Ruth Wawin, Paida Kangai, Thomas Ulrich

Case Analysis Dr. Pepper Snapple Group, Inc.

Ruth Wawin Paida Kangai Thomas Ulrich Submitted Oct 7, 2012

targeting the adult niche market or (3) not introducing an energy beverage. Thomas Ulrich Case Analysis . Pepper Snapple Group.Ruth Wawin. We have based this decision on potential profit margins. Paida Kangai. Andrew Barker. Pepper Snapple Group Inc. Inc. and whether entrance in the maturing energy drink market with the release of a new beverage would be a profitable opportunity. will provide the best chance at gaining entrance into the energy drink market and taking ownership of sufficient market share needed to ensure future success. we are recommending to Snapple brand manager. In this case. The alternatives that will be considered are to (1) introduce an energy beverage.Dr. Barker would like to consider the opportunity to gain market share in this high growth. Pepper Snapple Group has no energy beverages in their product line. Problem Statement: Dr. This. to introduce an energy beverage targeting heavy consumers. (2) introduce an energy beverage. . Executive Summary: This case report will provide a current analysis of Dr. energy-beverage market. in addition to the marketing strategies we intend to employ. targeting heavy consumers. and the ability to target the most profitable market. Mr.. the ability to differentiate our product. high margin. as well they are a late adopter into the market.

net sales of $5. · Owned 18.5 percent market share in 2006 of non-alcoholic beverages · Follow an integrated business model · Strong Customer relationships with competitors and distributors · Strong financial position. through vertical integration strategy · Copy Red bull strategy of aggressive media promotion · Offering a sugar-free alternative · Offer increased functionality in the physical design of drink External Threats: · Increased rival intensity Slowed growth market Growing bargain powers of customers and suppliers .78 billion · Extensive geographic manufacturing and distribution capability · Experienced executive management team (over 20 years of experience) Problematic weaknesses: · · · The only major domestic non-alcoholic beverage company in the USA without an energy drink Not global like competitors Will be a late adopter should they choose to introduce a new line of energy drink Market Opportunities: · Great opportunities to expand 6. Thomas Ulrich SWOT Analysis Resource strengths: · Strong diverse portfolio of leading consumer-preferred brands in the CSD and Non CSD brands. Paida Kangai.2 billion dollar Energy industry and a gain in an additional customer group · Increase presence in high-margin channels and packages · Less barriers to attractive foreign markets · Acquisition. · Strong brand name · Excellent company reputation.Ruth Wawin.

Ruth Wawin. The energy drink market does not seem to follow a seasonal pattern. However. Paida Kangai. the increase in product price and the emergence of the “hybrid” energy beverages. convenience and supermarket chains that currently carry their CSD and NCSD products.5% in the next three years. market research and promotional expenses should not be an immediate concern. internal funding for expenditures such as product development. This will all prove helpful in DRS‟s ability to establish themselves as a serious competitor in the energy beverage market. DRS have built strong relationships with many major distributors. the energy beverage market has become the fastest growing non-alcoholic beverage category. The . The energy drink segment is the „new wake up drug‟ during the morning. Company: Being a large and highly successful brand owner. Thomas Ulrich Industry With annual sales growth rate reaching 42. This is attributed to the market maturing. For North America. such as energy colas. sales are generally steady during the year unlike CSD and non CSD sales which are affected during the cooler seasons of the year.5% from 2001 to 2006. DRS is a publicly traded company and this can provide alternative avenues for any necessary fundraising through the issuance of shares. „boost‟ during the day and „alertness‟ and „push‟ during an evening of studying or partying. The industry characterized by a high budget in media promotion and major sports league sponsorships. fruit drinks and energy water. analysts expect this growth rate to decline to 10.

will make the obstacle of attaining shelf/fridge space to place their new products. along with the reputation of DRS. This suggests high brand loyalty in the energy drink market.4 brands.Ruth Wawin. This may hinder DRS‟s ability to get the current consumers of other brands to give their new product a try. less of an issue. for example. Also. but these competitors have had years of experience selling these products. only 1. They consume primarily in the afternoon hours. when they driving or even just at home. Not only that. Competition: The energy drink market is full of major players as far as competition is concerned. This. Paida Kangai. is an Austrian company who entered the market . This information is vital when considering marketing strategies for introduction of a new energy drink as you are able to focus your attention on providing convenient ways for consumers to find and purchase your product. on average. Consumer: The average consumer of energy drinks is males between the ages of 12-34. Red bull. They are what are known as the “heavy users” of the drink. They drink energy drinks to increase their mental alertness and to give them energy through the day and night. Thomas Ulrich distribution networks are largely already in place. the promotions and advertising can be honed in to appeal to the atypical energy drinker as well as appealing to people new to energy drinks altogether. The consumers in the energy beverage market have proven that they limit their choice to. while at work.

