Mountain Man Brewing Company
Bringing the Brand to Light
By Jonas Wera
BMK710MS Brand Strategy I
Prof. Bob Carroll
December 5, 2014
Table of Contents
Table of Contents
Problem Statement
Lack of Customer Inflow
Forecasted Beer Consumption over 2005 - 2007 in East Central Region
Shrinking Premium Beer Segment in ECR
Customer Segments
Competition
Criteria/Alternatives
Launch of Light is a bad Idea
Short Term Solution to boost Sales
Long Term Solution to boost Sales
Appendices
1
2
3
4
5
6
7
8
9
10
11
12 - 20
1
The MMBC is confronted with a two percent drop in sales last year and is looking forward to decreases in
sales of up to 12,7 percent by yearend 2007.
Current customers are ageing and there is no new inflow of young customers
The ECR (East and Central Region) beer market is declining and forecasted to decline in the near future
Within the shrinking ECR beer market, the premium beer segment is shrinking
Deep pocket players fight hard to maintain sales levels in premium market*
Stringent regulations has led to a limit on advertising & promotion, making distributors selling beer at deep discounts.
This has made the stores highly reluctant in offering a wide range of products (shelf space is distributors’ most
important limitation) and made distributors focus on products that contribute a lot to the bottom line and have high
selling rates. This tendency plays in the disadvantage of small and medium companies (like MMBC)
 Forecasted income statement for Mountain Man Lager if the MMBC does not take action:





Mountain Man Lager
Revenu
TVC
Gross Margin
Fixed Cost
Operating Margin
2005
$50.440.000,00
$34.803.600,00
$15.636.400,00
$10.995.920,00
$ 4.640.480,00
2006
$46.657.000,00
$32.193.330,00
$14.463.670,00
$10.995.920,00
$ 3.467.750,00
2007
$44.025.390,00
$30.377.519,10
$13.647.870,90
$10.995.920,00
$ 2.651.950,90
* In a shrinking market, market share has to grow in order to maintain sales levels
2
The biggest Threat for MMBC is a Lack of new Customer Inflow which leads to a shrinking Customer Base.






Younger Drinkers (the new generation) prefer Light beer
They are developing a bond with Light beer brands which will make them loyal to these brands when growing older
(older people become brand loyal)
MMBC’s current customer is 45+ and is expected to stay loyal to the brand. However, there will be natural outflow of
customers (by death, health reasons etc.)
The threat is that there is no new inflow of customers to replace the natural outflow of customers
This will lead to decreasing sales year after year and finally turning the profits into a loss
MMBC needs to address this issue by assuring a new inflow of customers
*Sole brand loyalty rate (loyal customers who are not interested in experimenting with other brands) of 53%
3
The Beer Consumption in The East Central Region is forecasted to decline over the next two years.
Beer Consumption in East Central Region
over last five years and forecast for next two
years (in barrels)
37.800.000
Historical Data
Forecast
37.600.000
37.400.000
37.200.000
37.000.000
36.800.000
36.600.000
36.400.000
36.200.000
2000
2001
2002
2003
2004
2005
2006
2007
Factors negatively influencing beer consumption in East Central Region in next two years:
 Increasing competition from wine and spirits
 Increases in the federal excise tax (government is more and more discouraging alcohol via tax increases)
 Initiatives encouraging moderation
 Increasing health concerns
 Personal responsibility
 Increased regulation for alcoholic beverages advertising & promotion
A new generation of new-drinkers will enter the market (people who turn 21 in the next two years) but this will largely be
compensated by a natural outflow of drinkers (e.g.: death, health reasons, etc.).
4
The Premium Beer Segment is Shrinking in the Declining East Central Region Beer Market over the
Period 2005 – 2007*
Forecasted East Central Region Beer Consumption by Type &
Origin, 2007
Light Beer
Premium Beer (including MM Lager)
Popular
Imported Premium
Superpremium (craft & high-end domestics)
7%
14%
9%
54%
16%
East Central Region Beer Consumption (in barrels) by Type &
Origin, 2005
Light Beer
Premium Beer (including MM Lager)
Popular
12%
Imported Premium
Superpremium (craft & high-end domestics)
6%
12%
50%
20%
*See Appendix 1, page 12 for more information about the pie charts.
5
The Two Customer Segments of our Primary Interest are Younger Drinkers and Rough Men.
Younger Drinkers







