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Dr. Pepper Snapple Group Case Analysis
Transcript of Dr. Pepper Snapple Group Case Analysis
and Kyle Jacobson
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
Red Bull, Monster Energy, Rockstar,
Full Throttle, AMP Energy
Males, 12-34, Hispanic and African American
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
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:
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
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
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