Re: Dr Pepper Snapple Group, Inc. – Memo of Recommendation
Energy beverages in 2006 were the fourth largest nonalcoholic beverage category in the United Sates after carbonated soft drinks (CSD), bottled water, and sport drinks. Currently the company sells ready-to-drink tea, juice, juice drink, and mixer categories. The main issue is Dr Pepper Snapple sells four categories which are not among the top four. Therefore, they are missing out on a huge opportunity in the market. It would be in their best interest to penetrate the energy beverage market based on their current standing. Dr Pepper Snapple should enter into the energy beverage market with an all-natural, ...view middle of the document...
Although they declined from 82% to 43% in 2006, due to the entry of new, aggressive competitors, and brands with lower prices. Their niche in the industry is the fact they are the energy beverage pioneers with a high consumer loyalty. That enable Red Bull to charge higher prices compared to their competitors. They do offer two products: regular Red Bull and Sugar Free.
• Hansen Natural Corporation – Monster is their most prominent energy drink since 2002. Sales have been attributed to their distribution agreement with Anheuser-Busch, who is able to deliver to wholesalers, retailers, on-premise retailers.
• Pepsi-Cola – Markets Amp Energy and SoBe Adrenaline Rush. Their competitive edge is the fact they market their products via the Pepsi-Cola distribution system.
• Rockstar, Inc. – Distributed by the Coca-Cola Company.
• Coca-Cola – They market Full Throttle and sugar free Tab energy brands.
• Coca-Cola – This competitor markets Full Throttle and sugar-free Tab Energy Brands. Their strength has been in acquiring licensing agreements (such as Rockstar).
After looking at the competitors with the industry, it seems that in order to be successful with this market, a company must have a great distribution system and something new that distinguishes their product from other products on the market.
Entering the Market
Dr Pepper Snapple has four key strengths which could allow them to be successful in the energy beverage market.
• Attractive Positioning – They are currently the number three company within the beverage markets in both the US, Canada, and Mexico.
• Strong Customer Relationships – They have long-standing relationships with many of their top customers and also have a very wide range of customers including retailers, foodservices (fast food chains), and convenience stores.
• Integrated Business Model – They currently are integrated within brand ownership, bottling, and distribution.
• Strong Operating Margins With Stable Cash Flow – The strength of their diverse portfolio has provided the company with strong operating margins which has created steady cash flows which in turn creates stockholders value.
Launching a new product within the energy beverage market would be a good idea for Dr Pepper Snapple because their strengths are strategically aligned with what makes a competitor successful within this market. The biggest challenges within the energy beverage market seem to be distribution, advertising, and the target market. Any of these challenges, if approached correctly can be a competitor’s advantage within the industry.
The current target market for the major competitors besides Coca-Cola with Tab is males between ages of 12 and 34 who account for the 70% of the markets consumption. However, male and female adults ages 35 to 55 are currently not being marketed too....