Dr Pepper Snapple Group, Inc. Energy Beverages Table of Contents STRATEGIC ISSUES AND PROBLEMS2 DR. PEPPER SNAPPLE GROUP, INC. 2 PLAN OF ACTION3 RECOMMENDED ENERGY BEVERAGES MARKETING STRATEGY3 Goals and Objectives3 Target Market3 Marketing Mix4 Product Strategy4 Price Strategy4 Distribution and Sales4 Advertising and Promotion4 STRATEGIC ISSUES AND PROBLEMS Andrew Barker, brand manager for Snapple beverages at the Dr Pepper Snapple Group, Inc. , has been charged with the task of assessing a new market opportunity for the brand.
The decision has been made by senior company management to explore a new energy beverage as a part of a corporate business strategy to focus on opportunities in high-growth and high-margin beverage businesses. Barker must determine whether or not a profitable market opportunity exists for a new energy beverage brand to be produced, marketed, and distributed by the company. He must then make a recommendation as to whether or not the company should introduce a new branded product into the energy beverage market.
Any proposal to enter into the beverage market requires a marketing strategy for a branded energy drink, including a first-year sales and profit projection. It is important to note that Dr Pepper Snapple Group, Inc. is the only major domestic nonalcoholic beverage company in the United States without a significant branded energy drink of its own. In order to come to an educated conclusion, Barker must assess Dr Pepper Snapple Group, Inc. ’s current situational analysis, analyze the energy beverage market in the United States, and consider the market opportunities available to the company.
The problem facing the Snapple brand is how to maintain its competitive position given an environmental threat (energy beverages). They must determine whether or not it is strategically effective to enter the energy beverage market, while at the same time preserving profitability and its customer base. DR. PEPPER SNAPPLE GROUP, INC. In the United States and Canada, Dr Pepper Snapple Group, Inc. participates primarily in the flavored carbonated soft drink (CSD) market segment. Their key brands are Dr. Pepper, 7UP, Sunkist, A&W and Canada Dry.
In 2007 the company had an 18. 8 percent share of the US CSD market segment (measured by retail sales). In the non-CSD market segment in the US, Dr Pepper Snapple Group, Inc. participates primarily in the ready-to-drink tea, juice, juice drinks, and mixer categories. The key brands in this segment are Snapple, Mott’s, Hawaiian Punch, and Clamato. In Mexico and the Caribbean, Dr Pepper Snapple Group, Inc. participates primarily in the carbonated mineral water, flavored CSD, bottled water, and vegetable juice categories. Dr Pepper Snapple Group, Inc. enior executives identify the key strengths of the company as: 1. Strong Portfolio of Leading, Consumer-Preferred Brands 2. Integrated Business Model 3. Strong Customer Relationships 4. Attractive Positioning Within a Large, Growing, and Profitable Market 5. Broad Geographic Manufacturing and Distribution Coverage 6. Strong Operating Margins and Significant, Stable Cash Flows 7. Experienced Executive Management Team Executives also identify the key elements of the company’s business strategy, which each capitalize on company strengths.
The key elements are: 1. Build and Enhance Leading Brands 2. Focus on Opportunities in High-Growth and High-Margin Categories 3. Increase Presence in High-Margin Channels and Packages 4. Leverage the Company’s Integrated Business Model 5. Strengthen the Company’s Route-to-Market Through Acquisitions 6. Improve Operating Efficiency PLAN OF ACTION There are two primary alternatives open to Dr Pepper Snapple Group, Inc. : to enter into the energy beverage market with a new branded product, or to not enter into the energy beverage market.
Based on our analysis of the energy beverage market and considering the strengths of the organization we feel that the best course of action is to develop a line extension under the Snapple brands division called Snapple Plus. While sales in the energy beverage market are not as high as in the carbonated beverage market, the profit margins in the energy beverage market is substantially higher. Therefore, it makes sense to enter into the market with a product line extension. We have chosen to pursue a product line extension rather than a new brand altogether based on the start up costs we are anticipating for the product.
If Dr Pepper Snapple Group, Inc. were to pursue a completely new brand, it would take an extensive amount of time to develop new packaging, create new flavors, and invest in a new plant and new equipment for production among other issues. By extending upon Snapple’s current brand to create Snapple Plus, the company will use current plants and equipment, keep the same glass bottle, and be able to enter into production and into the market more quickly. In order to launch into the market quickly, we will begin with launch of Snapple Plus with three flavors: Lemon Tea, Green Tea, and Raspberry Tea.
