Core Mountain Man Brewing Company Bringing the Brand

midpoint Marketing Mountain humans Brewing Company Bringing the Brand to Light 1. Overview Mountain Man Brewing Company (MMBC, or the Client) is a family-run business in western Virginia that has experienced much step-up since establish its flagship premium beer Mountain Man Lager (MMB) in 1925. Over the decades, fault loyalty, quality and brand awareness have been the cornerstones of the Clients success the importance of the MMBC brand among consumers has allowed the company to build its dwarfish but consistent market share in the East Central region (ECR), particularly in its home state, the only region it distributes in (7. % of the market with much than 50 million USD in revenue). 2. Challenges & Opportunities * Challenges MMBC presently faces a potentially identity-changing challenge The traditional premium beer market has been declining at a compound yearbook mark of 4%, and MMB experienced a 2% minify in revenue last year, the beginning(a) drop in its entire hist ory accordingly, MMBCs place aim is to recover from the 2% go down in revenue that occurred in the prior year. * OpportunitiesThe light beer market popular with younger drinkers has also been increase at a CAGR of 4%. Although MMBC has been historically weak in the 35-years-and-under segment, there is opportunity to generate more than sales by releasing a tonic Mountain Man Light Beer (MML) line to target this younger market. However, there is the risk of negatively impacting their current distribution of MMB through shelf-space fecal matternibalization and higher costs as well as the risk of alienating their core segment of older, blue-collar drinkers. . Analysis MMBC faces potentially losing more revenue at the current forecasted compound annual come down rate of 2% the projected decrease for MMB standalone in year-to-year net revenue from actual 520,000 position sold in 2005 (USD 50. 4 m) to 470,039 barrels (approximately USD 45. 6 m) by 2010 totals nearly 10% (see bu tt 1). According to the key age demographics among beer drinkers, MMBs customer segmentation is currently as follows 64% for 45 years and up, and only 17% for 35 years and under.Yet the ECR partitioning for consumption by beer type is the opposite 50. 4% for light and only 19. 7% for premium. Due to the sweep over potential in the light beer market, we have prepared projections on growth in revenues and expenses for MMBC should they decide to give notice forward with brewing Mountain Man Light (see demo 2A, 2B). * Making Mountain Man hoy (and More Profitable) Considerations have been made regarding MMB remaining as a stand-alone product (again, see Exhibit 1).However, per the Clients instructions, this report will focus on projected performance examining MMBCs submission into the light beer market at their evaluate MMB reduction rate of 20%. According to our analysis, MML would still direct in a significant increase in revenue within two years With the new product mix, net income margin increases from an insignificant 0. 88% in MMLs first year to a robust 3. 7% by its second year (2007), even with considerations on the extra expenses that would go into launching a new product manufacturing, advertising, general operating (see Exhibit 2A). Additionally, the projected MMB+MML sales volume afterward only two years would nearly match MMBCs current volume level 500,895 barrels to 520,000 and would eventually overtake the 2005 figure in 2008 duration standalone figures show a continuous decrease from the 2005 bench mark and eventually fall behind MML sales by 2011 (Exhibit 3). * Issues to Consider The forecast for MMB +MML sales are promising.However, JAFREM must(prenominal) note significant issues to consider with the presented data 1) Due to limited sales volume for the first sextet years, impact on COGS has not been taken into consideration should the current production capacity levels be exceeded, additional inputs regarding CAPEX (for example, for new plants) will be necessary. 2) With the forecasted MML growth rate, the Clients market share in the ERC amounts to 1. 5% after five years MMB has not achieved this level after more than 50 years in the business and so considerations on the MMB reduction rate have also been provided (Exhibit 2B). 