Problems and Opportunities
It is important to understand the primary problem being addressed throughout this case study:
Whether or not a profitable market opportunity exists for a new energy beverage brand to be produced, marketed and distributed by the Dr. Pepper Snapple Group.
In order to effectively answer the above question, there are a number of secondary questions that need to be answered to get the full picture. They are as follows:
Who would the target market be? What would be the full product line and how would it be positioned within the market place? What marketing channels would be used? How would it be advertised and promoted? What would be the RSP and within which margins can it operate to remain profitable?
Before answering these questions, it is important to highlight some of the external challenges that would face the company were they to go ahead and introduce a new energy drink.
Firstly, there has been significant price erosion within the energy drink market, with energy drink prices declining by 30% between the years 2001 and 2006. This has been attributed to larger package sizes, the introduction of multi-packs, and the increasing availability in supermarkets, which operate with lower retail gross margins. Secondly, the market has also experienced product proliferation due to line extensions, new packaging and sizes, and market segmentation. Thirdly, DPSG needs to be aware of the changing attitudes of the consumer. The consumer is becoming more and more health conscious and while energy drinks are not perceived as unhealthy as other soft drinks, there are certainly healthier options becoming more readily available and so the brand positioning will need to be carefully thought out to combat this.
Having looked at the overall challenges faced with entering the energy drinks market, there are also opportunities. The energy drinks category