21-27 year old
First-time drinker
Not loyal to beer
brand
Are open for new
tastes; want to
experiment
4 million growth
by 2010 (based on
demographics
data)
Willing and able
to spend a lot of
money on beer
Buys
predominantly offpremise
Rough Men








45+ year old men
Blue collar
Middle to low
income
Buys
predominantly
(60%) off-premise
Loyal to beer
brand
Has an emotional
connection with
beer brand (which
makes them price
insensitive)
Heavy consumers
of beer
Preference for
flavorful, bittertasting beers
Fancy Old






45+ year old men
and women
White collar
Middle to high
disposable income
Loyal to beer
brand
Price insensitive
for beer
Buys
predominantly onpremise
Non-involved Drinkers






Men and women
above 27 years of
age
Have drinking
experience
Not loyal to
specific brand
Poor knowledge
about the beer
market
Price sensitive for
beer
Looking for low
price rather than
quality
Experienced women




above 27 years of
age
Loyal to specific
beer brand
Have an
emotional
connection with
beer brand (which
makes them price
insensitive
Heavy consumers
of beer
The typical customer for Mountain Man Lager is the “Rough Man”. There is tremendous potential in the “Younger Drinkers”
segment as these customers are not yet loyal to a specific brand and are willing to experiment.
6
We Are Competing For the Same Customer (Rough Men) as Other 2nd Tier Premium & Popular Brewers,
Imported Beer Brands and Regional Craft Brewers.
Major Domestic*
Customer Segment



Younger
Drinkers as
primary target
audience
Experienced
Women
Not-involved
Drinkers
Other 2nd Tier
Premium & Popular
Brewers


Rough Men
Experienced
Women
Craft/Specialty Beers



Fancy Old
Rough Men
(especially for
Regional Craft
Brewers)
Experienced
Women
Imports



