Case Overview
It is important to understand the case’s critical underpinnings in order to conduct a thorough assessment of the problem. Mountain Man Beer Company of MMBC is a regional beer brewery, which is among the few ones surviving under the pressure of main players. These primary industry giants include Adolf Coors Company, Miller Brewing Company, and Anheuser Busch (Mukherjee, 2021). Chris Prangel, son of the current owner of MMBC Oscar Prangel, is aware that the light beer consumption market is growing each year, which is why he proposes to launch Mountain Man Light in order to capitalize on the growth.
However, the father and other senior managers oppose the idea due to fear of brand erosion and product cannibalization of the core brand, Mountain Man Lager. The latter is a cornerstone of the business due to its quality, brand image, and appeal to the target consumers, mostly middle-aged or older blue-collar workers. In other words, one side believes that the declining growth of Mountain Man Lager cannot be saved and can even be worsened by the introduction of Mountain Man Light, whereas Chris is optimistic that investment into the new line will recoup its costs.
Decisions
The key decision-maker of the case is Chris Prangel, who soon will overtake the business ownership from his father. He needs to decide whether or not a new product line in the face of Mountain Man Light will damage the already weakened company or bring new opportunities for growth. The consensus at the company is highly conservative, which means the majority opposes Chris’s idea, whereas the secondary decision is the introduction of Mountain Man Light. The latter decision requires immediate action in order to capitalize on the growing light beer market, whereas the conservative route is more strategic and time-tested. At the moment, the decision-maker is Oscar, but in a few years, it will be Chris. Both need to decide whether or not Mountain Man Light is a good idea. If Chris’s idea is to be implemented, the decision needs to happen as soon as possible.
Options
Status Quo
The first option is to keep Mountain Man Lager as the core brand and work on the growth of the sole product, which means adherence to the status quo. If the given course of action is undertaken, the company only needs to focus on increasing its sales since it has been declining in recent years.
Introduce Mountain Man Light
The second option is an introduction of Introduce Mountain Man Light, which means that the current product line is extended. In other words, Mountain Man Light and Mountain Man Lager will coexist as two products of the company brand.
New Brand Name
The third option is to launch a light beer product under a new brand name, eliminating the risk of product cannibalization and brand erosion. In other words, the new light beer will not have the same Mountain Man brand image as the core brand.
Brand Extension
The fourth option is to conduct a brand extension as opposed to a line extension of the second option. However, the given alternative is practically similar to the second option due to a heavy attachment of the brand to a single product.
Recommendation
The recommended course of action is to adhere to the status quo and work on increasing the sales of the main or core product, which is Mountain Man Lager.
Justification
Pros and Cons: Quantitative and Qualitative Evidence
For the first option, the pros include the preservation of the core attributes of the brand, which include the unique “toughness” of West Virginia, quality, and authenticity (Mukherjee, 2021). Another advantage is the lack of substantive costs associated with marketing and operational changes associated with the product line extension. The cons involved is that MMBC might not be able to enter and capitalize on the significant growth trend in the light beer market, which reached 50.4% in 2005 in terms of sales volume (Mukherjee, 2021). Therefore, the qualitative evidence suggests that “manufacturer brand erosion exerts a negative effect on assortment attractiveness and consumers’ repatronage intention; the greater the erosion, the larger the negative effect” (Li et al., 2019, p. 922).
In addition, “an advertising strategy does not remove the cannibalization effect, but inverts its impact on a goodwill agency’s profits,” where “the cannibalization effect is beneficial for sufficiently large product resale value” (Ramani & De Giovanni, 2017, p. 1009). In the case of quantitative data, considering the fact that the second-tier regional breweries only had 12.5% of the market share, 18.3% of all beer sales took place in East Central Region, and Mountain Man shares this small market with other disappearing second-tier breweries, there is a high risk that the volume might not be high enough to justify the cannibalization.
For the second option as well as the fourth option, the pros of extending the product line or brand are that Mountain Man Lager product is already highly recognized among loyal customers, which is why extending the product line could be cheaper due to lesser need to spend on marketing and manufacturing changes. However, the cons involve brand erosion and cannibalization risks, as stated in the previous option. The quantitative data suggests that the light beer category grew from almost 30% to more than 50% of volume sales within four years, and thus, Mountain Man Light could recoup the losses on extension due to market growth (Mukherjee, 2021).
However, qualitative data suggest that the current target loyal customers are not welcoming the light extension, where both representatives of the MMBC’s customers stated it clearly in a focus group, such as “come on, I’m not interested in light beer. Just don’t mess with Mountain Man Lager (Mukherjee, 2021, p. 167). In other words, the current core product’s popularity is not relevant for the light beer market since they are not as interested as one might expect, and the target market does not want the light version.
For the third option, launching a new brand will require even more costs on marketing and manufacturing since it does not benefit from extending the current brand or product line. However, the newly launched light beer will not have an effect of cannibalization on Mountain Man Lager. For qualitative data, it is stated that “the buyers of new launches tend to become only light brand buyers,” which means that it will take a significant effort and time to recoup the costs (Tanusondjaja et al., 2016, p. 733). In addition, when a company launches a new brand, “many fail to attract a sustainable customer base” because “new buyers of brands have weaker associations than existing buyers” (Trinh et al., 2016, p. 743). Quantitative data suggests that producing Mountain Man Light will cost $4.69 more per barrel, which further makes the option unfeasible (Mukherjee, 2021).
Pros vs. Cons
The survival of MMBC is more important than growth due to the already pressured situation in the beer market, which is being dominated by large competitors. It is stated that in the past 30 to 40 years, major regional breweries, such as Horlacher or Neuweiler, vanished under the increasing domination of giant beer manufacturers (Mukherjee, 2021). Therefore, second-tier regional breweries are in no position to experiment and test new opportunities. In addition, the sales of Mountain Man Lager are already declining by 2% annually, which also showcases the vulnerable position of the company. The evidence suggests that businesses such as MMBC “snap back” from fallbacks primarily by improving and advancing the manufacturing process by integrating technology and efficiency measures (Joglekar et al., 2020).
Therefore, Chris’s proposal is only viable if the company has some form of measure to leverage the risk of being unsuccessful after the launch of the light beer. MMBC is not in a position of strength to enter new markets, risking a significant sum of money on the new beer. Therefore, the cons of not entering the light beer market are not as significant as the pros of surviving in a highly competitive environment, where only the largest enterprises can afford to invest in new product lines and associated marketing campaigns.
Key Assumptions
Key assumptions include the fact that MMBC is not in a financially strong position to experiment and commit to heavy investments into a highly risky endeavor. If the company’s sales volume were static or increasing, then it would be possible to consider entering the light beer market. If distributors were not discriminating against smaller brands, it would be feasible to consider Chris’s option. Lastly, if MMBC’s core customer base were comprised of individuals similar to the light beer consumers, it would be a plausible option. However, none of these “what-ifs” favor Chris’s idea.
Action Plan
The action plan is to maintain the status quo and focus on Mountain Man Lager, which stood the test of time. The decline in sales needs to be addressed through manufacturing improvements and a reduction in the cost of production (Joglekar et al., 2020). Novel marketing measures should be implemented to increase the appeal to the target demographic and further improve customer loyalty.