Mountain Man Brewing Company (MMBC) has been successful because of many different reasons. Also known as “West Virginia’s beer”, MMBC brewed one beer, Mountain Man Lager. Guntar Prangel founded MMBC in 1925. He reformulated an old family brew recipe and by the 1960s the lager’s reputation as a quality beer was well entrenched throughout the East Central region of the United States. It was a legacy brew in a mature business. It had held the top market position among lagers in West Virginia for half of a century, and had respectable market share for an old school, regional brewery in most of the states where the beer was distributed. The lager was priced similarly to premium domestic brands Miller and Budweiser, and below specialty brands such as Samuel Adams. They stuck with the original 1925 design of a crew of coal miners on the label.
MMBC relied on its status as an independent, family-owned brewery and history to create an aura of authenticity and to position the beer with its core drinkers—blue collar, middle-to-lower income men over 45 years old. West Virginian’s rated the lager as the best-known regional beer, and won “Best Beer in West Virginia” from 1997-2005. Brand awareness was one cornerstone, along with the perception of quality and the brand loyalty it cultivated creating the brand’s success with blue-collar consumers. Research shows it being as recognizable in the East Central region as Chevy and John Deere. Over time MMBC has invested in multiple branding activities to build brand equity with their core customers. The distributors focused most of their servicing on their main customer and established its own sales force. This helped to not only push the brand, but created an environment where off-premise locations would also embrace Mountain Man Brewing. Blue-collar males purchase 60% of the beer they drink at off-premise locations, and MMBC sold 70% from these places.
Competition in the U.S. beer market falls into four separate categories: major and second-tier domestic producers, import beer companies, and specialty brewers. MMBC’s continued success was in large part due to the fact that it served a large enough market with a very strong brand, and it therefore could continue to compete against national players with deep pockets such as Anheuser-Busch, the company’s most significant competitor.
Due to changes in beer drinkers’ preferences, the company has experienced declining sales for the first time in the company’s history. I believe that Chris should launch Mountain Man Light, in order to remedy the current situation. This would attract younger drinkers to the brand. Over the previous six years, light beer sales in the United States had been growing at a compound annual rate of 4%, while traditional premium beer sales had declined annually by the same percentage. Most industry observers agreed that the key consumer segment for beer companies was younger drinkers, 21-27 years of age. This group represented the “first-time drinker demographic” that had not yet established loyalty to any particular brand of beer. The segment represented about 13% of the adult population in 2005, but accounted for more than 27% of total beer consumption and was growing. In addition, this age group spent twice as much per capita on alcoholic beverages than consumers over 35 years of age and was forecasted to grow by nearly four million by the year 2010.
Another significant trend was growth in the “light” beer category which had been steadily gaining in market share and accounted for 50.4% of volume sales in 2005, compared with 29.8% in 2001. In fact, younger consumers preferred light beer to other categories. They also typically consumed in quantity. A consumer study revealed that while Mountain Man rated high in terms of awareness with the younger, light-beer drinking segment of the market, Mountain Man Lager tracked very low as a purchasing preference-as did other lagers and fuller-flavor brews. Industry observers believed new products introduced beer drinkers to both styles of beer while simultaneously keeping them in the “brand” family. Product line extensions leveraging the core brand name often helped brewers obtain greater shelf space for products and created greater product focus among distributors and retailers. Mountain Man was now alone among the major and regional beer companies in not having expanded its product line beyond its flagship lager product.
Because younger beer drinkers held “anti-big-business” values, they did show some appreciation for the brand’s association with an independent brewery. Chris Prangel thought it was clear that product preferences in the beer market were changing, and that a light beer product was strategically important to MMBC’s future. First, light beer was a newer, fast-growing product category and the only beer category demonstrating consistent growth. A light beer would help MMBC gain share in on-premise locations i.e. restaurants and bars. Light beers appealed to younger drinkers overall, and to women, both groups that frequented these locations. Market research indicated that Mountain Man’s core customers did not state a brand preference in restaurants and bars. Chris believed that their brand recognition could translate into a meaningful share of the local light beer market and popularity could boost sales. He said, “this is our chance to play in the light beer sandbox but stay true to the Mountain Man brand by playing on the strengths of our core product.”
The Mountain Man Light product would generate a profit within two years, and sell enough barrels to cover both the associated launch marketing and incremental expenses that make up for the negative impact on overall profitability resulting from potential lost market sales of Mountain Man Lager. Financial projections show regional revenue growth of the light beer product at 4% annually and Mountain Man steadily would grow its share of the regional light beer market by a quarter of a percent each year off of a 2006 base market share of 0.25%. Oscar Prangel, president and owner, “Mountain Man is still standing because we manufacture an exceptional beer with a great brand name, we’ve never lost sight of our core customer, and we’ve never been seduced by the other guy’s market.” The revenues of Mountain Man are down, and I believe this is the best way for Chris to help his family business profit successfully again.
