Mountain Man Brewing
Company: Cultivating a New
Generation of Loyalty
By: Prianka Jhingan
December 5, 2014
1
Without a change in strategy, Mountain Man Brewing Company will risk its existence in
the market and operate in a loss of $1,096,973 by 2009.
Mountain Man Lager
Market Share
Net Income
$
2006
2007
2008
2009
2010
1.36%
1.32%
1.28%
1.24%
1.20%
3,387,446.97
$ 2,010,049.67
$
518,820.53
-$ 1,096,973.86
-$ 2,849,129.65
Mountain Man Consumption by Age
21-24
2%
How this concerns Mountain Man
25-34
15%
Increasing
competition
Competing against national major domestic
brands, as MM lacks the financial and marketing
resources to defend brand as aggressively.
35-44
19%
45-54
32%
Increasing
pressure
from
distributors
Looking for high margins and MM is not as
attractive and powerful as its competition, may
risk being dropped if they do not meet demand
requirements and contribute profitably.
55-64
19%
65+
13%
Changes in
beer
drinking
preferences
Premium segment of beer market is shrinking,
light beer is increasing and currently accounts for
50.4% of the market.
Loss of core
customers
The current core demographic is aging , resulting
in less consumption and is unable to capture a
younger consumer base.
Consumption by Type of Beer
Light Beer
+4%
Premium
Beer
Imported
Beer
(4%)
Specialty
Beer
+9%
(5%)
MMBC’s core customers are
aging and not consuming as
much beer and are not being
replaced. Mountain Man is
currently viewed as an older
man’s beer and is therefore
not seeing its consumption
in the younger demographic.
Although light beer is
growing, people who would
consider drinking MM,
would not consider drinking
light beer.
Specialty and craft beers –
beers with bold flavour,
similar to MM are growing
(which further concerns
MM’s recent decline)
2
Mountain Man should primarily focus on capturing individuals between the ages of 2535 who are not loyal to a particular brand.
Consumer Segments
Mountain Man’s
Opportunity? Can this be
a MM Drinker?
Is aware of MM, but has not tried it
due to its strong, blue collar
perception
Yes, the goal would be to
create occasions for this
individual to try MM and
create a new perception
Tried MM, but feels it is too strong
or bitter
No, will not convert into a
MM drinker
Has preference for light beer
No, will not convert into a
MM drinker
Has never heard of MM
Yes, introducing this
segment to MM could
allow MM to create a
brand loyal MM drinker
Drink other domestic premium
beer or craft beers other than MM
Age
Domestic
Light Beer
Domestic
Premium Beer
Mountain
Man Lager
25-34
20%
20%
15%
35-44
24%
23%
19%
45-54
22%
23%
32%
The highest consumption of domestic premium beer is consumed
by 25-34, there is an opportunity for MM to be in the consideration
set and should be the aimed target for MM’s strategy.
Yes, the distinctive
qualities of MM could
cause this segment to
become a MM drinker
Current Perceptions: Mountain Man is a beer that
fathers/grandfathers drank and is now consumed by older blue collars
Desired Perception: Mountain Man is a distinctively tasting beer which
is consumed by those who appreciate quality, local authenticity, and
are proud to identify themselves as hardworking individuals
Factors that
influence beer
purchase decisions
Is Mountain Man
distinguishable on
criteria the target
segment values?
Taste
Yes
Perceived Quality
Yes
Brand Image
Yes
Local authenticity
Yes
Tradition
Yes
3
Mountain Man must increase its presence through channels that appeal to their target
audience and consider extending their product offerings.
