1. Why had Mountain Man Brewing Company’s Mountain Man Lager been successful? Strong brand awareness
Older working class, blue collar
Perception of quality in Mountain Man Lager: its smoothness, percentage of water content, and “drinkability”—but it was Mountain Man Lager’s distinctively bitter flavor and slightly higher-than-average alcohol content that uniquely contributed to the company’s brand equity Strong brand loyalty cultivated by the perception of quality Effective "Grass roots" marketing
2. Why is Mountain Man Brewing Company now experiencing declining sales? Changes in beer drinkers’ preferences, including preference for a light beer U.S. per capita beer consumption had declined by 2.3% due to competition from wine and spirits-based drinks
an increase in the federal excise tax
initiatives encouraging moderation and personal responsibility increasing health concerns.
Limited distribution channels
3. What are the advantages of introducing a light beer? (Strengths & Opportunities) Help MMBC gain share in on-premise locations: restaurants and bars Would appeal to a younger demographic and to more females
A great foundation for growth has already been laid for introducing new products by using Mountain Man’s brand equity discussed earlier. Mountain Man’s brand recognition could translate into a meaningful share of the local light beer market and hoped that in turn, Mountain Man Light’s popularity could boost the sales of Mountain Man Lager
4. What are the disadvantages of introducing a light beer? (Weaknesses & Threats) Launching Mountain Man Light could alienate the core customer base and ultimately erode and dilute the Mountain Man brand equity. The sales of Mountain Man Light would create a new customer base, but the volume achieved may not be enough to replace the alienated Mountain Man Lager drinker. When a new product created, there is always the concern of cannibalization. Customers may simply switch from Mountain Man Lager to Mountain Man Light or retailers may refuse to offer incremental facings so overall cases in a certain percentage of retail outlets do not go up. (While this is listed under disadvantages, it is important to note that cannibalization is not always a bad thing. It could potentially be better for Mountain Man Brewing Company to be losing sales to itself rather than to a competitor.) Added cost (outlined below under quantitative data)
There is already a strong presence of light beer.
5. Congruent vs. Incongruent Line Extension
The popularity of brand extensions, which attach a recognized brand name to a new product in the same product category (line extension) or in a different product category (category extension), is in part due to the rising cost of introducing new brands and the realization among companies that their brand equity can be leveraged. In order to do brand extensions a company must: 1) identify current brand image, associations, personality and 2) map out what products & services would fit these associations.
I have estimated the projected loss of contribution ($750,547) by using the following: $50,440,000*(1-.04)= $48,422,400*.31= $15,010,944*.05 = $750,547. I then calculated the number of barrels of Mountain Man Light that MMBC would have to sell in order to cover the projected loss of contribution as shown above (29,572) and the number of barrels of Mountain Man Light that MMBC would have to sell in order to recover advertising costs (65,012). The fixed costs used to calculate the break-even units were $900,000 SG&A and $750,000 for the 6 month advertising. This estimate does not include any additional advertising expenses. Therefore, it would take 94,584 barrels of light beer to break-even in one year (29,572+65,012).
Market Share Analysis
Therefore, introducing Mountain Man Light could create revenue of $4,727,313 in 2006 and of $9,832,811...
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