Given the media expenditure of the competitors in the market. they are “late to the party” in this case.500. Paida Kangai. This is similar to what TAB energy spent in their initial year. Pepper Snapple Group. Thomas Ulrich in 1997 with aggressive marketing strategies and is the clear frontrunner in the industry. the ingredients will be much the same as competitors. this alternative offers a way to differentiate ourselves. with only a slight increase in caffeine and taurine content. targeting heavy users Our first alternative is to target heavy energy drink users which are men ages 1234.9 ounce aluminum can with a re-sealable screw top priced at $3.000 on advertising and promotion. To effectively target this group of men. Since this group of men is the target of many of the competitors in the energy drink market. Lines have been drawn and market share has been acquired.50. we have placed ourselves around the middle to higher end of the competition. It is vital that Dr. but is it too late? Alternatives: Alternative (1) Introduce energy beverage. DRS is set to attempt to hurdle itself into the mix in an attempt to gain a share of the market for itself. Inc. DRS has had proven success and while they are no stranger to a bit of competition. Although the flavoring of the drink will be custom fit to our market. The brand loyal market could see this as enough of a change to give the new product a chance. To successfully integrate ourselves into the mind of our targeted group of consumers.Ruth Wawin. as they deal with many competitors in the CSD/N-CSD markets. while differentiating ourselves from the many competitors whom target this group also.‟s energy beverage makes . we will be spending $12. we will be offering a16.

something that all men can yearn for. The sole purpose of visiting the convenience store could be to pick up an energy drink. Having a re-sealable top enables consumers to take the beverage on the road successfully without the fear of spillage or the loss of carbonation. In order to have a brand name that resonates with our target market we selected a word that was synonymous with strength. The . Heavy users of energy drinks.” Distributing “Thunder” to convenience stores was the best option to successfully provide the target market with the most convenience and frequent exposure to the product.Ruth Wawin. which is why we decided on “Thunder. We felt since 16. Men can take their energy drink to work. Men visit convenience stores solely for the reason of convenience. they are there to pick up a product and continue on their way. to the gym. Not just physical strength but also mental strength and alertness. Convenience stores also have the largest gross margin at 50% in comparison to the supermarket and wholesalers gross margins. 16. being the only available resealable screw top in the energy beverage market. anywhere knowing that it will travel without spilling a drop. such as our target market of men 12-34.9 ounce was similar to 16 ounces it would still be a desired option for our target market. We are also targeting those who visit the convenience store for others purposes and grab “Thunder” to gain that energy boost they are looking for to get through their day. are the type of consumers who seek out energy beverages in order to consume them.9 ounces is a single serving size that will be desired by our target market because they are heavy users and subsequently 16 ounce cans accounted for 50% of case sales. The size and physical construction of our of our can is what truly sets us apart from the competition. to school. Thomas Ulrich a big splash in its initial year in the market and media expenditure can be re-evaluated for its second year in the market. Paida Kangai.

Paida Kangai. which is slightly less than convenience stores at 50%.19. we have placed ourselves on the higher end of price per ounce for the convenience store distribution channel. The next highest price per ounce is Tab at $0.50 is established to position “Thunder” just below Red Bull in price per ounce in the convenience store distribution. it is optimal to have the product distributed to supermarkets because this where our target market will visit frequently. At a much lower price.21 per ounce. This will fit with the interests target market we aim to reach by reducing the potential crash-effect of a drink that is high in sugar. we wanted to be slightly cheaper and have the convenience of our re-sealable screw top being an added benefit to get consumers to choose “Thunder” over Red Bull. The gross margin in supermarkets is 40%. Our target market will value the benefit of the having the re-sealable aluminum can which will justify having our price point at the second highest price per ounce for convenience stores in the energy drink market. This product is an energy beverage called “Zen”. a 16 ounce can. both men and women 35-54. in comparison to other energy drinks.24 per ounce and “Thunder‟s” would be $0. Red Bulls price per ounce in the convenience store distribution is $0. In order to best target this market. Thomas Ulrich price point of $3. In order to not directly compete with Red Bull.60 a can. In regards to the rest of the competition. However. the “Zen” beverage will contain less sugar and less of the expensive ingredient “taurine”.Ruth Wawin. convenience stores are leveling off in their sales of energy drinks and we think our target market will be found in supermarkets more regularly then . priced at $1. Alternative (2) Introduce energy beverage. targeting adult niche Our target market for this alternative is adults.

