Dr. Pepper Snapple Group Case Study Essay

Andrew Barker, a brand manager for Snapple beverages at the Dr. Pepper Snapple Group, Inc., must assess whether or not a profitable market opportunity exists for a new energy beverage brand to be produced, marketed, and distributed by the company in 2008. He has about 3 months to determine the market opportunity. SWOT. Strengths| Weaknesses| * Strong portfolio of leading consumer-preferred brands * Integrated business model * Strong customer relationships * Attractive positioning within a large, growing, and profitable market * Broad geographic manufacturing and distribution coverage * Strong operating margins and significant, stable cash flows * Experienced executive management team| * Currently the only major domestic nonalcoholic beverage company in the US without a significant branded energy drink of its own * Company bottlers and distributors do not serve all areas of the US (by early 2008, 80% of the US market) * Market is already established| Opportunities| Threats|. * Integrated business model provides opportunities for net sales and profit growth through the alignment of the economic interests of its brand ownership and its bottling and distribution businesses * Carbonated beverages were the 4th largest nonalcoholic beverage category in the US in 2006 and the fasted growing beverage category * Average US per capita consumption of energy beverage drinkers increased by 14% since 2004| . * Industry analysts project an average annual growth rate of 10.5% from 2007 to 2011 (down 32% from 2001-2006) which is attributed to market maturity, increased price and packaging competition, and the entrance of hybrid energy beverages, such as energy water, energy fruit drinks, ready-to-drink energy teas, and energy colas * Energy beverage consumers limit their choice to only 1.4 different brands, which suggests brand loyalty in this market. * 5 Major brands (Red Bull, Hansen, Pepsi-Cola, Rockstar and Coca-Cola) dominate the US energy beverage market, accounting for 94% of dollar sales and unit volume. * The energy beverage market has experience product proliferation and price erosion in recent years * Energy beverage prices declined 30% from 2001-2006| Critical Issues * Dr. Pepper Snapple Group, Inc. is the only major domestic nonalcoholic beverage company in the US without a significant branded energy drink of its own. * 5 Major brands (Red Bull, Hansen, Pepsi-Cola, Rockstar and Coca-Cola) dominate the US energy beverage market, accounting for 94% of dollar sales and unit volume. Alternatives. * Do Nothing * The Dr. Pepper Snapple Group, Inc. bottling and distribution system should introduce an energy beverage, marketed towards adults, ages 34-54. The Energy beverage should include two flavors, with a regular and sugar free version of each, all available in a standard 16 ounce size, as this segment accounts for the most growth opportunity (150%). Advertising and expenditures for the new energy drink brand need to avenues through social media, TV, print, event, etc., as the market is very competitive and consumers are extremely brand loyal. Advertising should include free handouts of the beverage, or ‘trials’, to generate buzz and get consumers to try the product. The new product should be able to stand out when next to other energy drinks, maybe package it in a unique bottle, such as glass. They should supply all off-premise retailers, focusing on the convenience stores first, as they account for the most retail dollar sales, and then moving into the supermarkets and mass merchandisers. The new beverage should be priced a little higher than average, at $2.50 per single-serve package.