I â€“ Company Situation
Making Beer in one of the heaviest consuming country can sometimes be more difficult than it seems. Mountain Man Brewing Company is an old middle-sized brewery of the Centre-East region of the United States that produces a very well known beer, the Mountain Man Lager. Appreciated for its bitterness and its strong taste, it appears that the famous beverage cannot help the company to face a downward shift in revenue: 2 % less for the new exercise, and a decrease of the consumption of Popular Beer when the Light Beer consumption is massively increasing. Something has to be done to keep the company alive and sustainable, but finding a solution is not always as easy as ...view middle of the document...
Dark beer shares many similarities with Lager that Mountain Man is confident to produce. The risk lies on targeting a higher income customer group with a middle class brand. We do not suggest a new brand name for the Premium Dark Beer.
Grassroots marketingâ€”makes up 20% of Mountain Man Lagerâ€™s sales in 2005. By taking the economy of East-Central region - where agriculture plays an important role - into consideration, Mountain Man is able to achieve higher sales to grassroots group by doing a concentrated marketing strategy. Mountain Man could introduce a new Lager for the grassroots group at lower price. Although the contribution margin of the new Lager would be lower than the original Mountain Man Lager, the increased market share for the particular segment could offset the negative effect. Also, the initial expense is the least for this route.
III â€“ Factors to consider
From a financial perspective, we need to consider the increase of expenses when launching a new product. The expansion would not require extra capital expenditures in the short term. However, it needs large number of investment on advertising, especially for the launch of light beer, which is completely different from Mountain Man Lager. From the Income Statement, we can figure out that the advertising expenses in 2005 were $1.35 million. However, based on the estimation of the advertising agency, creating a brand awareness level of 60% for Mountain Men Light in the East-Central region would cost, on top, $0.9 million in annual. It implies that only about $0.45 million can be used on advertising on its core product.
Besides, Mountain Man Lager was known as â€œWest Virginiaâ€™s Beerâ€ and was supported by a large group of loyalty customers. Therefore, to maintain its strong brand equity and its core customers is very important. Targeting an entirely new segment is not easy and that may alienate existing customers and erode core brand equity. While for Mountain Man Premium Dark, the targeted group should be middle or high-income class and aged men around 30 to 40, which is close to the existing core customers.
For Grassroots marketing, it is feasible considering the finance aspect and the current skills on product. More concern will be the negative effect brought to its core customers and the deep brand image as a superior for blue collars.
IV â€“ Final Decision
All things taken into consideration, Mountain Manâ€™s primary activity...