UNITED BEVERAGES:PRODUCT DEVELOPMENT GENIUS OR ONE HIT WONDER

 RISHABH TANDON

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Introduction
• United Beverages' first product, GangBusters Interactive Beverages, has reached the stage of wide brand recognition. • However, over the past 12 months, growth has stalled and the product development team at United Beverages is considering several ideas for future growth.
• The team must consider market and technical uncertainty as well as resource allocation issues as they define the new productdevelopment strategy for United Beverages.
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 GangBusters is a brand name that’s on its way to becoming a product description, the mix of innovation and marketing is something special about it.
 Diaz described his idea for United Beverages: Dual Drinks and flavor mixing as the next big interactive beverage  There were convincing arguments for the tremendous payoff that was possible with a dual drink. However the development team was also clear about the dangers associated with a rapid expansion of the portfolio
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 Part of the dilemma was that United Beverages depended heavily on existing product sales to fund development. Infact the company had always committed 8% to 10% of revenue toward R&D and new product development.

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GANGBUSTERS

PROS

CONS

 GangBuster maintains revenue  Brand generification (may be) stream for UB.  Maturity stage has been reached.  There is still potential growth for GangBusters Expansion is mandatory to not lose market share.  Strengthen barriers of entry to the Interactive Beverage Industry It has been 5 years since the development of GangBusters, growth will eventually plateau .  Open to selling foreign markets and development of new flavors. Page  5

KID ENERGY DRINK

PROS

CONS  Fast acceptance rate as focus  Potential market < current group indicated easy product gangbuster market.
use & understanding due to the current market for energy drinks.

 High Competition

 Development time & development cost is less as compared to Dual drink project.

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Dual Drink Project

PROS CONS  Potential market is 4-5  Slower acceptance rate times current Gangbuster  Development time & market in the long run. development cost is  Innovative product & will comparatively high as have first movers advantage compared to Kid energy  In case of success, it will drink. fetch $40 lac/month.  Capital Intensive project & may have an effect on Gangbusters sales.

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Factors to be consider for developing a product
 Potential Costs:
1. How much does it cost to develop? 2. How long does it take to develop? 3. How much resource do we need to allocate for the development? 4. Do we have enough resources to develop it? 5. How will this development affect the development other products?

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 Potential Benefits:
1. How large is the (existing/potential) market for this product? 2. How much revenue is expected from it? 3. How long is the potential life of this product? 4. What are the growth potentials of this product? 5. How long will take for competitors to imitate/ pioneer a similar product?

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Launching of the product
 Pre launch  During launch  Post launch

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GRAPH ANALYSIS
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United Beverage :Potential Development Projects

Project Kid Energy Drink Dual-Drink Project

Expected Total Development Cost $800,000 $1,800,000

Minimum Development Time 4Months 6 Months

Maximum Development Time 10 Months 12 Months

Min. Devlp Cost for min time(monthly) $200,000 $300,000

Max. Devlp Cost for max time(monthly) $80000 $150000

Kid Energy Drink Dual-Drink

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 Total Operating Income(in thousands)=

(535+534+534+533+533+533+535+534+534+534+535+534)
=$6408

 United Beverages spends 8-10% on R & D and new product development.
 If company spend 12.5% of operating income on R&D they can go for Kids Energy drink and they can also continue gangbuster expansion program.

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Best Case Scenario :
 Kids Energy Drink :  Acceptance Rate - Fast  Potential Market - Huge  Competition - High  Dual Drink : (Innovation)  Acceptance Rate - Moderate  Potential Market - Small  Competition - Low   Gang buster expansion program:  Sales - Marginal Increase  Cash Inflow - Regular  Brand Identity - Elevated

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Worst Case Scenario
 Kids Energy Drink :  Acceptance Rate - Slow  Potential Market - High  Competition - High
 Dual Drink : (Innovation)  Acceptance Rate - Poor  Potential Market - Very Small  Competition - Low  Gang buster expansion program:  Sales - Decline  Cash Inflow - Irregular  Brand Identity - Neutral

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Overview :
Expected Total Development Cost Kids- Energy Drink - $800,000
Worst Case Result Moderately Successful Monthly sales ( $500,000) Market Failure Monthly Sales – Negligible Marginal Impact Sales decline @ 6% High Competition

Best Case Result
Very Successful Monthly sales ($1,000,000)

Dual – Drink Project - $1,8000,000 GangBusters Expansion Program
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Market Success Monthly Sales ($4,000,000)pm Positive Impact Competition – Low Sales - Constant