Fancy Old
Rough Men
Experienced
Women
Distribution Technique
Sold via distributors
and retailers
Sold via distributors
and retailers
Predominantly sold onpremise
Sold via distributors
and retailers
Price
Average
Premium
Above Premium
Above Premium
MMBC is not in competition with the major domestic brands, also known as the deep pocket players. Competition is most
severe from other 2nd tier premium & popular brewers (e.g.: Pabst Brewing Company and Genessee) followed by competition
from Regional Craft Brewers and to a lesser extent from Imports.
The competition with Regional Craft Brewers is limited given the difference in distribution (on- versus off-premise).
*Major Domestic is a collection of Anheuser-Busch, Miller and Coors’ beer brands.
7
Launching Second Version, expand Market Span and increase Price Will Turn The Declining Sales into Boosting Sales.
Launch of
Mountain Man
Light in ECR
Launch second
version of
Lager under
young image**
Extent onpremise selling
In line with
current target
audience (Rough
Men)
No. The target
audience for light
is Younger
Drinkers.
Damages the brand
image of Lager*
Increases bargaining power
over distributors
Differentiates us from
competitors (weakens
competition)
Will lead to new inflow
of customers
Yes. The
Yes. An increase in product
No. By launching
Yes. A big chunk of
scope and total brand sales
will leverage MM’s
bargaining power.
Yes. Target
Yes/No. The “rough
audience buys
40% of beer onpremise but we
currently only
have 30% onpremise sales.
men image” will be
damaged when sold
in fancy
restaurants/bars.
Carefully choose
appropriate
locations.
No. Makes Lager
even more exclusive
and strengthens the
image of “the real
thing”.
MM Light, we will
enter the area of the
large domestic
players (A-B, Miller
& Coors).
Yes. There currently
is no heavy, dark beer
specifically targeted
at Young Drinkers.
Yes. We are
currently at industry
average in terms of
on-premise sales;
increasing our onpremise presence can
set us apart from
competition.
No. This will
increase competition
with specialty beer
brands and imported
beers.
Younger Drinkers will
start drinking our
brand.
Younger
Drinkers.
introduction of MM
Light will soften the
“rough men image”
MM Lager currently
has.
Yes. “mine workers
image” of Lager will
be softened.
No. Targets
scope and total brand sales
will leverage MM’s
bargaining power.
No. No influence as we sell
directly to on-premise
locations or sell to them via
non-shelf holding
intermediaries.
audience is price
insensitive and
very brand loyal.
Yes. An increased price
Yes. A new inflow from
Younger Drinkers (no
drastic inflow as they
prefer Light over Dark)
No. We will only sell to
existing customers as
there is no incentive for
non-consumers to start
consuming when
offered on-premise.
5
1
4
No. A price increase
3
offers us the possibility to
will not attract new
offer a slightly larger
customers.
margin to the distributors,
making them willing to
carry our product(s).
Geographical
Yes. Target the
No. The same
Yes. The geographical
Yes/No. Will not
Yes. People from new
2
expansion (e.g.: Rough Men in
brand image will be
extension will make it more directly influence our geographical areas will
to Missouri)
the new
created in the new
difficult for distributors not competitive position.
start drinking MM
geographic area.
geographic area.
to carry our brand.
Lager.
*Mountain Man Lager’s image is about how the brand is perceived by customers; the focus is on its’ history, authenticity and status-giving aspects.
**Next to the current Lager, also sell the same liquid under other packaging and advertising, tailored around the Younger Drinkers segments.
Increase the
price of Lager
to Specialty
Beer Brand
prices
Yes. Target
Yes. An increase in product
Ranking
(1 is
best)
8
Launch of Mountain Man Light in the East Central Region will negatively impact the MMBC in the long
Term.
Next to the criteria outlined on page 8, a more extended list of (dis)advantages makes the absurdity of launching even more
clear.
Advantages




Helps to gain presence in on-premise locations
Extents the customer base by attracting the Younger
Drinkers
No initial investment in plant/equipment necessary
thanks to excess capacity
Has a net present value of $95.579 over the next two
years (See Appendix 4). Note that this number does
not take into account major brand damage costs in
more than two years and does not take into account
investment costs which are likely in the future.
Disadvantages








Brand image will be damaged
Increased competition from deep pocket players (large
domestic beer brands) and regional breweries
Cannibalization of MM Lager due to distributors who
will substitute Lager for Light
Increased inventory, SG&A, packaging costs
No experience with product launches
High advertising costs
Deep pocket players are constantly launching new
products
So far, no single small or medium company has been
able to successfully introduce a new product
9
Increasing Sales in the Short Term: The MMBC should geographically expand its’ brand presence and
increase the price to $100 per barrel.











Based on the alternatives table on page 8, we have the following promising alternatives: Increase the price of Lager to
specialty beer brand prices, geographically extent the brand and launch a second version of the brand.
It is advisable to do the geographical expansion together with the price increase to boost sales in the short term.
The launch of a second version lager is necessary to guarantee long term sales growth.
Geographical Expansion
Expansion to Missouri
Missouri is relatively close to our production plant in
West Virginia (low transport costs)
Drinking habits and patterns are comparable to the those
in the ECR
Missouri also has a coal mine industry which makes the
“coal mine workers image” of our brand very livable
Set up a marketing campaign to raise brand awareness
($1,000,000)
Build contacts with local distributors ($200,000)
This expansion will be profitable if we sell at least 39,900
barrels a year in this new market when keeping the price
at the same level. (See Appendix 2 and 3)
MMBC is expected to exceed this 39,900 barrel/year
target (See Appendix 3).




