Mountain Man Brewing Company: Bringing the Brand to Light Prepared by: Olena Gapon December 5, 2014 1

First time in the Mountain Man’s history the revenue is falling by 2% due to the changing tendencies in the market Tendencies in the industry Why they affected Mountain Man Over last 6 years light beer sales has been growing at 4% rate annually (in 2005 “light beer” category takes 50.4% of volume sales) while traditional premium beer sales has declined at 4% annually Mountain Man is a premium lager beer Glut of products in the market In the whole beer market in East Central Mountain Man takes only 1.4% market share (exhibit 1) Large national brewers put pressure on smaller regional breweries Mountain Man is a comparatively small regional brewery that does not have enough capacity to compete with national brands Due to discriminating small brands by distributors, many independent breweries in East Central have been closing Mountain Man is a small brand that provides lower gross margin to distributors due to limited capacity of distribution and lack of financial and marketing resources than big companies are able to do Changes in beer drinkers’ preferences and overall changes in consumer segments Mountain Man’ current target audience is very specific that influences other beer drinkers’ perception about the brand (the image of “working man” beer) Increasing health concerns among the consumers Mountain man is perceived as “stronger” beer, and has higher than average alcohol content Big companies are introducing more new products to the market Mountain Man keeps to a single- brand product strategy Aging demographics Mountain Man is targeting consumers of the age of 45-54 years old US beer consumption is decreasing by 2.3% due to competition from wine and spirits- based drinks Mountain Man is presented exclusively in beer market 2

If Mountain Man keeps Mountain Man Lager, it will be profitable only if the market share does not change, otherwise, the company will face loss Year 2005 2006 2007 2008 2009 Market size (barrels) 4,648,885 4541960,645 4437495,55 4335433,153 4235718,19 Mountain Man Lager market share stays the same (11%) 11% Revenue $ 50 440 000,00 $ 48 462 720,08 $ 47 348 077,52 $ 46 259 071,74 $ 45 195 113,09 Net Income $ 3 114 670,00 $ 2 501 713,23 $ 2 156 174,03 $ 1 818 582,24 $ 1 488 755,06 Mountain Man Lager market share decrease by 0.5% annually 10% 9% $ 47 077 029,09 $ 43 842 072,08 $ 40 731 019,34 $ 37 739 882,57 $ 2 072 149,02 $ 1 069 312,34 $ 104 886,00 $ -822 366,40 Mountain Man Lager market share decrease by 1% annually 8% 7% $ 44 874 178,17 $ 39 537 701,39 $ 34 422 964,10 $ 29 522 589,28 $ 1 389 265,23 $ -265 042,57 $ -1 850 611,13 $ -3 369 727,32 If the market share stays the same, the company will stay profitable, however, revenue still will be falling If the share falls by 0,5% every year, the company will face the loss in 2009 If the share falls by 1% every year, the company will face the loss in 2007 *East Central Region, “other 2nd tier premium & popular brewers” (exhibit 2) Even if the share will stay stable, Mountain Man’s revenue will still keep falling 3

Mountain Man should launch new product in the growing “light beer” market as it is profitable segment in the industry and even a small market share will bring high revenue Segments sold barrels market share 2nd tier brewers 4648885 13% light beer 18744303 50% others 13797889 37% total 37191077   Mountain Man Lager’s segment Potential segment for Mountain Man If the company gains at least 3.3% market share in the “light beer” market, the net income would be equal to holding 11% market share in the “2nd tier premium brewers segment in which the company currently operates. Beer segments Market Size of the segments Mountain Man share Revenue Net Income 2nd tier premium brewers 4,648,885 11% $ 50 440 000,00 $ 3 114 670,00 Light beer 18,744,303 3.3% $ 60 000 513,90 $ 3 177 373,53 4

Launching in “light beer” segment will bring Mountain Man to the national level in long term and provides it a sustainable competitive position Opportunities Threats Mountain Man will capture younger generation of drinkers who constitute 27% of total beer consumers Current customer perception about the brand will be a significant barrier in gaining new target audience As these customers are not loyal to any brand yet, Mountain Man can turn them into company’s loyal ones New customers don’t have certain beer preferences yet, so they are likely to try different brands As the brand awareness increases, more distributors will be interested to carry Mountain Man brand Mountain Man can still not be able to compete with big national competitors who are more attractive to distributors Having a substantial regional position, Mountain Man will have a capacity to compete in the national market In the national market the competition is high, and the existing companies already have stable competitive position Expanding market share will bring company growing market share, high competitive market position, and constantly increasing revenue The company’s growth may be slower than expected which may damage company’s capacity to compete 5

