Rochester Institute of Technology |
Mountain Man Brewing Company: Bringing the Brand to Light |
Advanced Corporate Financial Planning |
Professor Testa 1/23/2012 |
Complete a NPV analysis to see if Mountain Man Brewing Company should implement Mountain Man Light to its existing product lines:
* SWOT Analysis on Mountain Man Lager
* NPV analysis for Mountain Man Lager
* NPV analysis for Mountain Man Light
* NPV analysis on whole company
* ...view middle of the document...
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.
Chris looked at some revenue and net profit projections he had developed to 2010 assuming that Mountain Man lager lost 2% of its revenue base annually. He felt a knot in his stomach as he pondered the “status quo” strategy. He then examined the financial projections he had done a few weeks prior for the Mountain Man Light launch, which showed regional revenue growth of the light beer product at 4% annually and Mountain Man steadily growing its share of the regional light beer market by a quarter of a percent each year off a 2006 base market share of 0.25%.
* Mountain Man Brewing Company will only be able to achieve .25% of the light beer industry market share in 2006, with a gradual increment of .0025% annually
* Light Beer sales are growing at 4% annually, while Traditional premium beer sales are declining at 4% annually
* Price of a premium barrel will be same as the price of a light barrel
* To accept product, would have to generate profit within two years, enough barrels to cover both the associated launch marketing and make up for the negative impact on overall profitability resulting from lost sales of Mountain Man Lager
* Mountain Man brewery carries a legacy in a mature business
* 2005 revenues were $50 million (520,000 barrels)
* Top Market Position among lagers in West Virginia for almost 50 years
* Respectable Market Share for old school regional brewery
* Affordable, comparable with Miller and Budweiser ($2.25 for a 12 ounce serving, $4.99 for a six-pack)
* Recent survey in West Virginia with a 67% response rate rated Mountain Man Lager as the “Best Known Regional Beer”
* Mountain Lager won “Best Beer in West Virginia” for the 8th straight year
* A small percentage of MMBC’s blue collar customers accounted for a large percentage of sales
* Brand loyalty rate for Mountain lager was 53% (42% Budweiser, 36% Bud Light)
* Brand awareness was a cornerstone of the brand’s success with blue-collar consumers
* Mountain Man Lager revenues were decreasing annually by 2% in recent years
* Producing one product has caused Mountain Man to lose some of their market segment to competitors of other types of beer
* Most industry observers agreed that the key consumer segment for beer companies was younger drinkers, 21-27 years of age
* Mountain Man rated high in terms of awareness with the younger, light-beer drinking segment of the market
* Light Beer makes up 50.4% of the east central region beer market which is a large market to tap into.
* Expanding its sales territories to include other regions like East region
* With enough funding, could possibly buy out a regional brewer that has light beer in its...