This number is larger than what the majority of the competition is currently spending on media expenditure in 2007. Since Dr. Current energy drinks targeted at heavy user have bolder brand names to appeal to younger consumers.000.000.Ruth Wawin. or walk by and see our product and realize it is something that will benefit them.000. When . Our target group is picking up an energy drink while grocery shopping. while “Zen” will promote mental clarity and alertness that will appeal to the busy adult who is trying to stay alert while getting through their day. users within this group represent 34% of all energy drink users. Since “Zen” is targeted to a smaller group of the market and since the profit on each can sold is lower. stress free. Thomas Ulrich convenience stores. The media expenditure budget for promoting “Zen” to our niche adult market is $7. We felt that promoting this brand as a calming and stimulating drink would better appeal to this market of adults. Since “Zen” is targeting a niche market of adults. “Zen” will enable them to go about their busy day with mental clarity and a boost of energy. going to the store to grab lunch on the go. it will be easier for the company to obtain optimal shelf space in supermarkets compared to brands that have no established companies behind them. and trying to live fulfilling lifestyles. we determined $7. Paida Kangai. The targeted group is comprised of busy adults.9 million. is a well-established brand in itself. with the exception of Red Bull who is spending 60. Pepper Snapple Group Inc. we felt it was necessary to spend enough money to make an impact but not so much that it would take a long time and a lot of units sold to break even. “Zen” was determined to be the most appropriate brand name for a beverage to be targeted at adults from 35-54. working. Adults are busy spending time with their families.000 to be an appropriate number to make our product known in the market.

We want our consumers to be encouraged to consume their beverage as a singleserving beverage which will encourage repeat purchase.Ruth Wawin. loyal customer base. Pepper Snapple Group Inc. which in this case. it would subsequently place is in direct competition with that brand. it was determined that for the adult niche market that we were trying to target the can size may be too large for everyday convenience and would not be consumed as frequently as a smaller size. we opted for a relatively conservative price. We wanted to avoid direct competition with Red Bull due to their current market. In some cases repeat purchase will occur in the span of a day. When determining the size for this niche group of adults we took many criteria into consideration. by the process of elimination we decided 16 ounces would be the size that would best suit our target market. which is a unique size specific to Red Bull. Looking at the 24 ounce size can. there is less of a need to spend an excessive amount of money to make a splash in the energy beverage market. will be a niche product at a lower price per . Thomas Ulrich marketing a product to a niche group. Since our energy drink is targeting a narrower niche market. Some consumers will recognize the company behind the brand and try it because they recognize the name and are familiar with Dr. 16 ounces accounts for 50% of case sales and has the ability to travel well and be consumed more frequently than a larger size. Pepper Snapple Group Inc. and large media expenditure. We figured that if we choose the 8 ounce size can. less advertising expenditure is needed to be spent in comparison to the money needed to make an impact when advertising to a larger group of consumers. is well established and functioning. Therefore. Paida Kangai. Since the manufacturing and bottling aspect of Dr. When trying to attract a niche market you need to have specialized offerings.

there is not much room left for a non-established energy drink to enter the market. On average. it is our goal to sell more units by pricing “Zen” as a cheaper niche energy drink at retail price of $0. This is the lowest price per ounce for an energy beverage available in supermarkets. Despite emerging competition. Thomas Ulrich ounce. it is harder to absorb the competition‟s . Rockstar. an older consumer base is more likely to be on the conservative side when it comes to the money they spend on functional beverages. Rockstar and Full Throttle at $0. Sobe. The next highest price per ounce is Monster. This places “Zen” among the competition as having the lowest price per ounce in comparison to the other brands in supermarkets.4 brands. the first energy beverage to introduce itself into the market. as the average users varies between 1. Pepper Snapple Group Inc. Alternative (3) Status Quo This alternative is for Dr. Regular consumers of energy beverages are considered to be extremely brand loyal.60 in a 16 ounce can. Amp. Although the gross margin per unit will be somewhat low. With consumers being as loyal as they are to their favorite energy beverage.Ruth Wawin.11 per ounce. Red Bull has still managed to maintain almost half of the market share. With 94% of the energy beverage market being monopolized by five main competitors and the remaining 6% belonging to private labels. to remain at status quo and not enter the energy beverage market. The threat of the existing competition and the domination by its five main competitors makes the market difficult for any company to penetrate. “Zen” will have a pricing advantage over Monster. 43% of the market currently belongs to Red Bull. Paida Kangai.10 per ounce which equates to $1. Full Throttle and especially Red Bull.

