Q.1) Despite being a strong brand what caused its decline?

Answer: - Reasons for decline –

 Aging population was shrinking and key consumer segment was younger generation, 21-
27 years of age, who preferred light beer over lager. These first-time drinkers did not
create any loyalty towards a brand. In 2005 this population amounted to 13% of adults and
accounted for 27% of beer sales. Compared to their old counterparts this generation spent
twice as much on alcohol consumption. This was probably a reason for tipping of the
market.
 The younger consumers preferred light beer which was steadily gaining market share
which accounted for 50.4% of volume sales in 2005 (MBBC did not have a light beer
product to cater to this segment). Additionally, majority of females also belonged to the
light beer segment market.
 Large domestic brewers spent heavily to maintain sales volume in premium segment
which MMBC did not compete with.
 Preferences in beer consumption were changing and light beer demonstrated consistent
growth.
 No brand loyalty towards MMBC in restaurants and bars where younger population
frequented as compared to breweries.

Q.2) Should MMBC introduce a light beer? Justify your decision.

Answer: - Mountain Man Brew Company should launch Mountain Man Light based on –

1. The premise that MMBC will be targeting young customers of ages 21-27, this segment
accounts for more than 27% of total beer consumption.
2. MMBC needs to take advantage of the potential 0.25% market share annually from region
light beer market.
3. Mountain Man is the only brewing company in it’s region and amongst the major beer
companies that has not expanded it’s product line.
4. MMBC will need to sell 65,012 of barrels to break-even, which is a realistic capability for
the brewing company.

MMBC should launch the light beer brand to diversify its portfolio and to ensure continued
growth of its family-owned brewery. The company should also renew the marketing strategy of
its flagship product to retain core brand equity and Lager's loyal customers.
  MMBC can increase its profit by thinking about the young customers of beer and their
personal preference towards the light beer.
 With a change in taste and preference of the customers the MMBC should be flexible
enough to grow and diversify with the changing market scenario.
 There are lot of customers of different ages and MMBC should understand their personal
choice and taste rather than only focusing on its flagship product to retain core brand
equity. The young customers prefer the light beer instead of Mountain man lager.
 In the long run, that company only survives which can adjust themselves with the dynamic
market and can prepare themselves according to the need of the customers.
Calculation –
 2% decrease in revenue for the future two years

Year 2005: Net revenue is $50,440,000 (given in income statement)

2006: $50,440,000 * 98% = $49,431,200
2007: $49,431,200 * 98% = $48,442,576

 Selling Price per barrel = Net Revenue/Total Barrels sold = $50,440,000/5,20,000 = $97

 MMBC expected revenue in 2006 with a 0.25% market share every year in 2006, light
beer market share for MMBC will be :

$18,744,303 * 4% = $7,49,772.12 + $18,744,303 = $19,494,075.12 * 0.25% = 48,735 (market

share in
2006) * $97 per barrel = $4,727,295

 5% cannibalization

2006: $49,431,200 * 95% = $46,959,640

2007: $48,442,576 * 95% = $46,020,447.20

 Expected revenue in 2006 = $49,431,200 - $46,959,640 = $2,471,560

 Break-Even Point : Fixed Cost/Contribution

($9, 50, 000 + $7, 50,000) / $97 – ($66.93 + $4.69) = 65,012 Barrels

According to me introduction of a light beer can increase profits and can also lead to a successful
running and growth of business in the long run. So, launching Mountain Man Light Beer can also
increase awareness and uplift the brand value. Chris Prangel should go ahead and
launch Mountain Man Light.