Dr Pepper Snapple group, Inc. is a major integrated brand owner, bottler, and distributer of nonalcoholic beverages in the United States. In 2007 they had net sales of $5.748 billion, 21 manufacturing facilities and approximately 200 distribution centers in the United States. They are the number one Company in carbonated soft drink products in the United States. Their business strategy is to invest most heavily in their key brands to drive profitable and sustainable growth by strengthening consumer awareness, developing innovative products, and brand extensions to take advantage of evolving consumer trends, improving distribution and increasing promotional effectiveness. Dr Pepper Snapple Group, Inc. also wants to focus on driving growth in their business with emerging categories, through brand extensions, new product launches, and selective acquisitions of brands and distribution rights. The company has a future goal of significantly increasing the number of branded coolers and other cold drink equipment over the next few years, which is expected to provide an attractive return on investment. The company also intends to leverage its integrated business model to reduce costs by strategically creating greater geographic manufacturing and distribution coverage and to be more flexible and responsive to the changing needs of large retail customers by coordinating sales, service, distribution, promotions, and product launches.
A question came into play of whether or not a profitable market opportunity existed for a new energy beverage brand to be produced, marketed, and distributed by the company in 2008. With the company’s current strengths, business strategy, and positive reputation, it would seem to be a good move. But one must first consider the competition, customer, and if the company itself can successfully introduce a new product to a specific market. The company has several succinct strengths. They have a strong portfolio of leading consumer- preferred brands. This means that they have a diverse portfolio of bottlers, distributors, and retailers with a wide variety of products and provide a foundation for growth and profitability. Their Snapple brand is also a leading ready to drink tea. Overall, in 2007 more than 75 percent of Dr Pepper Snapple Group, Inc. volume was generated by brands that hold either the first or second position in their category. The strength of these key supporting brands has served as a platform for lunching innovations and brand extensions in the past such as Accelerade RTD, a ready to drink sports drink that launched in late May 2007.
The company therefore had experience in what it truly meant to create a new branded energy drink which would serve to be useful, as the strategy would be similar. Entering a new product market. A second strength the company possesses is their Integrated Business Model. This provides opportunities for net sales and profit growth through the alignment of the economic interest of its brand ownership and its bottling and distribution business. Thirdly, they have strong and long standing customer relationships. This is so important for the success of a company. They have a wide range of strong relationships from bottlers and distributors, to national retailers, large food service, and convenience store customers. They also have strong relationships with some of the most important U.S. retailers including Walmart, Safeway, Kroger, and Target. Another strength is their attractive positioning within a large, growing, and profitable market. They hold the number three position in the United States, Canada, and Mexico beverage market. The company has a great competitive edge, as they cater to the need for convince and the demand for product with health and wellness benefits more so than any of their competitors.
Dr Pepper Snapple Group, Inc. also has a broad geographic manufacturing and distribution coverage. They have 21 manufacturing facilities and approximately 200 distribution centers in the United States. The company has strategically laced their warehouse at or near bottling pants and geographically dispersed them across sales regions to ensure company products are available to meet consumer demand. This enables them to better align their operations with customers, reduce transportation costs, and have greater control over the timing and coordination of new product launches. Another strength is their strong operating margins and significant stable cash flows. The breadth and strength of the Dr Pepper Snapple Group, Inc. product portfolio has enabled the company to generate strong operating margins, which combined with relatively modest capital expenditures, have delivered significant and stable cash flows. This in turn creates stockholder value by enabling the company to consider a variety of alternatives, such as investing in its business, reducing debt and returning capital to its stockholders. Lastly, they have an experienced executive management team. They all have an average of more than 20 years of experience in the food and beverage industry.
The team has a broad experience in brand ownership, bottling, distribution, and enjoys strong relations both within the industry and with major customers. They also have diverse skills that support operating strategies, including driving organic growth through target and efficient marketing, reducing operating costs, enhancing distribution efficiencies, aligning manufacturing, bottling, distribution interests, and executing strategic acquisitions. Dr Pepper Snapple Group, Inc. realized they had a weakness, as they were the only major nonalcoholic beverage company with no energy drink brand of their own. They also recognized an opportunity, no company had yet positioned themselves as an adult energy drink. Going into the Energy beverage market also seemed to correlate with what their future and current goals were. Industry analysts were projecting an average annual growth rate of 10.5 percent from 2007 to 2011. Also, since their current demographic was more health conscious then the competition, which gives them a competitive competency, they also had another untapped opportunity to market their energy drink by differentiation.
Currently, there are five major competitors that dominate the U.S. energy beverage market: Red Bull North America, Hansen Natural Corporation, Pepsi-Cola, Rockstar Inc., and Coca-Cola. Pepsi and Coca-Cola also compete with what Dr Pepper already offers from an industry and market point of view. Sadly, when it comes to advertising funds available, Dr Pepper has some funds available, but not nearly close to what Red Bull has. With that being the case, we feel that an avoidance of the competition, by going the route of a product innovation technique by means of differentiation, would be the best route for Dr Pepper Snapple Group, Inc. to be successful.
There are some warning signs in the industry. The energy beverage market has experienced product proliferation and price erosion in recent years. Proliferation resulted from line extensions new packaging and size, and market segmentation. Existing brands also typically offer regular and sugar free verities which have a sizeable share already in the market. Brand position typically emphasizes an energy boost, metal alertness, refreshment, and taste. This is why our product differentiation positioning is so important for the brand to be truly successful.