it would have to do a variety of things: develop a new brand. An appropriate advertising budget would need to be quite large in the initial years in order successfully position the product in the consumer‟s minds. from losing revenue. Thomas Ulrich portions of the market share. In order for an energy drink to successfully be introduced into the market. mature market that has exhibited signs of slowed growth would need a well devised and well executed marketing plan. .We needed to choose an alternative that made our product . Pepper Snapple Group Inc. target a niche market with specialized offerings.Ruth Wawin. and the increase of availability of energy beverages in mass merchandisers are causing lower prices and resulting in lower profit margins. an energy beverage may not be as profitable as they may have hoped and therefore not entering the market may prevent Dr. With this industry already saturated with strong competition. multi-packs. there are a lot of criteria to consider. The energy beverage market has begun to see many different energy beverages enter the market resulting in price erosion.Profit Margins . Key decision criteria Our key decision criteria include: . The introduction of a new brand in an established. high profit market. Larger package prices.The market is a high growth. In order for a company such as Dr. This is something that was considered when choosing whether or not to enter the market. and/or differentiate a product clearly from that of the competitors. Pepper Snapple Group Inc. Paida Kangai. to break into the energy drink market. It is predicted that convenience stores will continue to have problems with price erosion for energy beverages in the future.Differentiation .

Ruth Wawin. This way we follow the general guidelines of entering a maturing market as a late adopter by (1) Attracting customers with a specialized offering and (2) Differentiating our product clearly from those of competitors. 12-34.We are choosing what we believe is the market that will provide us with the best potential to be profitable and successful. We provide newfound functionality by incorporating the first re-sealable screw-top to an energy beverage. targeting heavy users.” Consumer Trends: Agriculture and Agri-Food Canada (AAFC). Our can design will be of the 16.9oz that will include a revolutionary resealable screw cap to differentiate the product from other competitors.9oz can will compete with the others in that size range. at over 150% since 2004.. Also. we have chosen to use this size because it has shown the largest growth. 2011 . therefore the 16. consumers are looking for greater functionality. The “Thunder” brand will focus on males.. Consumer Trends: Agriculture and Agri-Food Canada (AAFC) are quoted as reporting: “For energy drinks and shots. especially the other similar sized cans. Paida Kangai.9oz size to avoid mimicking Red Bull‟s renowned 8oz can.Market Choice . It is not our immediate concern to compete with Red Bull‟s share of the market. Thomas Ulrich stand out from the competition in order to attain a decent market share. . introduce energy beverage. Choice and Rationale We have chosen to implement alternative (1). We have chosen a single serve can at a size of 16.

This. will provide enough of a presence in our first year of sales to get our product off to a good start and is similar to what TAB energy spent in their initial year.500.000. The margins using this channel.” Consumer Trends: Agriculture and Agri-Food Canada (AAFC).000. as reported by AAFC: “Certain manufacturers have targeted non-specialist retailers. we will be using convenience stores as our main source of distribution. have proven to be the highest in the industry at about 50%. our breakeven is relatively low at only $25. such as Red Bull. although slightly declining. A sugar-free alternative was decided against as the regular energy drinks account for 80% of the market and we do not feel that our target market makes up a large portion the 20% that would be left untapped. We feel that this is right where we need to be to match with our target market of heavy users.2B. To reach this number. that we will not have to spend as much time and money educating the public on what energy drinks do and we can focus on promoting the brand name. 2011 We will be introducing the “Thunder” beverage with an initial media expenditure cost of $12. we feel. This means. “Thunder” through various media avenues. With this choice.4% of the current total market sales of $6. This would appear to be easily attainable based on how the competition currently . The physical benefits of energy drinks have already been widely taught by the pioneers of the industry.Ruth Wawin. which it would be expected our competition has also come to realize. Thomas Ulrich With this choice. Paida Kangai. we would only have to attain 0.000. such as convenience stores to drive product sales. These are appealing due to their potential to capture casual athletes who currently use these products infrequently or not at all.

