ou FCMA Consulting Group Topic: Mountain Man Brewing Company Fernando Yemail Carlos Yap Juan Cam Amita Ahir Maria Jaen Group Leader Fernando Yemail FCMA Consulting Group FCMA Consulting group is honored to be the consulting source for Mountain Man Brewing Company’s line expansion. We are pleased to have the chance to work with a family owned company. It’s not so often that we come across a company that has kept their legacy integrated in the production of their products. Furthermore we want to congratulate you Chris on the behalf of FCMA Consulting group for ambitious thoughts of wanting to expand and grow your families company.
Looking at your company’s’ end year reports we have noticed the decline in your sales. You’ve taken the initiative and considered adding other beers to your product line; we believe this is the correct way to move your company forward. After thoroughly analyzing the past generation trends with the current we’ve come to realization that overall the worlds beer tastes buds, as well as the expectations of beer has changed within the population. We have concluded that this is the reason of the decline in your sales and we have come up with a Marketing plan for MMBC to boost profits.
Expanding Mountain Man Brewing line involves considerable risk and we are conscious that it can either make or breaks your companies brand and the image that it was founded on. However every factor must be taken into consideration and every possible outcome must be predicted to have a successful launch of the product without affecting your current core Lager. Currently MMBC brand is seen as a manly strong beer meant for only the toughest of men. Your company has targeted middle to lower income blue collar men over the age of 45, adding the new light version to our product line could make you lose a percentage of your loyal customers if not arketed in the correct way. FCMA Consulting group will analyze your consumer’s behaviors competition and your competition and what makes there light beers successful in addition to taking into consideration your macro and micro factors that essentially will all lead to maximizing your profits. We at FCMA Consulting strongly believe that your brand is your most valuable asset; it inspires people to trust Mountain Man Brewing. We believe it’s important to remind people of how your beer’s history and the glorious pride it held in your father’s generation.
Americans love to hear about these traditional stories and they need to be inspired once again in their hearts to create consumer loyalty. Research has shown that MMBC has created brand awareness among the hard working class which has been key to the brands success with Blue collar consumers. Furthermore you need to take advantage of your brand equity; MMBC has already conquered their target market blue collar customers. Now MMBC need to use their brand equity as a platform to launch a new line of Mountain Man Light beer. We recommend MMBC to invest their money in their brand on both product and consumer levels.
Brand equity is one of the factors that increase financial value of a brand to the brand company. The brand extension of Mountain Man Beer Light will gain a new spectrum of loyal customers. Marketing Mountain Man beer will be able to reel in a younger crowd of consumers between the ages of 21 to 27 which are classified as first time drinkers demographic, having no loyalty to any beer brand. This segment of the population is the one we need to target for the new Light category of beer that is just starting to gain popularity globally among consumers.
The window of opportunity is now and MMBC must act before it is too late. Mountain Man light is unlikely to ever be able to compete with larger light beer brands like Miller Light or Cooks light because they advertise in such grand scales, thus it would not be profitable to try and compete at their level without risk losing your core brand image. Launching the light beer extension must be carefully planned to avoid MMBC being lost in what Vice President John Fader considers to be “the sea of new-product introduction” which can happen if it’s not marketed correctly.
Up to now MMBC has only relied on grass roots marketing “word of mouth”, what we at FMCA see as a window of opportunity. By enforcing new ways of marketing on strong medians of advertising such as TV commercial, magazines and promotions, focus groups and your very MMBC models we believe FCMA Consulting Group can provide the strongest platform to launch the new beer light without affecting your main MMB lager. However the place and how you market the beer will be defined on those advertising medians that will allow your main core brand Lager not to be affected negatively.
Keeping quality control marketing on both light and Lager versions of your beer as 2 separate beers will be the key to increasing success. Both Light and Lager versions of your beer must be advertised by targeting two different segments of the population. We have heard your concern on how with the years beer brewing companies have gone out of the business like the Schlitz beer did in the 50’s, however times our different now and the advancements in technology today will enable us to send a clear message to the consumer and what mountain man beer company represents.
The broadcast of this message will allow Mountain Man Beer Lager consumers to understand and feel pride because only the toughest of men drink it; this will be the main focus for the advertisement. As for Mountain Man Light it’s marketing it as exactly what it is a lighter version for a younger crowd. This is how you will not lose your loyal customers and gain a new segment. In addition selecting carefully where you place every ad will play a major role.
FCMA must conduct mass research to be able to decide where you should place every add we believe in knowing your targeted segments the more we know the more beneficial it is to the company that results in sales. Data must be gathered about your segmented population on age range, lifestyle, and most watched TV channels by target groups, magazines, Socializing areas. FCMA Consulting Company is self-assured that using today’s advancement in advertising technology and the gathering of data, will allow Mountain Man Brewing Company to connect better with their consumers and most importantly maximize the profits of your company. years Projections and Budgeting FCMA Consulting Group analyzed the numbers and figures of Mountain Man Brewing Company; we calculated the break-even point where MMBC’s margins can cover their costs and expenses accounted for the new launch. Since MMBC had $50,440,000 in revenue and $34,803,600 accounts for Cost of Goods Sold (69% of revenues) in 2005, we can assume that if each barrel of lager beer costs 66. 93 to produce, then Mountain man produced 520,000 barrels of mountain man lager in that year. If we grab those 520,000 barrels and multiply them by $71. 2 (cost of Mountain Man Light barrel) we would have $37,242,400 in cost of goods sold for Mountain Man Light representing 74% of the Net Revenue. So for MMBC to break even we will consider $1,000,000 for SG&A expenses (new product manager, sales staff, and ongoing marketing expenditures). MMBC’s margin for each barrel of Mountain Man Light would be $25. 38 ($97 price per barrel – $71. 62 Cost of MMLight). MMBC would have to sell 39,401 barrels to Break Even with the additional costs of launching the new light beer.
According to the data we recollected form the company, MMBC has good possibilities in terms of budget to launch the new Mountain Man Light beer. MMBC will not need additional capital expenditure in plant and equipment in the short term due to existing excess capacity in their facilities. You’ll have enough money to cover the costs of the initial barrel production and the marketing and SG&A expenses ($1 million) due to Net Income after taxes for 2005 was over 3 million dollars and you’ll expect that the revenues will keep growing this year with the new launch.
It’s really hard for anyone to foresee the impact of cannibalization this launch could have in a company like Mountain Man Brewing Company due to so many external factors such as competition, market preferences and product acceptance, product quality, etc. In 2 years an accepted cannibalization rate could be 2% if MMBC follows the trends of the beer market of 4% annual growth for Light beer consumption and a loss of 2% for the regular beer. To calculate the cannibalization rate between Mountain Man Light Beer and Lager Beer, we used the 2005 Income Statement of Mountain Man Company.
The Net Revenue was our reference. We took the 4% increase of Net Revenues and also the 2% decrease. We divided the 2% loss in sales by sales made with the new product ($1,008,800/$52,457,600) resulting in a 2% annual cannibalization rate which can be controlled in the short term. As we said, we are really not sure if this decrease in lager beer will continue throughout the years or if it will level up and increase to an optimum percentage growth. We can be sure that light beer consumption is a growing market that we should take advantage of.