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Dr. Pepper Snapple Group Case Analysis

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by

Abby Mlinar

on 21 September 2012

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Transcript of Dr. Pepper Snapple Group Case Analysis

Abby Mlinar, John Grotta,
and Kyle Jacobson
(DPSG)
Case Analysis Raise your hand if you drink energy drinks. Question What is your favorite? Question Would you say that you drink that exclusively? Question Background Growth at 558.7% from 2002-2007

Competitors:
Red Bull, Monster Energy, Rockstar,
Full Throttle, AMP Energy

Consumers:
Males, 12-34, Hispanic and African American

Channels:
Convenience Stores and Vending Machines Supermarkets and mass merchandisers

DPSG’s involvement = none Energy Beverage Category Problem Whether or not it is profitable for
DPSG to create an energy drink? Primary Problem How to position a new energy drink to
penetrate the market? Secondary/Surface Problem -Who to target?
-How to price it?
-Which channels to use?
-How many flavors?
-How to package it? To Enter Or
Not To Enter? Potential profitability:
43 million users in U.S.
18% of population
Total market sales = 6.2 billion












Estimate of 10% dollar sales
$6.2 million dollar sales Profitability of Entering Carbonated Soft Drinks
- DPSG has 18.8% of market
- 2006-2011 sales are expected
to decline by -2%

Energy Drinks Market
- Growing at rate of 10.2%
from 2007 to 2011

DPSG Business Strategy
- Focus on opportunities in
high-growth and high-margin
categories

No cannibalism Reasons to Enter Market is established

Users limit choice to 1.4 brands
- Brand loyalty

The top 5 companies dominate 94% of dollar sales Weaknesses and Threats We already have retail centers and distribution around the U.S., Canada, and Mexico

Broad Geographic Manufacturing and distribution coverage

Strong Operating Margins and Significant Stable Cash flows

The majority of the suppliers are targeting the same market

There are opportunities in niche markets

Strong Customer Relationships = DPSG strength Strengths and Opportunities Already losing
2% of dollar sales in Carbonated Soft Drink (CSD) Market annually

Last CSD growth was in 2004

Would be missing out on
$6.2 million in potential dollar sales from Energy Drink Market If We Don't Enter... What would YOU do? Knowing All of This... WHY? Recommendations ENTER! Utilize network of distribution channels including:
Convenience Stores
Supermarkets
Mass Merchandisers

On and off process retailers

Same process as used for Accelerade RTD

Healthy adults use all channels Place / Channels $55.8 million

%18 of gross margin
Good percent for new business

Top 5 competitors spent $70 million

Energy drink advertising is modest
Other than Red Bull Promotion and Advertising Price skimming
Value = benefit / price
Not looking for the best price
The best value aka health drink

Prices have been eroding
Declined 20% from 2001 to 2006

Price single-serve package at $2.79
Same price as DPSG's
Accelerade RTD Sports Drink
Average single serve = $2.00 Pricing Strategy Two flavors

Single-serve

Aluminum bottle with
resealable screw cap
New, and nobody else has it

16.9 fl oz.
Fastest growing, at 150% since 2004 Product Market the new product to:
active, intelligent adults
35-54 demographic
25% of US population
Consume at a rate only slightly
less than the consumers under 24








Nobody else has targeted an
energy beverage to this market Target Market Pro-Forma Income Statement Measure sales against current projections Evaluation Do you know what DPSG acutally did? Question
Full transcript