Mountain Man Brewing Company Case Exam

1091 words - 5 pages

Recommendation:

Mountain Man Brewing should create a new market strategy and introduce a line extension of Light Beer to expand their portfolio and create new sales among non-existing customers. This line extension will target the younger drinkers and women in the East Central Region and will increase sales and create profit within 2 years.

Rationale:

1. Light beer sales will be profitable within 2 years. The first year MMBC will lose $486,374. However, in 2007, the second year, MMBC will gain $1,520,341 in profit. See Appendices 6 and 7.

2. Currently, MMBC can afford the line extension. If MMBC were to wait a few years, there might not be any profit to pay for a line ...view middle of the document...

9. MMBC is a regional second tier beer and many young adults appreciate that it is an independent brewery.

10. Currently, MMBC’s consumers are very loyal, but are aging. Most MMBC’s drinkers are above the age of 45.

11. MMBC has high brand equity. Mainly for its quality, smoothness, water content percentage, bitter taste, and alcohol percentage and that will help the light beer sales because new users will associate the brand name and quality with the product.

12. MMBC does not want to lose any brand equity by introducing a light beer. Light beer sales are growing and targeting a different market segment.

13. Advertising for a line extension for a light beer will cost $900,000 additional SG&A costs as well as $750,000 for an intense six-month ad campaign. No additional capital expenditures in plant and equipment in the short term because the current MMBC’s facility has excess capacity. See Appendices 6 and 7.

14. The Light Beer with cannibalize 5-20% of MMBC Lager’s sales. See Appendix 5.

15. Most beer companies have expanded their product lines to contain more than their flagship brands, except MMBC.

16. Currently, 70% of MMBC’s sales are at off-premise locations. Bringing in a light beer can bring more sales to restaurants and bars since most young drinkers drink there.

Appendices:

Appendix 1: MMBC’s Projected Revenue

Projecting Revenue
Year Revenue
2005 $50,440,000
2006 $49,431,200.00
2007 $48,442,576.00
2008 $47,473,724.48
2009 $46,524,249.99
2010 $45,593,764.99

• Decrease in Revenue by 2% annually.

Appendix 2: Status Quo- Partial Income Statement

Year 2005 2006 2007
Net Revenue $50,440,000 $49,431,200.00 $48,442,576.00
COGS $ 34,803,600 $ 34,107,528 $ 33,425,377
NI Before Tax $ 3,114,670 $ 3,052,377 $ 2,991,329
Year 2008 2009 2010
Net Revenue $47,473,724.48 $46,524,249.99 $45,593,764.99
COGS $ 32,756,870 $ 32,101,732 $ 31,459,698
NI Before Tax $ 2,931,502 $ 2,872,872 $ 2,815,415

- NI is declining at a 2% annual rate.

Appendix 3: Light Beer Sale’s Growth

Light Beer Growth Barrels
2005 18,744,303
2006 19,494,075
2007 20,273,838
2008 21,084,792
2009 21,928,183
2010 22,805,311

Appendix 4: MMBC Introduces Light Beer- Profit

MMBC's Share...

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