Senior company management has decided to investigate the potential of launching a new energy beverage as part of its corporate strategy to target lucrative opportunities in the beverage industry. Barker is tasked with evaluating the feasibility of entering the market and recommending whether the company should introduce a new branded product in the energy beverage segment.
Having a marketing strategy is crucial for entering the beverage market and introducing a branded energy drink. This involves establishing projections for first-year sales and profit. It is worth mentioning that Dr Pepper Snapple Group, Inc., a prominent nonalcoholic beverage company in the US, currently does not possess its own substantial branded energy drink. To make an informed decision, Barker needs to assess the present situational analysis of Dr Pepper Snapple Group, Inc., analyze the American energy beverage market, and take into account the available market opportunities for the company.
The Snapple brand is confronted with the task of maintaining competitiveness amidst the presence of energy beverages. They must determine whether entering the energy beverage market would be a favorable strategic decision, all while guaranteeing profitability and preserving their existing customer base.
Dr. Pepper Snapple Group, Inc.
In the flavored carbonated soft drink (CSD) market segment, Dr Pepper Snapple Group, Inc. is a major player in both the United States and Canada. Their top brands include Dr. Pepper, 7UP, Sunkist, A&W, and Canada Dry.
In 2007, the company held an 18.8 percent share of the US CSD market segment based on retail sales. In the US non-CSD market segment, Dr Pepper Snapple Group, Inc. primarily participates in categories such as ready-to-drink tea, juice, juice drinks, and mixers. The main brands in this segment include Snapple, Mott’s, Hawaiian Punch, and Clamato. In Mexico and the Caribbean, Dr Pepper Snapple Group, Inc. mainly participates in categories such as carbonated mineral water, flavored CSD, bottled water, and vegetable juice. The company’s senior executives identify the main strengths of the company as:
- Strong Portfolio of Leading, Consumer-Preferred Brands
- Integrated Business Model
- Strong Customer Relationships
- Attractive Positioning Within a Large, Growing, and Profitable Market
- Broad Geographic Manufacturing and Distribution Coverage
- Strong Operating Margins and Significant, Stable Cash Flows
- Experienced Executive Management Team
Executives utilize the company’s strengths in order to identify crucial components of its business strategy.
The main components include:
- Build and Enhance Leading Brands
- Focus on Opportunities in High-Growth and High-Margin Categories
- Increase Presence in High-Margin Channels and Packages
- Leverage the Company’s Integrated Business Model
- Strengthen the Company’s Route-to-Market Through Acquisitions
- Improve Operating Efficiency
Plan Of Action
Dr Pepper Snapple Group, Inc. has two main options: either to introduce a new branded product to the energy beverage market or to choose not to enter the market.
After analyzing the energy beverage market and acknowledging the organization’s strengths, we recommend creating a line extension named Snapple Plus under the Snapple brands division. Although sales in the energy beverage market are not as strong as the carbonated beverage market, the profit margins in this market are considerably higher. Hence, it is logical to enter this market with a line extension. We have decided to pursue a line extension instead of establishing a completely new brand due to the expected start-up costs for the product.
The Dr Pepper Snapple Group, Inc. would face significant time-consuming tasks if it were to embark on creating an entirely new brand, such as developing new packaging, formulating new flavors, and investing in a new production plant and equipment, among other challenges. To expedite the entry into the market, the company will leverage Snapple’s existing brand and introduce Snapple Plus. This approach enables the utilization of current production facilities and equipment while retaining the iconic glass bottle. To ensure a swift market launch, we will initially introduce Snapple Plus with three flavors: Lemon Tea, Green Tea, and Raspberry Tea.
During the initial stages of development and post-launch, Dr Pepper Snapple Group, Inc. will allocate resources towards conducting marketing research. This research aims to identify the flavors that are most popular among consumers, ultimately influencing the selection of future flavor offerings.
Recommended Energy Beverages Marketing Strategy
Goals and Objectives
In 2008, Dr Pepper Snapple Group, Inc. plans to expand the Snapple brand division by introducing a new line extension into the energy beverage market.
