Dr. Pepper Snapple Group Case Study Essay

1. HOW WOULD YOU CHARACTERIZE THE ENERGY BEVERAGE CATEGORY, COMPETITORS, CHANNELS, AND DPSG’S CATEGORY PARTICIPATION IN LATE 2007?_ In late 2007 the energy beverage category was reaching market maturity and projected to have a slower annual growth rate from 2007 to 2011 (10.5%) than it had between 2001 and 2006 (42.5%). Rising prices, packaging competition, and the introduction of hybrid energy beverages also added to the slower projected growth rate. However in 2007 the market still saw growth of 32%. The category is dominated by 5 major brands (94% of dollar sales), with Red Bull far above the pack with a 43% dollar sales market share. The other 4 are in close competitions with dollar sales market shares from 10-16%. Though Red Bull continues to grow, so does the competition. New, aggressive competition into the market and brands offering lower prices has brought Red Bull’s market share down from 82% in 2000 to 43% in 2007. This 43% of dollar sales is maintained with only a 30% share of unit case volume. Because of loyalty to Red Bull, consumers pay a premium price for its products. Red Bull’s 8.5 oz. cans sell for the same price (approx. $2.00) as many competitors’ 16 oz. cans and their 16 oz. can sells for around $3.50. This loyalty puts Red Bull far above other brands and leaves them to compete with each other on price and packaging. Pepsi and Rockstar are not projected to have any significant media expenditures in 2007, but Red Bull and Hansen Natural Corporation are projected to increase their media expenditures to $60.9 Million (from $39.6M) and $153,800 (from $61,100) respectively. Once again, it is clear to see the major difference between Red Bull and the rest of the group. Coca-Cola (Full-Throttle, Tab) is projected to decrease its media expenditure from $7.3 million to $492K, which is still more than Hansen, but far from the expenditure that Red Bull maintains. Off-premise retailers represent 71% of total retail dollar sales compared to 29% for on-premise retailers. Off-premise retail sales are dominated by convenience stores (74%), but the off-premise retailers are slowly evolving. Convenience stores are slowly decreasing in percentage of sales, while sales  in supermarkets and Wal-Mart are growing. Brands with broad product lines, multi-packs, and widespread distribution networks are succeeding in supermarkets and stores like Wal-Mart. In convenience stores, brands with smaller product lines and high inventory turnover, are gaining success. Restaurants, night clubs, and other on-premise retailers remain constant and are not projected to have any significant changes. In 2007 DPSG began setting up distribution channels, which were projected to reach 80% of its target market by early 2008. It also began distributing Monster energy drinks on behalf of Hansen. DPSG also participated in the U.S. Sports Drink market in late 2007 with its launch of Accelerade RTD. Using its distribution network, DPSG introduced Accelerade to convenience stores, supermarkets, and mass merchandisers. It targeted the $35 million Americans who were competitive and exercise regularly. It supported the launch with a large marketing budget which consisted of a web site, podcasts, search-engine marketing, and a chat room. It emphasized the protein content to differentiate itself from the competition. _2. DOES YOUR CHARACTERIZATION BODE WELL FOR A NEW ENERGY BEVERAGE BRAND INTRODUCTION GENERALLY AND FOR DPSG, INC. IN PARTICULAR?_ Generally it does not bode well for the introduction of a new energy beverage brand but in Dr. Pepper Snapple Group’s case, they may have the brand loyalty, budget, and awareness to pull it off. With a large market share and huge media budget, Red Bull makes it difficult for new brands to compete. Unless a brand is willing to spend a large amount of cash on R&D, media expenditures and competitively price its product to give incentive for consumers to switch from Monster or one of the other brands, it would not gain enough of the market share to compete. Red Bull is in a league of its own so new entries would mostly be competing with Monster, Full-Throttle, Tab, Rockstar, and numerous other less popular brands. DPSG on the other hand has the brand loyalty, equity, image, and budget to support such a venture. It also has some unique qualities such as the addition of protein, a larger, re-sealable bottle, and an emphasis on performance over simply something to perk the consumer up. Since DPSG already has a target market,  distribution network, and manufacturing set up, it could feasibly enter the market on the shoulders of its good name. The fact that DPSG has differentiated itself from the other brands also gives them a leg up. If it could successfully attract more consumers from the 35-54 year old range by riding its healthy image and promoting a healthier, more fulfilling energy beverage, it could that target market and become a great competitor. _3. WHAT TARGET CONSUMER MARKET SHOULD BE CHOSEN FOR A NEW ENERGY BEVERAGE BRAND?_ An opportunity lies in the 35-54 year old range. It is a market that does not receive much attention and is not specifically targeted. Since this target market consumes only slightly less than the 24 and under market, there is a great opportunity to promote a product that suits their needs and advertisements that speak to them. By capturing that market, DPSG will stay consistent with its brand image and give it the awareness and experience to begin transitioning into the 12-34 year old market in the future. After 35, many men and women begin to exercise harder, and more often to maintain their youth as much as they can. If DPSG can provide a happy medium between a sugary energy drink and a full-fledged protein shake, they could help the 35+ consumers feel younger, while still giving them beneficial ingredients that their bodies need. _4. WHAT PRODUCT SHOULD BE INTRODUCED AND HOW SHOULD IT BE POSITIONED/DIFFERENTIATED?_ Considering DPSG’s brand image, I think its best bet would be to introduce a low carb, low sugar, protein infused energy tea. Since the earliest civilizations, teas have been used for their various health benefits and today is no different. If they target the 35-54 market, a tea would be much more attractive than a sugary, carbonated beverage. Since Snapple has such a good name in today’s marketplace, especially with adults, I believe the drink should be branded under the Snapple name. As of right now, Snapple’s most popular flavors out of all its products are Lemon Tea and Peach Tea. DPSG could parlay that popularity into an energy tea by adding a few  ingredients. In order to position itself in a more grown up market, differentiate itself from the competition, and stay true to its loyal customers, DPSG should introduce the energy tea an aluminum bottle with the same dimensions as its 16 oz. glass bottles. This allows it to be resealed and gives it a different look than the energy drink competition on the shelf. 4-packs could also be considered for supermarket shelves. The tea should keep with the healthy image by using vitamins, minerals, herbs, and other natural ingredients to provide sustainable energy and health benefits that other energy drinks just do not provide. Instead of focusing on providing a large energy burst, DPSG should focus on providing a youthful, energetic feeling, and restoring the body to full potential. _5. THROUGH WHICH CHANNEL(S) SHOULD A NEW ENERGY BRAND BE DISTRIBUTED?_ The new energy brand should be distributed mostly through off-premise retailers, but health conscious on-premise retailers such as subway would also be a good fit. Convenience stores are a great place to start because of the amount of exposure they provide and their track record in the energy drink market. Supermarkets are also a must because the majority of supermarket shoppers are within the target market. Whole foods would be a great place to showcase a new product to health conscious 35-54 year old adults. Also, vending machines in fitness centers and even placing fridges in sporting goods stores could attract attention from the target market. Other possible vending machine spots include golf-courses, college gymnasiums, police departments, firehouses, and airports.