The problem associated with this case is whether or not the company should introduce a new energy beverage brand into the market. If a profitable market opportunity exists for the company to enter the energy beverage market the next step would be to identify a target market and marketing mix along with a product line and brand positioning.
The best opportunity for the company to gain market share is to target adult energy drinkers from ages 35 to 54 since none of the competitors are catering towards this segment. Bottlers, distributors, and retailers are unlikely to produce and stock more than two SKUs of a new energy drink brand so it would be best to introduce a regular 16ounce single-serve package that consists of two different flavors. Since regular energy beverages hold 80% share of the market selecting regular is best, and since the 16ounce energy drinks represent 50% of case sales in convenience stores and want a high turnover to maintain prevalence in convenience stores its best to go with a 16ounce size. Also having two different flavors to choose from will help increase chance of trial rather than have only one flavor and have regular and sugar free or have one flavor and two different sizes.
In positioning the brand the company should differentiate the energy drink from competitors by basis of packaging and select the 16.9ounce single-serve aluminum bottle with a resealable screw cap, and also by ingredients in having lower carbohydrates in the formulation. The energy brand should be distributed to all types of off-premise retailers where beverages are sold for maximum sales. The company’s U.S. media expenditure should be $12.6 million, equal to that of Tag Energy’s U.S. media expenditure which lead to a 2.3% dollar market share, because Tag Energy was also new to the energy beverage market and targeted to a certain demographic the company should experience a similar result.
The manufacturer’s suggested retail selling price should be $2.29. Higher than the average $2.00 per single-serve because of it’s unique point of difference – lower carbohydrates and aluminum bottle with resealable screw cap. Market sales potential for the company’s target market is equal to $1.608 (Exhibit 1) billion and market sales forecast is equal to $133.202 million (Exhibit 2). With a retail trade margin equal to 40% the company’s selling price to retailers would be $.961 (Exhibit 3). Thus from the market sales forecast of $133.202 million the company would receive $79.921 million in revenue, and with the company’s contribution margin of 30% total profit would be equal to $22.378 million (Exhibit 4).
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