Dr Pepper Snapple Group, Inc. needs to focus on achieving significant market awareness in the adult segment of the energy beverage market, with the goal of capturing 10% of the market share. It is crucial for Dr Pepper Snapple Group, Inc. to reach breakeven point in the first year after the launch. The target market for Dr Pepper Snapple Group, Inc.’s new energy drink product line extension should consist of existing customers with strong brand loyalty, as well as adults who are 25 years old and above and already consume energy beverages. These adult users account for approximately 59% of the current energy beverage consumer market and roughly 66% of the entire US population.
By targeting this market segment and attracting new customers within it, Dr Pepper Snapple Group, Inc. can establish a significant market presence. In terms of product strategy, Snapple Plus aims to differentiate itself from other energy drinks by offering a more natural and holistic option. This line extension will consist of tea and juice-based beverages, unlike the high-sugar, heavily carbonated products offered by other energy drink brands. Instead of relying on synthetic additives that can cause energy crashes, Snapple Plus will utilize yerba-mate tea extract for a natural energy boost.
The packaging of the beverage will be significant, as it will feature a re-sealable screw top and a more neutral color to highlight its healthy nature. The renowned glass bottles, commonly associated with Snapple, will be used for packaging. These bottles are already extensively produced in established distribution centers, ensuring that the pricing remains reasonably affordable, even with their superior quality. To cater to our dedicated customers, the line extension will initially focus on the most well-established flavors: lemon, raspberry, and green tea.
The new drink based on traditional Snapple flavors is expected to be popular among dedicated Snapple drinkers and generate excitement. It will target older energy beverage consumers with a higher disposable income who are looking for a healthier option. To reflect its quality and target market, the recommended price for the product is $2.50 per package, which is $0.50 higher than the market average. Dr Pepper Snapple Group, Inc. should utilize their strong distribution channels and extensive geographic coverage to launch the new product in stores. The product will be available at both supermarkets and convenience stores to reach a wide range of customers. In supermarkets, it will be positioned as impulse buy items at the checkout lines in coolers, specifically in the standard 16 oz. single Snapple bottles.
Our goal is to attract customers who desire an energy boost but also want a delicious product. These customers will be attracted to our products when they are displayed for sale. In convenience stores, we will reserve shelf space for three primary flavors in individual 16 oz. bottles. We will strategically introduce different flavors and variations of our products, but at first, we will only aim to reserve a small amount of potentially expensive premium shelf space in a well-visited area of the store. This is done to increase customer awareness and improve the chances of purchase.
The brand plans to expand its customer loyalty by entering the sales market for wholesalers, but this will happen only after the first year. To ensure that a significant percentage of customers (more than 50%) become aware of the brand in the first year, a comprehensive advertising and promotion campaign is advised. This campaign should incorporate TV commercials, in-store promotional signs, and other advertising channels that cater to the older demographic.
The advertisement should emphasize the product’s health benefits and unique qualities compared to other beverages. To directly reach many of our target customers, we intend to set up small booths at nearby grocery stores where we can provide samples and product explanations. This approach aims to generate enthusiasm and educate the surrounding audience. Since we are targeting an older demographic, we believe that grocery stores are an ideal location to attract new customers, given their regular visits as heads of their households.
The booths will have enthusiastic and friendly promoters to attract customers and persuade them to listen to their message. We will also conduct sample testings at convenience stores in collaboration with local radio stations to inform potential customers about the opportunity to try our product for free. This partnership will benefit both parties as the radio stations can promote our product and testing on air, while we can promote the station at the booth. Furthermore, we will utilize relatable spokespeople to establish a connection with our customers.
We believe that an experienced golfer can effectively represent the laid-back yet energetic mindset we want to convey. A suitable candidate could be Phil Mickelson, who remains prominent and is recognized by a vast adult demographic. His friendly and approachable demeanor is ideal for attracting our target audience. By making Phil the spokesperson for our line extension, we can utilize golf tournaments as an additional promotional platform, reaching out to large groups of adults. Establishing several Snapple Plus booths at these events and actively promoting the drink to golfers can help us establish a customer base that we can readily expand.