Several opportunities for product differentiation exist. One of which are the ingredients. Specifically, a new brand could augment the energy and mental alertness benefits by increasing the amount of herbs, vitamins, and natural ingredients. Secondly, no brand has positioned itself as an adult energy drink. Adults between the ages of 35 to 54 consumed energy beverages at a rate that was only slightly less than consumers under 24. Thirdly, the packaging. All the energy brands on the market lacked meaningful differentiation. They all looked the same. With the product, they felt it would be smart to introduce a new drink with a re-sealable lid, something that would stand out in the crowd. The current energy beverage consumer typically consists of males between the ages of 18-24. Energy beverages are most often consumed in the afternoon, the second most popular time of day is morning consumption. Convenience stores and supermarkets are the dominant off-premise retail channels for energy beverages.
In general, energy beverage manufactures with a broad product line and an extensive distribution network have had the greatest success in gaining shelf space in supermarkets and mass merchandisers for their brand. This would correlate with Dr Pepper Snapple Group Inc. strength of having great relationships with their vendors. We would recommend that they follow suit with partnerships with the dominate off-premise retail channels, but as a more health conscious beverage. The solution that we came up with for the Dr. Pepper Snapple Group was to incorporate all of these opportunities into a new product called RAM, which stands for Real Alive Micro-Nutrients. The product’s target market will be adults ages 25- 44 both males and females, who are interested in their health. In specific we are targeting the working middle class.
Our average consumer would be someone working long hours that need constant energy throughout the day, even after work when they need to go home and take care of their families. They are constantly on the go and busy. When developing a new product you must implement the marketing mix. The first being the product, RAM energy drink. Our product is focused on providing the same alert and energized feeling as traditional energy drinks, without including ingredients that have harmful side effects. Other drinks such as Red Bull can lead to dangers such as cardiac arrest, headaches, insomnia, type two diabetes, and many other health issues (Top 10 Energy Drink Dangers). Our new product RAM, will be replacing ingredients that lead to these dangers with more vitamins. For example our product will not include ingredients such as Carnitine, Guarnana, Ginseng, and Ginko Biloba. All of which are commonly used in energy beverages but there presence is not clearly reflected on their labels. Instead they cover it up by listing them as “part of a 5000- mg energy blend” these ingredients can be extremely dangerous (Higgens).
Instead, we will have ingredients such as Iron, Biotin, Zinc, Omega -3 fatty acids, antioxidants, Vitamins A, B1, B2, B3, B5, B6, B9, B12, C, D. All of these attributes to healthy energy levels but are a more natural way of doing so. Another detail of RAM will be lower calories, right now out of the five leading companies in the energy beverage market, not including sugar free products, Monster has the lowest calories being 200 per 16oz can. We want our product RAM to be around 150 calories per bottle, with only about 25 grams of sugar. Compared to Monster, which has 54 grams of sugar. RAM will also only be made up of natural flavors with no added artificial flavors or colors added, whereas the other lead competitors all ad coloring and most admit to adding artificial flavoring when some do not list the specification, which usually means they are trying to hide something. We want our customers to know every little ingredient that makes up RAM and hopefully this will build trust and relationships in return.
Many people are just now starting to notice all of the potential dangers that energy drinks contain, which is why our product will stand out as a healthier choice that offers the same benefits. The look of our product will be completely unlike any other energy drink, which are usually un-sealable cans. RAM will be sold in a 17 ounce recyclable cardboard bottle with a re-sealable screw on cap, similar to those that Vita Coco coconut water uses. This type of bottling will fit better with the target market’s lifestyle because the container will be easier to bring on the go with no spills or messes. They are also able to drink some now and easily save the rest for later. When designing the prototype of the bottle we choose the colors dark blue and black so that they would be gender neutral and attract the more mature market. The label is also clear and easy to read. We suggest that RAM only starts off introducing two flavors and see how they perform and introducing a new flavor within the next 8 months of the campaign.
The two flavors to start with might be RAM berry and citrus, because they are common and consumers might be more willing to try. From there they can extend the product line even further by offering a sugar-free option and even being sold in packs of four or large cases. The next aspect of the marketing mix to look at with RAM is pricing. We think that it is best to price themselves competitively at about $2.15 a bottle. Which is only a few cents cheaper than drinks such as Monster and Amp depending on the location. The third part of the marketing mix is place. Dr Pepper Snapple Group, Inc. has a wide range of strong relationships from bottlers and distributors, to national retailers, large food service, and convenience stores, such as 7-11, and their customers. They also have strong relationships with some of the most important U.S. retailers including Walmart, Safeway, Kroger, and Target. Building on their current strength of market channels, we felt that off premise retailers would represent the best choice for the product to be carried. Lastly, we have to figure out the promotion that will be used for RAM.
Since our funds are low compared to competitors, and we are going to avoid any conflict, we will be focusing on giving out samples while the product is being first introduced. We recommend the company hires sales reps to go to local grocery stores, with whom they already are doing business with, to give out samples to customers for them to try the new drink. It would also be a good idea to promote the new brand at events such races, athletic games, and concerts that our target market would be attending. This can be as simple as setting up a tent offering free samples and coupons. We also recommend using social media as a platform because it is extremely cost efficient and we can easily select our target. By means of analyzing the company’s strengths, tactics, opportunities, weaknesses, and threats, we were able to come up with a product that would be successful.
Dr Pepper Snapple Group, Inc. vision statement says, “It is our vision to be the best beverage business in the Americas. Our brands have been synonymous with refreshment, fun, and flavor for generations, and our sales are poised to keep growing into the future.” We feel that by building on their current strengths and marketing a product by means of differentiation through its ingredients, demographic, unisex packaging, and partnerships with loyal vendors, we will have a success with RAM. Real, Alive, Micro-nutrients.
Higgens, John. “Energy Beverage: Content and Safety.” (2011). Print.
“Top 10 Energy Drink Dangers.” Caffeine Informer. 24 Apr. 2012. Web.