Price Increase
Lager currently priced at $2,25 for 12 ounce at bar,
$4,99 for a 6-pack at convenience store. Taking into
account the distribution margins, this leads to an
average price per barrel of $97,00 (See Appendix 2).
An increase of 3,09% in price gives an average price
per barrel of $100,00, leading to 36.287 barrels to be
break-even (See Appendix 2).
An increase of 6,19% in price gives an average price
per barrel of $103,00, leading to 33.269 barrels to be
break-even (See Appendix 2).
A 3,09% increase in price will not lead to drastic
customer switching, given the loyalty and price
insensitivity of our customers.
10
Increasing Sales in the Long Term: The MMBC should launch Second Version of Lager Under Young
Drinker Image in order to drive Customer Inflow.






The biggest threat to the MMBC is a declining customer base
New inflow of customers is necessary to guarantee sustainability in the long term
The Younger Drinker segment is the new generation with a large CLV* and as such, deserves special attention
The Younger Drinkers are not a big fan of heavy, dark beer so we don’t expect a large amount of them to start drinking
Lager
However, every Younger Drinker that starts drinking Lager is a highly profitable one in terms of CLV
Over two years, this will result in a NPV of $15.760 (See Appendix 5). Although this is a small NPV, it is nevertheless
important to launch this second version of Lager in order to guarantee customer inflow. This customer inflow will later
(more than two years in the future) generate high income streams.
*CLV stands for Customer Lifetime Value; a cumulative number reflecting all future value streams of a certain customer
with the company.
11
Appendix 1: Forecasted East Central Region Beer Consumption (in barrels) by Type & Origin, 2007.
Light Beer +4% (54%)*
New generation drinkers (21 years old) predominantly drink light beer. Light beer will get a new
inflow of consumers over the next two years and the people who are currently drinking light beer
will mostly stay loyal to light, even when growing older (as they have developed a psychological
bond with their light brand). This stretches the light customer base and drives up the market
share.
Premium Beer –4% (16%) A small inflow of new customers is expected, however, the increased presence and competition
from light beers will derive part of the new generation drinkers towards light. Besides, there is
an outflow of old customers (for health reasons, death, etc.).
Popular -3% (9%)
The negative tendency of the last years is expected to level out.
Imported Premium +2%
Imported premium brands are not that popular in the ECR as in the rest of The States but they
(14%)
are gaining attention.
Superpremium (craft and This industry is gaining more and more attention in the ECR, however, the limited size of the
high-end domestics) +1% companies will be a problem as the distributors are becoming more and more discriminative
(7%)
about which brands to carry (distributors have limited shelf space and are confronted with
decreasing margins on beer products). Although the margins on superpremium beer are generally
higher, the rotation (number of items sold over a certain time span) is lower which makes
distributors reluctant to carry them.
*The first percentage indicates the increase/decrease in volume market share and the percentage between brackets indicates
the forecasted volume market share in 2007.
12
Appendix 2: Minimum Number of Barrels MMBC Need to Sell in order to be Profitable in the Missouri
Market.
Quantity (in barrels)
39.907
Price
$
97,00
UVC
$
66,93
Revenu
$ 3.870.979,00
TVC
$ 2.670.975,51
Gross Margin
$ 1.200.003,49
Fixed Cost
$ 1.200.000,00
Operating Margin
$
Quantity (in barrels)
3,49
 The average price of $97,00/barrel for Lager is obtained by the following
calculation:
Net revenues of Mountain Man in 2005/Number of barrels sold in 2005
=$50.440.000/520.000 barrels
=$97,00/barrel
36.287
Price
$
100,00
UVC
$
66,93
Revenu
$ 3.628.700,00
TVC
$ 2.428.688,91
Gross Margin
$ 1.200.011,09
Fixed Cost
$ 1.200.000,00
Operating Margin
$
Quantity
 The Unit Variable Cost of $66,93/barrel for Lager is obtained by the following
calculation:
Cost of goods sold in 2005/Number of barrels sold in 2005
=$34.803.600/520.000 barrels
=$66,93/barrel
11,09
33.269
Price
$
103,00
UVC
$
66,93
Revenu
$ 3.426.707,00
TVC
$ 2.226.694,17
Gross Margin
$ 1.200.012,83
Fixed Cost
$ 1.200.000,00
Operating Margin
$
 The Fixed costs are the sum of the $1.000.000 advertising costs and the $200.000
contact set-up costs. No initial investment in plant/equipment is necessary as we
are currently dealing with excess capacity.
12,83
13
Appendix 3: MMBC will easily realize the 39.000 barrels/year Target in the Missouri Market.



