Dr. Pepper Snapple Group: Energy Group Analysis & Report

Dr. Pepper Snapple Group: Energy Group Analysis & Report

1. How would you characterize the energy beverage category, competitors, consumers, channels, and DPSG’s category participation in late 2007?

The energy beverage category was reasonably developed in late 2007. The market was projected to have a slower growth rate from 2007 to 2011 (10.5%) than it had in the years 2001 to 2006 (42.5%). The market had a wide variety of options that met consumer needs for energy drinks. The main beverages of energy drinks included Rockstar, Monster Energy, Red Bull, and similar brands. Available beverages were not differentiated other than by their specific brand. The major competition brands were held by Red Bull (43% market share), Hansen Natural Corporation (Monster), Pepsi-Cola, and Coca-Cola (remaining 4 with 57% market share). The main idea behind energy drinks were to offer a large dose of caffeine for an energy burst or refreshment and taste. Due to rising prices, packaging competition, and the concept of hybrid energy drinks also plaid factors in the slowing of the energy drink market. Growth was stilling occurring though in 2007 by almost 32%, which was relatively still good. Energy drinks main users was the demographic of males from age 12 to 34. Places of consumption included at home, work/school, or in the car.

In 2007, Dr. Pepper Snapple Group announced their first product in the energy beverage market, which was Accelerade RTD. The product was basically a relaunch of the sports drink that was favored by athletes. This launch didn’t occur until May 2007, putting the product near the end of the year and creating hype as DPSG initiated marketing and branding campaigns that opened up to a larger audience than just athletes.

1. What target consumer market should be chosen for a new energy beverage brand?

The energy beverage consumer consists of males between the ages of 12 and 34. Energy beverage consumers are estimated to account for 70% of market consumption. Consumers drink energy beverages in the morning and afternoon. Consumers drink energy beverages in order to get an energy boost and refresh mental awareness, as well as enjoying the taste. Taking this into consideration, the target market for a new energy beverage brand should be young male athletes. This target market will include high school and college football and basketball players, both male and female. Other possible outlets would be more health-conscious and athletic adults who are looking for energy that has other nutritional value. DPSG should launch the new energy beverage to focus on heavy users as they are more likely to be particular about what they drink. These users are more likely to recognize the unique formula Accelerate RTD offers and promoting the brand’s protein content. This will help DPSG to distinguish their brands drink from their rivals.

1. What product should be introduced and how should it be positioned/differentiated?

DPSG should introduce a 16.9oz aluminum bottle with a re-sealable cap. The drink contents should consist of caffeine, herbs, and B vitamins to make the “energy” and “mental alertness” factors more effective than its competitors. The differentiated bottle will make the product stand out on shelves and intrigue consumers. The re-sealable cap on the bottle will add convenience to the product because the consumer does not have to drink the product at one time. Consumer will be able to take their beverage with them without the risk of spilling it. The re-sealable cap should position the product as having an “on the go” energy drink since consumers can easily put the cap on. This “on the go” incentive would also appeal to energy drink users because they are often consumed in cars when consumers are moving from place to place and an energy boost is needed begins to set in.  

1. Through which channels should a new energy beverage brand be distributed? 

Main channels that the new energy product should be sold at will be convenience stores and supermarkets, on-premise and off-premise retailers. These include 7/11’s and health awareness stores like Whole Foods. A side channel would be vending machines in fitness centers or in sports merchandise stores, such as Dicks Sporting Goods. Other possible places for vending machines would be at sports arenas, airports, malls, and wreck league centers.

1. What dollar amount for media advertising and promotion should be budgeted for a new energy beverage brand?

In the case study, the top five competitors spent $70 million on advertising media and promotions. DPSG does not rate to the standards of Red Bull because it is the leader in energy drink market sales, however, DPSG to break into this market will have to invest more into their marketing strategies such as social networking sites, sporting event sponsorship, tastings at supermarkets, and other promotional events. DPSG in sense should roughly have an advertising and promotion expenditure around 12,750,000. However, in order to raise brand awareness, the budget should actually be a bit higher from around $15 to $18 million.