Objective
Broaden Target
Audience
New Product
Extension
Alternative
Change packaging/label
What we need to believe
That the reason that the younger drinkers are not interested in MM is
because they feel as though they do not fit with the current target
audience, packaging can be more inclusive
No
Change size of offering
A smaller can offering would be inviting enough those who currently do
not feel as though they are “tough” enough to handle MM to feel they
are able to
No
Light beer – to appeal to female/younger drinker trends
Product offering will outweigh the investment costs
Yes
Dark beer – to shift perceptions that MM lager is too
strong
Current brand awareness will aid in capturing non-drinkers to become
MM drinkers – current non-drinkers were not consuming MM solely
because the product was not for them, but would be willing to switch if
it did
Flavoured beer – to keep original MM formula but offer a
different product
New Product
Extension under
new name
Launch product extension without leveraging Mountain
Man’s name
That the new product would perform better in the market under a
parent name. This extension not diminish the existing brand equity.
Modify Current
Lager Formula
Reformulate the current MM lager
The slightly higher-than-average alcohol and percentage of water
content are hindering the younger generation to try MM beer based on
the tough, working man perception
Increase presence in
on-site locations
Do we believe it?
Increase presence of MM in local bars with MM branded
signage, coasters, glasses etc. to create an on-site buzz
No
No
MM has not captured a younger audience because it is not as
prominent as other brands in channels that they consume beer in
Yes
Leverage grassroot marketing, in smaller local bars, in order to let the
product speak for itself, while staying true to core drinkers
Increase presence in
channels specifically
appealing to
younger audience
Sponsorships in local events at College sport events, local
bars and specialty events
The presence of MM in local events will allow the younger drinkers to
associate MM with more than just a drink for blue collar working men
Increase the market
size
Expand out of East Central Region by considering the
expansion outside of its current operations
MM does not have the necessary production and distribution
capabilities to support a national launch ($10-20M)
No
Lower price of MM
Lower manufacturer price in order to appeal to
distributors who can offer MM at the same price to
retailers
That the decrease in price will be significant enough to attract the
attention of distributors.
No
Yes
4
An experiential marketing campaign will allow Mountain Man to reach younger
audiences directly, cultivating a relationship similar to those of current core customers.
Increase overall MM
Profit
Does not alienate core MM
drinkers
Makes MM more appealing to
distributors
Broadens the target audience
Protects the brand
reputation
Launch of
Light Beer
No, the launch of Light
beer shows a decrease in
overall profitability of
MM.
No, MM light does not align
with the values of current
MM drinkers. It favours
what mainstream brewery
companies are doing, which
does not respect what the
core customer seeks to
offer.
No, the launch of light beer in a
highly saturated market would
make MM light less favourable
in the distribution channel as
its demand against major
competitors would be lower.
Yes, the introduction of MM
light would extend its product
offering to those who felt
alienated by the higher-content
level.
No, for years MM has
done business on the
basis of its quality
offering, which would
not translate to its light
beer offering.
Experiential
marketing
campaign
Yes, through broadened
awareness, non current
MM drinkers would
switch to MM after trial
and increased presence
in desired channels.
Yes, because sponsorships
are in line with core values.
N/A, this campaign does not
affect distribution channels.
Yes, this campaign is designed to
be situated in events that
pertain to younger audiences.
Yes, this campaign
would enhance brand
reputation due to
involvement and
increased presence in
the ECR community,
furthering their local
promise.
Decrease
selling price
to appeal to
distributors
No, the decrease in price
would not grow the
overall profit, as this
would not increase sales
as drastically as would be
needed.
Yes, the core MM consumer
would be unaffected by the
implementation of a price
reduction to distributors.
Yes, however, with the high
competition in the market,
Mountain Man would still not
be as desirable as its powerful
major competitors.
No, the target audience would
not be broadened by the
implementation of a price
reduction to distributors.
N/A, the price to
distributors does not
affect the end consumer.
Promotional
Advertising
to brand
loyalists
Yes, by leveraging
current consumers, the
younger demographic is
likely to , which would
result in increased profit
for MM with the desire
to attract the next wave
of loyal consumers.
Yes, the advertising to
current core consumers will
further strengthen the
relationship by cultivating
an emotional connection
with the next generation.
N/A, this campaign does not
affect distribution channels.