Last year (2005), we sold 520.000 barrels
We were (and currently are) serving seven different states
When comparing the number of inhabitants of each state with the number of barrels sold in that particular state, we
observe an extraordinarily high correlation.
State
Inhabitant Ranking (1 is most inhabitants, 7
is least inhabitants)*
Illinois
1
Indiana
4
Kentucky
6
Michigan
3
Ohio
2
West Virginia
7
Wisconsin
5
*Data from The United States Government






Consumption Ranking (1 is most barrels/year, 7 is least
barrels/year)
1
5
6
3
2
7
4
This observation is in line with the expectations (as the demographics are comparable over the states).
The new market (Missouri) also has comparable demographics and ranks around Indiana when it comes to number of
inhabitants.
So we expect similar sales volumes for Missouri as for Indiana.
10,75% (3.998.855 barrels / 37.191.077 barrels) of the barrels consumed in the ECR are consumed in Indiana. Assuming
similar market shares across the seven states, we sell 55.911 (10,75% of 520.000) barrels in Indiana.
This gives us a rough indication of 55.911 barrels that we will sell in Missouri.
The start-up phase in Missouri may lead to slightly decreased sales compared to Indiana but 55.911 is still way above
the target of 39.907 barrels.
14
Appendix 4: Net Present Value (NPV) Calculation for Launch of Mountain Man Light over the next two
Years.


Notice that this NPV calculation only covers a two year situation. Damage to the Lager brand is likely to cause severe
negative effects on the income stream after this two-year period.
In case the MMBC does not launch Light and does not change anything to the current strategy (the base case), the
following brand matrix is expected for the next two years.
Volume Market shares
Mountain Man Lager
Mountain Man Youth
Major Domestic
Other 2nd tier Premium & Popular Brewers
Craft/Specialty Brewers
Imports
Total





2005
1,40%
0,00%
74,00%
11,10%
1,50%
12,00%
100,00%
2006
1,30%
0,00%
75,30%
9,00%
1,40%
13,00%
100,00%
2007
1,23%
0,00%
76,50%
6,97%
1,30%
14,00%
100,00%
Mountain Man Lager is forecasted to lose market share mainly due to natural outflow of customers in combination
with a lack of customer inflow. Also the decreasing margins which has led to more discriminating distributors is not
playing in our advantage.
Major Domestic consists of deep pocket players A-B, Miller & Coors who are gaining market share in an attempt to
keep their sales on the same level in the shrinking market. They predominantly do this buy regularly launching new
products and spending lots of money on advertising and promotion. Besides, they have considerably more power over
distributors then other players.
Other 2nd tier Premium & Popular Brewers are losing shares because of their limited power over distributors
(distributors are becoming more and more reluctant to carry their products).
Craft/Specialty Brewers are losing share due to a lack of bargaining power over distributors.
Imports are decreasing as a consequence of the new trends in the ECR where imports are becoming more and more
popular and evolving to levels comparable to other states.
15
Net Present Value (NPV) Calculation for Launch of Mountain Man Light over the next two Years - Ctd.
Historical and Forecasted Income Statements for the Period 2005 – 2007 in Base Case (no Launch).
Mountain Man Lager
Market Share
Quantity
Price
UVC
$
$
Revenu
TVC
Gross Margin
Fixed Cost
Operating Margin
$ 50.440.000,00
$ 34.803.600,00
$ 15.636.400,00
$ 10.995.920,00
$ 4.640.480,00

