MARKETING MANAGEMENT BUS506

Case Study Analysis: Dr. Pepper Snapple Group, Inc.: Energy Beverages

Aida Nusinovic, Aida Bulbul, AlenHusukic

International Burch University, Sarajevo

MARKETING PROBLEM DEFINITION

Dr. Pepper Snapple Group, Inc, encouraged by its long-lasting history, experience, and favorable market conditions has decided to enter a new market segment, launch energy drink beverage and they are facing several dilemmas. A thorough analysis of company’s internal conditions, industry facts, market conditions and trends, is needed in order to develop possible alternatives, realize the possible outcomes of those alternatives, and finally to choose the most convenient options. To be specific, company needs to make decision about the following:

  • Choice of Target Market
  • Product Line and Positioning Choice
  • Marketing Channel Choice
  • Advertizing and Promotion
  • Pricing and Profitability

COMPANY FACTS

One of North America's leading refreshment beverage companies, DPS, markets more than 50 brands of carbonated soft drinks, juices, teas, mixers, waters and other premium beverages. The company's strategy, brands and people have made it a strong, sustainable and profitable business throughout the years.

The company today known as DPS has evolved from a combination of discovery, invention and collaboration. This rich history includes the very birth of the soft drink in 1783, when Jean Jacob Schweppes perfected the process for carbonating water and created the world's first carbonated mineral water.

In 2000, Cadbury Schweppes acquired Snapple Beverage Group, which included the namesake brand as well as RC Cola, Diet Rite and Stewart's, among others.

During the 2007 year management made decision to launch new product, and in late may they lunched ready to drink (RTD) sport drinks. After that, they were thinking about aggressive strategy and had to make decision about branding new product, energy beverage.

Energy beverage market was growing market, but also there were a few strong companies with the products that were already strong and well known brands. Examples of that are Red Bull, Monster and Rockstar. It is important to say that Dr. Pepper Snapple Group was major domestic nonalcoholic beverage company in the US without branded energy drink of its own. Company and its management had to make decision to launch or not new product, after that it was important to choose best marketing solution, distribution channels and some other important strategies for that product.

INDUSTRY FACTS

Energy beverages were 4thlargest nonalcoholic beverage segment in the US in 2006. It was the fastest growing category in the market. Growth in years 2005 and 2006 is displayed in the chart bellow.

Ten major competitors at U.S. Market are shown in the chart below.

  • 2006 Sales – 6,2 billion (71% off premise-supermarkets, merchandises, convenience stores; 29% on premise – restaurants, night clubs)
  • 2001-2006 retail sales grew 42,5% per annum
  • 2007-2011 (prediction) 10,2% per annum
  • Sport Drinks 2006 sales – 7,5 billion; 13% growth rate

Competitors offer two varieties (regular and sugar-free), and position themselves in a way to emphasize energy. When it comes to price, average is $2.00 regardless of the package.

Consumer Behavior

  • Heavy users – males age 12-34
  • Consumption period – afternoon & morning
  • Consumption place – home, car, work/school
  • Consumers loyal to brands
  • Buy mostly off premises – supermarkets
  • Demand products with health and wellness benefits

SWOT ANALYSIS

POSITIVE / NEGATIVE
INTERNAL FACTORS / STRENGTHS
  • portfolio of strong brands
  • integrated business model
  • strong customer relationship
  • market position
  • stable cash flow
  • experienced management
/ WEAKNESSES
  • no branded energy beverage
  • weak advertising
  • no experience in the energy beverages market

EXTERNAL FACTORS / OPPORTUNITIES
  • growing market
  • loyal consumers
  • existing brands have no significant differentiation
  • new segments exploration
/ THREATS
  • consumers loyal to already existing brands
  • strong and competitiverivals

ALTERNATIVES AVAILABLE

As a response to the marketing problem presented, company is faced with few choices and alternatives. It has to make decisions about its target market, product lines and positioning, marketing channels, advertisement and promotion, and its pricing strategy. It has alternatives as follows:

  • Target Market
  • All energy drink users (43 mill of USA population)
  • Heavy users (males 12-34; 70% of all users)
  • Product Line and Positioning
  • Choice of package size, mix of packaging, line variation, flavors
  • Differentiation source
  • Packaging – 5L aluminum bottle package)
  • Ingredients – ingredients others do not use
  • Position as adult energy drink – market segment unexplored by competitors, has potential
  • Position same as competitors
  • Marketing Channel
  • Off-premise (supermarkets, convenience stores, etc)
  • On-premise (restaurants, night clubs)
  • Advertizing and Promotion
  • Due to modest funds, company does not have many choices, but they need to use their stable cash funds to advertize and create awareness among customers.
  • Pricing
  • $2.00
  • Higher
  • Lower

POSSIBLE OUTCOMES

Although faced with many choices and alternatives, company needs to take into consideration industry and market conditions, opportunities it has, consumer behavior trends, and its own strengths, and choose the most convenient alternatives. It is important to find ways for differentiation, by offering something new and different, and built competitive advantage upon that differentiation.

  • Build differentiation I terms of packaging and ingredients (later on, if launching proves to be successful, they can explore and concentrate on adult consumer segment, because it is currently unexplored, and seems to have profitability potential.
  • Marketing Channel – Taking into consideration popular consumption and buying places, off-premise marketing channel should provide the highest returns in the launching period.
  • Advertizing and Promotion
  • Advertizing Goal – Create awareness and stimulate brand trial
  • Reasonable expenditure for media advertizing and promotion, without specific details
  • Radio advertizing – in periods when people drive to work and back home
  • Pricing – The best choice is to set price around the industry average ($2.00), but if the company manages to be different, they can set higher price.

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