Advertisements for “Thunder” will be placed in all of the major men‟s magazines. “Thunder” is a 16. These sales figures are similar to the initial introduction of TAB energy drink.500. fitness magazines such as Men‟s Health. it is necessary to have advertising present at the point of purchase.50.9 ounce can. Its promotion will focus on the convenience of having a re-sealable top so that you can take it with you throughout the day.000. Having a point of purchase display will show consumers our product is out there and when they go into the store for an energy .5% of the current market by having sales numbers at $155. men ages 12-34 by positioning our brand at the forefront of their minds as the man‟s “go-to” energy beverage. Point of purchase displays in convenience stores will be a large portion of our promotional advertising. We hope to attain at least 2. The promotional budget of $12. priced at $3.000 in the first year. With low involvement purchases consumers tend to select brands because they are familiar with.Ruth Wawin. therefore it is necessary for the promotional efforts of “Thunder” to have a big impact on the target market especially within its initial year in the market. An extensive promotional strategy will aid in placing “Thunder” in the evoked set of our target market and consumers will recognize our drink as the one that gives you a strong energy boost that will get you through the day. Thomas Ulrich fares and how Tab Energy fared in their first year.000 will be used on a well devised marketing plan targeted towards men. car magazines such as Car and Driver. Paida Kangai. Implementation Our goal is to attract our target market. and a variety of sports magazines such as Sports Illustrated. Since energy beverages are a low involvement purchase and differences between brands are small.

Sponsoring an athlete strengthens the “Thunder” brand not only because of television and promotional exposure but also because it places our brand in the forefront of consumers mind as a man‟s energy beverage. fitness websites. Twitter. With the advertising . Monster. and Tumblr. Thomas Ulrich beverage they will be inclined to try the newest energy beverage by Dr. Red Bull and Rockstar are all well-known sponsors in the motocross industry. Having “Thunder” seen among our competitors in the market will give our brand notoriety by the consumers. car websites.Ruth Wawin. The display will be a large energy drink can cut out. Pepper Snapple Group Inc. Paida Kangai. Sports websites. Consumers will see the display when entering any convenience store that “Thunder” is available. as well as miscellaneous sites that are popular among men are where the majority our internet advertising will take place. Not only will this grab our target markets attention. but we will also reach out to the consumers outside of our target market using this method. Our competition is known for sponsoring extreme sports such as motocross. with shelving to hold the cans. Appealing banner ads with a click-through to the “Thunder” website is an optimal way to get attention from consumers who spend a lot of time on social media sites. and will hopefully spark our consumers‟ interest. vibrant in color. Similar banner ads for internet sites that are popular among our target market will also be a prominent part of our advertising. Another great way to advertise to our target market is to use social media advertising on sites such as Facebook. Sponsoring an athlete in an extreme sport such as motocross will allow us to have our presence known among our target audience that watches extreme sports.

000 million in net income that we expect the beverage to make. will use to determine whether or not the energy beverage “Thunder” is performing successfully in the market will be based largely on profits and unit sales. The current market share that “Thunder” has obtained will be evaluated quarterly and re-evaluated at year end to see if we have obtained our goal. Our goal is to obtain 2. Since TAB energy has been a newer entrance into the energy beverage market. . our goal for “Thunder” is to obtain 2. we will compare our results in unit sales against theirs in their initial year. Important performance criteria such as how many units we are selling in convenience stores will be evaluated against the current competition to see how we are performing in our chosen channel. If “Thunder” does not reach its goal of obtaining 2.5% market share it will be below the $80. Marketing research will be completed on our target market to see if we are making the expected impact the consumers mind. Re-evaluating our promotional themes will be considered as an option to recover if we do receive lower than expected sales performance. Control-evaluating criteria The criteria that Dr. so this makes the two performances easier to compare.5% of the current market share.500. Pepper Snapple Group Inc. Paida Kangai.5% of the current market by the end of year one. Our media expenditure is also similar to their first year. we will evaluate the response of our various sections of advertising is having on our target market.Ruth Wawin. Pepper Snapple Group Inc. If changes need to be made. Thomas Ulrich expenditure that Dr. At this point we will need to re-evaluate and consider changes to the marketing mix and to promotional expenditure. is spending on its promotions.

necessary evaluations will take place. . Changing the course of where “Thunder” is distributed is also a reasonable option if performance in convenience stores levels off. Thomas Ulrich At the end of year one. place and promotion. Paida Kangai. price. as predicted. Changing the various aspects of the marketing mix will be seriously considered including the changes to the product.Ruth Wawin. If they are less than half the percentage of what we expected we will change course.