2005
1,40%
520.000
97,00 $
66,93 $
2006
1,30%
481.000
97,00 $
66,93 $
$ 46.657.000,00
$ 32.193.330,00
$ 14.463.670,00
$ 10.995.920,00
$ 3.467.750,00
2007
1,23%
453.870
97,00
66,93
$ 44.025.390,00
$ 30.377.519,10
$ 13.647.870,90
$ 10.995.920,00
$ 2.651.950,90
A severe drop in operating margin is observed over the period 2005 – 2007 in case the MMBC continues business as
usual.
16
Net Present Value (NPV) Calculation for Launch of Mountain Man Light over the next two Years - Ctd.
Brand Share Matrix in Case of Innovation (Launch of Light):
Volume Market shares
Mountain Man Lager
Mountain Man Light
Major Domestic
Other 2nd tier Premium & Popular Brewers
Craft/Specialty Brewers
Imports
Total



2005
1,40%
0,00%
74,00%
11,10%
1,50%
12,00%
100,00%
2006
1,25%
0,20%
75,22%
8,96%
1,37%
13,00%
100,00%
2007
1,17%
0,23%
76,41%
6,92%
1,27%
14,00%
100,00%
The introduction of Light will lead to cannibalization with Lager. This cannibalization is NOT due to customers who
switch from Lager to Light but is caused by distributors who only want to carry one of our brands or will devote the
same shelf space that now needs to be shared with two brands instead of one.
Market share will be taken from Major Domestic (A-B, Miller & Coors) as we fight for the same customer, i.e.: the
Younger Drinkers.
Market share will also be taken from Other 2nd tier Premium brands and Craft/Specialty brewers.
17
Net Present Value (NPV) Calculation for Launch of Mountain Man Light over the next two Years - Ctd.
Historical and Forecasted Income Statements for the Period 2005 – 2007 in Innovation Case (Launch).
Mountain Man
Light
Market Share
Quantity
Price
UVC
Revenu
TVC
Gross Margin
Fixed Cost
Operating Margin
Mountain Man
Total
Market Share
Quantity
Price
UVC
Revenu
TVC
Gross Margin
Fixed Cost
Operating Margin
2005
2006
$
$
0,00%
0
97,00
$
71,62
$
$
$
$
-
$
2005
1,40%
520.000
$50.440.000,00
$34.803.600,00
$15.636.400,00
$10.995.920,00
$ 4.640.480,00
2007
0,20%
74.000
97,00 $
71,62 $
$ 7.178.000,00
$ 5.299.880,00
$ 1.878.120,00
$ 900.000,00
$ 978.120,00
2006
1,45%
536.500
$52.040.500,00
$36.255.005,00
$15.785.495,00
$11.895.920,00
$ 3.889.575,00
$
$
$
$
$
0,23%
84.870
97,00
71,62
8.232.390,00
6.078.389,40
2.154.000,60
900.000,00
1.254.000,60
2007
1,40%
516.600
Mountain Man
Lager
Market Share
Quantity
Price
UVC
$
$
Revenu
TVC
Gross Margin
Fixed Cost
Operating Margin
$ 50.440.000,00
$ 34.803.600,00
$ 15.636.400,00
$ 10.995.920,00
$ 4.640.480,00
2005
2006
1,40%
520.000
97,00
$
66,93
$
2007
1,25%
462.500
97,00 $
66,93 $
$ 44.862.500,00
$ 30.955.125,00
$ 13.907.375,00
$ 10.995.920,00
$ 2.911.455,00
1,17%
431.730
97,00
66,93
$ 41.877.810,00
$ 28.895.688,90
$ 12.982.121,10
$ 10.995.920,00
$ 1.986.201,10
 The fixed costs of Light ($900.000) are incremental
SG&A costs associated with Light.
 In order to obtain the NPV, an investment cost of
$750.000 is taken into account (advertising
campaign to get product launched).
$50.110.200,00
$34.974.078,30
$15.136.121,70
$11.895.920,00
$ 3.240.201,70
The differences between the Innovation and the Base situation gives us a NPV for the launch of Light of $95.579.
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Appendix 5: NPV Calculation for Launch of Mountain Man Youth.
Brand share matrix for the period 2005 - 2007 if we launch Mountain Man Youth
Volume Market shares
Mountain Man Lager
Mountain Man Youth
Major Domestic
Other 2nd tier Premium & Popular Brewers
Craft/Specialty Brewers
Imports
Total


