Mr. Prangel as we all know Mountain Man Beer Company has been in the market over eight decennaries ; fabricating a beer known for its genuineness. quality and stamina. In all these old ages we have seen many regional breweries vanished by fatal determinations. Mountain Man Beer Company is still standing strong in the market. yet it has come the clip to do a important determination sing the hereafter of our company.

Before I present my recommendation I would wish you to cognize that I am good cognizant of your father’s words when he talks about the company. when he says that “Mountain Man is still standing because we manufacture and exceeding beer with a great trade name name. we have ne’er lost sight of our nucleus client. and we have ne’er been seduced by the other guy’s market” . Unfortunately due to alterations in beer drinkers’ penchants and diminutions in gross revenues for the first twelvemonth. we need to see different options to counterbalance for possible diminutions in gross revenues in the coming old ages.

Despite all our attempts to construct trade name equity in 2005 Mountain Man Lager Beer’s gross revenues have declined for the first clip in the history of the company by 2 % . which could go on on the undermentioned old ages if no action is taken. On the other manus the Light Beer class. in which we have to presence at all. has been steadily deriving market portion at a compound one-year rate of 4 % per twelvemonth in the past 5 old ages. Light beer’s market portion accounted for 50. 4 % of volume gross revenues in 2005. At this point we have two different options from which we can pick from with their pros and cons.

The first scheme would be to maintain making what we are making concentrating on our nucleus consumers. keeping our company as a individual merchandise company. The 2nd scheme. and the one I am urging after looking at the industry’s Numberss and different facts in the Beer industry. is to travel to variegation of our merchandise portfolio towards light beer to fulfill a new client base. to catch up with the altering times and the lost in gross revenues of our chief merchandise Mountain Man Lager Beer. Keep making what we are making

The scheme consist in concentrating in our nucleus consumers and maintaining our trade name image of “Working man’s beer” as Oscar Prangel said “focusing on what we do best. non by attaching our trade name to every imaginable version of a merchandise. ” Mountain Man Beer Company has been successful selling to the bluish neckband. middle-to-lower income work forces over age 45. distinguishing from rivals with an old household brew ensuing in a flavourful. bitter-tasting. high intoxicant degree beer. obtaining a trade name trueness rate of 53 % .

At the same clip we have to take in consideration that the beer ingestion in the US has declined 2. 3 % plus the lost in market portion of premium beers. traveling with this scheme could ache the company in many ways. This scheme does non include presenting a light beer into the market. even though the market for light beer has been turning systematically 4 % per twelvemonth for the past 5 old ages. Professionals: Keep trade name image strong. No investing needed Focus on our nucleus consumers. Cons: Beer ingestion in US declined 2. 3 % Gross saless decreased by 2 % in 2005 ( Appendix 1 )

45 + old ages old beer drinkers are being overshadow by the cardinal consumer section for beer ( 21-27 old ages old ) Light beer’s market is turning 4 % per twelvemonth while Premium beer has been losing 4 % market portion per twelvemonth. Our Gross will be well hurt in the following old ages ( Appendix 2 & A ; 3 ) Launch Mountain Man Light Mountain Man Beer Company will hold to present a “light” beer to their merchandise portfolio. to fulfill the turning demand of the younger beer drinkers and counterbalance the doomed in gross revenues of our chief merchandise Mountain Man Lager.

Light beer is the fastest turning section in the $ 75 billion beer industry in the US. accounting for 50. 4 % and increasing at compound one-year growing rate of 4 % . There are many factors we need to take into consideration when establishing Mountain Man Light. such as cannibalization. cost. and advertisement. -We are hiting for a 0. 25 % market portion of the light beer ingestion in 2006. while turning our portion by a one-fourth of a per centum per twelvemonth the undermentioned old ages. We are projecting 48. 735 barrels on 2006 ( Appendix 4 ) -There is a hazard of possible cannibalization from MM Light to MM Lager of 5 % – 20 % harmonizing to Oscar.

I will put cannibalization at 5 % due to the fact that MM Lager drinkers consume our merchandise for its raggedness. and they are non likely to exchange to a lighter version of MML. 25. 480 barrels of beer will be cannibalize from MM Lager on 2006. ( Appendix 5 ) -An advertisement bureau estimated that making a 60 % degree of consciousness for Mountain Man Light will be $ 750. 000 for an intensive six months. -Another cost to take in consideration is the increase selling general and disposal which is $ 900. 000 per twelvemonth.

-The cost of bring forthing Mountain Man Light will be $ 71. 62 which is $ 4. 69 more than a Mountain Man Lager barrel. cut downing our part border from 31 % to % 26. 16. ( Appendix 6 ) -We will see addition in Income and Revenue get downing 2007 ( Appendix 7 ) Appendix Appendix 1 Appendix 2 Mountain Man Gross saless Assuming 2 % per twelvemonth decrease Mountain Man Gross saless Assuming 2 % per twelvemonth decrease Appendix 3 Projected Income Statement | | | | Mountain Man Income Stament | 2005| 2006| 2007| | 520. 000 Barrels| 509. 600 Barrels| 499. 408 Barrels | | | | | | | | .

Net Revenue| | | 50. 440. 000 | 49. 431. 200 | 48. 442. 576 | | COGS| | | 34. 803. 600 | 34. 107. 528 | 33. 425. 377 | Gross Margin | | | 15. 636. 400 | 15. 323. 672 | 15. 017. 199 | | SG & A ; A| | | 9. 583. 600 | 9. 391. 928 | 9. 204. 089 | | Others| | | 1. 412. 320 | 1. 384. 074 | 1. 412. 320 | Operating Margin| | 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 | Appendix 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 | | | SG & A ; A ( +900. 000 annually ) | | | 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 | | | Provision 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 | | .