end of 2007:
Revenue needed to breakeven(best case scenario) = $9,745,881
Revenue needed to breakeven(worst case scenario)= $12,720,308
We would take a loss in 2006 but
our 2007 projections put us at
Estimated revenue for mountain man light beer: $1,839,780 net revenues for the
two years even in worst case
scenario.
2006 revenues= $4,727,295
2007 revenues= $9,832,793
Total revenues at the end of 2007= $14,560,088
Analysis
 The product is expected to
cover all its investment cost
and become profitable past
2007.
 Launching mountain man
light beer can also increase
awareness and uplift the
brand value.
Conclusio
n
Yes, Chris Prangel should go ahead and launch

Mountain Man Light.
Created by Shashank Srivastava, IET Lucknow, during a
marketing internship under the guidance of Prof. Sameer
Mathur, IIM Lucknow.

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MOUNTAIN MAN BREWING COMPANY:

BRINGING THE BRAND TO LIGHT

Harvard business school case

Who is Chris Prangel?

 Founded by Guntar Prangel in 1925.

Light beer competitive market shares:

The MMBC wants to

Evaluating the effect of

In how many years the

Diversify brand Appeal to Increased

Alienate the Competing against

Variable cost calculations:

Initial advertising cost = $750,000

Total fixed cost = $2,550,000

Total breakeven volume = fixed cost/net profit margin

Total fixed cost =$3,328,262

Yes, Chris Prangel should go ahead and launch

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