2005
1,40%
0,00%
74,00%
11,10%
1,50%
12,00%
100,00%
2006
1,28%
0,15%
75,22%
8,98%
1,37%
13,00%
100,00%
2007
1,20%
0,20%
76,39%
6,94%
1,27%
14,00%
100,00%
Mountain Man Youth will predominantly steal market share from Major Domestic brands (A-B, Miller & Coors)
Cannibalization with Lager will only occur to a very limited extent as the target market is totally different (Younger
Drinkers versus Rough Men)
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NPV Calculation for Launch of Mountain Man Youth - Ctd.
Income Statements for the period 2005 – 2007 when we launch Mountain Man Youth.
Mountain Man
Lager
Market Share
Quantity
Price
UVC
$
$
Revenu
TVC
Gross Margin
Fixed Cost
Operating Margin
$50.440.000,00
$ 34.803.600,00
$ 15.636.400,00
$ 10.995.920,00
$ 4.640.480,00
$ 45.939.200,00
$ 31.698.048,00
$ 14.241.152,00
$ 10.995.920,00
$ 3.245.232,00
$ 42.951.600,00
$ 29.636.604,00
$ 13.314.996,00
$ 10.995.920,00
$ 2.319.076,00
2005
2006
2007
Mountain Man
Total
Market Share
Quantity
Price
UVC
Revenu
TVC
Gross Margin
Fixed Cost
Operating Margin
2005
2006
1,40%
520.000
97,00 $
66,93 $
1,40%
520.000
$50.440.000,00
$34.803.600,00
$15.636.400,00
$10.995.920,00
$ 4.640.480,00
2007
1,28%
473.600
97,00 $
66,93 $
1,43%
529.100
$51.322.700,00
$35.672.958,00
$15.649.742,00
$11.895.920,00
$ 3.753.822,00
1,20%
442.800
97,00
66,93
1,40%
516.600
Mountain Man
Youth
Market Share
Quantity
Price
UVC
Revenu
TVC
Gross Margin
Fixed Cost
Operating Margin
2005
2006
$
$
0,00%
0
97,00 $
71,62 $
$
$
$
-
$
-
2007
0,15%
55.500
97,00 $
71,62 $
$ 5.383.500,00
$ 3.974.910,00
$ 1.408.590,00
$ 900.000,00
$ 508.590,00
0,20%
73.800
97,00
71,62
$ 7.158.600,00
$ 5.285.556,00
$ 1.873.044,00
$ 900.000,00
$ 973.044,00
 The fixed costs of Youth ($900.000) are incremental
SG&A costs associated with Youth.
 In order to obtain the NPV, an investment cost of
$750.000 is taken into account (advertising
campaign to get product launched).
$50.110.200,00
$34.922.160,00
$15.188.040,00
$11.895.920,00
$ 3.292.120,00
The differences between the Innovation and the Base situation gives us a NPV for the launch of Youth of $15.760.
20