In the initial phases of development after the launch, Dr Pepper Snapple Group, Inc. will invest time and money into marketing research to determine what flavors are most consumed by customers, which will decide what the next flavors will be. RECOMMENDED ENERGY BEVERAGES MARKETING STRATEGY Goals and Objectives 1. Dr Pepper Snapple Group, Inc. should launch a new line extension as a part of the Snapple brand division into the energy beverage market in 2008. 2. Dr Pepper Snapple Group, Inc. should focus on reaching a substantial market awareness level in the adult segment of the energy beverage market, with a target market share of 10%. . Dr Pepper Snapple Group, Inc. should aim to break even the first year after launch. Target Market The target market for Dr Pepper Snapple Group, Inc. ’s new energy drink product line extension should be a current customer with high brand loyalty and also adult energy beverage users 25 years old and older. These users make up approximately 59% of the current energy beverage user market and about 66% of the total US population. By tapping into this segment of the market and attracting new customers within this population, Dr Pepper Snapple Group, Inc. ill be able to create a substantial market share. Marketing Mix Product Strategy In order to differentiate their product from the rest of the energy beverage market, Snapple Plus will be a more natural and holistic approach to energy. This line extension will be a tea and juice based product, rather than a high-sugar, heavily carbonated product like that of other energy beverage brands. It will use the yerba-mate tea extract for a natural energy boost rather than synthetic additives that lead to unnatural energy crashes.
Packaging will also be important; the can will be re-sealable with a screw top, and will be more neutral in color to emphasize the healthy nature of the beverage. The product will be packaged in the glass bottles that Snapple is so famous for. These bottles are already heavily manufactured in established distribution centers, so the packaging pricing should still be rather affordable, despite its higher quality. The line extension will begin with the most established flavors so we can build from the more loyal customers. The first flavors will be lemon, raspberry, and green tee.
The great success of these traditional Snapple flavors should allow for immediate popularity amongst adamant Snapple drinkers, and build some hype over the new drink. Price Strategy This new brand will target older energy beverage consumers with a greater expendable income, which they will spend on a more healthy energy option. Due to this target market and the high quality of the product, it is recommended that the product be sold at $2. 50 per package, $. 50 higher than the market average. Distribution and Sales Dr Pepper Snapple Group, Inc. hould use their strengths in distribution channels and geographic coverage to help launch their new product in stores. This product will be sold at both supermarkets and convenience stores in order to reach a large number of customers. When entering into the supermarket channel, the target location for our beverages will be in the standard 16 oz. single Snapple bottles at the checkout lines in coolers. Items stocked at this location are typically termed “impulse buy” items, which our beverage will most likely be at these locations.
Our intention is to target the consumer who needs a boost of energy but wants to have a great tasting product- they will be drawn to our products at the point of sale locations. In convenience stores we will target shelf space for three main flavors in single serve 16 oz. bottles. We will strategically launch different flavors and variations of the products, but initially will only seek to block a limited amount of potentially high priced premium shelf space in a high traffic area of the store in order to raise customer awareness and increase the likelihood of purchase.
The brand will also move into sales to wholesalers in order to build more customer loyalty, however this will not occur until after the first year in market. Advertising and Promotion A large advertising and promotion program is recommended for this new brand in order to reach a significant customer awareness percentage (>50%) in the first year. The advertising and promotion program should include TV advertisements, in-store promotional signing, and utilization of other advertising channels that appeal to the older demographic.
The advertising should focus on the health benefits of the product and how it is different from competitors’ beverages. In order to approach many of our target customers head on, we plan on opening small booths at local grocery stores to offer samples and explanations of the product, to build some excitement and knowledge from surrounding audiences. Since we are going after an older generation, we think a grocery store would be an excellent location to find new customers, with their consistent trips as the heads of their households.
The promoters in these booths will be energetic and approachable, in order to entice customers to listen to what they have to say. Similar sample testings will also be held at convenience stores as we will partner with local radio stations to spread the word about where promising customers can try our product, free of charge. The partnership will be mutually beneficial as they can promote our product and testing through air time, and we can promote the station at the booth. We will also be using spokespeople that our customers can connect to.
We think an established golfer can promote the easy going, yet energetic mentality that we are trying to get across. We could go with someone like Phil Mickelson who is still prominent, yet well known throughout the adult population. He has the friendly, approachable face that we think can best attract our customers. With Phil as the face of our line extension, we could use golf tournaments as another promotional center to approach large populations of adult audiences. More Snapple Plus booths can be set up at these tournaments and a heavy push of the drink to golfers could set up a customer base we could easily build off of.