4. RecommendationsLight beer is an attractive proposition for MMBC, especially with the decrease in the premium beer segment. Accordingly, ignoring the dynamic growth in the light segment is simply too much of an opportunity to let pass. In order to reduce the risks that come with launching MML (alienating core customers, promoting a failed product), we recommends the following measures * To avoid losing brand equity at the consumer level for MMB, pilot the MML launch outside West Virginia, as this is MMBCs strongest and most loyal market should the testing prove successful, then consideration can be made on moving into West Virginia. Should the MML growth forecast not be cognize af ter two years, return focus to MMB distribution at a national level while advertising and sales at the grass roots level has been good for MMBC, there has been no plan of attack to reach a larger marketing through the traditional channel of television media. * Despite the expected decrease in the premium beer market, MMB still has potential to capture more market share by expanding its advertising activities and consumer base outside the ERC. Exhibit 1 Lager Standalone Projections MMB Standalone (next five years) 2005 2006 2007 2008 2009 2010 puts 520,000 509,600 499,408 489,420 479,631 470,039 Price per Barrel $97. 00 $97. 00 $97. 00 $97. 00 $97. 00 $97. 00 brighten Revenue 50,440,000 49,431,200 48,442,576 47,473,724 46,524,250 45,593,765 COGS 34,803,600 34,107,528 33,425,377 32,756,870 32,101,732 31,459,698 Gross Margin 15,636,400 15,323,672 15,017,199 14,716,855 14,422,517 14,134,067 SG&A 9,583,600 9,583,600 9,583,600 9,583,600 9,583,600 9,583,600 Other Op. Exp. 1,412,320 1, 412,320 1,412,320 1,412,320 1,412,320 1,412,320 Operating Margin 4,640,480 4,327,752 4,021,279 3,720,935 3,426,597 3,138,147 Other Income 151,320 151,320 151,320 151,320 151,320 151,320 Net Income before Tax 4,791,800 4,479,072 4,172,599 3,872,255 3,577,917 3,289,467 Prov. Income Tax 1,677,130 1,567,675 1,460,409 1,355,289 1,252,271 1,151,314 Net Income after(prenominal) Tax 3,114,670 2,911,397 2,712,189 2,516,965 2,325,646 2,138,154 Net Present Value 3,114,670 2,599,461 2,162,141 1,791,526 1,477,990 1,213,246Exhibit 2A MMB + MML Projections 2005 2006 2007 2008 2009 2010 2011 MML Barrels 0 48735 101369 158136 219282 285066 355763 MMB Barrels 520000 407680 399526 391536 383705 376031 368510 produce% -12% 10% 10% 10% 10% 10% Price per Barrel $97 $97 $97 $97 $97 $97 $97 Net Revenue 50440000 44272273 48586872 53318166 58489738 64126451 70254508 COGS 34803600 30776437 34000363 37531192 41386351 45584213 50144138 COGS/Revenue 69. 00% 69. 52% 69. 98% 70. 39% 70. 6% 71. 08% 71. 37% Gro ss Margin 15636400 13495837 14586509 15786974 17103387 18542239 20110370 SG&A 9583600 11233600 10483600 10483600 10483600 10483600 10483600 Other Op. Expenses2 1412320 1412320 1412320 1412320 1412320 1412320 1412320 MML, superfluous Ad Expenses 0 400000 400000 400000 400000 400000 400000 Op. Expenses 10995920 13045920 12295920 12295920 12295920 12295920 12295920 % 18. 64% -5. 75% 0. 00% 0. 00% 0. 00% 0. 00% Op.Profit 4640480 449917 2290589 3491054 4807467 6246319 7814450 Op. Margin -90. 30% 409. 11% 52. 41% 37. 71% 29. 93% 25. 10% Other Income 151320 151320 151320 151320 151320 151320 151320 Net Income before Tax 4791800 601237 2441909 3642374 4958787 6397639 7965770 Prov. Income Tax 1677130 210433 854668 1274831 1735575 2239173 2788019 Net Income After Tax 3114670 390804 1587241 2367543 3223212 4158465 5177750 Net Income Margin 6. 18% 0. 88% 3. 27% 4. 44% 5. 51% 6. 48% 7. 7% NPV 3114670 348932 1265339 1685one hundred seventy 2048409 2359625 2623209 Exhibit 2B Inputs & Stress Te st Results Inputs Stress scenario MMB, Avg. Market Share Growth 0. 25% Year MML, Avg. Market Share Growth Reduction Rate MMB, Var. Cost per Barrel 66. 93 2006 0. 04% 30. 19% MML, Var. Cost per Barrel 4. 69 2010 0. 28% 17. 28% Reduction Rate 20% 2011 0. 23% 21. 80% Discount Rate 12% MMB, Growth Rate -2% Price per Barrel $97 MMB, Extra Ad Expenses $0 MML Growth Rate 2% MML, SG&A in 2006 $900,000 MML, SG&A Extra show $750,000 Exhibit 3 MMB (stand alone) vs. MMB + MML 1 . Forecast prepared according to the 2% compound annual decrease rate provided by the Client 2 . SG&A and Other Operating Expenses are quantity freelancer in the consider range of production. 3 . The Stress Scenarios included in this Exhibit denote the level best reduction rate possible in order to achieve the target market growth sought after by the Client should they move ahead with MML in order to remain profitable, these are the reduction rate ceilings.