Mountain Man Beer Company Essay Example for Free

weed troops Beer Company EssayMr. Prangel as we all know big money gentleman Beer Company has been in the market over eight decades manufacturing a beer known for its authenticity, quality and toughness. In all these geezerhood we go for chequern many regional breweries vanished by lethal decisions. Mountain Man Beer Company is still standing strong in the market, yet it has come the season to make a crucial decision regarding the future of our company.Before I present my recommendation I would like you to know that I am well aware of your fathers words when he talks about the company, when he says that Mountain Man is still standing because we manufacture and exceptional beer with a great brand name, we have never lost sight of our core customer, and we have never been seduced by the other guys market. Unfortunately due to changes in beer drinkers preferences and declines in gross revenue for the offset printing division, we need to consider different options to comp ensate for potential declines in gross sales in the coming years. contempt all our efforts to build brand equity in 2005 Mountain Man L shape upr Beers sales have declined for the first time in the history of the company by 2%, which could continue on the following years if no action is taken. On the other hand the pass Beer category, in which we have to presence at all, has been steadily gaining market share at a compound annual prescribe of 4% per year in the past 5 years. lighter beers market share accounted for 50. 4% of volume sales in 2005. At this point we have two different options from which we can cleanse from with their pros and cons.The first st localizegy would be to keep doing what we are doing focusing on our core consumers, master(prenominal)taining our company as a single product company. The second strategy, and the one I am recommending after looking at the industrys numbers and different facts in the Beer industry, is to move to diversification of our produ ct portfolio towards fire up beer to encounter a new customer base, to catch up with the changing times and the lost in sales of our main product Mountain Man Lager Beer. Keep doing what we are doingThe strategy consist in focusing in our core consumers and keeping our brand image of Working mans beer as Oscar Prangel said focusing on what we do best, not by attaching our brand to every conceivable discrepancy of a product. Mountain Man Beer Company has been successful marketing to the blue collar, middle-to-lower income men over age 45, distinguishing from competitors with an old family brew resulting in a flavorful, bitter-tasting, high alcohol level beer, obtaining a brand subjection rate of 53%.At the same time we have to take in consideration that the beer purpose in the US has declined 2. 3% plus the lost in market share of premium beers, firing with this strategy could hurt the company in many ways. This strategy does not include introducing a luminance beer into the market, even though the market for light beer has been growing consistently 4% per year for the past 5 years. ProsKeep brand image strong. No investment needed Focus on our core consumers. ConsBeer using up in US declined 2. 3% Sales decreased by 2% in 2005 (Appendix 1)45 + years old beer drinkers are being overshadow by the key consumer segment for beer (21-27 years old) Light beers market is growing 4% per year while Premium beer has been losing 4% market share per year. Our tax forget be considerably hurt in the next years (Appendix 2 3) Launch Mountain Man Light Mountain Man Beer Company will have to introduce a light beer to their product portfolio, to satisfy the growing demand of the younger beer drinkers and compensate the lost in sales of our main product Mountain Man Lager.Light beer is the fastest growing segment in the $75 billion beer industry in the US, accounting for 50. 4% and increasing at compound annual growth rate of 4%. There are many factors we need to tak e into consideration when launching Mountain Man Light, such as cannibalization, cost, and advertising. -We are shooting for a 0. 25% market share of the light beer utilization in 2006, while growing our share by a quarter of a percent per year the following years. We are projecting 48,735 barrels on 2006 (Appendix 4) -There is a risk of possible cannibalization from MM Light to MM Lager of 5% 20% according to Oscar.I will set cannibalization at 5% due to the fact that MM Lager drinkers consume our product for its roughness, and they are not likely to bruise to a lighter version of MML. 25,480 barrels of beer will be cannibalize from MM Lager on 2006. (Appendix 5) -An advertising agency estimated that creating a 60% level of awareness for Mountain Man Light will cost $750,000 for an intensive six months. -Another cost to take in consideration is the increment selling usual and administration which is $900,000 per year.-The cost of producing Mountain Man Light will be $71. 62 whi ch is $4. 69 more(prenominal) than a Mountain Man Lager barrel, reducing our contribution margin from 31% to %26. 16. (Appendix 6) -We will see increase in Income and Revenue starting 2007 (Appendix 7) Appendix Appendix 1 Appendix 2 Mountain Man Sales take for granted 2% per year reduction Mountain Man Sales Assuming 2% per year reduction Appendix 3 Projected Income Statement Mountain Man Income Stament 2005 2006 2007 520,000 put 509,600 Barrels 499,408 Barrels . make Revenue 50,440,000 49,431,200 48,442,576 COGS 34,803,600 34,107,528 33,425,377 Gross permissiveness 15,636,400 15,323,672 15,017,199 SGA 9,583,600 9,391,928 9,204,089 Others 1,412,320 1,384,074 1,412,320 Operating leeway 4,640,480 4,547,670 4,400,789 Other Income 151,320 148,294 145,328 Net Income Before Taxes 4,791,800 4,695,964 4,546,117 Provision for Income Tax 1,677,130 1,631,230 1,598,605 Net Income After Taxes 3,114,670 3,064,734 3,003,440 Appendi x 4Projected Market share Year Light Beer MM Light Market Consumption 0. 25% Share CAGR + %4 . +. 25% per year 2005 18,744,303 0. 00% 2006 19,494,075 48,735 0. 25% 2007 20,273,838 101,369 0. 50% 2008 21,084,792 158,136 0. 75% Appendix 5 Cannibalize Barrels Cannibalize Barrels Contribution Margin Contribution Margin Appendix 6 Appendix 7 Projected Income Statement Mountain Man Income Stament 2005 2006 2007 520,000 484,120 474,438 BB Lager 74,215 126,339 BB Light Net Revenue $ 50,440,000 $ 54,158,495 $ 58,275,369 COGS BB Lager .34,803,600 32,402,151 31,754,135 COGS BB Light 5,315,278 9,048,399 Gross Margin 15,636,400 16,441,066 17,472,834 SGA (+900,000 yearly) 9,583,600 11,190,114 11,072,320 Others (+750,000) 1,412,320 2,266,438 1,631,710 Operating Margin 4,640,480 2,984,514 4,768,804 Other Income 151,320 162,475 174,826 Net Income Before Taxes 4,791,800 3,146,990 4,943,630 Pr ovision for Income Tax 1,677,130 1,787,230 1,923,087 Net Income After Taxes 3,114,670 1,359,759 3,613,073 .