Mountain Man Case Analysis

1. Introduction

Mountain man brewing company, established 1925 in West Virginia by Guntar Prangel, is a family owned business that is mainly operating in the US premium beer market. Mountain Man’s only product is its Lager beer, named Mountain Man Lager, which has a strong regional presence. The Mountain Man Lager Beer is well known as “West Virginia’s Beer” and as the “Working man’s beer”. It has a distinct bitter taste and a high alcohol content. The recipe and quality did not change over the past 3 generations. The company established a strong local brand image in terms of quality and tradition by winning various awards over the last 50 years. Research has shown that they have a brand loyalty of 53% (42% Budweiser, 36% Budlight) which can be regarded as one of their main strengths. The company is currently being managed by president and owner Oscar Prangel and his son, soon to be predecessor Chris Prangel, who is responsible for marketing operations. Other key stakeholders of the business are the employees, distributors, competitors and of course the customers.

1. Issue Identification

Mountain Man’s only product Mountain Man Lager is experiencing annual declines of 2% in revenue. Revenue forecasts show future deterioration of revenue streams of 2% yearly. This can be traced back to the 4% negative growth rates in the US premium beer segment (19.7%) in which the company is operating in. The underlying cause of the decline of the premium beer market is due to demographic trends and a shift in consumer preference.

Mountain Man Beer’s main profit source, a segment composed of middle income owners aged 45 and up, is slowly aging and will eventually be replaced by the next generation. The young generation has little loyalty towards the Mountain Man brand; they prefer light beer over traditional lager. This caused the light beer market to grow 4% over the last couple of years. It already makes up 50.4% of the total volume of beer sales. Although the younger generation only accounts for 13% of the market, they also spend more (about 27%) on beers compared to other age groups. Women have also begun to shift away from traditional beer move towards light beer. They typically prefer to drink light beer because they are less bitter and weaker in terms of alcohol content. Aesthetics and beauty also play a major role in their beer preference since women (and a few men) are trying to prevent gaining weight when drinking, and would prefer the light instead of traditional beers. The light beer market is expected to increase by 4% each year, eroding away the traditional premium beer segment, giving Oscar Prangel a cause for concern. Chris Prangel sees penetrating the light beer market as the solution to the problem. This, however, gives birth to further issues.

There are various potential problems attached to such a decision: Firstly, the introduction of light beer could lead to a dilution of the brand, due to the fact that many costumers have shown signs of retaliation. Mountain man’s image and product “Lager beer” appeals to a distinct target group (Blue collar workers), one in which light beer consumers (women and youngsters) don’t fit into. MM Lager consumers fear mass production which might cause a drop in the quality of their beers. On the other hand, the fact that the company only has a single product, and is perceived as “old school” by the younger generation, will lead the light beer target group to see MM Light as being a niche product. A second issue that arises is Cannibalization. One issue given by Oscar Prangel is that some younger MM Lager costumers will buy MM Light due to product association, therefore essentially eroding their MM main product. Furthermore, Oscar believes MM Lager will be neglected due to time and resources been re-allocated to MM Light. He assumed a 5% to 20% cannibalization rate of MM Lager’s revenues. In addition, giving in to the light beer trend would furthermore hurt the already deteriorating traditional beer culture, to which generations of Prangel family members dedicated their life’s work. A third issue would be the retaliation of the company’s employees towards the introduction of light beer. The employees are also likely to have very strong ties to the company and the premium beer product. Having to forsake their loyalty to traditional beer making, could lead to low motivation, protests or even sabotage by the employees; jeopardizing the success of the launch. The need to re-train / re-educate existing employees is another issue that needs to be addressed. A fourths issue concerns the external stakeholder’s distributors and competitors. It is certain that large competitors, such as Miller and Budweiser, will try to prevent Mountain Man establishing themselves in the light beer market. Using their competitive advantages such as economies of scale, “deep pockets” and bargaining power, they might run aggressive advertising and low-pricing campaigns (especially in West Virginia) or even put pressure on distributors against Mountain Man. Distributors such as retailers would rather want to build up their main customers such as Budweiser and Anheuser-busch than supporting Mountain Man’s small scale product launch or brand equity. By not giving MM additional shelf-space or by even dropping MM entirely, distributors could make market penetration of MM Light difficult. The fact that MM does not have alternative distribution channels aggravates the issue. For example, Mountain Man is not being sold in restaurants and pubs; meaning their brand’s presence wouldn’t be felt by the younger generations.