Yes , the core purpose of this
campaign is to directly target the
older demographic to allow
them to encourage the younger
demographic in their social circle
to try MM.
Yes, this further
establishes MM’s
reputation as a local
brewery, which strives to
strengthen existing
relationships through
grassroot marketing.
5
Mountain Man should not expand into light beer because it cannot compete in an
already saturated market and its NPV suggests that it will not yield a good investment.
Before Launching
Light Beer by 2010
After Launching
Light Beer by 2010
NPV Before Investment
Investment Costs
Overall MM
Net Income
Overall MM Share
-$2,849,129
1.30%
-$4,442,394
NPV
-$3, 441, 552
$750, 000
-$4, 191, 552
1.18%
The launch of light beer impacts MM’s overall profitability
negatively in the next 5 years.
A negative NPV suggests that
MM will not yield a return on their
investment in light beer.
Factors that hinder successful launch of light beer
Shelf Space
MM would not take away from facings of other light beers, suggesting that in order to gain shelf space,
MM would be replacing its existing offering, which will not benefit the overall MM portfolio
Promotion
MM does not have the financial capabilities to compete with larger domestic light beers. Light has a lower
contribution margin than its Lager, which would mean that volumes must be higher to match the same
revenue as Lager.
Popularity
MM’s launch of a light beer would not convert non-existing MM drinkers to switch to MM, due to the
increasing popularity of other light beers that have established themselves in the market already (Bud
Light, Miller Lite)
Distributors
MM Light would not be able to guarantee turnover, making them less favourable than its Original Lager.
Since distributors are becoming stricter with their requirements, MM Light would be a tough sell.
6
Mountain Man will need to focus its efforts towards on-premise channels in order to
gain awareness and attract new audiences.
Off-premise sales are dominated by MM core blue collar drinkers
because they are more likely to purpose for the purpose of
home/work consumption rather than consume on-premise where
younger consumers tend to be
Off-Premise
Account for 70% of
MM sales
Convenience
Stores
Liquor Stores
Consumption
of Beer
Restaurants
On-Premise
Target would be to increase brand
awareness from 60% to 80% so that a
younger audience would put MM in their
consideration set when choosing their beer.
Grocery Stores
Bars
Account for 30% of
MM sales
Sporting
Events
Desired
demographic is
more likely
influenced by on
the spot decisions,
based on
presence,
availability, social
influence
With on-premise locations, there is more opportunity to be influential to the younger
7
audience in channels that involve direct advertising and recommendations.
The marketing campaign must initiate a relationship among younger audiences
through event sponsorship and sampling, in order for Mountain Man to be more
appealing.
How the young audience is
consuming their beer?
What does the marketing campaign need to do?
At the Bar
Increase the exposure of MM by increasing
presence in bars through signage, merchandise
and special events
At a sporting event
Encourage sampling at local sponsored sporting
events to gain the attention of younger audiences
and eliminate perception of ‘older man’s beer’
At local concerts
Encourage sampling at beer tents with emphasis
on local and quality, pass out free merchandise
(branded glasses, t-shirts, history)
At home
Encourage current older demographic to pass on
beer to the next generation through advertising
directly pertaining to current loyal MM drinkers
Why this will work
Currently, the younger audience, although
aware of MM does not view it as a beer in
their consideration set. This is partly due to
the fact that MM has not built a relationship
with a younger demographic. The
experiential marketing will allow a younger
demographic to get closer to the brand and
try it firsthand. This is MM’s opportunity to
emphasize its history and local heritage
which is valued by the younger demographic
but has not been the focus of current
advertising strategies.
With an 11% higher brand loyalty rate than
competitive products (at 53%), MM’s has a
loyal consumer base to direct its marketing,
younger consumers are likely to be
influenced with their beer choices based on
parental influences
8
Experiential marketing will lead to an increase in revenue and will yield a positive NPV
over a 5 year period.
How the
young
audience is
consuming
their beer?
