Dr. Pepper Snapple Group: Exploring The Energy Drinks Market

Discuss about the Strategic Marketing Management, Energy drinks fall in the group of functional drinks such as sports drinks. When consumed they boost energy within the body. The main ingredient in producing energy drink is caffeine which is extracted from the guarana bean.

Background

Dr. Pepper Snapple Group is a brand owner, distributor and distributor of non-alcoholic beverages in USA, Canada and Mexico. By 2006 it was the only non-alcoholic beverage company in USA which did not produce branded energy drinks by 2006. As part of the company’s corporate business strategy, the senior management came up with a decision to explore market in the beverage industry. At the beginning of September Mr. Andrew Barker, a brand manager for Snapple beverages was tasked to find out whether it was possible for the company to start manufacturing its own energy drinks. Energy drinks fall in the group of functional drinks such as sports drinks. When consumed they boost energy within the body. The main ingredient in producing energy drink is caffeine which is extracted from the guarana bean.

This situation is observed when there are many producers in the market. In this type of competition none of the players can control how the market operates.

 In 2007, the company was able to generate 5.748 billion dollars in net sales from non-alcoholic Beverages Company with the well-known brands such as 7 up which is one of their drinks. The company not only sells energy drinks but also carbonated soft drinks, syrup and other non-carbonated soft drinks. Due to its diversification in production of non-alcoholic beverage this has enabled them to be able acquire larger profit margin as compared to their competitors. They do sell their beverage concentrate to third party companies or hospitality industry.

SWOT Analysis

The company is well known for manufacturing the best of non-carbonated soft drinks and carbonated soft drinks that are preferred by consumers. This has fostered brand loyalty among consumers. Their unique brands have enabled them to become leaders in the market. The company leads in producing the best brands that are highly preferred by consumers such as Dr. Pepper.

The company does own their brands hence they have incorporated integrated business model in their operations. It has done some diversifications in operations for distribution. This is whereby, the company sells some of the brand products directly to customer or third parties. They have specific consumers as well as the food service industry. This aspect has placed the company at a higher place as compared to their competitors.

They also have a good relationship with their customers. Since their products range from CSD to non CSD they have ensured that they forge strong relationships with them from the bottlers, distributor, food service onto retailers. Some of their customers include Coca cola, Walmart, Mac Donald and 7 eleven. This companies are leaders in market within their various line of specification.

SWOT Analysis

The company holds the third position in the market share and the profitability of ion beverage industry in USA, Mexico and Canada. This places the company in a favorable position within the market. It also plays a great role towards health and wellness. This factor allows the company to be placed in a   position where customers are able to access their products and in a convenience ways (Berendt, 2018).

After Barker did a market analysis on introduction of the product in the market, he came up with recommendations. When the company was launching their new product, they did not have enough money for advertising. When a new product is launched in the market it is advisable to invest in advertising so as to inform consumers. Therefore, the fact that they did not have enough funds, it became a problem to them when advertising their products and services.

The company can look at the high emerging brand companies where it can focus on distributing some of their beverages. The teas and energy beverages that are ready for consumption can be distributed in the untapped market. This can be achieved through distribution, brand extension and new product launches. The management will provide distribution resources capability hence making the resources to grow. This will allow penetration into the market for all consumers.

There are areas of growth such as focusing on companies that have integrated business model. This can be achieved through ensuring product distribution within a large area so as to cut down product cost. They will also ensure that distribution is flexible and can fit the need of the consumers especially the retailers.

 Increasing their presence in high margin markets. This can be done through introduction of vending machines, retails stores and investing in coolers. By doing so, it will allow accessibility of customers within the convenient areas. All this can be done through promotions so as to ensure consumers are aware of the branded stores and coolers. This branded outlet can be offered to small retailers at a fair price so that they will be able to adopt them (Ryan, 2016). 

There are several companies that do offer energy drinks to consumers. Some of the companies have the beverages which have been in the market for a long time. Thus, there are consumers who will rarely move to a new produce since they have formed product loyalty.

There are already set prices for selling the beverage in the market. The prices range between 2 dollars per single serve to 5 dollars per single serve. This means that, as a manufacturer, operational costs have to be made as low as possible so as to achieve the profit margin. This does not mean that you also compromise on the quality of product (Hill T, Westbrook, 2017).

Problem Statement

Problem statement

Over the years the energy drinks market has undergone a lot of changes. This has been observed through proliferation and price erosion. There are several companies that do offer energy drinks to consumers in the market. It is therefore important to come up with a well-researched market decision before launching a new product.

Major trends

Most of the players within the industry have undergone some of the major trends within the market namely;

• Convergence of the Brand plus performance marketing. This trend has played a great role towards revenue growth for the players in the industry. It has also helped to brand the marketers hence showing the deeper funnel effect in their campaigns.
• Increased focus for experiential marketing. Due to the use of social media for campaigns, the brand started to shift the marketing dollars towards experiential plus immersive endeavors. As a result most of the consumers became aware of the relationship they had with the brand. This helped the company in blending the product with the culture as the passive attempt towards educating targeted demography.
• Sales automation. This affected the business consumer relationship and business to business relationship with other competitors within the market.

Therefore, many players on the energy beverage market have started offering their products with sugar free content. This is normally done so as to attract consumers who are on diet. This has led consumers to look for such products when doing purchases of energy drinks.

In order to market your product, it is important you promote and advertise it. This strategy ensures that consumers are aware of what you deliver. Therefore, in the last decade some companies have resulted to the use of promotional vehicles in advertising their products to consumers. They have used websites, sponsorships and events in order to market their products. In 2006 it was estimated that top five competitors used close to 70 million dollars in advertising their products. This figure shows that the cost of advertising is quite high by 4 to six times as compared to the expenditure incurred in media (Popkin, Hawkes, 2016).

Plausible alternatives.

Manufactures can now set the price of retail and channel margin. The price of purchasing a single serve has been settled on 2 dollars. This does not matter with the size of the package. Generally, the margin of selling the beverage at retail, wholesale or manufacturers is very close. Retailers include supermarkets and convenience stores. They sell and distribute the products.

Number of firms.

There are several companies that do manufacture energy drinks in USA. This companies have their own share in market.  They account for 94% sales in dollars. There are five most known established companies in the beverage industry. They include Pepsi cola, Coca-Cola, Roc star, Red bull North America and Hansen Natural.

Red bull North America is known for distributing Red bull energy drink in America. The company’s parent company is in Austria. The beverage was introduced in 1977 and it is leading in the market. However, over the years the company’s sales have decreased from 82 percent in the year 2000 to 43 percent of year 2006. This has been so due to the entry of some companies that offer a competitively low prices for the product.

Hansen Natural cooperation is mostly known for distribution of Monster energy drink in USA. They entered the US market in 2002 and have benefited from distribution agreement of their product (Kitchen, 2009).

References.

Berendt. J. (2018) Marketing, get ready to rumble. How rivalry promotes distinctiveness.

Hill T, Westbrook R. (2017) SWOT Analysis: it’s time for a product recall.

Kitchen P. J (2009). Market share and competitive Rivalry.

Popkin, B. M., & Hawkes, C. (2016). Sweetening of the global diet, particularly beverages: patterns, trends, and policy responses. The Lancet Diabetes & Endocrinology, 4(2), 174-186.

Ryan, D. (2016). Understanding digital marketing: marketing strategies for engaging the digital generation. Kogan Page Publishers.