Mountain Man should target young consumers with its new “light beer” product New Target Audience Age: 21-27 years (27% of total beer consumers (constitute 13% of adult population), and the number is constantly growing) “the first- time drinker demographic” not brand loyal yet spend twice as much per capita on alcoholic beverages than older consumers prefer light beer consume in quantity buy mainstream products While purchasing consider: taste, price, the occasions of drinking, perceived quality, brand image, tradition, local authenticity Reasons why Mountain Man should target new audience can increase the number of company’s loyal customers new product will bring the company into new bigger market which is constantly growing will help the company to increase its revenue and total net income 6

Even though the risk to lose current target audience is high, Mountain Man should use its name to launch and promote the new product as it will increase the chances of becoming profitable quickly Advantages to use Mountain Man name in the new product positioning Disadvantages to use Mountain Man name in the new product positioning The company is known for its quality The only company’s product, Mountain Man Lager, is recognized as “Best beer in West Virginia”, “Best beer in Indiana”, and “best- known regional beer” what positively affects the customer perception of the company Younger drinkers (company’s new target audience) are well aware of the brand and show appreciation for the brand’s association with an independent brewery New product will not cannibalize the current one as the target audiences are completely different Mountain Man reputation will help the new product to enter more distribution channels New product may damage brand equity The distributors may be interested in “light” beer rather than in the core company’s product which will lead to space cannibalization The product is perceived as “working men beer” The new product does not align with the current company’s positioning Launching new product may offense company’s current target audience Mountain Man name is a significant attribute in the new product’s strategy as the brand awareness among beer consumers in East Central is high 7

Premium Light by Mountain Man Mountain Man should launch a sub-brand “Premium Light by Mountain Man” under company’s name as it will help the new product to have high brand awareness immediately Mountain Man Light Premium Light by Mountain Man New Light Advantages Company’s market reputation Sounds like product extension of Mountain Man Sounds like separate product under Mountain Man brand The name emphasizes the “premium” quality of the new product The name will not suffer from current consumers’ perception of the product as of the one exclusively for “blue collars” Disadvantages Consumers perceive Mountain Man brand still as a strong beer product for “blue collars” Without using Mountain Man name, the new name sounds like a completely new product in the market Using Mountain Man name in the name for the new product will transfer these attributes to the new product Mountain Man’s core attributes are authenticity and quality 8

“Premium Light by Mountain Man” should be launched in mainstream channels with an average price Mountain Man should put efforts into placing “Premium Light by Mountain Man” in every “beer” point of sale Channels Supermarkets and liquor stores Breweries and restaurants How to persuade distributors to place the product Distributors already know Mountain Man brand, so company’s reputation will persuade them to place the new product of the company Give them an opportunity to get a minimum possible inventory Provide them with additional refrigerators for the new products Put higher than average price for the product, so that distributors will have bigger margin How it will be presented in the channel The product will be placed on the shelves next to its main competitors: Corona Light, Anheuser- Busch, Bud Light, and Amstel Light There will be additional refrigerators around the store exclusively for “Premium Light by Mountain Man” The refrigerators should be surrounded by Mountain Man print advertising The new product will be positioned as premium domestic light beer The company should create a separate department for the new product which should include a manager who deals exclusively with distribution 9

The main advertising channel for “Premium Light by Mountain Man” should be outdoor advertising, television, and digital Advertising channels Advantages for “Premium Light by Mountain Man” Disadvantages for “Premium Light by Mountain Man” Television Big audience can be reached in the same time High expenses Radio Short broadcast time New target audience does not listen the radio much Social Media New target audience is highly presented in the channel and get a lot of information from there. Low expenses The company cannot completely control Print magazines and newspapers Due to big audience, low price to contact 1 consumer May not appeal to the readers Outdoor Good “reminding” tool to increase brand awareness. Will attract current beer consumers High expenses. Will not be effective to attract new consumers Word- of- mouth Consumers’ recognition Television, Social Media, and Outdoor are the most relevant advertising channels to promote “Premium Light by Mountain Man” because they will contact the target audience with the highest repeat rate The approximate advertising expenses will be at least $750,000 for 6 months, or $1.5 million for a year, what is absolutely affordable budget for Mountain Man Company (as its net present value will still be high) 10

Mountain Man should keep supporting its core Mountain Man Lager product as it is targeted towards very specific group of beer consumers who show high brand loyalty Current customers profile: rugged, middle- aged men, blue- collar, particularly miners, middle- to- lower income, over 45 years Why it is important to keep them: 58% of customers are extremely brand loyal and bring company the most of the revenue. Current customers will feel that the company takes care about them, not only focusing on the new product. So, they will not feel offended, and the brand equity will not be damaged Mountain Man should extend its product line with new packaging variations of Mountain Man Lager, not changing the taste and positioning 11