History of the MMBC
Mountain Man Brewing Company is established by Guntarprangel in 1925 as a family business which is continued by his son then his grandson. The company has only one product of beer known as Mountain Man lager which is produced under the taste of family trend in a refined way. In 2005 MM lager had a market leader position in West Virginia and also increases its overall revenue by the $50million. Through this company maintain its successful family business status.
MMBC Competitive Advantage
MMBC success is based on several major factors such has brand recognition among their customers, their special family refined taste recipe for the core product of the company and its maintained quality throughout the several past years. These factors made MMBC as the best beer in the West Virginia. (Wera, 2014)
By the efficient use of trained staff and getting possible benefits from customers brand loyalty towards MMBC make it unique from its competitors. Past strong position of the company with the title of the best brewing in the “West Virginia” support MM Lager, the core product of the company to break into new marketplaces for the greater exposure and growth in the new markets. MMBC didn’t follow it competitor’s receipt for their product, therefore, they have the unique taste and quality to entertain its customer based requirements. (Tobey, 2010)
Increase in pricing impact
MMBC was categorized as leading brand among working class people. It was considered as above from premium brands and below from the special brands in the region, therefore, it was priced with the highly competitive pricing strategy to maintain its sales growth and competition with it competitors.
Besides the strong brand recognition along with customer’s perception of good quality from the MMBC still, it’s declined in its revenue in 2001 because of overall downfall in the beer industry in U.S per capita consumption with the increasing of competitor’s product such as spirit-based drinks and wines. As this MMBC brand is popular in working class they perceive it as high quality and upper-class status product as compared to Miller and Budweiser. Through this MMBC can gain its higher return as compared to its competitors without going into deep competition with the competitors. (Tobey, 2010)
It was suggested that company should expand its product line beyond the Lager beer to compete within the competitive environment because it was decreased its overall sale revenue by 2% as compared with the previous year. No doubt there is majority type of customers who has been chosen MMBC brand by their heart but still there was a decline in that segment of the customer and also distributors were preferred other new entrants in the market for a large number of sales commission earnings. It makes hard to compete in the competitive environment with a single line of a product among the competitors offering the number of product lines. Also, new consumers are only in that number which is MMBC has currently in its fraction of current customers.
Another uncontrollable circumstance which leads towards company’s cost of product increase is extra taxes and increase in the raw material price of the product. As company bears more cost which is unavoidable and enable the company to absorb it without pass it on their customers. So buyers which have a capacity to buy more in fewer prices now has less power of purchasing the same product with the high price so demand is contracted due to this factor which ultimately has the impact on the sales revenue of the MMBC overall. (Tobey, 2010)
Problem statement/issue identification
In recent years health awareness is going viral among the customers so consumers prefer less caloric product such as spirit drinks and wines. As beer contains the high amount of calories it is losing its popularity in new customers, who preferring less caloric products of the main competitors. This phenomenon leads towards the shrinkage in the existing market share of the MMBC brand in the competitive environment and no new inflow of the customers towards the existing product. By this company’s annual sales are also in declining phase which ultimately reduce the profitability of the company. Only those customers who are loyal to the MMCB brand use the alternatively lighter version of the MMBC products over the other available substitute in the marketplace.
Introduction of Light beer
After the market analysis about lager beer and lighter version of the product, recently graduated Chris angel decide to introduce MM light in the market to grab the difference between the sales. As it can be analyzed that MM Light has 4% compound annual rate growth, opposite in the MM Lager. It is analyzed that the consumption age group of Lager MM is above 45 years and for MM light would be 25 to 45 and ratio between male and female is 4 to 1 in MM Lager and Lighter beer contain 3-2. Also with the current situation aspects, it is anticipated that in future this decline in Lager MM continues to decline with the same ratio. By 2005 MMBC has a position to bear the capital expenditure to launch its new product line. Although by introducing the new product line with the name of light MM can deteriorate the sales revenue of the Lager Beer and also damage the brand loyalty among the existing customers of the company. Therefore MMBC management is going to evaluate its decision through financial management by evaluating it through SWOT Analysis of the company. (Wera, 2014)
According to the SWOT Analysis of the MMBC whether it is seen more weaknesses and threats but still it’s out weight against the strength of the company is less. It is seen that more than 50% of the total sales would generate from the Light MM which ultimately increases the market share of the company in the marketplace.
Major strength of MMBC is its brand name but it threat is from competitors in the market which are already in growing phase. Opportunities lies with the attraction of new customers towards company beyond the blue collar class it can be in access of common person as a company’s customer. Major threat for the company is the canalization risk of major product of the company.(Mountain Man Brewing Case Analysis)
Analysis Break-Even point
As shown in Exhibit 1 there is net income calculated from the operations of the Lager MM which can easily cover up the initial expenditures (Exhibit 7) to launch the new product of Light MM. so launching the new brand is not a full-time burden on MMBC it’s just the allocation of the profits to expand its product line in existing marketplace. By conducting breakeven analysis we have analyzed, 94,563 barrels of Light MM and 520,000 barrels of Lager MM need to sell to achieve break-even point by launching the new product line. (Mountain Man Brewing Case Analysis)
MM Light Opportunity cost
There is forgone sales revenue encountered with the introduction of Light MM in the Lager Beer market. So this would be an opportunity cost considered for the Light MM product. But it is important o meet sales revenue in Light MM greater than the fall in the revenue of larger Beer to compensate the effect of decreasing the main product demand of the MMBC. Still, it is the threat for the company’s brand bad impression on existing customers with the larger level of cannibalization of the products although the MM light will grow continuously in from 2007 to 2010. (Wera, 2014)
Launch of new product in existing market
It can also be considered that introduction of the Light MM cannot deteriorate the sales revenue of the existing product but it can create a new customer based without switching Lager beer customers towards Light MM. This will create a new customer based on the existing market with less marketing expenditure cost because of an existence of strong brand recognition. This will help in competing directly with the competitors having cheap and light caloric products which ultimately enhance the market share of MMBC. (Tobey, 2010)
For companies, it is always a great risk to introduce its new product with the threat of forgoing sales of its existing flagging product. But the market trends and customers behaviors towards a specific product and their lifestyle demand the alteration in MMBC product line.
To compete in competitive environment MMBC should consider its customer’s needs and demands for the new product. Through MM light launch MMBC can cope with its major threat of not attracting new customers towards the company which is the major reason for declining the sales revenue of the company over the years. By launching Light MM MMBC can attract new customer based on its competitors.(Wera, 2014)
Company should introduce its new product Light MM with proper marketing mix of 4p’s (price, product, promotion and place). Light MM product should marketing through social and online media so that customers of new age group can easily know about new product of the company.
Initially MMBC should give price offers for MM Light for its retailers to promote their product actively. MM Light marketing is needed to display it on the prime locations of pub and bars where new customers based can be target directly.(Wera, 2014).