Cost Allocation
NPV Before Investment
$17,568,752
Experiential Investment
$2,250,000
NPV
$15,318, 572
Experiential marketing will be viewed as an upfront
investment, aimed at aggressively increasing
presence. Consistent increases in advertising
expenses in the future years will ensure that the
ongoing presence is maintained.
Merchandise spending, equip bars with free glasses, coasters,
banners, bottle openers - $50,000
On-site parties and contests hosted by MM- $100,000
At the Bar
On-site complimentary tastings - $100,000
Dedicated sales team to handle in-bar promotions - $50,000 x
10 people = $500,000
Giveaways, sampling – $150,000
Beer information tent – $200,000
At a sporting
event
Sponsorship of event and teams (logos on jerseys and team
equipment) – $500,000
Tailgate (Pre-game party) for local college teams and minor
leagues – $100,000
At local
concerts
Mountain Man Lager Overall Post Marketing Initiative
2006
Total
Quantity
Revenue
COGS
Gross
Margin
Fixed Costs
Net Income
2007
623,546
2009
2010
716,546
774,023
859,940
$60,483,922 $ 66,240,826
$69,505,027
$75,080,296
$ 83,414,209
$41,733,906 $ 45,706,170
$47,958,468
$ 51,805,404 $ 57,555,804
$18,750,016 $ 20,534,656
$21,546,558
$23,274,891
$ 25,858,404
$12,755,512 $ 14,476,563
$16,303,719
$18,247,591
$ 20,319,850
$5,994,504
$5,242,838
$5,027,300
$ 5,538,554
Major sponsor for concerts supporting local talent in each
state – $500, 000
Increase trial rates and social responsibility through community involvement will
attribute to MM’s presence in influential channels that will attract younger non
MM drinkers to taste Mountain man beer, whether for the first time or to gain
appreciation for local, reputable quality
682,895
2008
$ 6,058,092
In comparison to the current forecasted income
statement where MM experiences a loss, this
marketing campaign allows MM is to experience
increasing revenue.
9
Direct advertising that appeals to core customers in the older consumer base will
increase the likelihood of shifting in demographics, leading to an increase in market
share.
How to
target
current
drinkers?
Packaging
Design –
further
reinforce the
message
Print – aimed
at targeting
off-premise
locations,
major
channels of
core
customers
Radio aimed at
targeting
blue collar
audiences
Advertising Breakdown
$50,000 (redesign and
printing)
$2000/full page ad x 15
appearances = $30,000
x 7 states
Yearly expenditure:
$210,000
Daily Radio Spots=
$1500/ day =
$7500/work week
Yearly expenditure:
$390,000
Channels
Limited Edition
packaging to
encourage sharing
an integral part of
their lives with
family and friends
Trade magazines,
specialty outdoorsy
magazines, Cottage
Life
Communication
Message
To encourage the
younger drinkers to try
MM through parental
influenced at home
Transcend loyalty from
current MM drinkers
who consider
Mountain Man to be
more than just a beer –
a meaningful
generational tradition
“Official Beer of the
Eastern Region” – from
your father and now to
your children.
Popular country
stations, talk radio,
other local stations
We’ve gained your
trust for generations,
now its your turn to
share quality beer with
your son and show him
what MM is all about
2006 2007 2008 2009 2010
Current
1.36% 1.32% 1.28% 1.24% 1.20%
Market Share
Market Share
after
broadening
target
1.40% 1.66% 1.80% 1.87% 2.00%
through
aggressive
advertising
MM can expect a steady increase that is due to
an influx of advertising and social
recommendations from existing loyal
consumers. Unaided awareness will increase
and the newly reached audience will be more
likely to choose MM over other domestic beers.
Target: Total core consumer demographic
make up for 32% of current revenue, which
amounts to 166,400 barrels
If direct advertising to these consumers is
able to convert 5% of their children, MM can
expect an increase of 8,320 barrels or
$807,040 annually
10