Mountain Man Brewing Company

Mountain Man Brewing Company

Shad Griffith

Situation

        Mountain Man Brewing Company was founded in 1925 by Guntar Prangel in the New River coal region of West Virginia. Mr. Prangel started the brewery with the idea of using an old family recipe with a “meticulous selection of rare, Bavarian hops and unusual strains of barley, resulting in a flavorful, bitter-tasting beer” which he named Mountain Man Lager (Abelli, 2007). The independent, family-owned company distributes beer to the East Central region of the United States. They produce only one style of beer, Mountain Man Lager.

        Due to increasing competition within the East Central region and decreasing beer consumption across the US, Mountain Man Brewing Company (MMBC) was experiencing declining revenues of “2% relative to the prior fiscal year” (Abelli, 2007). Additionally, the overall beer market in their sales territory experienced a 0.3% decline and the US overall had a 2.3% decline over the same period (Abelli, 2007). More specifically, within East Central region Premium and Popular Brewers, of which Mountain Man Brewing is a part, experienced an approximate 5% decrease in sales. (Abelli, 2007) At the same time that the overall beer market was declining, however, sales of light beer have increased by approximately 21% since 2001.

        Chris Prangel, a member of the Prangel family who plans to soon take over operations of MMBC, is interested in trying to expand the company’s beer selections to counter the decline of Mountain Man Lager and to tap into the large growth rate of other beer styles, especially light beers. He needs to decide if the company should brew a light beer to take to market.

Problem

In 2005, due to increasing competition from large domestic brewers and “changes in beer drinkers’ preferences, MMBC was experiencing declining sales for the first time in the company’s history” (Abelli, 2007). While still profitable, MMBC revenues declined “2% relative to the prior fiscal year” (Abelli, 2007). One cause of the decline is that MMBC’s target consumer, males between the ages of 45-54, was far from the “key consumer segment for beer companies” of “younger drinkers, 21-27 years of age” (Abelli, 2007). The company’s flagship beer, Mountain Man Lager, was underperforming and was projected to continue to decline over the next few years; the company needed to determine the best way to increase revenues.

Analysis

         Mountain Man Brewing Company (MMBC) is a family owned business that produces one style of beer, Mountain Man Lager. “Mountain Man Lager’s reputation as a quality beer was well entrenched throughout the East Central Region of the United States” (Abelli, 2007). They have been family owned and operated since 1925 and continue to use the same “brown bottle, with its original 1925 design of a crew of coal miners printed on the front” (Abelli, 2007).

        MMBC has “relied on its history and its status as an independent, family-owned brewery to create an aura of authenticity and to position the beer with its core drinkers—blue-collar, middle-to-lower income men over age 45” (Abelli, 2007). Mountain Man Lager has won several regional awards for being the “’Best Beer in West Virginia’ for its eighth year straight” (Abelli, 2007). It also won “Best Beer in Indiana” and “America’s Championship Lager” at the American Beer Championship. “In a recent study in West Virginia, this audience had rated Mountain Man Lager as the best-known regional beer, with an unaided response rate of 67% from the state’s adult population” (Abelli, 2007).

        With the declining sales that MMBC experienced over the past year, they need to seek a new approach to leverage their strong brand reputation within their sales territory. “Brand awareness was one cornerstone of the brand’s success with blue-collar consumers…The brand is as recognizable a brand among working-class males in the East Central region as Chevrolet and John Deere.” (Abelli, 2007) Despite MMBC strong brand recognition, their customer base is aging, and they are not attracting the younger beer drinking population that accounts for “13% of the adult population in 2005, but accounted for more than 27% of total beer consumption...” (Abelli, 2007).

        One of the options that MMBC’s new manager of marketing operations, Chris Prangel, recommended was to release a new style of beer, Mountain Man Light. Chris believed that by creating Mountain Man Light the company could tap into the increasing market for light beer. The light beer market had seen an increase of 20.6% since 2001, while other styles of beer declined about 4% last year (Abelli, 2007). The light beer market presented an opportunity for the company to attract a younger and broader demographic, including females who make up 42% of the domestic light beer drinkers (Abelli, 2007).

Chris was informed by the President of the company along with the Vice President of Sales and the CFO that they were concerned that launching a new product line “might cannibalize the sales of Mountain Man Lager.” (Abelli, 2007) Unlike light beer drinkers, the majority of Mountain Man Lager consumers are males ranging from 45-54 years of age and make between $25k and $75k per household. (Abelli, 2007) These are blue-collar workers that have grown up on the brand and have a strong sense of loyalty to the company. One customer said “my dad drank Mountain Man just like my granddad did. They both felt it was as good a beer as you could get anywhere” (Abelli, 2007). The upper management team for MMBC did not think that launching Mountain Man Light was good for the company. They were concerned that “Mountain Man Light might alienate the core consumer base and ultimately erode and dilute the Mountain Man brand” (Abelli, 2007).

Another risk factor was that the light beer market is heavily targeted by large national and regional breweries. To compete in the saturated light beer market, the MMBC marketing agency estimated that it would cost at least $750,000 to launch an intensive six-month advertising campaign and an additional $900,000 annually to market the new brand (Abelli, 2007). Mountain Man Light would cost an additional $4.69 per barrel to produce over the current Mountain Man Lager production price of $66.93 (Abelli, 2007).

        The team was also concerned that if they were to expand their brand labels, they would not be able to expand their facing, or shelf space, in the off-premise sales locations. They felt that stores would not give them additional shelf space for the new labels and instead would take away space currently given to Mountain Man Lager for the new product, decreasing visibility to the consumer. If they could not increase the shelf space, the company was afraid “it would only draw time, resources, and attention away from our lager—our bread and butter” (Abelli, 2007).