Mountain Man Brewing Company has had huge success in the Eastern Central United States due to their well-beloved Lager, but just recently, have noticed a decline in sales revenue this past year. With the realization of this trend comes with another: light beer sales have grown in the U.S at an annually compounded rate of four percent. In this analysis of Mountain Man Light, I will touch base on a few revenue projections, finishing with a breakeven analysis to hopefully point this product line in the direction of best fit for this brewery.
MMBC GOALS AND BRAND IMAGE Mountain Man Brewing Company hangs its hat on its history and all its family that’s tied to it. In 1925, Guntar Prangel reformulated a family recipe, making the formula that is …show more content…
I have already seen the brand loyalty that they have built over the years, but times are changing, with growth in the light category of beer from 29.8% of volume sales in 2001, to now 50.4% of volume sales in 2005(Abelli, 2007, p.4). There is a new wave of consumers that can be tended to if Mountain Man were to choose to. Along with a growth in our market, there comes with the diversification of our products, yielding us to meet a wider variety of consumer preference. Light beer has shown to be popular to health conscious, calorie-counting individuals, including women, who are currently 42% of all Light Beer Drinkers. There may be a chance of success here, but with it, there are some potential drawbacks as well. As Guntar proclaimed, “The light beer would only draw time, resources, and attention away from our…bread and butter” (Abelli 2007, p.7). This certainly a chance for product cannibalization to occur, but I can also understand his stance on maintaining the authentic, family stylized image, and I respect the integrity he holds for his business’s values. When thinking at this standpoint, the risk seems too much to bear, leaving Guntar skeptical about this project being …show more content…
Chris knew our variable costs for brewing a light beer would amount to $71.62, $4.69 more than Mountain Man Traditional Lager. In the end, the Light Beer has a Net Profit Margin of $25.38. With an initial Advertising Campaign Cost of $750,000, along with the yearly $900,000 of SG&A costs, Mountain Man will be incurring fixed costs of $2,550,000. And that is at the best launch scenario, meaning zero product cannibalization. But as you can see from the Breakeven Analysis Section, Cost of Cannibalization has been included for both 2006 and 2007 at 5% and 20%, their total fixed costs being $3,539,633 and $3,542,659 respectively. With this, we have projected a breakeven number of barrels, without cannibalization, to be 100,473 or $9,745,863 of revenue. If encountered with 5% or 20% cannibalization, breakeven dollars would need to be $13,528,147 and $13,539,714 respectively. But as we observe in Exhibit 5A, we see a breakdown of the consumption of barrels by the types of beer. In 2005, Light Beer had 50.4% of the market share, totaling 18,744,303 barrels consumed. Chris described the regional revenue growth of the beer to be four percent annually, all while growing MMBC market share “by a quarter of a percent each year... at a base… of 0.25%” (Abelli 2007, p.7). After the growth in annual light beer consumption and holding a quarter of a
MMBC GOALS AND BRAND IMAGE Mountain Man Brewing Company hangs its hat on its history and all its family that’s tied to it. In 1925, Guntar Prangel reformulated a family recipe, making the formula that is …show more content…
I have already seen the brand loyalty that they have built over the years, but times are changing, with growth in the light category of beer from 29.8% of volume sales in 2001, to now 50.4% of volume sales in 2005(Abelli, 2007, p.4). There is a new wave of consumers that can be tended to if Mountain Man were to choose to. Along with a growth in our market, there comes with the diversification of our products, yielding us to meet a wider variety of consumer preference. Light beer has shown to be popular to health conscious, calorie-counting individuals, including women, who are currently 42% of all Light Beer Drinkers. There may be a chance of success here, but with it, there are some potential drawbacks as well. As Guntar proclaimed, “The light beer would only draw time, resources, and attention away from our…bread and butter” (Abelli 2007, p.7). This certainly a chance for product cannibalization to occur, but I can also understand his stance on maintaining the authentic, family stylized image, and I respect the integrity he holds for his business’s values. When thinking at this standpoint, the risk seems too much to bear, leaving Guntar skeptical about this project being …show more content…
Chris knew our variable costs for brewing a light beer would amount to $71.62, $4.69 more than Mountain Man Traditional Lager. In the end, the Light Beer has a Net Profit Margin of $25.38. With an initial Advertising Campaign Cost of $750,000, along with the yearly $900,000 of SG&A costs, Mountain Man will be incurring fixed costs of $2,550,000. And that is at the best launch scenario, meaning zero product cannibalization. But as you can see from the Breakeven Analysis Section, Cost of Cannibalization has been included for both 2006 and 2007 at 5% and 20%, their total fixed costs being $3,539,633 and $3,542,659 respectively. With this, we have projected a breakeven number of barrels, without cannibalization, to be 100,473 or $9,745,863 of revenue. If encountered with 5% or 20% cannibalization, breakeven dollars would need to be $13,528,147 and $13,539,714 respectively. But as we observe in Exhibit 5A, we see a breakdown of the consumption of barrels by the types of beer. In 2005, Light Beer had 50.4% of the market share, totaling 18,744,303 barrels consumed. Chris described the regional revenue growth of the beer to be four percent annually, all while growing MMBC market share “by a quarter of a percent each year... at a base… of 0.25%” (Abelli 2007, p.7). After the growth in annual light beer consumption and holding a quarter of a