Mountain Man Brewing Company
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A1.
Shrinking and highly competitive market in the sector of premium beers
Growth in new market of light beers, shift in consumer’s taste
Highly concentrated customer base
Increased health awareness promoting responsibility and restraint
General decline of beer consumption since 2001 (by 2.3%)
Growth in new market of light beers, shift in consumer’s taste (sales increase form 2001: 29.8% to 2005: 50.4%)
Aging society (current consumers); MMBC’s clients were low-income men, +45 years old. Now people aged 21-27 become key consumers
Increased health awareness
Pressure from large national breweries, and competition in spirits and wine
Increase in federal taxes
collapse just as tens of other during the crisis, dominated by large companies
Implement changes in the current MM Lager product
Will enter the expanding market of light beers addressing the new target segment (21-27 year olds), building new brad image and enter new locations: restaurants, bars.
B1. Appendix 1
Contribution per barrel MM Lager: $15,636,400/520,000 or $97 – $66.93 = $30.07
Contribution per barrel MM Light: $30.07 – $4.69 = $25.38
B2.
2007
Contribution from MM Lager
$15,636,400
$15,323,672
$15,017,199
Cannibalization 5%
$781,820
$766,183.6
$750,859.9
Cannibalization 20%
$3,127,280
$3,064,734.4
$3,003,439.8
Cannibalization 5% = $766,184 + $750,860 = $1,517,044
Cannibalization 20% = $3,064,734 + $3,003,440 = $6,068,174
B3. Appendix 2 & Appendix 3
Total fixed costs = Initial advertising costs + SG&A2006 + SG&A2007
Fixed cost 2006 = $750,000 + $900,000 + $766,183.6 = 2,416,184
B/E 2006 5% = 2,416,184/25.38 = 95,200
Cannibalization 5%= 95,200+ 65,046 = 160,246 units
Cannibalization 20% = 185,766 + 153,780 = 339,566 units
2007
Market total
37,191,077
36,447,255
35,718,310
Light Beer market
18,744,303
19,494,075.12
20,273,838.12
In relation to total market share: (decreasing by 2% annually)
BEMS 2006 5%= (95,200/36,447,255)*100%= 0.26%
BEMS 2007 5%= (65,046/35,718,310)*100%=0.18%
BEMS 2006 20% = (185,766/36,447,255)*100%= 0.51%
BEMS 2007 20% = (153,780/35,718,310)*100% = 0.43%
In relation to light beer market only: (increasing 4% annually)
BEMS 2006 5%= (95,200/19,494,075)*100% = 0.49%
BEMS 2007 5%= (65,046/20,273,838)*100% = 0.32%
BEMS 2006 20% = (185,766/19,494,075)*100% = 0.95%
BEMS 2007 20% = (153,780/20,273,838)*100%